-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SSuRg6usuwsh0XB3z3a4cpOdtSDGCr8DkZd1oO/N+YlNZWyQCtq8I14Qq5fLyRqK ZUawCsxJ8dbVgFgkQvyCCg== /in/edgar/work/0000950156-00-000569/0000950156-00-000569.txt : 20001129 0000950156-00-000569.hdr.sgml : 20001129 ACCESSION NUMBER: 0000950156-00-000569 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MFS SERIES TRUST V CENTRAL INDEX KEY: 0000200489 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 042468583 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02031 FILM NUMBER: 777515 BUSINESS ADDRESS: STREET 1: 500 BOYLSTON ST STREET 2: 15TH FL CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6179545261 MAIL ADDRESS: STREET 1: 500 BOYLSTON STREET STREET 2: 15TH FL CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: MFS TOTAL RETURN FUND DATE OF NAME CHANGE: 19930408 FORMER COMPANY: FORMER CONFORMED NAME: MASSACHUSETTS FINANCIAL TOTAL RETURN TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MASSACHUSETTS INCOME DEVELOPMENT FUND INC DATE OF NAME CHANGE: 19860127 N-30D 1 0001.txt MFS TOTAL RETURN - 09/30/2000 [Logo] M F S (R) INVESTMENT MANAGEMENT We invented the mutual fund(R) [Graphic Omitted] MFS(R) TOTAL RETURN FUND ANNUAL REPORT o SEPTEMBER 30, 2000 ---------------------------------------------------- MUTUAL FUND GIFT KITS (see page 47) ---------------------------------------------------- TABLE OF CONTENTS Letter from the Chairman .................................................. 1 Management Review and Outlook ............................................. 5 Performance Summary ....................................................... 9 Portfolio of Investments .................................................. 13 Financial Statements ...................................................... 31 Notes to Financial Statements ............................................. 38 Independent Auditors' Report .............................................. 45 Trustees and Officers ..................................................... 49 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 - -------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - -------------------------------------------------------------------------------- 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) October 16, 2000 A prospectus containing more complete information on any MFS product, including all 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. MANAGEMENT REVIEW AND OUTLOOK [Photo of David M. Calabro] David M. Calabro For the 12 months ended September 30, 2000, Class A shares of the fund provided a total return of 15.06%, Class B shares 14.24%, Class C shares 14.27%, and Class I shares 15.46%. These returns assume the reinvestment of any distributions but exclude the effects of any sales charges and compare over the same period to returns of 13.28% and 6.74%, respectively for the funds benchmarks, the Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common stock total return performance, and the Lehman Brothers Government/Corporate Bond Index, an unmanaged, market-value-weighted index of U.S. Treasury and government-agency securities that excludes mortgage-backed securities. During the same period, the average balanced fund tracked by Lipper Inc., an independent firm that reports mutual fund performance, returned 11.31%. Q. OVER THE PAST SIX MONTHS, THE FUND'S BALANCED INVESTMENT STRATEGY HAS OUTPERFORMED THE BROADER EQUITY MARKET AS REPRESENTED BY THE S&P 500. WHAT OTHER FACTORS CONTRIBUTED TO THE FAVORABLE PERFORMANCE? A. Several factors contributed to this performance. First and foremost, investors paid more attention to stock valuations as prices for many stocks, especially those in the technology and telecommunications sectors, became extended. Fortunately, we've been successful at identifying and investing in stocks that we believed were undervalued relative to their business fundamentals. As a result, many of our holdings experienced significant price appreciation during the past two fiscal quarters as the market broadened. In addition, for the first time in a few years, most sectors of the bond market outperformed equities. Given our disciplined approach to asset allocation, the fixed-income component of the portfolio generally provided a strong contribution to our performance. Q. WHAT CHARACTERISTICS DO YOU LOOK FOR IN A VALUE STOCK? A. We look for stocks that are cheaper than the overall market but which we believe have equal or better-than-average appreciation potential. Often these stocks are in mature or, out-of-favor industries or we believe a company is making the right decisions and changes to turn around its business. We also look closely at the balance sheet of each potential investment and concentrate on finding companies that show a positive catalyst for change. While we've recently seen a renewed interest in cyclicals, value stocks, and undervalued growth companies, for the most part we've experienced a two-year bear market in these areas. As a result, we look for potential catalysts to ignite interest in our selections, such as unique or compelling products, services, or business strategies. Q. WHAT INVESTMENT THEMES HAVE CAUGHT YOUR EYE RECENTLY? A. Early this year we determined that a number of multiline insurance companies were poised for stronger earnings growth and had entered into a more favorable pricing environment driven by higher earnings. We also believe their favorable premium environment can last for several years. Another trend we noticed was that investors continued to pour money into equity investments and retirement plans. This trend led us to a broad range of financial services companies including large insurance providers and asset management companies, such as St. Paul Companies, AXA Financial, and Hartford Financial Services. The market's harsh treatment of interest-rate sensitive stocks also provided opportunities with mortgage loan providers and related investments such as the Federal Home Loan Mortgage Corporation (Freddie Mac). We believe the chances of further interest rate hikes are unlikely in the near term and that concerns about Freddie Mac's potential loss of the U.S. government's guaranteed backing were overdone. Q. WHERE ELSE WERE YOU FINDING OPPORTUNITIES? A. While there have been some warning signs on the global economic scene, we remain comfortable with our long-term outlook for strong worldwide economic growth. Therefore, we believe economically sensitive large-cap value stocks offer good value, especially relative to large-cap growth stocks. In many instances, these large-cap value stocks have remained depressed from the late 1990s meltdown in many foreign economies. As a result, we have remained focused on multinational industrial goods and services firms such as Akzo Nobel, United Technologies, Boeing, and Deere & Co. Q. WHICH STOCKS DETRACTED FROM THE FUND'S PERFORMANCE? A. Despite their recent rebound, telecommunications companies such as Verizon Communications and SBC Communications provided lackluster performance in recent months. Concerns about increased competition, new technology, and deregulation have hurt most of the telecommunications group; however, we've maintained significant positions in Verizon and SBC because we believe their long-term outlooks are still positive. Q. HOW WAS THE BOND PORTFOLIO POSITIONED? A. During the past quarter, the bond portfolio benefited from a well-diversified mix of high-quality corporate bonds, mortgage-backed securities, and an emphasis on U.S. Treasuries, which outperformed all other sectors of the bond market and most equity indices. (Principal value and interest on Treasury securities are guaranteed by the U.S. government if held to maturity.) Q. WHAT IS YOUR OUTLOOK GOING FORWARD? A. This year we've witnessed sharp day-to-day price fluctuations in the stock market, significant swings in investor sentiment, and sudden shifts in market leadership. All of this volatility squeezed into a short period underscores the fact that unpredictability is par for the course in financial markets. The timing, extent, and duration of such episodes are difficult to predict; therefore, we think it becomes increasingly important for investors to maintain a diversified portfolio suited to their time horizon, investment objectives, and tolerance for market risk. Once an investment plan is in place, we believe it's best to stick with it and to avoid the impulse to alter it based on short-term events -- whether they be unsettling turbulence in the market or glittery returns from some particular corner of the market. This has generally been the strategy we've pursued, and we believe it can serve our investors well over the long term. /s/ David M. Calabro David M. Calabro Lead Portfolio Manager (on behalf of the MFS Total Return Team) The opinions expressed in this report are those of the lead portfolio manager and are current only through the end of the period of the report as stated on the cover. His views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS' PROFILES - -------------------------------------------------------------------------------- DAVID M. CALABRO, SENIOR VICE PRESIDENT; KENNETH J. ENRIGHT, SENIOR VICE PRESIDENT; DAVID S. KENNEDY, SENIOR VICE PRESIDENT; CONSTANTINOS MOKAS, VICE PRESIDENT; AND LISA B. NURME, SENIOR VICE PRESIDENT, ARE THE FUND'S PORTFOLIO MANAGERS. MR. CALABRO IS THE HEAD OF THE PORTFOLIO MANAGEMENT TEAM AND A MANAGER OF THE COMMON STOCK PORTION OF THE FUND'S PORTFOLIO. MR. CALABRO HAS BEEN EMPLOYED BY MFS SINCE 1992. MR. ENRIGHT, A MANAGER OF THE COMMON STOCK PORTION OF THE FUND'S PORTFOLIO, HAS BEEN EMPLOYED BY MFS SINCE 1986. MR. KENNEDY, THE MANAGER OF THE FUND'S FIXED-INCOME SECURITIES, HAS BEEN EMPLOYED BY MFS SINCE JUNE 2000. MR. MOKAS, THE MANAGER OF THE FUND'S CONVERTIBLE SECURITIES, HAS BEEN EMPLOYED BY MFS SINCE 1990. MS. NURME, A MANAGER OF THE COMMON STOCK PORTION OF THE FUND'S PORTFOLIO, HAS BEEN EMPLOYED BY MFS SINCE 1987. ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES. - -------------------------------------------------------------------------------- This report is prepared for the general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus. A prospectus containing more information, including the exchange privilege and all charges and expenses, for any 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. - -------------------------------------------------------------------------------- FUND FACTS - -------------------------------------------------------------------------------- OBJECTIVE: SEEKS TO PROVIDE ABOVE-AVERAGE INCOME (COMPARED TO A PORTFOLIO ENTIRELY INVESTED IN STOCKS) CONSISTENT WITH THE PRUDENT EMPLOYMENT OF CAPITAL. THE FUND ALSO SEEKS TO PROVIDE REASONABLE OPPORTUNITY FOR GROWTH OF CAPITAL AND INCOME. COMMENCEMENT OF INVESTMENT OPERATIONS: OCTOBER 6, 1970 CLASS INCEPTION: CLASS A OCTOBER 6, 1970 CLASS B AUGUST 23, 1993 CLASS C AUGUST 1, 1994 CLASS I JANUARY 2, 1997 SIZE: $6.1 BILLION NET ASSETS AS OF SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------- 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 10-year period ended September 30, 2000) MFS Total S&P 500 Lehman Brothers Return Composite Government/Corporate Fund - Class A Index Bond Index --------------------------------------------------------------- 9/90 $ 9,425 $10,000 $10,000 9/92 15,467 14,566 13,119 9/94 18,108 17,066 14,015 9/96 25,745 26,644 16,748 9/98 29,485 40,807 20,711 9/00 33,925 59,081 21,748 TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 2000 CLASS A
