[LOGO} MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
Semiannual Report
February 29, 1996
<PAGE>
<TABLE>
<CAPTION>
MFS(R) WORLD ASSET ALLOCATION FUND(SM)
<S> <C>
TRUSTEES SECRETARY
A. Keith Brodkin* - Chairman and President Stephen E. Cavan*
Richard B. Bailey* - Private Investor; ASSISTANT SECRETARY
Former Chairman and Director (until 1991), James R. Bordewick, Jr.*
Massachusetts Financial Services Company
Director, Cambridge Bancorp; Director, CUSTODIAN
Cambridge Trust Company Investors Bank & Trust Company
Marshall N. Cohan - Private Investor
AUDITORS
Lawrence H. Cohn, M.D. - Chief of Cardiac Ernst & Young LLP
Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School INVESTOR INFORMATION
For MFS stock and bond market outlooks,
The Hon. Sir J. David Gibbons, KBE - Chief call toll free: 1-800-637-4458 anytime from
Executive Officer, Edmund Gibbons Ltd.; a touch-tone telephone.
Chairman, Bank of N.T. Butterfield & Son Ltd.
For information on MFS mutual funds,
Abby M. O'Neill - Private Investor; call your financial adviser or, for an
Director, Rockefeller Financial Services, Inc. information kit, call toll free:
(investment advisers) 1-800-637-2929 any business day from
9 a.m. to 5 p.m. Eastern time (or leave
Walter E. Robb, III - President and Treasurer, a message anytime).
Benchmark Advisors, Inc. (corporate financial
consultants) INVESTOR SERVICE
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive Vice P.O. Box 2281
President, Director and Secretary, Boston, MA 02107-9906
Massachusetts Financial Services Company
For general information, call toll free:
Jeffrey L. Shames* - President and Director, 1-800-225-2606 any business day from
Massachusetts Financial Services Company 8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt - President, Insight Resources,
Inc. (acquisition planning specialists) For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
Ward Smith - Former Chairman (until 1994), (To use this service, your phone must be equipped with a
NACCO Industries; Director, Sundstrand Telecommunications Device for the Deaf.)
Corporation
For share prices, account balances and
INVESTMENT ADVISER exchanges, call toll free: 1-800-MFS-TALK
Massachusetts Financial Services Company (1-800-637-8255) anytime from a touch-tone telephone.
500 Boylston Street
Boston, MA 02116-3741
TOP-RATED SERVICE
DISTRIBUTOR [Dalbar Logo] For the second year in a
MFS Fund Distributors, Inc. row, MFS earned a #1
500 Boylston Street ranking in DALBAR,
Boston, MA 02116-3741 Inc.'s Broker/Dealer
Survey, Main Office
ASSET ALLOCATION COMMITTEE Operations Service Quality
A. Keith Brodkin* category. The firm achieved
Jeffrey L. Shames* a 3.49 overall score -- on a scale of 1 to 4 -- in the
John W. Ballen* 1995 survey. A total of 71 firms responded, offering
Leslie J. Nanberg* input on the quality of service they receive from 36
James T. Swanson* mutual fund companies nationwide. The survey
contained questions bout service quality in 17
TREASURER categories, including "knowledge of phone service
W. Thomas London* contracts," "accuracy of transaction processing," and
"overall ease of doing business with the firm."
ASSISTANT TREASURER
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
For the six months ended February 29, 1996, Class A shares of the Fund provided
a total return of 11.02%, Class B shares returned 10.66%, and Class C shares
returned 10.71%. All of these returns assume the reinvestment of distributions
but exclude the effects of any sales charges, and they compare to the six-month
returns for the following unmanaged indices: 15.31% for the Standard & Poor's
500 Composite Index, a popular, unmanaged index of common stock performance;
7.04% for the Morgan Stanley Capital International EAFE (Europe, Australia, Far
East) Index (an unmanaged index of international stocks); 4.13% for the Lehman
Brothers Aggregate Bond Index (an unmanaged index of government and corporate
bonds including Treasury, agency and corporate bond issues and mortgage-backed
securities); and 4.01% for the J.P. Morgan Non-Dollar Government Bond Index (an
unmanaged international bond index).
