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[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual Fund(R)
MASSACHUSETTS INVESTORS TRUST
SEMIANNUAL REPORT o JUNE 30, 1998
[Graphic Omitted]
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LEARNING FINANCIAL BASICS THE EASY WAY (see page 31)
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TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 25
Trustees and Officers ..................................................... 33
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HIGHLIGHTS
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o FOR THE SIX MONTHS ENDED JUNE 30, 1998, CLASS A SHARES OF THE TRUST
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 16.40%, CLASS B SHARES
16.05%, CLASS C SHARES 16.02%, AND CLASS I SHARES 16.63%. (SEE PERFORMANCE
SUMMARY FOR MORE INFORMATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.)
o THE TRUST FOLLOWS A DISCIPLINED APPROACH TOWARD WHAT THE MANAGERS CONSIDER
TO BE BLUE-CHIP INVESTING, FAVORING LARGE-CAPITALIZATION, HIGH-QUALITY
COMPANIES WITH ABOVE-AVERAGE GROWTH RATES.
o THE TRUST IS SEEKING TO TAKE ADVANTAGE OF A GROWING WAVE OF CONSOLIDATION
IN THE FINANCIAL SERVICES SECTOR, PARTICULARLY IN THE INSURANCE INDUSTRY.
o THE IMPACT OF THE TROUBLED JAPANESE ECONOMY ON SOME PORTFOLIO COMPANIES HAS
BEEN OFFSET BY THE STRONG U.S. AND EUROPEAN ECONOMIES. THE PORTFOLIO HAS
VERY LITTLE EXPOSURE TO THE PRODUCTION-ORIENTED ECONOMIES OF SOUTHEAST
ASIA SUCH AS MALAYSIA, SINGAPORE, AND INDONESIA AND, THEREFORE, THE
ECONOMIC TURMOIL IN THAT REGION HAS HAD LITTLE IMPACT ON THE PORTFOLIO.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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LETTER FROM THE CHAIRMAN
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[Photo of Jeffrey L. Shames]
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Jeffrey L. Shames
Dear Shareholders:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly accepted
measures, equity valuations appear to have risen to a point at which the stock
market has become more vulnerable to changes in the investment environment such
as rising inflation and interest rates or a slowing economy. As a result, while
we continue to hold a favorable long-term outlook for the equity markets, we
also believe that a significant market correction is possible and that such a
correction would be a healthy near-term event.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive
than most fixed-income investments, while low inflation helps control
companies' costs, such as for raw materials, wages, and benefits. The near-
term outlook for a continuation of this environment appears relatively
favorable. However, this year has seen a marked slowdown in corporate
earnings. This means that as equity prices continue to rise, price-to-earnings
(P/E) ratios, or the amount an investor pays for a stock in relation to the
company's earnings per share, also go up. A year ago, the average P/E ratio
for stocks in the unmanaged Standard & Poor's 500 Composite Index stood at
approximately 22; this summer, the average P/E ratio was 32% higher,
at about 29. In some cases, such as with some of the newer companies
associated with the Internet, P/E ratios have soared to levels that are
unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow,
it is possible that some of these valuations can be supported. We expect
corporate earnings to grow 4% to 6% this year. However, just as no one can
predict market cycles, so too no one can predict economic cycles -- except to
say that these cycles do exist and that an economic slowdown at some point is
inevitable.
We believe it is prudent to remind investors of the need to take a long-term
view and to diversify their investments across a range of asset classes. This
includes mutual funds that focus on bonds and international investments as well
as on the U.S. stock market. The likelihood of an eventual market correction
also makes it important for us to use original, bottom-up research to find
companies that we think can keep growing or gain market share in the face of the
occasional downturn. To help achieve this, and to provide the broadest possible
coverage of industry sectors and individual companies, MFS continues to increase
its number of full-time research analysts. These analysts thoroughly investigate
each company's earnings potential and position in its industry as well as the
overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation.
Every year, both fixed-income and equity managers meet with thousands of
credit issuers and companies. They also attend many presentations, closely
follow sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research
to both the equity and fixed-income markets is the best way to provide
favorable long-term performance for our shareholders -- regardless of changes
in the overall market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS(R) Investment Management(SM)
July 13, 1998
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MANAGEMENT REVIEW AND OUTLOOK
For the six months ended June 30, 1998, Class A shares of the Trust provided a
total return of 16.40%, Class B shares 16.05%, Class C shares 16.02%, and
Class I shares 16.63%. These returns, which include the reinvestment of
distributions but exclude the effects of any sales charges, compare to a
17.71% return for the Standard & Poor's 500 Composite Index (the S&P 500) for
the same period. The S&P 500 is a popular, unmanaged index of common stock
total return performance. It is not possible to invest directly in an index.
Q. WHAT DIFFERENTIATES THE PORTFOLIO FROM OTHER LARGE-CAP INVESTMENT VEHICLES?
A. The portfolio follows a strong investment discipline. We invest in large-
capitalization, high-quality companies, seek growth at a reasonable price,
strive for a dividend yield that is 90% of the dividend yield of the S&P
500, seek to keep volatility lower than that of the S&P 500, and try to
stay fully invested. MFS(R) Original Research(SM), our process of selecting
stocks through in-depth fundamental analysis of companies' earnings
outlooks, managements, business models, competitive strategies, market
positions, and growth prospects, sets us apart and has been a clear factor
in our success.
Q. FINANCIAL SERVICES IS YOUR LARGEST SECTOR. WHY ARE THESE COMPANIES APPEALING?
A. In the financial services sector we're featuring investments in insurance
companies, based on their fundamental strengths and as a means of
leveraging the growing trend toward consolidation in this industry.
Consolidation will allow companies to function more efficiently and produce
cleaner, more profitable balance sheets, which should positively impact
share prices. Because consolidation in the insurance industry is a newer
phenomenon than it is in the banking business, we are focusing less on
banking and brokerage stocks. Some key holdings for the sector include
Hartford Financial Services, Chubb, and Allstate.
Q. AIR PRODUCTS IS A NEW STOCK IN YOUR TOP 10. WHY DO YOU FEEL THIS IS AN
ATTRACTIVE INVESTMENT?
A. Air Products is an industrial gas company that exemplifies what we're looking
for in the portfolio. The company locates its plants at customer sites, and
customers contract to take a certain amount of product or to pay the
difference for what they don't use. Any excess product that the plant can
make is sold to other customers, which helps keep plants running more
profitably. Also, the company has modified its management compensation plan
to focus on earnings growth. As a result, Air Products is more rigorously
examining its corporate investments, which has helped earnings growth more
easily reach the bottom line. The company has potential earnings growth in
the mid-teens and its stock sells for a reasonable price given its earnings
prospects, so we get growth at a good price.