1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------------------------------- Cumulative Total Return Excluding Sales Charge +15.06% +31.78% +87.35% +256.17% - -------------------------------------------------------------------------------------------------------- Average Annual Total Return Excluding Sales Charge +15.06% + 9.63% +13.38% + 13.54% - -------------------------------------------------------------------------------------------------------- Average Annual Total Return Including Sales Charge + 9.59% + 7.87% +12.28% + 12.99% - -------------------------------------------------------------------------------------------------------- CLASS B 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------------------------------- Cumulative Total Return Excluding Sales Charge +14.24% +29.16% +80.90% +237.99% - -------------------------------------------------------------------------------------------------------- Average Annual Total Return Excluding Sales Charge +14.24% + 8.90% +12.59% + 12.95% - -------------------------------------------------------------------------------------------------------- Average Annual Total Return Including Sales Charge +10.24% + 8.14% +12.34% + 12.95% - -------------------------------------------------------------------------------------------------------- CLASS C 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------------------------------- Cumulative Total Return Excluding Sales Charge +14.27% +29.22% +81.08% +242.00% - -------------------------------------------------------------------------------------------------------- Average Annual Total Return Excluding Sales Charge +14.27% + 8.92% +12.61% + 13.08% - -------------------------------------------------------------------------------------------------------- Average Annual Total Return Including Sales Charge +13.27% + 8.92% +12.61% + 13.08% - -------------------------------------------------------------------------------------------------------- CLASS I 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------------------------------- Cumulative Total Return Excluding Sales Charge +15.46% +33.16% +89.89% +260.99% - -------------------------------------------------------------------------------------------------------- Average Annual Total Return Excluding Sales Charge +15.46% +10.02% +13.68% + 13.70% - -------------------------------------------------------------------------------------------------------- COMPARATIVE INDICES(+) 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------------------------------- Average balanced fund+ +11.31% + 8.96% +12.73% + 13.00% - -------------------------------------------------------------------------------------------------------- Standard & Poor's 500 Composite Index# +13.28% +16.44% +21.69% + 19.44% - -------------------------------------------------------------------------------------------------------- Lehman Brothers Government/Corporate Bond Index# + 6.74% + 5.82% + 6.30% + 8.08% - -------------------------------------------------------------------------------------------------------- (+) Average annual rates of return. + Source: Lipper Inc. # Source: Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY Class A Share Performance Including Sales Charge takes into account the deduction of the maximum 5.75% sales charge. Class B Share Performance Including Sales Charge takes into account the deduction of the applicable contingent deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class C Share Performance Including Sales Charge takes into account the deduction of the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I shares have no sales charge and are only available to certain institutional investors. Class B, C, and I share performance include the performance of the fund's Class A shares for periods prior to their inception (blended performance). Class B and C blended performance has been adjusted to take into account the CDSC applicable to Class B and C shares rather than the initial sales charge (load) applicable to Class A shares. Class I share blended performance has been adjusted to account for the fact that Class I shares have no sales charge. These blended performance figures have not been adjusted to take into account differences in class-specific operating expenses. Because operating expenses of Class B and C shares are higher than those of Class A, the blended Class B and C share performance is higher than it would have been had Class B and C shares been offered for the entire period. Conversely, because operating expenses of Class I shares are lower than those of Class A, the blended Class I share performance is lower than it would have been had Class I shares been offered for the entire period. All performance results reflect any applicable expense subsidies and waivers in effect during the periods shown; 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. PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 2000 FIVE LARGEST STOCK SECTORS FINANCIAL SERVICES 26.6% UTILITIES & COMMUNICATIONS 20.3% ENERGY 12.1% INDUSTRIAL GOOD & SERVICES 7.6% HEALTH CARE 6.8% TOP 10 STOCK HOLDINGS VERIZON COMMUNICATIONS 2.7% UNITED TECHNOLOGIES CORP. 1.9% Integrated telecommunications company Aerospace, defense, and building equipment company ST. PAUL COMPANIES, INC. 2.6% Commercial property-liability and life insurance FEDERAL HOME LOAN MORTGAGE CORPORATION 1.9% company U.S. mortgage banker and underwriter HARTFORD FINANCIAL SERVICES, GROUP, INC. 2.3% ROYAL DUTCH PETROLEUM CO. 1.8% Multiline insurance company Oil exploration and production company EXXONMOBIL CORP. 2.0% PNC BANK CORP. 1.8% International oil and gas company Diversified financial services company AKZO NOBEL N.V. 2.0% SBC COMMUNICATIONS, INC. 1.8% Diversified Dutch chemical company Integrated telecommunications company The portfolio is actively managed, and current holdings may be different.
PORTFOLIO OF INVESTMENTS -- September 30, 2000 Stocks - 56.5%
- ------------------------------------------------------------------------------------------------------ ISSUER SHARES VALUE - ------------------------------------------------------------------------------------------------------ U.S. Stocks - 50.5% Aerospace - 3.4% Boeing Co. 1,007,300 $ 63,459,900 General Dynamics Corp. 22,100 1,388,156 Honeywell International, Inc. 1,128,800 40,213,500 TRW, Inc. 759,300 30,846,563 United Technologies Corp. 1,012,396 70,108,423 -------------- $ 206,016,542 - ------------------------------------------------------------------------------------------------------ Agricultural Products AGCO Corp. 49,300 $ 585,438 - ------------------------------------------------------------------------------------------------------ Automotive - 0.6% Delphi Automotive Systems Corp. 1,221,900 $ 18,481,237 Ford Motor Co.* 552,124 13,975,639 Visteon Corp. 168,200 2,544,025 -------------- $ 35,000,901 - ------------------------------------------------------------------------------------------------------ Banks and Credit Companies - 2.4% Bank America Corp. 620,300 $ 32,488,213 Bank of New York Co., Inc. 83,008 4,653,636 Bank One Corp. 56,000 2,163,000 Chase Manhattan Corp. 728,600 33,652,212 National City Corp. 25,000 553,125 PNC Bank Corp. 1,026,500 66,722,500 Providian Financial Corp. 6,000 762,000 SunTrust Banks, Inc. 12,000 597,750 U.S. Bancorp 278,500 6,335,875 Washington Mutual, Inc. 10,000 398,125 -------------- $ 148,326,436 - ------------------------------------------------------------------------------------------------------ Biotechnology - 1.6% Abbott Laboratories, Inc. 1,014,300 $ 48,242,644 Pharmacia Corp. 844,015 50,799,153 -------------- $ 99,041,797 - ------------------------------------------------------------------------------------------------------ Business Machines - 0.3% Hewlett-Packard Co. 14,900 $ 1,445,300 International Business Machines Corp. 132,300 14,883,750 -------------- $ 16,329,050 - ------------------------------------------------------------------------------------------------------ Business Services - 0.4% Automatic Data Processing, Inc. 360,900 $ 24,135,188 Computer Sciences Corp.* 11,800 876,150 United Parcel Service, Inc. 22,200 1,251,525 -------------- $ 26,262,863 - ------------------------------------------------------------------------------------------------------ Cellular Telephones - 0.6% Motorola, Inc. 144,200 $ 4,073,650 Powertel, Inc.* 10,000 760,625 Telephone & Data Systems, Inc. 276,360 30,593,052 Voicestream Wireless Corp.* 5,000 580,313 -------------- $ 36,007,640 - ------------------------------------------------------------------------------------------------------ Chemicals - 1.0% Air Products & Chemicals, Inc. 424,200 $ 15,271,200 Eastman Chemical Co. 10,000 369,375 Rohm & Haas Co. 1,462,100 42,492,281 -------------- $ 58,132,856 - ------------------------------------------------------------------------------------------------------ Computer Hardware - Systems - 0.3% Compaq Computer Corp. 740,300 $ 20,417,474 - ------------------------------------------------------------------------------------------------------ Computer Software - Personal Computers - 0.7% Microsoft Corp.