We believe that international stocks continue to pose a more favorable
investment opportunity than U.S. stocks, based on measures of relative value and
key fundamental indicators. During the last six months we have been overweighted
in international stocks relative to the United States, a position which has
helped the Fund's performance. We believe parts of Asia currently offer
significant opportunities, with growth rates there expected to exceed growth
rates of the developed Western world. At the same time, we are positioned to
take advantage of Japan's recovery from recession through investment in stocks
of key growth industries there. We have also found what we believe are several
promising investment opportunities from Hong Kong southward to Thailand.
Our bond positions have also favored international holdings, primarily
government bonds from Europe. Economic weakness in Europe has helped create a
favorable situation for bonds, while central banks have had to lower short-term
interest rates in an effort to foster growth. Key fixed-income holdings have
included Germany, Spain, and the United Kingdom.
Changes in emphasis among asset classes of the Fund will continue to occur
at least monthly, and they will be made less with a focus to market timing than
to exploiting key advantages in the relative attractiveness of the various
markets. The current strategies of the managers of each portfolio may be found
on the following pages.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
- ---------------------- ---------------------
- ---------------------- --------------------
[A photo of A. Keith Brodkin, [A photo of James T. Swanson]
Chairman and President]
/s/ A. Keith Brodkin /s/ James T. Swanson
- ------------------------ -------------------------------
A. Keith Brodkin James T. Swanson
Chairman and President On behalf of the Asset
Allocation Committee
March 14, 1996
<PAGE>
PORTFOLIO ALLOCATION
Previous Quarter
42.7% 9.4% 23.1% 9.2% 15.6%
Current Quarter
8.9% 14.3% 8.5% 23.4% 44.9%
o U.S. Stocks
o International Stocks
o High-Yield Corporate Bonds
o International Bonds
o Cash and Cash Equivalents
U.S. STOCK MARKET - 23.4%
Our holdings in U.S. equities range across a variety of industries and
incorporate both value and growth strategies. Recent additions to the portfolio
include E.W. Scripps, a newspaper and television broadcast company; Fort Howard
Paper, a recycled tissue producer; and Beverly Enterprises, a nursing home
company. Currently, our top three sectors are leisure (22.1%), industrial goods
(15.1%), and technology (13.0%). Our current outlook is slightly more cautious
than in our last update. The recent rise in long-term interest rates and a
softer profit outlook could present challenges for the U.S. stock market in
1996. We expect this short-term caution to be mitigated by a continued decline
in interest rates in the second half of 1996.
-- John Brennan
FIVE LARGEST HOLDINGS
- -------------------------------------------------------------------------------
Harrah's Entertainment, Inc. (entertainment) 1.1%
- -------------------------------------------------------------------------------
Student Loan Marketing Assn. (financial institutions) 1.0%
- -------------------------------------------------------------------------------
Tyco International Ltd. (consumer goods and services) 0.9%
- -------------------------------------------------------------------------------
Philip Morris Cos., Inc. (consumer goods and services) 0.9%
- -------------------------------------------------------------------------------
Loral Corp. (defense electronics) 0.8%
- -------------------------------------------------------------------------------
INTERNATIONAL STOCK MARKETS - 44.9%
Although central banks have lowered short-term interest rates, economic growth
in Europe remains relatively weak, and while the long Japanese recession is
continuing, the Japanese stock market has shown some recent improvement. In
general, we emphasize stock selection in our international investments as
opposed to country or industry selection. Priority is placed on companies which
we believe will generate above-average growth and which are trading at
attractive valuations, regardless of their home country.
As of February 29, approximately 45% of the portfolio's assets were invested in
international stocks. Currently, 53% of our international stock holdings are in
Europe, 45% in Asia/Pacific, and 2% in Canada. The largest individual country
exposures are Japan (18%), Sweden (14%), and the United Kingdom (11%). Roughly
17 of our international holdings were in emerging markets, all of which were in
Southeast Asia. Over the past three months, the European weighting has increased
slightly due to several additions to the portfolio, including Union des
Assurances Federales, a French life insurance company, and Accor, a French
hotelier. An offsetting decline in the Asia/Pacific weighting was the result of
reductions in several Australian holdings which neared our price targets.