Q. GILLETTE HAS BEEN A TOP HOLDING IN THE PORTFOLIO FOR SOME TIME. WHAT DO YOU
THINK OF THEIR NEW RAZOR PRODUCT?
A. The new razor product is an excellent example of the strength of Gillette's
business model. Unlike companies that rely on gaining new customers or
increasing consumption among existing customers, Gillette has built a
successful business by constantly improving its products and convincing
customers to pay more for them. I've tried the new razor, and I think it's
great.
Q. AMERICAN HOME PRODUCTS, YOUR FIFTH-LARGEST HOLDING, RECENTLY ANNOUNCED A
MERGER WITH MONSANTO. WHAT CAN YOU TELL US ABOUT THE DEAL?
A. This is a very strategic merger for both companies. American Home Products
(AHP) is one of the world's largest pharmaceutical and health care
companies. It produces products such as Advil and Robitussin. Monsanto, in
addition to producing well-known products like NutraSweet and Round-Up, has
cutting-edge agricultural products that should thrive under AHP's
management and strong financial discipline. We are optimistic about the new
company's growth prospects.
Q. YOU HAVE THE ABILITY TO INVEST UP TO 35% OF THE PORTFOLIO IN INTERNATIONAL
STOCKS. TO WHAT DEGREE DO YOU USE THIS FLEXIBILITY?
A. The portfolio will probably never reach that level and currently is only
about 8% invested in non-U.S. dollar stocks. Ten percent to 15% is a
reasonable maximum. We only invest overseas if we find a company with
quality and growth potential equivalent to those of a U.S. company and
whose stock is selling at a discount sufficient to compensate for currency
risk.
Q. WHAT IMPACT HAS THE ASIAN CRISIS HAD ON LARGE MULTINATIONAL COMPANIES SUCH AS
THOSE OFTEN FOUND IN THE PORTFOLIO?
A. The portfolio doesn't have much exposure to economies in Asia such as
Malaysia, Indonesia, and Singapore. Japan is a consumer economy, and some of
our holdings have a presence there. However, U.S. companies have had a hard
time selling products in Japan because of that country's trade barriers. This
has provided some protection that, combined with the strength of the European
and American economies, has limited the impact on stocks in the portfolio.
/s/ Mitchell D. Dynan /s/ John D. Laupheimer, Jr. /s/ Kevin R. Parke
Mitchell D. Dynan John D. Laupheimer, Jr. Kevin R. Parke
Portfolio Manager Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGERS' PROFILES
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MITCHELL D. DYNAN IS A VICE PRESIDENT -- INVESTMENTS OF MFS(R)
INVESTMENT MANAGEMENT(SM) AND PORTFOLIO MANAGER OF MFS(R) UNION
STANDARD(R) EQUITY FUND. HE ALSO IS A MEMBER OF THE PORTFOLIO MANAGEMENT
TEAM OF MASSACHUSETTS INVESTORS TRUST, AMERICA'S OLDEST MUTUAL FUND, AS
WELL AS MFS(R) MERIDIAN(SM) U.S. EQUITY FUND, MFS(R) AMERICAN(SM) U.S.
EQUITY FUND, AND THE CONSERVATIVE GROWTH SERIES OFFERED THROUGH MFS/SUN
LIFE ANNUITY PRODUCTS. HE JOINED MFS IN 1986 AS A MEMBER OF THE RESEARCH
DEPARTMENT AND WAS NAMED AN ASSISTANT VICE PRESIDENT -- INVESTMENTS IN
1987, A VICE PRESIDENT -- INVESTMENTS IN 1988, AND A PORTFOLIO MANAGER
OF MASSACHUSETTS INVESTORS TRUST IN 1995. FROM 1983 TO 1986 MR. DYNAN
WORKED AS A SECURITIES ANALYST ON WALL STREET. HE STARTED HIS CAREER AS
A BANK LENDING OFFICER IN 1979. A GRADUATE OF TUFTS UNIVERSITY, HE IS A
MEMBER OF THE BOSTON SOCIETY OF SECURITY ANALYSTS FEDERATION AND IS A
CHARTERED FINANCIAL ANALYST.
JOHN D. LAUPHEIMER, JR., IS A SENIOR VICE PRESIDENT OF MFS(R) INVESTMENT
MANAGEMENT(SM) AND PORTFOLIO MANAGER OF MASSACHUSETTS INVESTORS TRUST,
AMERICA'S OLDEST MUTUAL FUND. HE ALSO MANAGES THE CONSERVATIVE GROWTH
SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS, MFS(R) GROWTH
WITH INCOME SERIES, PART OF MFS(R) VARIABLE INSURANCE TRUST(SM), AND CO-
MANAGES THE MFS(R) AMERICAN(SM) U.S. EQUITY FUND AND MFS(R) MERIDIAN(SM)
U.S. EQUITY FUND. MR. LAUPHEIMER JOINED THE MFS RESEARCH DEPARTMENT IN
1981 AS AN INDUSTRY SPECIALIST. HE WAS NAMED INVESTMENT OFFICER IN 1983,
ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1984, VICE PRESIDENT --
INVESTMENTS IN 1986, PORTFOLIO MANAGER OF MFS(R) TOTAL RETURN FUND IN
1987, PORTFOLIO MANAGER OF MASSACHUSETTS INVESTORS TRUST IN 1992, AND
SENIOR VICE PRESIDENT IN 1995. MR. LAUPHEIMER IS A GRADUATE OF BOSTON
UNIVERSITY AND THE SLOAN SCHOOL OF MANAGEMENT OF MASSACHUSETTS INSTITUTE
OF TECHNOLOGY. HE IS A CHARTERED FINANCIAL ANALYST AND A MEMBER OF THE
BOSTON SECURITY ANALYSTS SOCIETY, INC.
KEVIN R. PARKE WAS NAMED CHIEF EQUITY OFFICER OF MFS(R) INVESTMENT
MANAGEMENT(SM) EFFECTIVE AUGUST 1, 1998. MR. PARKE IS AN EXECUTIVE VICE
PRESIDENT, DIRECTOR OF EQUITY RESEARCH, AND A MEMBER OF THE EXECUTIVE
COMMITTEE OF MFS(R) INVESTMENT MANAGEMENT(SM), AS WELL AS PORTFOLIO
MANAGER OF MASSACHUSETTS INVESTORS TRUST, THE CONSERVATIVE GROWTH SERIES
OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS, AND MFS(R) GROWTH WITH
INCOME SERIES, PART OF MFS(R) VARIABLE INSURANCE TRUST(SM). HE OVERSEES
THE COMMITTEE OF ANALYSTS WHO COLLECTIVELY MANAGE MFS(R) RESEARCH FUND.