* 677,200 $ 40,843,625 - ------------------------------------------------------------------------------------------------------ Conglomerates - 0.5% Eastern Enterprises Co. 413,284 $ 26,372,685 Tyco International Ltd. 44,610 2,314,144 -------------- $ 28,686,829 - ------------------------------------------------------------------------------------------------------ Construction Services Martin Marietta Materials, Inc. 10,000 $ 382,800 - ------------------------------------------------------------------------------------------------------ Consumer Goods and Services - 0.4% Fortune Brands, Inc. 637,400 $ 16,891,100 Kimberly-Clark Corp. 31,500 1,758,094 Procter & Gamble Co. 114,700 7,684,900 -------------- $ 26,334,094 - ------------------------------------------------------------------------------------------------------ Containers - 0.2% Owens Illinois, Inc.* 1,600,900 $ 14,808,325 - ------------------------------------------------------------------------------------------------------ Electrical Equipment - 0.1% Emerson Electric Co. 37,900 $ 2,539,300 General Electric Co. 27,132 1,565,177 -------------- $ 4,104,477 - ------------------------------------------------------------------------------------------------------ Energy - 0.6% Devon Energy Corp. 632,200 $ 38,026,830 TXU Corp. 15,000 594,375 -------------- $ 38,621,205 - ------------------------------------------------------------------------------------------------------ Entertainment - 1.5% Harrah's Entertainment, Inc.* 1,244,700 $ 34,229,250 Infinity Broadcasting Corp., "A"* 352,100 11,619,300 Metro Goldwyn Mayer, Inc.* 780,800 18,739,200 Time Warner, Inc. 155,700 12,183,525 USA Networks, Inc.* 328,500 7,206,469 Viacom, Inc., "B"* 173,435 10,145,947 -------------- $ 94,123,691 - ------------------------------------------------------------------------------------------------------ Financial Institutions - 2.4% Associates First Capital Corp., "A" 804,000 $ 30,552,000 Citigroup, Inc. 326,333 17,642,378 Edwards (A.G.), Inc. 146,700 7,674,244 Federal National Mortgage Assn 236,500 16,909,750 FleetBoston Financial Corp. 20,000 780,000 Federal Home Loan Mortgage Corp. 1,284,800 69,459,500 Household International, Inc. 12,000 679,500 Merrill Lynch & Co., Inc. 42,602 2,811,732 Morgan (J.P.) & Co. 3,000 490,125 -------------- $ 146,999,229 - ------------------------------------------------------------------------------------------------------ Financial Services - 1.7% AXA Financial, Inc. 1,103,264 $ 56,197,510 Mellon Financial Corp. 1,088,700 50,488,462 -------------- $ 106,685,972 - ------------------------------------------------------------------------------------------------------ Food and Beverage Products - 1.1% Anheuser-Busch Cos., Inc. 233,800 $ 9,892,662 Archer-Daniels-Midland Co. 901,844 7,778,405 Coca-Cola Co. 148,300 8,175,038 General Mills, Inc. 320,100 11,363,550 Keebler Foods Co. 14,600 613,200 McCormick & Co., Inc. 85,100 2,531,725 PepsiCo., Inc. 320,200 14,729,200 Quaker Oats Co. 159,500 12,620,437 -------------- $ 67,704,217 - ------------------------------------------------------------------------------------------------------ Healthcare - 0.3% HCA Healthcare Co. 491,400 $ 18,243,225 - ------------------------------------------------------------------------------------------------------ Insurance - 7.4% AFLAC, Inc. 92,400 $ 5,919,375 Allstate Corp. 698,500 24,272,875 American General Corp. 150,500 11,739,000 American International Group, Inc. 269,025 25,742,330 Chubb Corp. 234,900 18,586,463 CIGNA Corp. 315,700 32,959,080 Gallagher (Arthur J.) & Co. 18,000 1,064,250 Hartford Financial Services Group, Inc. 1,135,285 82,804,850 Jefferson Pilot Corp. 315,100 21,387,412 Lincoln National Corp. 1,183,700 56,965,562 Marsh & McLennan Cos., Inc. 157,700 20,934,675 MetLife, Inc.* 582,380 15,251,076 Nationwide Financial Services, Inc., "A" 531,800 19,876,025 Safeco Corp. 748,500 20,396,625 St. Paul Cos., Inc. 1,928,500 95,099,156 -------------- $ 452,998,754 - ------------------------------------------------------------------------------------------------------ Machinery - 1.7% Caterpillar, Inc. 191,300 $ 6,456,375 Deere & Co., Inc. 1,600,900 53,229,925 Grainger (W.W.), Inc. 889,100 23,394,444 Ingersoll Rand Co. 523,600 17,736,950 -------------- $ 100,817,694 - ------------------------------------------------------------------------------------------------------ Medical and Health Products - 1.0% American Home Products Corp. 777,400 $ 43,971,687 Baxter International, Inc. 30,000 2,394,375 Bristol-Myers Squibb Co. 93,000 5,312,625 Schering Plough Corp. 242,200 11,262,300 -------------- $ 62,940,987 - ------------------------------------------------------------------------------------------------------ Medical and Health Technology and Services - 0.1% UnitedHealth Group, Inc.* 49,400 $ 4,878,250 - ------------------------------------------------------------------------------------------------------ Metals and Minerals - 1.1% Alcoa, Inc. 1,262,700 $ 31,962,094 Phelps Dodge Corp. 898,600 37,516,550 -------------- $ 69,478,644 - ------------------------------------------------------------------------------------------------------ Oil Services - 2.1% Baker Hughes, Inc. 20,000 $ 742,500 Burlington Resources, Inc. 12,000 441,750 Cooper Cameron Corp.* 114,900 8,466,694 Global Marine, Inc.* 614,200 18,963,425 Halliburton Co. 819,300 40,094,494 Kerr McGee Corp. 163,700 10,845,125 Kerr McGee Corp. Exchangeable 59,800 3,180,612 Noble Drilling Corp.* 737,800 37,074,450 Smith International, Inc.* 111,200 9,069,750 Weatherford International, Inc.* 20,000 860,000 -------------- $ 129,738,800 - ------------------------------------------------------------------------------------------------------ Oils - 3.2% Anadarko Petroleum Corp. 10,000 $ 664,600 Apache Corp. 369,400 21,840,775 Coastal Corp. 642,775 47,645,697 Conoco, Inc. 45,000 1,212,187 Conoco, Inc., "A" 265,200 6,928,350 EOG Resources, Inc. 15,000 583,125 ExxonMobil Corp. 823,680 73,410,480 Occidental Petroleum Corp. 520,300 11,349,044 Phillips Petroleum Co. 108,500 6,808,375 R & B Falcon Corp.* 15,000 418,125 Santa Fe International Corp. 36,800 1,658,300 Transocean Sedco Forex, Inc. 305,200 17,892,350 Unocal Corp. 184,250 6,529,359 -------------- $ 196,940,767 - ------------------------------------------------------------------------------------------------------ Photographic Products - 0.1% Polaroid Corp. 340,700 $ 4,578,156 - ------------------------------------------------------------------------------------------------------ Printing and Publishing - 1.0% Gannett Co., Inc. 528,500 $ 28,010,500 New York Times Co. 354,700 13,944,144 Tribune Co. 381,800 16,656,025 -------------- $ 58,610,669 - ------------------------------------------------------------------------------------------------------ Railroads - 0.4% Burlington Northern Santa Fe Railway Co. 1,056,300 $ 22,776,469 Union Pacific Corp. 15,800 614,225 -------------- $ 23,390,694 - ------------------------------------------------------------------------------------------------------ Real Estate Investment Trusts - 0.8% CarrAmerica Realty Corp. 344,300 $ 10,415,075 Equity Office Properties Trust 310,000 9,629,375 Equity Residential Properties Trust 487,700 23,409,600 Kilroy Realty Corp. 250,800 6,693,225 -------------- $ 50,147,275 - ------------------------------------------------------------------------------------------------------ Restaurants and Lodging - 0.2% MGM Mirage, Inc. 354,700 $ 13,545,106 - ------------------------------------------------------------------------------------------------------ Retail - 0.8% CVS Corp. 12,200 $ 565,012 Gap, Inc. 570,000 11,471,250 Lowe's Cos., Inc. 18,000 807,750 Office Depot, Inc.* 889,200 6,946,875 TJX Cos., Inc. 15,000 337,500 Wal-Mart Stores, Inc. 582,600 28,037,625 -------------- $ 48,166,012 - ------------------------------------------------------------------------------------------------------ Special Products and Services MCN Energy Group, Inc. 15,000 $ 384,375 - ------------------------------------------------------------------------------------------------------ Supermarkets - 1.5% Kroger Co.* 2,171,128 $ 48,986,076 Safeway, Inc.* 932,700 43,545,431 -------------- $ 92,531,507 - ------------------------------------------------------------------------------------------------------ Telecommunications - 3.7% Alltel Corp. 827,100 $ 43,164,281 AT&T Corp. 383,200 11,256,500 AT&T Corp., "A"* 30,000 540,000 CenturyTel, Inc. 273,700 7,458,325 Intermedia Communications, Inc. 1,198 35,341 SBC Communications, Inc. 1,316,348 65,817,400 Sprint Corp. 15,000 439,688 UnitedGlobalCom, Inc. 1,001 30,030 Verizon Communications 2,051,536 99,371,275 Winstar Communications, Inc.* 2,314 35,867 -------------- $ 228,148,707 - ------------------------------------------------------------------------------------------------------ Telecommunications and Cable - 0.4% Comcast Corp., "A"* 643,600 $ 26,347,375 - ------------------------------------------------------------------------------------------------------ Utilities - Electric - 2.6% AES Corp.* 11,000 $ 753,500 CMS Energy Corp. 63,200 1,702,450 CP&L Energy, Inc. 497,800 20,752,037 Duke Energy Corp. 358,800 30,767,100 Florida Progress Corp. 250,600 13,266,138 Keyspan Corp. 84,200 3,378,525 NiSource, Inc. 1,128,200 27,499,875 NSTAR Co. 298,100 11,998,525 Peco Energy Co. 288,600 17,478,338 Pinnacle West Capital Corp. 523,300 26,622,887 Public Service Enterprise Group 171,600 7,668,375 -------------- $ 161,887,750 - ------------------------------------------------------------------------------------------------------ Utilities - Gas - 2.4% Columbia Energy Group 302,120 $ 21,450,520 National Fuel Gas Co. 901,700 50,551,556 NICOR, Inc. 205,400 7,432,913 Spinnaker Exploration Co.* 21,000 732,375 Washington Gas Light Co. 368,100 9,892,687 Williams Cos., Inc. 1,309,600 55,330,600 -------------- $ 145,390,651 - ------------------------------------------------------------------------------------------------------ Total U.S. Stocks $3,104,580,859 - ------------------------------------------------------------------------------------------------------ Foreign Stocks - 5.9% Bermuda Ace Ltd. (Insurance) 13,000 $ 510,250 - ------------------------------------------------------------------------------------------------------ Canada - 0.2% Canadian National Railway Co. (Railroads) 366,000 $ 10,728,375 Talisman Energy, Inc. (Oils)* 15,000 525,938 -------------- $ 11,254,313 - ------------------------------------------------------------------------------------------------------ France - 0.2% Total Fina S.A., ADR (Oils) 176,000 $ 12,925,000 - ------------------------------------------------------------------------------------------------------ Japan - 0.3% Canon, Inc. (Special Products and Services) 146,000 $ 6,485,579 Tokyo Gas Co. Ltd. (Gas) 5,048,000 13,435,741 -------------- $ 19,921,320 - ------------------------------------------------------------------------------------------------------ Netherlands - 2.6% Akzo Nobel N.V. (Chemicals) 1,689,370 $ 71,336,219 ING Groep N.V. (Financial Services)* 297,139 19,812,942 Royal Dutch Petroleum Co., ADR (Oils) 1,102,200 66,063,112 -------------- $ 157,212,273 - ------------------------------------------------------------------------------------------------------ Switzerland - 0.8% Nestle S.A. (Food and Beverage Products) 16,851 $ 35,159,151 Novartis AG (Medical and Health Products) 10,800 16,587,458 -------------- $ 51,746,609 - ------------------------------------------------------------------------------------------------------ United Kingdom - 1.8% BAE Systems PLC (Aerospace)* 39,699 $ 214,266 BP Amoco PLC, ADR (Oils) 730,639 38,723,867 CGU PLC (Insurance)* 841,386 11,943,906 Diageo PLC (Food and Beverage Products)* 3,145,945 28,120,776 HSBC Holdings PLC (Banks and Credit Cos.)* 1,995,100 28,380,472 Standard Chartered PLC (Banks and Credit Cos.)* 39,540 575,908 -------------- $ 107,959,195 - ------------------------------------------------------------------------------------------------------ Total Foreign Stocks $ 361,528,960 - ------------------------------------------------------------------------------------------------------ Total Stocks (Identified Cost, $2,918,297,832) $3,466,109,819 - ------------------------------------------------------------------------------------------------------ Bonds - 37.2% - ------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT (000 OMITTED) - ------------------------------------------------------------------------------------------------------ U.S. Bonds - 19.4% Advertising Lamar Advertising Co., 5.25s, 2006 $ 996 $ 993,510 - ------------------------------------------------------------------------------------------------------ Aerospace - 0.1% Boeing Capital Corp., 7.375s, 2010 $ 7,764 $ 7,831,392 - ------------------------------------------------------------------------------------------------------ Airlines - 0.2% Jet Equipment Trust, 9.41s, 2010## $ 3,306 $ 3,564,042 Jet Equipment Trust, 8.64s, 2012## 2,999 3,080,587 Jet Equipment Trust, 11.44s, 2014## 4,700 5,256,010 Jet Equipment Trust, 10.69s, 2015## 1,250 1,348,600 -------------- $ 13,249,239 - ------------------------------------------------------------------------------------------------------ Automotive - 0.7% Ford Motor Credit Co., 7.6s, 2005 $ 20,881 $ 21,097,536 Ford Motor Credit Co., 7.375s, 2009 8,224 8,035,012 Ford Motor Credit Co., 7.875s, 2010 7,672 7,751,405 General Motors Corp., 9.4s, 2021 5,049 5,804,886 -------------- $ 42,688,839 - ------------------------------------------------------------------------------------------------------ Banks and Credit Companies - 1.3% BCH Cayman Island Ltd., 7.7s, 2006 $ 8,859 $ 8,882,742 Beaver Valley Funding Corp. II, 9s, 2017 560 577,478 Capital One Financial Corp., 7.25s, 2003 4,845 4,768,464 Chase Manhattan Corp., 6.75s, 2004 2,466 2,447,554 Chase Manhattan Corp., 7.875s, 2010 9,917 10,276,690 Colonial Capital II, 8.92s, 2027 5,010 4,221,792 Fleet Norstar Financial Group, 9.9s, 2001 8,700 8,855,382 MidAmerican Funding LLC, 5.85s, 2001 9,980 9,926,297 MidAmerican Funding LLC, 6.927s, 2029 12,485 10,810,849 Midland Cogeneration Venture Corp., 10.33s, 2002 6 6,350 Midland Funding Corp., 10.33s, 2002 9,435 9,633,949 Riggs National Corp., 9.65s, 2009 1,425 1,425,000 Socgen Real Estate Co., 7.64s, 2049## 3,894 3,633,998 State Street Corp., 7.65s, 2010 3,042 3,114,430 -------------- $ 78,580,975 - ------------------------------------------------------------------------------------------------------ Business Services - 0.1% Unisys Corp., 11.75s, 2004 $ 7,000 $ 7,402,500 - ------------------------------------------------------------------------------------------------------ Conglomerates - 0.5% News America Holdings, Inc., 6.703s, 2004 $ 12,847 $ 12,589,803 News America Holdings, Inc., 6.625s, 2008 9,835 9,201,233 News America Holdings, Inc., 10.125s, 2012 1,085 1,167,113 News America Holdings, Inc., 7.3s, 2028 8,176 7,201,911 -------------- $ 30,160,060 - ------------------------------------------------------------------------------------------------------ Corporate Asset Backed - 3.0% American Airlines Pass-Through Trust, 6.855s, 2009 $ 5,884 $ 5,803,516 Banamex Credit Card Merchant Voucher, 6.25s, 2003## 3,869 3,807,065 BCF LLC, 7.75s, 2006## 3,162 1,714,474 Bear Stearns Commercial Mortgage Securities, Inc., 6.8s, 2008 11,409 11,360,109 Chase Commercial Mortgage Securities Corp., 6.39s, 2008 8,417 8,040,344 Chase Commercial Mortgage Securities Corp., 7.543s, 2009 3,311 3,353,578 Commerce 2000, 6.839s, 2011 10,730 10,569,050 Commerce 2000, 6.923s, 2011## 6,824 6,823,569 Contimorgage Home Equity, 6.13s, 2013 6,020 5,986,509 Continental Airlines Pass-Through Trust, Inc., 9.5s, 2013 3,522 3,635,572 Continental Airlines Pass-Through Trust, Inc., 6.648s, 2019 11,429 10,581,108 Continental Airlines Pass-Through Trust, Inc., 7.256s, 2020 6,188 5,992,469 Criimi Mae Commercial Mortgage Trust, 7s, 2011 5,500 4,945,703 Criimi Mae Corp., 6.701s, 2008## 4,350 3,972,773 CWMBS, Inc. Pass-Through Trust, 8s, 2030 17,960 17,982,450 GS Mortgage Securities Corp. II, 6.06s, 2030 17,690 17,181,542 Istar Receivables Trust, 6.92s, 2022 4,298 4,299,091 Merrill Lynch Mortgage Investors, Inc., 8.484s, 2022+ 4,000 3,806,250 Northwest Airlines, Inc., 6.81s, 2020 1,486 1,371,148 Residential Accredit Loans, Inc., 6.75s, 2028 21,246 20,203,459 Residential Accredit Loans, Inc., 7s, 2028 9,068 8,623,927 Summit Acceptance Auto Investment LLC, 7.51s, 2007 5,940 5,999,400 Time Warner Pass-Through Asset Trust, 6.1s, 2001## 17,578 17,340,521 -------------- $ 183,393,627 - ------------------------------------------------------------------------------------------------------ Electrical Equipment - 0.1% American Tower Corp., 5s, 2010## $ 6,310 $ 6,013,087 - ------------------------------------------------------------------------------------------------------ Entertainment - 0.6% Hearst Argyle Television, Inc., 7.5s, 2027 $ 7,905 $ 6,873,002 Time Warner, Inc., 10.15s, 2012 17,570 20,676,728 Time Warner, Inc., 6.875s, 2018 4,532 4,099,511 Time Warner, Inc., 9.15s, 2023 3,421 3,744,387 -------------- $ 35,393,628 - ------------------------------------------------------------------------------------------------------ Finance - 0.1% Countrywide Funding Corp., 6.25s, 2009 $ 6,410 $ 5,835,920 - ------------------------------------------------------------------------------------------------------ Financial Institutions - 1.9% Associates Corp., 5.5s, 2004 $ 947 $ 904,470 AT&T Capital Corp., 6.25s, 2001 5,379 5,347,156 FleetBoston Financial Corp., 7.25s, 2005 3,500 3,523,695 General Motors Acceptance Corp., 5.5s, 2002 3,000 2,940,630 General Motors Acceptance Corp., 6.75s, 2002 29,500 29,362,235 General Motors Acceptance Corp., 5.95s, 2003 17,142 16,742,626 Goldman Sachs Group LP, 5.9s, 2003 5,300 5,159,285 GS Escrow Corp., 6.75s, 2001 18,807 18,517,222 Household Finance Corp., 7.875s, 2007 14,265 14,632,181 Salton Sea Funding Corp., 7.84s, 2010 7,270 7,067,894 Salton Sea Funding Corp., 8.3s, 2011 1,304 1,299,000 Sunamerica Institutional, 5.75s, 2009 9,589 8,543,799 United Companies Financial Corp., 7.7s, 2004 2,650 848,000 -------------- $ 114,888,193 - ------------------------------------------------------------------------------------------------------ Financial Services - 2.3% AIG Sunamerica Global Financing I, 7.4s, 2003## $ 14,355 $ 14,411,272 AIG Sunamerica Global Financing II, 7.6s, 2005## 10,863 11,163,253 Deere (John) Capital Corp., 7s, 2002 6,261 6,278,656 General Electric Capital Corp., 7.5s, 2005 12,300 12,646,614 General Electric Capital Corp., 8.7s, 2007 9,646 10,539,934 General Electric Capital Corp., 8.75s, 2007 3,073 3,371,419 General Electric Capital Corp., 8.85s, 2007 4,572 5,033,726 General Electric Capital Corp., 8.5s, 2008 2,419 2,642,492 General Electric Capital Corp., 7.375s, 2010 11,464 11,780,750 Lehman Brothers Holdings, 7.75s, 2005 19,418 19,807,719 Morgan (JP) Commercial Mortgage Finance Corp., 6.613s, 2030 4,018 3,892,106 Morgan Stanley Dean Witter, 7.75s, 2005 7,036 7,243,914 Morgan Stanley Group, Inc., 7.125s, 2003 9,600 9,644,928 Sprint Capital Corp., 6.5s, 2001 17,261 17,135,858 Sprint Capital Corp., 5.875s, 2004 4,418 4,223,519 -------------- $ 139,816,160 - ------------------------------------------------------------------------------------------------------ Food and Beverage Products - 0.7% Nabisco, Inc., 6.375s, 2035 $ 2,426 $ 2,252,662 Seagram (Joseph E) & Sons, Inc., 5.79s, 2001 12,771 12,647,377 Seagram (Joseph E) & Sons, Inc., 6.4s, 2003 17,630 17,275,284 Seagram (Joseph E) & Sons, Inc., 7.5s, 2018 11,012 10,778,546 -------------- $ 42,953,869 - ------------------------------------------------------------------------------------------------------ Forest and Paper Products - 0.3% Georgia-Pacific Corp., 9.95s, 2002 $ 4,320 $ 4,482,994 Georgia-Pacific Corp., 7.7s, 2015 3,100 2,956,935 Georgia-Pacific Corp., 9.875s, 2021 11,382 11,935,848 Georgia-Pacific Corp., 9.5s, 2022 1,000 1,045,600 -------------- $ 20,421,377 - ------------------------------------------------------------------------------------------------------ Housing - 0.1% Residential Funding Mortgage Securities, Inc., 7.66s, 2012 $ 3,901 $ 3,935,095 - ------------------------------------------------------------------------------------------------------ Insurance - 0.6% Aflac, Inc., 6.5s, 2009 $ 22,913 $ 21,278,386 Atlantic