MR. PARKE ALSO OVERSEES THE MFS(R) MERIDIAN(SM) AND MFS(R) AMERICAN(SM)
U.S. RESEARCH FUNDS. MR. PARKE JOINED THE RESEARCH DEPARTMENT IN 1985 AS
AN INDUSTRY SPECIALIST. HE WAS NAMED ASSISTANT VICE PRESIDENT --
INVESTMENTS IN 1987, VICE PRESIDENT -- INVESTMENTS AND PORTFOLIO MANAGER
OF MFS(R) LARGE CAP GROWTH FUND IN 1988, PORTFOLIO MANAGER OF
MASSACHUSETTS INVESTORS TRUST IN 1991, SENIOR VICE PRESIDENT IN 1993,
DIRECTOR OF EQUITY RESEARCH IN 1995, AND EXECUTIVE VICE PRESIDENT IN
1997. MR. PARKE IS A GRADUATE OF LEHIGH UNIVERSITY AND THE HARVARD
UNIVERSITY GRADUATE SCHOOL OF BUSINESS ADMINISTRATION.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
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FUND FACTS
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OBJECTIVE: SEEKS REASONABLE CURRENT INCOME AND LONG-TERM GROWTH
OF INCOME AND CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JULY 15, 1924
CLASS INCEPTION: CLASS A JULY 15, 1924
CLASS B SEPTEMBER 7, 1993
CLASS C JULY 1, 1996
CLASS I JANUARY 2, 1997
SIZE: $9.2 BILLION NET ASSETS AS OF JUNE 30, 1998
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH JUNE 30, 1998
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +16.40% +28.89% +126.25% +180.62% +457.15%
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Average Annual Total Return -- +28.89% + 31.28% + 22.92% + 18.74%
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SEC Results -- +21.48% + 28.72% + 21.47% + 18.04%
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<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +16.05% +28.09% +121.48% +170.16% +436.84%
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Average Annual Total Return -- +28.09% + 30.35% + 21.99% + 18.30%
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SEC Results -- +24.09% + 29.75% + 21.81% + 18.30%
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<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +16.02% +28.06% +123.32% +176.87% +450.15%
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Average Annual Total Return -- +28.06% + 30.71% + 22.59% + 18.59%
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SEC Results -- +27.06% + 30.71% + 22.59% + 18.59%
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<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +16.63% +29.35% +127.44% +181.99% +460.44%
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Average Annual Total Return -- +29.35% + 31.51% + 23.04% + 18.81%
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</TABLE>
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
B and C results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of A for periods prior to the inception of B and C.
Because operating expenses of B and C are higher than those of A, B and C
performance generally would have been lower than A performance. The A
performance included in the B and C SEC performance has been adjusted to
reflect the CDSC generally applicable to B and C rather than the initial sales
charge generally applicable to A.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of I. Because operating expenses
of A are greater than those of I, I performance generally would have been
higher than A performance. The A performance included in the I performance has
been adjusted to reflect the fact that I have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.
All results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
PORTFOLIO CONCENTRATION AS OF JUNE 30, 1998
FINANCIAL SERVICES 24.6%
HEALTH CARE 13.1%
CONSUMER STAPLES 10.2%
UTILITIES & COMMUNICATIONS 8.3%
RETAILING 8.2%
TOP 10 STOCK HOLDINGS
BRISTOL-MYERS SQUIBB CO. 2.7% HARTFORD FINANCIAL SERVICES GROUP,
Pharmaceutical products company INC. 1.5%
Multiline insurance company
AIR PRODUCTS & CHEMICALS,
INC. 1.7% U.S. BANCORP 1.5%
Diversified chemical company Bank holding company
GENERAL ELECTRIC CO. 1.7% BENEFICIAL CORP. 1.5%
Diversified manufacturing and Consumer financial services company
financial services conglomerate
UNITED TECHNOLOGIES CORP. 1.5%
EXXON CORP. 1.6% Aerospace, defense, and building
International oil and gas company equipment company
AMERICAN HOME PRODUCTS CO. 1.6% MICROSOFT CORP. 1.5%
Pharmaceutical and home products Computer software and systems
company company
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 1998
<TABLE>
Stocks - 96.1%
<CAPTION>
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 87.5%
Aerospace - 4.7%
Allied Signal, Inc. 1,760,200 $ 78,108,875
General Dynamics Corp. 663,900 30,871,350
Goodrich (B.F.) Co. 550,400 27,313,600
Lockheed-Martin Corp. 1,009,121 106,840,686
Raytheon Co., "A" 933,400 53,787,175
United Technologies Corp. 1,432,300 132,487,750
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$ 429,409,436
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Airlines - 0.1%
AMR Corp.* 150,000 $ 12,487,500
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Agricultural Products - 0.1%
Case Corp. 239,423 $ 11,552,160
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Apparel and Textiles - 0.2%
VF Corp. 392,000 $ 20,188,000
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Automotive - 0.8%
Federal Mogul Corp. 381,800 $ 25,771,500
Ford Motor Co. 340,000 20,060,000
TRW, Inc. 507,700 27,733,113
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$ 73,564,613
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Banks and Credit Companies - 7.3%
Comerica, Inc. 971,150 $ 64,338,687
Firstar Corp. 688,100 26,147,800
Fleet Financial Group, Inc. 187,500 15,656,250
National City Corp. 1,201,600 85,313,600
Northern Trust Corp. 449,000 34,236,250
Norwest Corp. 3,424,800 128,001,900
State Street Corp. 1,015,900 70,605,050
SunTrust Banks, Inc. 500,000 40,656,250
US Bancorp 3,160,200 135,888,600
Washington Mutual, Inc. 1,718,450 74,645,172
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$ 675,489,559
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Building - 0.7%
American Standard Cos., Inc.* 700,000 $ 31,281,250
Sherwin Williams Co. 948,200 31,409,125
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$ 62,690,375
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Business Machines - 1.8%
International Business Machines Corp. 943,300 $ 108,302,631
Xerox Corp. 597,500 60,720,938
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$ 169,023,569
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Business Services - 1.0%
Computer Sciences Corp. 949,700 $ 60,780,800
DST Systems, Inc.* 544,200 30,475,200
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$ 91,256,000
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Cellular Telephones - 0.1%
Century Telephone Enterprises, Inc. 175,350 $ 8,044,181
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Chemicals - 2.3%
Air Products & Chemicals, Inc. 3,707,700 $ 148,308,000