Mutual Insurance Co., 8.15s, 2028## 10,964 8,450,613 Providian Capital I, 9.525s, 2027## 11,526 8,579,839 -------------- $ 38,308,838 - ------------------------------------------------------------------------------------------------------ Oil Services - 0.2% Kerr McGee Corp., 5.25s, 2010 $ 1,280 $ 1,590,400 Phillips Petroleum Co., 8.5s, 2005 6,703 7,085,473 Ultramar Diamond Shamrock Corp., 7.2s, 2017 5,030 4,651,593 -------------- $ 13,327,466 - ------------------------------------------------------------------------------------------------------ Oils - 0.2% Alberta Energy Ltd., 7.65s, 2010 $ 3,235 $ 3,256,901 Alberta Energy Ltd., 8.125s, 2030 4,732 4,704,271 Occidental Petroleum Corp., 6.75s, 2002 1,712 1,696,626 Occidental Petroleum Corp., 6.4s, 2003 1,245 1,224,196 Oryx Energy Co., 8s, 2003 2,000 2,035,020 -------------- $ 12,917,014 - ------------------------------------------------------------------------------------------------------ Railroads - 0.2% Union Pacific Corp., 5.78s, 2001 $ 7,488 $ 7,362,426 Union Pacific Corp., 6.34s, 2003 7,211 7,017,529 -------------- $ 14,379,955 - ------------------------------------------------------------------------------------------------------ Real Estate - 0.1% EOP Operating Ltd., 8.1s, 2010 $ 3,671 $ 3,694,862 - ------------------------------------------------------------------------------------------------------ Restaurants and Lodging - 0.1% MGM Mirage, Inc., 8.5s, 2010 $ 7,397 $ 7,391,008 - ------------------------------------------------------------------------------------------------------ Retail - 0.3% Federated Department Stores, Inc., 8.5s, 2003 $ 9,959 $ 10,162,562 Federated Department Stores, Inc., 6.3s, 2009 12,875 11,150,136 -------------- $ 21,312,698 - ------------------------------------------------------------------------------------------------------ Supermarkets - 0.2% Safeway, Inc., 5.875s, 2001 $ 10,400 $ 10,258,352 - ------------------------------------------------------------------------------------------------------ Telecommunications - 0.6% Sprint Spectrum LP, 11s, 2006 $ 3,750 $ 4,150,050 TCI Communications Financing III, 9.65s, 2027 15,844 17,105,816 Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 5,862 5,584,001 United Telecommunications Co., 9.5s, 2003 6,806 7,132,075 WorldCom, Inc., 8.875s, 2006 5,000 5,174,700 -------------- $ 39,146,642 - ------------------------------------------------------------------------------------------------------ Telecommunications and Cable - 0.2% Belo Ah Corp., 7.75s, 2027 $ 5,420 $ 4,587,813 Comcast Corp., 10.25s, 2001 6,818 7,025,813 -------------- $ 11,613,626 - ------------------------------------------------------------------------------------------------------ Telecom - Wire Less - 0.3% Qwest Capital Funding, Inc., 7.75s, 2006 $ 17,000 $ 17,295,460 - ------------------------------------------------------------------------------------------------------ Utilities - Electric - 3.4% CalEnergy Co., Inc., 7.23s, 2005 $ 5 $ 4,974 Cleveland Electric Illuminating Co., 7.88s, 2017 7,403 7,247,759 Cleveland Electric Illuminating Co., 9s, 2023 8,396 8,635,118 CMS Energy Corp., 8s, 2001 5,859 5,807,013 CMS Energy Corp., 8.375s, 2003 5,651 5,519,191 CMS Panhandle Holding Co., 6.5s, 2009 9,270 8,375,723 Commonwealth Edison Co., 8.5s, 2022 7,370 7,284,213 Connecticut Light & Power Co., 7.875s, 2001 15,365 15,417,615 Connecticut Light & Power Co., 7.75s, 2002 3,900 3,936,036 Connecticut Light & Power Co., 8.59s, 2003 7,800 7,782,606 Dominion Resources, Inc., 7.625s, 2005 6,879 6,957,283 Entergy Mississippi, Inc., 6.2s, 2004 5,533 5,321,086 GGIB Funding Corp., 7.43s, 2011 4,339 4,191,812 Gulf States Utilities Co., 8.21s, 2002 4,445 4,473,403 Gulf States Utilities Co., 8.25s, 2004 2,781 2,860,064 Illinois Power Special Purpose Trust, 5.26s, 2003 2,765 2,743,739 Niagara Mohawk Power Corp., 7.25s, 2002 11,797 11,741,467 Niagara Mohawk Power Corp., 7.375s, 2003 1,843 1,852,694 Niagara Mohawk Power Corp., 7.75s, 2006 18,456 18,798,543 North Atlantic Energy, 9.05s, 2002 2,290 2,303,694 Northeast Utilities, 8.58s, 2006 7,783 7,917,217 NRG Energy, Inc., 8.7s, 2005## 4,525 4,788,717 NRG Energy South Central, 8.962s, 2016 6,408 6,568,997 NSTAR Co., 8s, 2010 6,108 6,247,751 PNPP II Funding Corp., 9.12s, 2016 2,228 2,300,633 PP&L, Inc., 6.125s, 2001 7,790 7,738,976 Texas Utilities Co., 5.94s, 2001 14,180 14,019,341 Toledo Edison Co., 7.875s, 2004 5,128 5,199,638 TXU Eastern Funding Co., 6.15s, 2002 7,759 7,591,018 Utilicorp United, Inc., 7s, 2004 3,499 3,395,884 Waterford 3 Funding Entergy Corp., 8.09s, 2017 10,945 10,673,525 -------------- $ 207,695,730 - ------------------------------------------------------------------------------------------------------ Utilities - Gas - 0.8% Coastal Corp., 6.2s, 2004 $ 14,755 $ 14,314,416 Coastal Corp., 7.75s, 2010 13,831 14,037,151 Enron Corp., 7.875s, 2003 4,793 4,899,932 Tennessee Gas Pipeline Co., 7.625s, 2037 5,338 5,071,313 Texas Gas Transmission Corp., 7.25s, 2027 6,288 5,787,444 Williams Gas Pipelines Central, Inc., 7.375s, 2006## 3,759 3,739,115 -------------- $ 47,849,371 - ------------------------------------------------------------------------------------------------------ Utilities - Telephone - 0.2% U.S. West Communications, Inc., 7.625s, 2003 $ 10,355 $ 10,483,195 - ------------------------------------------------------------------------------------------------------ Total U.S. Bonds $1,189,231,688 - ------------------------------------------------------------------------------------------------------ U.S. Federal Agencies - 4.5% Federal Home Loan Bank, 6.5s, 2028 $ 420 $ 403,131 Federal National Mortgage Assn., 5.722s, 2009 16,001 14,703,419 Federal National Mortgage Assn., 6.5s, 2028 42 40,235 Federal National Mortgage Assn., 6.625s, 2009 16,950 16,748,634 Federal National Mortgage Assn., 7s, 2005 - 2030 104,480 102,900,000 Federal National Mortgage Assn., 7.25s, 2010 92,973 95,878,406 Federal National Mortgage Assn., 7.5s, 2030 - 2030 46,000 45,893,841 - ------------------------------------------------------------------------------------------------------ Total U.S. Federal Agencies $ 276,567,666 - ------------------------------------------------------------------------------------------------------ U.S. Government Guaranteed - 12.7% Government National Mortgage Assn., 7s, 2027 - 2028 $ 39,715 $ 39,133,406 Government National Mortgage Assn., 7.5s, 2023 - 2028 86,531 86,821,632 Government National Mortgage Assn., 8s, 2022 - 2030 303,419 308,973,847 Small Business Administration, 8.8s, 2011 250 258,480 U.S. Treasury Bonds, 6.125s, 2029 100,768 102,925,443 U.S. Treasury Bonds, 6.25s, 2030 19,257 20,237,952 U.S. Treasury Notes, 4.25s, 2010 32,929 33,618,351 U.S. Treasury Notes, 5.75s, 2010 68,300 68,022,702 U.S. Treasury Notes, 6.375s, 2001 - 2002 40,000 40,045,900 U.S. Treasury Notes, 6.5s, 2001 - 2010 30,834 31,700,600 U.S. Treasury Notes, 6.75s, 2005 43,700 45,270,578 - ------------------------------------------------------------------------------------------------------ Total U.S. Government Guaranteed $ 777,008,891 - ------------------------------------------------------------------------------------------------------ Foreign Bonds - 0.6% Canada - 0.3% AT&T Canada, Inc., 0s to 2003, 9.95s to 2008 (Telecommunications) $ 2,155 $ 1,799,123 Gulf Canada Resources Ltd., 9.25s, 2004 (Oils) 1,785 1,812,400 Province of Quebec, 7.5s, 2029 11,080 11,067,701 -------------- $ 14,679,224 - ------------------------------------------------------------------------------------------------------ Mexico - 0.2% United Mexican States, 9.875s, 2010 $ 9,068 $ 9,657,420 - ------------------------------------------------------------------------------------------------------ Netherlands - 0.1% KPN NV, 8s, 2010 (Telecommunications)## $ 2,332 $ 2,333,609 Telefonica Europe Bv, 7.35s, 2005 (Telecommunications) 8,419 8,451,918 -------------- $ 10,785,527 - ------------------------------------------------------------------------------------------------------ Norway Union Bank of Norway, 7.35s, 2049 (Banks and Credit Cos.)## $ 2,273 $ 2,240,451 - ------------------------------------------------------------------------------------------------------ Total Foreign Bonds $ 37,362,622 - ------------------------------------------------------------------------------------------------------ Total Bonds (Identified Cost, $2,296,172,271) $2,280,170,867 - ------------------------------------------------------------------------------------------------------ Convertible Preferred Stocks - 2.1% - ------------------------------------------------------------------------------------------------------ ISSUER SHARES VALUE - ------------------------------------------------------------------------------------------------------ U.S. Stocks - 2.0% Banks and Credit Companies Sovereign Bancorp, Inc. 7.5% 49,820 $ 2,758,783 - ------------------------------------------------------------------------------------------------------ Business Services - 0.1% EVI, Inc., 5% 70,000 $ 3,333,750 - ------------------------------------------------------------------------------------------------------ Consumer Goods and Services Newell Financial Trust I, 5.25% 80,400 $ 2,914,500 - ------------------------------------------------------------------------------------------------------ Containers - 0.1% Owens-Illinois, Inc., 4.75% 210,600 $ 3,632,850 - ------------------------------------------------------------------------------------------------------ Financial Institutions - 0.1% Salomon, Inc., 6.25% 51,000 $ 4,845,000 - ------------------------------------------------------------------------------------------------------ Insurance - 0.5% Ace Ltd., 8.25% 44,000 $ 3,550,250 Lincoln National Corp. 1.85% 204,000 4,080,000 Lincoln National Corp., 7.75% 125,600 2,983,000 Metlife Capital Trust I, 8% 201,800 17,153,000 QBE Insurance Group Ltd., 8%## 52,000 2,782,000 -------------- $ 30,548,250 - ------------------------------------------------------------------------------------------------------ Oil Services - 0.1% Enron Corp., 7% 140,200 $ 4,985,863 - ------------------------------------------------------------------------------------------------------ Oils - 0.1% Apache Corp., 6.5% 50,000 $ 2,565,625 Coastal Corp., 5.58% 13,400 522,600 Coastal Corp., 6.625% 74,150 3,086,494 -------------- $ 6,174,719 - ------------------------------------------------------------------------------------------------------ Telecommunications - 0.3% Cox Communications, Inc., 0.25% 92,000 $ 3,846,520 Cox Communications, Inc., 7.75% 17,600 1,282,688 Global Telesystems Group, Inc., 7.25%## 37,750 401,282 Intermedia Communications, Inc., $3.25 73,100 2,595,050 Intermedia Communications, Inc., 7%## 39,900 1,436,400 Qwest Trends Trust, 5.75%## 54,700 4,239,250 UnitedGlobalCom, Inc., "C", 7% 40,000 1,665,000 UnitedGlobalCom, Inc., "D", 7% 13,340 436,885 -------------- $ 15,903,075 - ------------------------------------------------------------------------------------------------------ Telecom - Wire Less Crown Castle International Corp., 6.25%* 30,000 $ 1,507,500 - ------------------------------------------------------------------------------------------------------ Utilities - Electric - 0.6% AES Trust III, 6.75% 58,800 $ 6,085,800 AES Trust VII, 6%## 16,700 1,371,487 Calpine Capital Trust, 5.75% 15,000 2,681,250 CMS Energy Corp., 8.75% 186,800 5,954,250 NiSource, Inc., 7.75% 353,200 16,953,600 Southern Energy, Inc., 6.25% 4,300 282,188 TXU Corp., 9.25% 106,600 4,976,887 -------------- $ 38,305,462 - ------------------------------------------------------------------------------------------------------ Utilities - Gas - 0.1% El Paso Energy Capital Trust I, 4.75% 80,000 $ 6,250,000 Semco Energy, Inc., 11% 158,700 1,745,700 -------------- $ 7,995,700 - ------------------------------------------------------------------------------------------------------ Utilities - Telephone Williams Communications Group, 6.75%## 24,000 $ 1,020,000 - ------------------------------------------------------------------------------------------------------ Total U.S. Stocks $ 123,925,452 - ------------------------------------------------------------------------------------------------------ Foreign Stocks - 0.1% Bermuda - 0.1% Global Crossing Ltd., 6.75% (Telecommunications) 2,600 $ 650,845 Global Crossing Ltd., 7% (Telecommunications)## 8,000 1,547,000 -------------- $ 2,197,845 - ------------------------------------------------------------------------------------------------------ Canada Canadian National Railway Co., 5.25% (Railroads) 40,300 $ 1,798,387 - ------------------------------------------------------------------------------------------------------ Total Foreign Stocks $ 3,996,232 - ------------------------------------------------------------------------------------------------------ Total Convertible Preferred Stocks (Identified Cost, $112,464,988) $ 127,921,684 - ------------------------------------------------------------------------------------------------------ Convertible Bonds - 1.1% - ------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT (000 OMITTED) - ------------------------------------------------------------------------------------------------------ U.S. Bonds - 1.1% Banks and Credit Companies Providian Financial Corp., 3.25s, 2005 $ 1,500 $ 1,526,250 - ------------------------------------------------------------------------------------------------------ Computer Software - Services Affiliated Computer Services, Inc., 4s, 2005## $ 1,495 $ 1,950,975 - ------------------------------------------------------------------------------------------------------ Computer Software - Systems - 0.1% Analog Devices, Inc., 4.75s, 2005## $ 1,160 $ 1,194,081 Ingram Micro, Inc., 0s, 2018 6,200 2,325,000 Networks Assocs., Inc., 0s, 2018 10 3,787 -------------- $ 3,522,868 - ------------------------------------------------------------------------------------------------------ Conglomerates - 0.2% Loews Corp., 3.125s, 2007 $ 12,100 $ 10,723,625 - ------------------------------------------------------------------------------------------------------ Electrical Equipment - 0.1% American Tower Corp., 6.25s, 2009## $ 1,790 $ 3,007,200 Atmel Corp., 0s, 2018 2,000 1,700,000 -------------- $ 4,707,200 - ------------------------------------------------------------------------------------------------------ Electronics - 0.1% Conexant Systems, Inc., 4.25s, 2006 $ 800 $ 1,446,016 SCI Systems, Inc., 3s, 2007 1,500 1,530,000 -------------- $ 2,976,016 - ------------------------------------------------------------------------------------------------------ Energy - 0.1% Alliant Energy Resources, Inc., 7.25s to 2003, 2.25s to 2030## $ 30 $ 1,605,000 Devon Energy Corp., 0s, 2020## 3,300 1,555,851 -------------- $ 3,160,851 - ------------------------------------------------------------------------------------------------------ Financial Services - 0.2% Bell Atlantic Financial Services, Inc., 4.25s, 2005## $ 3,000 3,384,300 Elan Finance Corp. Ltd., 0s, 2018## 8,000 6,389,920 -------------- $ 9,774,220 - ------------------------------------------------------------------------------------------------------ Internet America Online, Inc., 0s, 2019 $ 3,500 $ 1,748,250 - ------------------------------------------------------------------------------------------------------ Medical and Health Technology and Services Health Management Associates, Inc., 0s, 2020## $ 3,500 $ 2,410,625 - ------------------------------------------------------------------------------------------------------ Oil Services Global Marine, Inc., 0s, 2020 $ 2,000 $ 1,017,500 - ------------------------------------------------------------------------------------------------------ Oils - 0.1% Diamond Offshore Drilling, Inc., 0s, 2020## $ 4,000 $ 2,000,000 Transocean Sedco Forex, Inc., 0s, 2020 1,700 1,064,625 -------------- $ 3,064,625 - ------------------------------------------------------------------------------------------------------ Pharmaceuticals - 0.1% Millennium Pharmaceuticals, 5.5s, 2007## $ 2,000 $ 3,772,500 - ------------------------------------------------------------------------------------------------------ Printing and Publishing Tribune Co., 2s, 2029 $ 20 $ 2,395,000 - ------------------------------------------------------------------------------------------------------ Retail Anntaylor Stores Corp., 0s, 2019## $ 4,000 $ 2,295,000 - ------------------------------------------------------------------------------------------------------ Telecommunications - 0.1% Cox Communications, Inc., 0s, 2020 $ 6,500 $ 2,717,650 Echostar Communications Corp., 4.875s, 2007## 1,990 2,634,263 Liberty Media Group, 4s, 2029## 1,160 1,083,150 Transwitch Corp., 4.5s, 2005 880 1,078,000 -------------- $ 7,513,063 - ------------------------------------------------------------------------------------------------------ Telecommunications and Cable Comcast Corp., 2s, 2029 $ 28 $ 1,897,450 - ------------------------------------------------------------------------------------------------------ Total U.S. Bonds $ 64,456,018 - ------------------------------------------------------------------------------------------------------ Foreign Bonds Canada Four Seasons Hotels, Inc., 0s, 2029 (Restaurants and Lodging) $ 4,982 $ 2,045,609 - ------------------------------------------------------------------------------------------------------ Total Convertible Bonds (Identified Cost, $57,493,303) $ 66,501,627 - ------------------------------------------------------------------------------------------------------ Preferred Stocks - 0.1% - ------------------------------------------------------------------------------------------------------ SHARES - ------------------------------------------------------------------------------------------------------ Automotive - 0.1% Tower Automotive Capital Trust, 6.75% 94,800 $ 2,512,200 - ------------------------------------------------------------------------------------------------------ Telecommunications Global Telesystems Group, Inc., 7.25% 22,250 $ 230,844 WinStar Communications, Inc., 7%* 55,000 1,608,750 -------------- $ 1,839,594 - ------------------------------------------------------------------------------------------------------ Utilities - Electric CMS Energy Corp.* 80,000 $ 2,026,000 - ------------------------------------------------------------------------------------------------------ Total Preferred Stocks (Identified Cost, $10,704,213) $ 6,377,794 - ------------------------------------------------------------------------------------------------------ Right - 0.1% - ------------------------------------------------------------------------------------------------------ CVS Corp. (Identified Cost, $5,429,248) 78,100 $ 6,345,625 - ------------------------------------------------------------------------------------------------------ Short-Term Obligations - 1.9% - ------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT (000 OMITTED) - ------------------------------------------------------------------------------------------------------ Aig Funding, Inc., due 10/02/00 $ 829 $ 828,847 American Express Credit Corp., due 10/02/00 9,581 9,579,220 Associates Corp. of North America, due 10/02/00 9,197 9,195,291 Barton Capital Corp., due 10/04/00^ 38,896 38,874,704 Electronic Data Systems Corp., due 10/02/00 3,129 3,128,419 Federal National Mortgage Assn., due 10/02/00 1,708 1,707,700 General Electric Capital Corp., due 10/02/00 14,175 14,172,382 General Electric Co., due 10/11/00 10,106 10,087,753 General Motors Acceptance Corp., due 10/02/00 1,259 1,258,765 Gillette Co., due 10/02/00 13,636 13,633,470 Goldman Sachs Group LP, due 10/02/00 7,699 7,697,574 Morgan Stanley Dean Witter, due 10/02/00 6,564 6,562,787 Salomon Smith Barney Holdings, Inc., due 10/02/00 3,675 3,674,320 - ------------------------------------------------------------------------------------------------------ Total Short-Term Obligations, at Amortized Cost $ 120,401,232 - ------------------------------------------------------------------------------------------------------ Total Investments (Identified Cost, $5,520,963,087) $6,073,828,648 Other Assets, Less Liabilities - 1.0% 59,080,996 - ------------------------------------------------------------------------------------------------------ Net Assets - 100.0% $6,132,909,644 - ------------------------------------------------------------------------------------------------------ * Non-income producing security. ## SEC Rule 144A restriction. + Restricted security. ^ 4(2) paper. See notes to financial statements.