DuPont (E.I.) de Nemours & Co., Inc. 212,400 15,850,350
Praxair, Inc. 1,001,300 46,873,356
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$ 211,031,706
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Computer Software - Personal Computers - 1.6%
Compaq Computer Corp. 560,000 $ 15,890,000
Microsoft Corp.* 1,220,200 132,239,175
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$ 148,129,175
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Computer Software - Systems - 1.5%
BMC Software, Inc.* 425,600 $ 22,104,600
Computer Associates International, Inc. 1,503,850 83,557,666
Oracle Corp.* 1,262,800 31,017,525
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$ 136,679,791
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Consumer Goods and Services - 8.2%
Black & Decker Corp. 1,126,700 $ 68,728,700
Clorox Co. 319,890 30,509,509
Colgate-Palmolive Co. 1,230,800 108,310,400
Gillette Co. 1,671,400 94,747,487
Kimberly-Clark Corp. 2,312,500 106,085,937
Philip Morris Cos., Inc. 1,895,500 74,635,313
Procter & Gamble Co. 791,800 72,103,288
Service Corp. International 1,996,300 85,591,362
Tyco International Ltd. 1,722,600 108,523,800
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$ 749,235,796
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Electrical Equipment - 2.9%
Cooper Industries, Inc. 584,696 $ 32,121,737
General Electric Co. 1,623,400 147,729,400
Honeywell, Inc. 1,002,600 83,779,762
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$ 263,630,899
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Entertainment - 0.7%
CBS Corp. 226,300 $ 7,185,025
Time Warner, Inc. 386,400 33,013,050
Viacom, Inc., "B"* 350,000 20,387,500
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$ 60,585,575
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Financial Institutions - 4.0%
Associates First Capital Corp., "A" 367,208 $ 28,229,115
Beneficial Corp. 865,700 132,614,419
CIT Group, Inc., "A" 903,000 33,862,500
Federal Home Loan Mortgage Corp. 1,220,600 57,444,487
Heller Financial, Inc., "A"* 563,400 16,902,000
Household International, Inc. 327,300 16,283,175
Merrill Lynch & Co., Inc. 400,000 36,900,000
Morgan Stanley, Dean Witter & Co. 500,000 45,687,500
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$ 367,923,196
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Food and Beverage Products - 3.4%
Archer-Daniels-Midland Co. 1,250,000 $ 24,218,750
Bestfoods Co. 822,400 47,750,600
Coca-Cola Co. 210,900 18,031,950
Corn Products International, Inc.* 50,000 1,693,750
General Mills, Inc. 212,900 14,557,038
Hershey Foods Corp. 330,800 22,825,200
Interstate Bakeries Corp. 901,800 29,928,487
McCormick & Co., Inc. 350,600 12,522,994
Nabisco Holdings Corp., "A" 311,000 11,215,438
PepsiCo., Inc. 215,100 8,859,431
Ralston-Ralston Purina Co. 1,008,500 117,805,406
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$ 309,409,044
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Insurance - 9.5%
Allstate Corp. 1,138,700 $ 104,262,219
Chubb Corp. 1,606,000 129,082,250
CIGNA Corp. 1,279,700 88,299,300
Conseco, Inc. 150,000 7,012,500
Hartford Financial Services Group, Inc. 1,189,400 136,037,625
Lincoln National Corp. 766,200 70,011,525
MBIA, Inc. 345,300 25,854,337
Progressive Corp. 652,300 91,974,300
Torchmark Corp. 2,304,200 105,417,150
Transamerica Corp. 540,900 62,271,112
Travelers Group, Inc. 809,049 49,048,596
--------------
$ 869,270,914
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Machinery - 0.6%
Eaton Corp. 565,400 $ 43,959,850
York International Corp. 300,000 13,068,750
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$ 57,028,600
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Medical and Health Products - 8.4%
American Home Products Corp. 2,733,400 $ 141,453,450
Bristol-Myers Squibb Co. 2,111,700 242,713,519
Johnson & Johnson 1,000,000 73,750,000
McKesson Corp. 545,000 44,281,250
Merck & Co., Inc. 160,320 21,442,800
Pfizer, Inc. 911,500 99,068,656
Pharmacia & Upjohn, Inc. 811,600 37,435,050
Schering Plough Corp. 119,980 10,993,167
Warner-Lambert Co. 1,474,800 102,314,250
--------------
$ 773,452,142
- --------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.7%
Columbia/HCA Healthcare Corp. 2,094,100 $ 60,990,662
HealthSouth Corp.* 2,654,100 70,831,294
Medtronic, Inc. 375,800 23,957,250
Tenet Healthcare Corp.* 2,448,600 76,518,750
United Healthcare Corp. 1,653,000 104,965,500
--------------
$ 337,263,456
- --------------------------------------------------------------------------------------------------------
Metals and Minerals - 0.2%
Phelps Dodge Corp. 300,000 $ 17,156,250
- --------------------------------------------------------------------------------------------------------
Oils - 3.8%
Chevron Corp. 199,100 $ 16,537,744
Exxon Corp. 2,039,200 145,420,450
Mobil Corp. 902,700 69,169,387
Texaco, Inc. 1,200,500 71,654,844
USX-Marathon Group 1,344,600 46,136,588
--------------
$ 348,919,013
- --------------------------------------------------------------------------------------------------------
Photographic Products
Eastman Kodak Co. 39,300 $ 2,871,356
- --------------------------------------------------------------------------------------------------------
Pollution Control - 0.6%
Browning Ferris Industries, Inc. 238,000 $ 8,270,500
Waste Management, Inc. 1,388,500 48,597,500
--------------
$ 56,868,000
- --------------------------------------------------------------------------------------------------------
Printing and Publishing - 1.7%
Gannett Co., Inc. 1,260,400 $ 89,567,175
Tribune Co. 1,006,200 69,239,138
--------------
$ 158,806,313
- --------------------------------------------------------------------------------------------------------
Railroads - 1.0%
Burlington Northern Santa Fe Railway Co. 781,607 $ 76,744,037
CSX Corp. 300,000 13,650,000
--------------
$ 90,394,037
- --------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.7%
Cendant Corp.* 869,387 $ 18,148,454
McDonalds Corp. 729,500 50,335,500
--------------
$ 68,483,954
- --------------------------------------------------------------------------------------------------------
Stores - 6.2%
CVS Corp. 1,268,200 $ 49,380,538
Home Depot, Inc. 733,000 60,884,812
Liz Claiborne, Inc. 316,500 16,537,125
Nordstrom, Inc. 892,600 68,953,350
Office Depot, Inc.* 609,500 19,237,344
Penney (J.C.), Inc. 1,536,100 111,079,231
Rite Aid Corp. 2,385,200 89,594,075
Sears, Roebuck & Co. 1,796,400 109,692,675
Wal-Mart Stores, Inc. 729,700 44,329,275
--------------
$ 569,688,425
- --------------------------------------------------------------------------------------------------------
Supermarkets - 1.5%
Kroger Co.* 733,600 $ 31,453,100
Meyer (Fred), Inc. 162,300 6,897,750
Safeway, Inc.* 2,470,800 100,530,675
--------------
$ 138,881,525
- --------------------------------------------------------------------------------------------------------
Telecommunications - 3.1%
AirTouch Communications, Inc.* 240,500 $ 14,054,219
Alltel Corp. 804,300 37,399,950
Cincinnati Bell, Inc. 592,400 16,957,450
Cisco Systems, Inc.* 286,800 26,403,525
Lucent Technologies, Inc. 305,000 25,372,188
MCI Communications Corp. 939,500 54,608,437
Sprint Corp. 1,083,600 76,393,800
WorldCom, Inc.* 655,000 31,726,562
--------------
$ 282,916,131
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.1%
Carolina Power & Light Co. 244,300 $ 10,596,512
Cinergy Corp. 791,600 27,706,000
CMS Energy Corp., "G" 393,900 17,331,600
FPL Group, Inc. 441,500 27,814,500
Illinova Corp. 365,100 10,953,000
New Century Energies, Inc. 207,000 9,405,563
Pinnacle West Capital Corp. 412,800 18,576,000
Texas Utilities Co. 998,000 41,541,750
Unicom Corp. 572,400 20,069,775
Wisconsin Energy Corp. 350,200 10,637,325
--------------
$ 194,632,025
- --------------------------------------------------------------------------------------------------------
Utilities - Gas - 1.1%
Columbia Gas System, Inc. 1,148,400 $ 63,879,750
KN Energy, Inc. 686,000 37,172,625
--------------
$ 101,052,375
- --------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.9%
Bell Atlantic Corp. 385,200 $ 17,574,750
BellSouth Corp. 518,800 34,824,450
GTE Corp. 1,352,200 75,216,125
SBC Communications, Inc. 1,131,600 45,264,000
--------------
$ 172,879,325
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $8,040,894,416
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 8.6%
Bermuda - 1.1%
Ace Ltd. (Insurance) 943,700 $ 36,804,300
Exel Ltd. (Insurance) 822,600 64,008,563
--------------
$ 100,812,863
- --------------------------------------------------------------------------------------------------------
Canada - 0.7%
Canadian National Railway Co. (Railroads) 1,208,300 $ 64,190,938
- --------------------------------------------------------------------------------------------------------
France - 0.9%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 1,509,700 $ 61,425,919
Sanofi S.A. (Medical and Health Products) 154,000 18,084,730
--------------
$ 79,510,649
- --------------------------------------------------------------------------------------------------------
Germany - 0.5%
Henkel KGAA (Chemicals) 502,800 $ 49,681,594
- --------------------------------------------------------------------------------------------------------
Japan - 0.5%
AFLAC, Inc. (Insurance) 920,000 $ 27,887,500
Sony Corp. (Electronics) 200,000 17,297,532
--------------
$ 45,185,032
- --------------------------------------------------------------------------------------------------------
Netherlands - 1.3%
Akzo Nobel N.V. (Chemicals) 338,100 $ 75,074,304
ING Groep N.V. (Financial Services)* 169,562 11,090,429
ING Groep N.V., ADR (Financial Services) 579,411 37,878,994
--------------
$ 124,043,727
- --------------------------------------------------------------------------------------------------------
Sweden - 0.9%
Mandamus Fastighet (Real Estate Investment Trust)* 21,005 $ 131,528
Securitas AB (Security Services) 114,000 5,575,078
Skandia Forsakrings AB (Insurance) 4,349,000 62,089,668
Sparbanken Sverige AB, "A" (Banks and Credit Cos.) 420,100 12,626,675
--------------
$ 80,422,949
- --------------------------------------------------------------------------------------------------------
Switzerland - 0.8%
Nestle AG (Food and Beverage Products) 18,500 $ 39,611,478
Novartis AG (Pharmaceuticals) 19,086 31,776,427
--------------
$ 71,387,905
- --------------------------------------------------------------------------------------------------------
United Kingdom - 1.9%
British Petroleum PLC, ADR (Oils) 1,483,365 $ 130,906,961
Lloyds TSB Group PLC (Banks and Credit Cos.)* 1,217,476 17,027,849
PowerGen PLC (Utilities - Electric)* 2,008,505 27,739,561
--------------
$ 175,674,371
- --------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 790,910,028
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $6,473,447,446) $8,831,804,444
- --------------------------------------------------------------------------------------------------------
Convertible Preferred Stock - 0.4%
- --------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.2%
Newell Financial Trust Co.##* 256,700 $ 14,824,425
Entertainment - 0.2%
Houston Industries, Inc., 7% 262,000 19,519,000
- --------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stock (Identified Cost, $24,884,095) $ 34,343,425
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.6%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000) OMITTED
- --------------------------------------------------------------------------------------------------------
Duke Power Co., due 7/28/98 $ 5,000 $ 4,979,375
Federal Home Loan Mortgage Corp., due 7/01/98 - 8/27/98 231,578 230,759,260
Federal National Mortgage Assn., due 7/13/98 - 8/21/98 72,175 71,795,292
General Electric Co., due 7/01/98 11,755 11,755,000
National Rural Utilities Cooperative Finance, due 7/23/98 15,000 14,949,584
- --------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 334,238,511
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $6,832,570,052) $9,200,386,380
Other Assets, Less Liabilities - (0.1)% (6,329,734)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $9,194,056,646
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
JUNE 30, 1998
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $6,832,570,052) $9,200,386,380
Cash 179,738
Foreign currency, at value (identified cost, $1,868,041) 1,812,634
Net receivable for foreign currency exchange contracts
closed or subject to master netting agreements 516,700
Receivable for Trust shares sold 96,364,089
Receivable for investments sold 47,489,661
Dividends and interest receivable 12,256,448
Other assets 39,651
--------------
Total assets $9,359,045,301
--------------
Liabilities:
Distributions payable $ 4,045,239
Payable for investments purchased 139,127,666
Payable for Trust shares reacquired 19,960,476
Payable to affiliates -
Management fee 125,903
Shareholder servicing agent fee 84,322
Distribution and service fee 432,027
Administrative fee 3,082
Accrued expenses and other liabilities 1,209,940
--------------
Total liabilities $ 164,988,655
--------------
Net assets $9,194,056,646
==============
Net assets consist of:
Paid-in capital $6,526,583,368
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 2,368,283,952
Accumulated undistributed net realized gain on
investment and foreign currency transactions 297,782,536
Accumulated undistributed net investment income 1,406,790
--------------
Total $9,194,056,646
==============
Shares of beneficial interest outstanding 459,033,392
===========
Class A shares:
Net asset value per share
(net assets of $5,928,262,804 / 294,911,913 shares of
beneficial interest outstanding) $20.10
======
Offering price per share (100 / 94.25) $21.33
======
Class B shares:
Net asset value and offering price per share
(net assets of $2,717,888,809 / 136,527,879 shares of
beneficial interest outstanding) $19.91
======
Class C shares:
Net asset value and offering price per share
(net assets of $498,422,952 / 25,133,035 shares of
beneficial interest outstanding) $19.83
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $49,482,081 / 2,460,565 shares of
beneficial interest outstanding) $20.11
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1998
- -------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 55,564,491
Interest 7,332,909
Foreign taxes withheld (815,097)
--------------
Total investment income $ 62,082,303
--------------
Expenses -
Management fee $ 6,743,125
Trustees' compensation 78,091
Shareholder servicing agent fee 4,256,042
Distribution and service fee (Class A) 8,446,982
Distribution and service fee (Class B) 10,329,954
Distribution and service fee (Class C) 1,696,202
Administrative fee 185,329
Custodian fee 729,275
Postage 363,943
Printing 69,472
Auditing fees 20,113
Legal fees 9,512
Miscellaneous 2,294,566
--------------
Total expenses $ 35,222,606
Fees paid indirectly (292,372)
--------------
Net expenses $ 34,930,234
--------------
Net investment income $ 27,152,069
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 315,149,093
Foreign currency transactions (25,450)
--------------
Net realized gain on investment and foreign
currency transactions $ 315,123,643
--------------
Change in unrealized appreciation -
Investments $ 755,948,939
Translation of assets and liabilities in foreign
currencies 130,125
--------------
Net unrealized gain on investments and foreign
currency translation $ 756,079,064
--------------
Net realized and unrealized gain on investments
and foreign currency $1,071,202,707
--------------
Increase in net assets from operations $1,098,354,776
==============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 27,152,069 $ 42,758,249
Net realized gain on investment and foreign
currency transactions 315,123,643 475,712,512
Net unrealized gain on investments and foreign
currency translation 756,079,064 679,447,907
-------------- --------------
Increase in net assets from operations $1,098,354,776 $1,197,918,668
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (22,390,218) $ (36,968,683)
From net investment income (Class B) (3,032,726) (4,911,186)
From net investment income (Class C) (628,596) (625,297)
From net investment income (Class I) (268,646) (253,082)
From net realized gain on investment and foreign
currency transactions (Class A) (54,698,309) (291,966,401)
From net realized gain on investment and foreign
currency transactions (Class B) (22,061,323) (101,973,791)
From net realized gain on investment and foreign
currency transactions (Class C) (3,567,077) (14,088,283)
From net realized gain on investment and foreign
currency transactions (Class I) (496,338) (1,559,900)
In excess of net investment income (Class A) -- (1,515,419)
In excess of net investment income (Class B) -- (201,319)
In excess of net investment income (Class C) -- (25,633)
In excess of net investment income (Class I) -- (10,374)
-------------- --------------
Total distributions declared to shareholders $ (107,143,233) $ (454,099,368)
-------------- --------------
Net increase in net assets from Trust share
transactions $2,124,033,941 $2,208,342,129
-------------- --------------
Total increase in net assets $3,115,245,484 $2,952,161,429
Net assets:
At beginning of period 6,078,811,162 3,126,649,733
-------------- --------------
At end of period (including accumulated undistributed
net investment income of $1,406,790 and $574,907,
respectively) $9,194,056,646 $6,078,811,162
============== ==============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ----------------------------------------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $17.52 $14.46 $12.71 $10.07 $11.50 $12.31
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.09 $ 0.18 $ 0.21 $ 0.25 $ 0.25 $ 0.39
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 2.78 4.33 3.07 3.67 (0.36) 0.86
------ ------ ------ ------ ------ ------
Total from investment
operations $ 2.87 $ 4.51 $ 3.28 $ 3.92 $(0.11) $ 1.25
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.08) $(0.17) $(0.21) $(0.46) $(0.25) $(0.39)
From net realized gain on
investments and foreign
currency transactions (0.21) (1.27) (1.32) (0.82) (1.05) (1.67)
In excess of net investment
income -- (0.01) -- -- (0.00)+++ --
In excess of net realized gain
on investment and foreign
currency transactions -- -- -- -- (0.02) --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.29) $(1.45) $(1.53) $(1.28) $(1.32) $(2.06)
------ ------ ------ ------ ------ ------
Net asset value - end of period $20.10 $17.52 $14.46 $12.71 $10.07 $11.50
====== ====== ====== ====== ====== ======
Total return(+) 16.40%++ 31.69% 25.90% 39.34% (1.02)% 10.03%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.72%+ 0.74% 0.74% 0.70% 0.71% 0.68%
Net investment income 0.93%+ 1.09% 1.51% 2.13% 2.20% 3.04%
Portfolio turnover 19% 44% 47% 54% 87% 41%
Net assets at end of period
(000,000 omitted) $5,928 $4,323 $2,678 $2,074 $1,535 $1,626
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data for the periods subsequent to December 31, 1992, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust's expenses are calculated without reduction for fees paid
indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included the results
would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $13.87 $12.28 $13.55 $11.22 $11.26
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.32 $ 0.38 $ 0.43 $ 0.45 $ 0.40
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 0.69 2.95 (0.45) 3.56 0.76
------ ------ ------ ------ ------
Total from investment operations $ 1.01 $ 3.33 $(0.02) $ 4.01 $ 1.16
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.33) $(0.39) $(0.43) $(0.45) $(0.39)
From net realized gain on investment and
foreign currency transactions (2.22) (1.32) (0.82) (1.22) (0.81)
In excess of net realized gain on
investment and foreign currency
transactions -- (0.00)+++ -- -- --
From paid in capital (0.02) (0.03) -- (0.01) (0.00)+++
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(2.57) $(1.74) $(1.25) $(1.68) $(1.20)
------ ------ ------ ------ ------
Net asset value - end of period $12.31 $13.87 $12.28 $13.55 $11.22
====== ====== ====== ====== ======
Total return(+) 7.68% 27.41% (0.33)% 35.80% 10.12%
Ratios (to average net assets)/Supplemental data:
Expenses 0.62% 0.62% 0.47% 0.50% 0.55%
Net investment income 2.30% 2.73% 3.28% 3.40% 3.39%
Portfolio turnover 46% 44% 26% 20% 19%
Net assets at end of period (000,000
omitted) $1,548 $1,530 $1,265 $1,382 $1,139
(+) Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to
January 2, 1991). If the charge had been included, the results would have been lower.