FINANCIAL STATEMENTS Statement of Assets and Liabilities - --------------------------------------------------------------------------------------------------------------- SEPTEMBER 30, 2000 - --------------------------------------------------------------------------------------------------------------- Assets: Investments, at value (identified cost, $5,520,963,087) $6,073,828,648 Investments of cash collateral for securities loaned, at identified cost and value 14,328,057 Cash 472,545 Foreign currency, at value (identified cost, $348) 320 Receivable for fund shares sold 6,385,818 Receivable for investments sold 113,781,924 Interest and dividends receivable 39,619,234 Other assets 93,651 -------------- Total assets $6,248,510,197 -------------- Liabilities: Distributions payable $ 1,764,394 Payable for fund shares reacquired 16,670,610 Payable for investments purchased 80,997,315 Collateral for securities loaned, at value 14,328,057 Payable to affiliates - Management fee 130,452 Shareholder servicing agent fee 33,688 Distribution and service fee 206,553 Administrative fee 3,754 Accrued expenses and other liabilities 1,465,730 -------------- Total liabilities $ 115,600,553 -------------- Net assets $6,132,909,644 ============== Net assets consist of: Paid-in capital $5,420,618,631 Unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 552,828,953 Accumulated undistributed net realized gain on investments and foreign currency transactions 162,314,342 Accumulated distributions in excess of net investment income (2,852,281) -------------- Total $6,132,909,644 ============== Shares of beneficial interest outstanding 403,753,022 =========== Class A shares: Net asset value per share (net assets of $3,570,342,548 / 235,079,765 shares of beneficial interest outstanding) $15.19 ====== Offering price per share (100 / 95.25 of net asset value per share) $15.95 ====== Class B shares: Net asset value and offering price per share (net assets of $2,014,088,756 / 132,655,859 shares of beneficial interest outstanding) $15.18 ====== Class C shares: Net asset value and offering price per share (net assets of $497,319,602 / 32,648,951 shares of beneficial interest outstanding) $15.23 ====== Class I shares: Net asset value, offering price, and redemption price per share (net assets of $51,158,738 / 3,368,447 shares of beneficial interest outstanding) $15.19 ====== 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.
FINANCIAL STATEMENTS -- continued Statement of Operations - ---------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2000 - ---------------------------------------------------------------------------------------------- Net investment income: Income - Interest $178,445,061 Dividends 80,891,046 Foreign taxes withheld (970,368) ------------ Total investment income $258,365,739 ------------ Expenses - Management fee $ 20,945,302 Trustees' compensation 129,647 Shareholder servicing agent fee 6,092,547 Distribution and service fee (Class A) 12,323,874 Distribution and service fee (Class B) 20,381,829 Distribution and service fee (Class C) 4,864,404 Administrative fee 478,392 Custodian fee 1,126,300 Printing 198,909 Postage 497,007 Auditing fees 40,749 Legal fees 24,704 Miscellaneous 3,682,837 ------------ Total expenses $ 70,786,501 Fees paid indirectly (735,757) ------------ Net expenses $ 70,050,744 ------------ Net investment income $188,314,995 ------------ Realized and unrealized gain (loss) on investments: Realized gain (loss) (identified cost basis) - Investment transactions $181,801,804 Foreign currency transactions (2,206,180) ------------ Net realized gain on investments and foreign currency transactions $179,595,624 ------------ Change in unrealized appreciation - Investments $440,275,014 Translation of assets and liabilities in foreign currencies 2,205,880 ------------ Net unrealized gain on investments and foreign currency translation $442,480,894 ------------ Net realized and unrealized gain on investments and foreign currency $622,076,518 ------------ Increase in net assets from operations $810,391,513 ============ See notes to financial statements.
FINANCIAL STATEMENTS -- continued Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------ YEAR ENDED SEPTEMBER 30, 2000 1999 - ------------------------------------------------------------------------------------------------ Increase (decrease) in net assets: From operations - Net investment income $ 188,314,995 $ 207,767,725 Net realized gain on investments and foreign currency transactions 179,595,624 401,496,989 Net unrealized gain (loss) on investments and foreign currency translation 442,480,894 (205,475,863) -------------- -------------- Increase in net assets from operations $ 810,391,513 $ 403,788,851 -------------- -------------- Distributions declared to shareholders - From net investment income (Class A) $ (116,270,542) $ (129,580,179) From net investment income (Class B) (54,038,292) (59,446,051) From net investment income (Class C) (12,844,370) (11,895,158) From net investment income (Class I) (1,709,284) (975,400) From net realized gain on investments and foreign currency transactions (Class A) (236,088,862) (456,637,307) From net realized gain on investments and foreign currency transactions (Class B) (141,602,847) (261,186,854) From net realized gain on investments and foreign currency transactions (Class C) (32,927,178) (46,940,472) From net realized gain on investments and foreign currency transactions (Class I) (3,092,028) (2,276,517) -------------- -------------- Total distributions declared to shareholders $ (598,573,403) $ (968,937,938) -------------- -------------- Net increase (decrease) in net assets from fund share transactions $ (551,332,005) $1,198,132,902 -------------- -------------- Total increase (decrease) in net assets $ (339,513,895) $ 632,983,815 Net assets: At beginning of period 6,472,423,539 5,839,439,724 -------------- -------------- At end of period (including accumulated distributions in excess of net investment income of $2,852,281 and $5,393,683, respectively) $6,132,909,644 $6,472,423,539 ============== ============== See notes to financial statements.
FINANCIAL STATEMENTS -- continued Financial Highlights
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- CLASS A - ----------------------------------------------------------------------------------------------------------------------- Per share data (for a share outstanding throughout each period): Net asset value - beginning of period $14.57 $16.06 $16.92 $15.03 $14.46 ------ ------ ------ ------ ------ Income from investment operations# - Net investment income(S) $ 0.48 $ 0.53 $ 0.57 $ 0.60 $ 0.64 Net realized and unrealized gain on investments and foreign currency 1.55 0.56 0.53 2.94 1.21 ------ ------ ------ ------ ------ Total from investment operations $ 2.03 $ 1.09 $ 1.10 $ 3.54 $ 1.85 ------ ------ ------ ------ ------ Less distributions declared to shareholders - From net investment income $(0.47) $(0.51) $(0.58) $(0.59) $(0.62) From net realized gain on investments and foreign currency transactions (0.94) (2.07) (1.37) (1.06) (0.66) In excess of net realized gain on investments and foreign currency transactions -- -- (0.01) -- -- ------ ------ ------ ------ ------ Total distributions declared to shareholders $(1.41) $(2.58) $(1.96) $(1.65) $(1.28) ------ ------ ------ ------ ------ Net asset value - end of period $15.19 $14.57 $16.06 $16.92 $15.03 ====== ====== ====== ====== ====== Total return(+) 15.06% 7.06% 6.98% 25.27% 13.50% Ratios (to average net assets)/Supplemental data: Expenses## 0.90% 0.89% 0.90% 0.93% 0.91% Net investment income 3.36% 3.45% 3.44% 3.84% 4.35% Portfolio turnover 112% 151% 126% 143% 140% Net assets at end of period (000,000 omitted) $3,570 $3,699 $3,503 $3,199 $2,568 # 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.
FINANCIAL STATEMENTS -- continued Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- CLASS B - ----------------------------------------------------------------------------------------------------------------------- Per share data (for a share outstanding throughout each period): Net asset value - beginning of period $14.57 $16.05 $16.92 $15.02 $14.46 ------ ------ ------ ------ ------ Income from investment operations# - Net investment income $ 0.39 $ 0.43 $ 0.46 $ 0.50 $ 0.52 Net realized and unrealized gain on investments and foreign currency 1.54 0.58 0.53 2.95 1.21 ------ ------ ------ ------ ------ Total from investment operations $ 1.93 $ 1.01 $ 0.99 $ 3.45 $ 1.73 ------ ------ ------ ------ ------ Less distributions declared to shareholders - From net investment income $(0.38) $(0.42) $(0.48) $(0.49) $(0.51) From net realized gain on investments and foreign currency transactions (0.94) (2.07) (1.37) (1.06) (0.66) In excess of net investment income -- -- (0.01) -- -- ------ ------ ------ ------ ------ Total distributions declared to shareholders $(1.32) $(2.49) $(1.86) $(1.55) $(1.17) ------ ------ ------ ------ ------ Net asset value - end of period $15.18 $14.57 $16.05 $16.92 $15.02 ====== ====== ====== ====== ====== Total return 14.24% 6.43% 6.22% 24.51% 12.49% Ratios (to average net assets)/Supplemental data: Expenses## 1.54% 1.54% 1.55% 1.60% 1.67% Net investment income 2.71% 2.80% 2.80% 3.17% 3.56% Portfolio turnover 112% 151% 126% 143% 140% Net assets at end of period (000,000 omitted) $2,014 $2,217 $1,984 $1,707 $1,284 # Per share data is based on average shares outstanding. ## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements. See notes to financial statements.
FINANCIAL STATEMENTS -- continued Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- CLASS C - ----------------------------------------------------------------------------------------------------------------------- Per share data (for a share outstanding throughout each period): Net asset value - beginning of period $14.61 $16.10 $16.96 $15.06 $14.49 ------ ------ ------ ------ ------ Income from investment operations# - Net investment income $ 0.39 $ 0.43 $ 0.46 $ 0.50 $ 0.53 Net realized and unrealized gain on investments and foreign currency 1.55 0.57 0.53 2.95 1.22 ------ ------ ------ ------ ------ Total from investment operations $ 1.94 $ 1.00 $ 0.99 $ 3.45 $ 1.75 ------ ------ ------ ------ ------ Less distributions declared to shareholders - From net investment income $(0.38) $(0.42) $(0.47) $(0.49) $(0.52) From net realized gain on investments and foreign currency transactions (0.94) (2.07) (1.37) (1.06) (0.66) In excess of net investment income -- -- (0.01) -- -- ------ ------ ------ ------ ------ Total distributions declared to shareholders $(1.32) $(2.49) $(1.85) $(1.55) $(1.18) ------ ------ ------ ------ ------ Net asset value - end of period $15.23 $14.61 $16.10 $16.96 $15.06 ====== ====== ====== ====== ====== Total return 14.27% 6.41% 6.27% 24.39% 12.67% Ratios (to average net assets)/Supplemental data: Expenses## 1.54% 1.54% 1.55% 1.60% 1.63% Net investment income 2.70% 2.80% 2.80% 3.16% 3.67% Portfolio turnover 112% 151% 126% 143% 140% Net assets at end of period (000,000 omitted) $497 $508 $336 $190 $83 # 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.