+++ Per share amount was less than $0.01.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -------------------------------------------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $17.36 $14.36 $12.63 $10.03 $11.48 $13.02
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.02 $ 0.07 $ 0.10 $ 0.15 $ 0.15 $ 0.04
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 2.77 4.28 3.06 3.64 (0.36) 0.32
------ ------ ------ ------ ------ ------
Total from investment
operations $ 2.79 $ 4.35 $ 3.16 $ 3.79 $(0.21) $ 0.36
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.03) $(0.08) $(0.11) $(0.37) $(0.17) $(0.23)
From net realized gain on
investment and foreign
currency transactions (0.21) (1.27) (1.32) (0.82) (1.05) (1.67)
In excess of net investment
income -- (0.00)+++ -- -- (0.00)+++ --
In excess of net realized gain
on investment and foreign
currency transactions -- -- -- -- (0.02) --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.24) $(1.35) $(1.43) $(1.19) $(1.24) $(1.90)
------ ------ ------ ------ ------ ------
Net asset value - end of period $19.91 $17.36 $14.36 $12.63 $10.03 $11.48
====== ====== ====== ====== ====== ======
Total return 16.05%++ 30.75% 25.05% 38.05% (1.88)% 2.62%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.40%+ 1.41% 1.54% 1.56% 1.61% 1.56%+
Net investment income 0.25%+ 0.42% 0.72% 1.25% 1.37% 1.05%+
Portfolio turnover 19% 44% 47% 54% 87% 41%
Net assets at end of period
(000,000 omitted) $2,718 $1,522 $437 $165 $69 $15
* For the period from the inception of Class B, September 7, 1993, through December 31, 1993.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust's expenses are calculated without reduction for fees paid
indirectly.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED --------------------------------
JUNE 30, 1998 1997 1996**
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $17.30 $14.33 $13.93
------ ------ ------
Income from investment operations# -
Net investment income $ 0.02 $ 0.07 $ 0.05
Net realized and unrealized gain on investments and
foreign currency transactions 2.75 4.27 1.76
------ ------ ------
Total from investment operations $ 2.77 $ 4.34 $ 1.81
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.03) $(0.10) $(0.09)
From net realized gain on investment and foreign
currency transactions (0.21) (1.27) (1.32)
In excess of net investment income -- (0.00)+++ --
------ ------ ------
Total distributions declared to shareholders $(0.24) $(1.37) $(1.41)
------ ------ ------
Net asset value - end of period $19.83 $17.30 $14.33
====== ====== ======
Total return 16.02%++ 30.76% 12.74%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.40%+ 1.41% 1.49%+
Net investment income 0.25%+ 0.42% 0.77%+
Portfolio turnover 19% 44% 47%
Net assets at end of period (000,000 omitted) $498 $211 $12
** For the period from the inception of Class C, July 1, 1996, through December 31, 1996.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Trust's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997***
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $17.52 $14.33
------ ------
Income from investment operations# -
Net investment income $ 0.13 $ 0.26
Net realized and unrealized gain on investments and foreign
currency transactions 2.78 4.44
------ ------
Total from investment operations $ 2.91 $ 4.70
------ ------
Less distributions declared to shareholders -
From net investment income $(0.11) $(0.23)
From net realized gain on investment and foreign currency
transactions (0.21) (1.27)
In excess of net investment income -- (0.01)
------ ------
Total distributions declared to shareholders $(0.32) $(1.51)
------ ------
Net asset value - end of period $20.11 $17.52
====== ======
Total return 16.63%++ 33.30%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.39%+ 0.41%+
Net investment income 1.26%+ 1.42%+
Portfolio turnover 19% 44%
Net assets at end of period (000 omitted) $49,482 $22,555
*** For the period from the inception of Class I, January 2, 1997, through December 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Trust's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
Massachusetts Investors Trust (the Trust) was organized as a common law trust
under the laws of the Commonwealth of Massachusetts in 1924 and is registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data, without exclusive reliance
upon exchange or over-the-counter prices. Short-term obligations, which mature
in 60 days or less, are valued at amortized cost, which approximates market
value. Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction of the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Forward Foreign Currency Exchange Contracts - The Trust 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 Trust will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Trust may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Trust 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 Trust may
enter into contracts with the intent of changing the relative exposure of the
Trust'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 Trust's custody fee is calculated as a percentage
of the Trust's month-end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Trust. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Trust files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Trust's tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on Form
1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Trust
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Trust offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Trust based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Trust 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 0.30% First $6 million 6.67%
Next $300 million 0.24% Next $9 million 5.33%
In excess of $500 million 0.12% In excess of $15 million 2.67%
Administrator - The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Trust pays MFS an administrative fee
at the following annual percentages of the Trust's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain officers and
Trustees of the Trust are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trust has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of
$23,915 for the six months ended June 30, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$5,033,913 for the six months ended June 30, 1998, as its portion of the sales
charge on sales of Class A shares of the Trust.
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 Trust's distribution plan provides that the Trust 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 Trust 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 Trust'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 Trust'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 $1,369,000 for the six
months ended June 30, 1998. Fees incurred under the distribution plan during the
six months ended June 30, 1998, were 0.33% of average daily net assets
attributable to Class A shares on an annualized basis.