FINANCIAL STATEMENTS -- continued Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------ YEAR ENDED SEPTEMBER 30, PERIOD ENDED ----------------------------------- SEPTEMBER 30, 2000 1999 1998 1997* - ------------------------------------------------------------------------------------------------------------ CLASS I - ------------------------------------------------------------------------------------------------------------ Per share data (for a share outstanding throughout each period): Net asset value - beginning of period $14.57 $16.06 $16.92 $14.70 ------ ------ ------ ------ Income from investment operations# - Net investment income $ 0.53 $ 0.58 $ 0.63 $ 0.48 Net realized and unrealized gain on investments and foreign currency 1.55 0.57 0.53 2.23 ------ ------ ------ ------ Total from investment operations $ 2.08 $ 1.15 $ 1.16 $ 2.71 ------ ------ ------ ------ Less distributions declared to shareholders - From net investment income $(0.52) $(0.57) $(0.64) $(0.49) From net realized gain on investments and foreign currency transactions (0.94) (2.07) (1.37) -- In excess of net investment income -- -- (0.01) -- ------ ------ ------ ------ Total distributions declared to shareholders $(1.46) $(2.64) $(2.02) $(0.49) ------ ------ ------ ------ Net asset value - end of period $15.19 $14.57 $16.06 $16.92 ====== ====== ====== ====== Total return 15.46% 7.43% 7.35% 18.69%++ Ratios (to average net assets)/Supplemental data: Expenses## 0.55% 0.54% 0.55% 0.60%+ Net investment income 3.71% 3.84% 3.79% 4.16%+ Portfolio turnover 112% 151% 126% 143% Net assets at end of period (000,000 omitted) $ 51 $ 48 $ 17 $ 16 * For the period from the inception of Class I shares, January 2, 1997, through September 30, 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.
NOTES TO FINANCIAL STATEMENTS (1) Business and Organization MFS Total Return Fund (the fund) is a diversified series of MFS Series Trust V (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 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 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. Deferred Trustee Compensation - Effective July 24, 1999, under a Deferred Compensation Plan (the Plan) independent Trustees may elect to defer receipt of all or a portion of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or other MFS funds selected by the Trustee. Deferred amounts represent an unsecured obligation of the fund until distributed in accordance with the plan. 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/or 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. 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 September 30, 2000, the value of securities loaned was $45,405,619. These loans were collateralized by U.S. Treasury securities of $36,728,216 and cash of $14,328,057 which was invested in the following short-term obligations: AMORTIZED COST PRINCIPAL AMOUNT AND VALUE - -------------------------------------------------------------------------------- Salomon Smith Barney, Inc. 2002 14,328,057 $14,328,057 Forward Foreign Currency Exchange Contracts - The fund may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The fund may enter into forward contracts for hedging purposes as well as for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency it will receive from or require for its normal investment activities. The fund may also use contracts in a manner intended to protect foreign currency-denominated securities from declines in value due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund's portfolio of securities to different currencies to take advantage of anticipated changes. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded as unrealized until the contract settlement date. On contract settlement date, the gains or losses are recorded as realized gains or losses on foreign currency transactions. Investment Transactions and Income - Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All discount is accreted for financial statement and tax reporting purposes as required by federal income tax regulations. Dividends received in cash are recorded on the ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date. 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 $656,942 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 $78,815 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 September 30, 2000, distributions in excess of net investment income decreased by $911,105, accumulated undistributed net realized gain on investments and foreign currency transactions increased by $3,396,376, and paid in capital from common shareholders decreased by $2,485,271 due to differences in book and tax accounting for currency transactions and mortgage backed securities. 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 the following annual rates:
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME - ------------------------------------------------- --------------------------------------------- First $200 million 0.250% First $14 million 3.57% In excess of $200 million 0.212% In excess of $14 million 3.04%
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 $45,777 for the year ended September 30, 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 $732,802 for the year ended September 30, 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 $692,950 for the year ended September 30, 2000. Fees incurred under the distribution plan during the year ended September 30, 2000, were 0.35% of average daily net assets attributable to Class A shares on an annualized basis. The fund's distribution plan provides that the fund will pay MFD a distribution fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the fund's average daily net assets attributable to Class B and Class C shares. MFD will pay to securities dealers that enter into a sales agreement with MFD all or a portion of the service fee attributable to Class B and Class C shares, and will pay to such securities dealers all of the distribution fee attributable to Class C shares. The service fee is intended to be consideration for services rendered by the dealer with respect to Class B and Class C shares. MFD retains the service fee for accounts not attributable to a securities dealer, which amounted to $93,262 and $9,765 for Class B and Class C shares, respectively, for the year ended September 30, 2000. Fees incurred under the distribution plan during the year ended September 30, 2000, were 1.00% of average daily net assets attributable to Class B and Class C shares. 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 September 30, 2000, were $71,901, $3,686,071, and $114,325 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 $2,539,092,281 $2,465,762,616 -------------- -------------- Investments (non-U.S. government securities) $4,120,697,369 $5,107,500,142 -------------- -------------- 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 $5,441,459,577 -------------- Gross unrealized appreciation $ 680,326,674 Gross unrealized depreciation (168,358,862) -------------- Net unrealized appreciation $ 511,967,812 ============== (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: Class A shares
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999 ------------------------------------ ------------------------------------ SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------- Shares sold 93,955,325 $ 1,331,798,426 110,586,325 $ 1,674,314,695 Shares issued to shareholders in reinvestment of distributions 22,064,256 308,357,353 34,947,572 517,032,870 Shares reacquired (134,782,749) (1,898,852,252) (109,828,347) (1,664,143,600) ------------ --------------- ------------ --------------- Net increase (decrease) (18,763,168) $ (258,696,473) 35,705,550 $ 527,203,965 ============ =============== ============ =============== Class B shares YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999 ------------------------------------ ------------------------------------ SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------- Shares sold 17,621,933 $ 250,155,798 38,673,047 $ 586,933,287 Shares issued to shareholders in reinvestment of distributions 12,883,446 179,778,090 19,921,555 294,415,702 Shares reacquired (50,025,254) (696,003,696) (29,991,200) (454,715,848) ------------ --------------- ------------ --------------- Net increase (decrease) (19,519,875) $ (266,069,808) 28,603,402 $ 426,633,141 ============ =============== ============ =============== Class C shares YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999 ------------------------------------ ------------------------------------ SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------- Shares sold 7,034,780 $ 100,045,652 17,496,762 $ 266,491,500 Shares issued to shareholders in reinvestment of distributions 2,934,602 41,083,330 3,561,406 52,786,839 Shares reacquired (12,081,436) (168,996,210) (7,147,794) (108,828,036) ------------ --------------- ------------ --------------- Net increase (decrease) (2,112,054) $ (27,867,228) 13,910,374 $ 210,450,303 ============ =============== ============ =============== Class I shares YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999 ------------------------------------ ------------------------------------ SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------- Shares sold 1,895,714 $ 26,863,733 2,364,510 $ 35,910,941 Shares issued to shareholders in reinvestment of distributions 342,694 4,796,606 220,172 3,263,023 Shares reacquired (2,165,175) (30,358,835) (367,947) (5,328,471) ------------ --------------- ------------ --------------- Net increase 73,233 $ 1,301,504 2,216,735 $ 33,845,493 ============ =============== ============ ===============
(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 September 30, 2000, was $47,053. The fund had no significant borrowings during the year. (7) Restricted Securities The fund may invest not more than 15% of its net assets in securities which are subject to legal or contractual restrictions on resale. At September 30, 2000, the fund owned the following restricted securities, excluding securities issued under Rule 144A, constituting 0.06% of net assets which may not be publicly sold without registration under the Securities Act of 1933. The fund does not have the right to demand that such securities be registered. The value of these securities is determined by valuations furnished by dealers or by a pricing service, or if not available, in good faith, at fair value, by the Trustees.
DATE OF PAR DESCRIPTION ACQUISITION AMOUNT COST VALUE - ------------------------------------------------------------------------------------------------------------------ Merrill Lynch Mortgage Investors, Inc., 8.484s, 2022 June 1994 4,000,000 $2,772,500 $3,806,250
INDEPENDENT AUDITORS' REPORT To the Trustees of MFS Series Trust V and Shareholders of MFS Total Return Fund: We have audited the accompanying statement of assets and liabilities of MFS Total Return Fund (one of the series comprising MFS Series Trust V), including the portfolio of investments, as of September 30, 2000, and the related statements of operations for the year then ended, the statements 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 Trust'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 of America. 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. Our procedures included confirmation of securities owned as of September 30, 2000, by correspondence with the custodian and brokers. 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 MFS Total Return Fund as of September 30, 2000, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts November 2, 2000 - -------------------------------------------------------------------------------- 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 $354,887,123 AS A CAPITAL GAIN DIVIDEND FOR THE YEAR ENDED SEPTEMBER 30, 2000. FOR THE YEAR ENDED SEPTEMBER 30, 2000, THE AMOUNT OF DISTRIBUTIONS FROM INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS IS 27.80%. - -------------------------------------------------------------------------------- MFS(R) TOTAL RETURN FUND TRUSTEES SECRETARY J. Atwood Ives+ - Chairman and Chief Stephen E. Cavan* Executive Officer, Eastern Enterprises (diversified services company) ASSISTANT SECRETARY James R. Bordewick, Jr.* Lawrence T. Perera+ - Partner, Hemenway & Barnes (attorneys) CUSTODIAN State Street Bank and Trust Company William J. Poorvu+ - Adjunct Professor, Harvard University Graduate School of Business AUDITORS Administration Deloitte & Touche LLP Charles W. Schmidt+ - Private Investor INVESTOR INFORMATION For information on MFS mutual funds, call your Arnold D. Scott* - Senior Executive investment professional or, for an information Vice President, Director, and Secretary, kit, call toll free: 1-800-637-2929 any MFS Investment Management business day from 9 a.m. to 5 p.m. Eastern time (or leave a message anytime). Jeffrey L. Shames* - Chairman and Chief Executive Officer, MFS Investment Management INVESTOR SERVICE MFS Service Center, Inc. Elaine R. Smith+ - Independent Consultant P.O. Box 2281 Boston, MA 02107-9906 David B. Stone+ - Chairman, North American Management Corp. (investment adviser) 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. LEAD PORTFOLIO MANAGER WORLD WIDE WEB David M. Calabro* www.mfs.com TREASURER James O. Yost* ASSISTANT TREASURERS Mark E. Bradley* Robert R. Flaherty* Laura F. Healy* Ellen Moynihan* + Independent Trustee * MFS Investment Management
------------ MFS(R) TOTAL RETURN 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. MTR-2 11/00 397.1M 15/215/315/815 -----END PRIVACY-ENHANCED MESSAGE-----