The Trust's distribution plan provides that the Trust will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Trust'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 $74,061 and $41,382 for
Class B and Class C shares, respectively, for the six months ended June 30,
1998. Fees incurred under the distribution plan during the six months ended
June 30, 1998, were 1.00% and 1.00% of average daily net assets attributable
to Class B and Class C shares on an annualized basis, respectively.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the six months ended June 30, 1998, were
$25,182, $1,235,308, and $93,824 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 Trust's average daily net assets at an effective annual rate
of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$3,289,332,586 and $1,404,386,331, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $6,832,570,052
--------------
Gross unrealized appreciation $2,408,099,235
Gross unrealized depreciation (40,282,907)
--------------
Net unrealized appreciation $2,367,816,328
==============
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED JUNE 30, 1998 YEAR ENDED DECEMBER 31, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 97,930,826 $1,881,129,111 108,356,333 $ 1,816,718,757
Shares issued to shareholders
in reinvestment of
distributions 3,045,621 59,731,228 15,057,865 254,083,546
Shares transferred to Class I -- -- (977,846) (14,217,885)
Shares reacquired (52,838,702) (1,014,665,970) (60,788,485) (1,014,640,995)
---------- -------------- ----------- ---------------
Net increase 48,137,745 $ 926,194,369 61,647,867 $ 1,041,943,423
========== ============== =========== ===============
<CAPTION>
Class B Shares
SIX MONTHS ENDED JUNE 30, 1998 YEAR ENDED DECEMBER 31, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 55,141,311 $1,049,832,796 60,547,150 $ 1,011,314,619
Shares issued to shareholders
in reinvestment of
distributions 1,145,295 22,216,907 5,752,255 96,250,575
Shares reacquired (7,425,010) (140,715,668) (9,037,298) (150,648,443)
---------- -------------- ----------- ---------------
Net increase 48,861,596 $ 931,334,035 57,262,107 $ 956,916,751
========== ============== =========== ===============
<CAPTION>
Class C Shares
SIX MONTHS ENDED JUNE 30, 1998 YEAR ENDED DECEMBER 31, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 14,518,782 $ 276,074,409 12,051,608 $ 202,729,481
Shares issued to shareholders
in reinvestment of
distributions 145,796 2,819,755 606,219 10,113,634
Shares reacquired (1,750,557) (33,329,559) (1,309,344) (22,589,323)
---------- -------------- ----------- ---------------
Net increase 12,914,021 $ 245,564,605 11,348,483 $ 190,253,792
========== ============== =========== ===============
<CAPTION>
Class I Shares
SIX MONTHS ENDED JUNE 30, 1998 YEAR ENDED DECEMBER 31, 1997*
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,339,167 $ 24,171,257 321,571 $ 5,237,008
Shares issued to shareholders
in reinvestment of
distributions 27,584 541,611 103,620 1,748,324
Shares transferred from Class A -- -- 977,846 14,217,885
Shares reacquired (193,347) (3,771,936) (115,876) (1,975,054)
---------- -------------- ----------- ---------------
Net increase 1,173,404 $ 20,940,932 1,287,161 $ 19,228,163
========== ============== =========== ===============
* For the period from the inception of Class I, January 2, 1997, through December 31, 1997.
</TABLE>
(6) Line of Credit
The Trust and other affiliated funds participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Trust
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Trust for the six months ended June 30, 1998, was $16,564.
(7) Financial Instruments
The Trust trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange contracts. The notional or
contractual amounts of these instruments represent the investment the Trust has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Forward foreign currency purchases and sales under master netting agreements
amounted to a net receivable of $516,700 with Swiss Bank Corp. at June 30,
1998.
At June 30, 1998, the Trust had sufficient cash and/or securities to cover any
commitments under these contracts.
<PAGE>
MASSACHUSETTS INVESTORS TRUST
<TABLE>
<S> <C>
Trustees Assistant Secretary
Richard B. Bailey* - Private Investor; James R. Bordewick, Jr.*
Former Chairman and Director (until 1991),
MFS Investment Management Custodian
State Street Bank and Trust Company
Peter G. Harwood - Private Investor
Investor Information
J. Atwood Ives - Chairman and Chief Executive For MFS stock and bond market outlooks,
Officer, Eastern Enterprises (diversified call toll free: 1-800-637-4458 anytime from
services company) a touch-tone telephone.
Lawrence T. Perera - Partner, Hemenway For information on MFS mutual funds, call your
& Barnes (attorneys) financial adviser or, for an information kit,
call toll free: 1-800-637-2929 any business day
William J. Poorvu - Adjunct Professor, Harvard from 9 a.m. to 5 p.m. Eastern time (or leave a
University Graduate School of Business message anytime).
Administration
Investor Service
Charles W.Schmidt - Private Investor MFS Service Center, Inc.
P.O. Box 2281
Arnold D. Scott* - Senior Executive Boston, MA 02107-9906
Vice President, Director, and Secretary,
MFS Investment Management For general information, call toll free:
1-800-225-2606 any business day from
Jeffrey L. Shames* - Chairman, Chief 8 a.m. to 8 p.m. Eastern time.
Executive Officer, and Director,
MFS Investment Management For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business day
Elaine R. Smith - Independent Consultant from 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be equipped with
David B. Stone - Chairman and Director, a Telecommunications Device for the Deaf.)
North American Management Corp.
(investment advisers) For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
Investment Adviser (1-800-637-8255) anytime from a touch-tone
Massachusetts Financial Services Company telephone.
500 Boylston Street
Boston, MA 02116-3741 World Wide Web
www.mfs.com
Distributor
MFS Fund Distributors, Inc. For the fourth year in a row,
500 Boylston Street MFS earned a #1 ranking in the
Boston, MA 02116-3741 [Dalbar Logo] DALBAR, Inc. Broker/Dealer
Survey, Main Office Operations
Portfolio Managers Service Quality Category. The
Mitchell D. Dynan* firm achieved a 3.42 overall score on a scale
John D. Laupheimer, Jr.* of 1 to 4 in the 1997 survey. A total of 111
Kevin R. Parke* firms responded, offering input on the quality
of service they received from 29 mutual fund
Treasurer companies nationwide. The survey contained
W. Thomas London* questions about service quality in 11
categories, including "knowledge of operations
Assistant Treasurers contact," "keeping you informed," and "ease of
Mark E. Bradley* doing business" with the firm.
Ellen Moynihan*
James O. Yost*
Secretary
Stephen E. Cavan*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-----------------
MASSACHUSETTS Bulk Rate
INVESTORS TRUST U.S. Postage
Paid
[Logo] M F S(R) MFS
INVESTMENT MANAGEMENT -----------------
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
[DALBAR LOGO]
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MIT-3 8/98 521M 13/213/313/813