Some of our largest holdings include PowerGen, a U.K.-based electric generator;
Astra, a multinational pharmaceutical company based in Sweden; Telecom Italia
Mobile, the operator of Italy's largest cellular telephone system; DDI Corp.,
the Japanese cellular and long distance telephone operator; and ASEA AB, a large
electrical equipment company in Sweden.
-- David Mannheim
<PAGE>
FIVE LARGEST HOLDINGS
- -------------------------------------------------------------------------------
PowerGen PLC (utilities - electric - United Kingdom) 2.3%
- -------------------------------------------------------------------------------
Astra AB (pharmaceuticals - Sweden) 2.1%
- -------------------------------------------------------------------------------
DDI Corp. (telecommunications - Japan) 1.6%
- -------------------------------------------------------------------------------
ASEA AB (electrical equipment - Sweden) 1.5%
- -------------------------------------------------------------------------------
Telecom Italia Mobile (telecommunications - Italy) 1.3%
- -------------------------------------------------------------------------------
U.S. GOVERNMENT BOND MARKET
The U.S. government bond market retreated during the recent period as some early
signs of a pickup in economic activity and a heavy dose of supply from corporate
and government issuers sparked a selloff. After declining to 5 1/2% in
mid-January, interest rates on 10-year Treasuries rose to 6% by the end of
February. The retreat in short-term interest rates was even more severe, with
two-year Treasuries rising from 4 3/4% to 5 1/2%. The market has come to the
realization that the likelihood of further cuts in short-term interest rates has
been reduced as a result of these signs of strength. Federal Reserve Chairman
Greenspan's recent testimony suggested that the Fed was comfortable with the
current level of short-term rates and that economic activity would pick up in
the coming months.
-- Geoffrey Kurinsky
HIGH-YIELD CORPORATE BOND MARKET - 8.9%
The high-yield market continues to benefit from strong cash inflows into
high-yield mutual funds. Favorable market technicals are further supported by an
economic environment of low interest rates and modest economic growth, which has
enabled issuers to generate free cash flow to repay debt ahead of schedule or
invest for future growth. We do not expect a boom in economic activity which
would favor commodity cyclicals. The broad telecommunications sector, where we
have an overweighted position, has fared particularly well in light of the
enactment of a telecommunications deregulation law. We believe the outlook is
more favorable for bonds in defensive industries such as telecommunications,
supermarkets, and health care. Accordingly, we have added to positions in those
areas. Our strategy will continue to focus on the upper- credit quality tier of
the high-yield market.
-- Joan Batchelder
FIVE LARGEST HOLDINGS
- -------------------------------------------------------------------------------
Tenet Healthcare Corp. (medical and health technology and services) 0.6%
- -------------------------------------------------------------------------------
Wolverine Tube, Inc. (special products and services) 0.5%
- -------------------------------------------------------------------------------
Paging Network, Inc. (telecommunications) 0.5%
- -------------------------------------------------------------------------------
American Standard, Inc. (building) 0.4%
- -------------------------------------------------------------------------------
K-III Communications Corp. (telecommunications) 0.4%
- -------------------------------------------------------------------------------
INTERNATIONAL BOND MARKETS - 14.3%
After an extended rally, the global bond markets suffered a sharp correction in
the last few weeks of the period. However, we believe that the economic
fundamentals which have driven the rally -- moderate global growth, benign
inflation, fiscal austerity programs, and easing monetary policies -- could
continue to provide support over the next few months. The markets now appear to
be looking ahead to the next phases of the policy cycle, i.e., stable, and then
rising, official interest rates. Hence, longer-term yields are unlikely to
regain their recent low levels. The portfolio's emphasis on shorter maturities
reflects both the potential for steeper yield curves and a generally defensive
stance. We have increased exposure to the higher-yielding European markets since
they offer the greatest potential for further rate cuts.
-- Leslie Nanberg
FIVE LARGEST HOLDINGS
- -------------------------------------------------------------------------------
Republic of Germany 3.0%
- -------------------------------------------------------------------------------
Republic of Italy 2.0%
- -------------------------------------------------------------------------------
Government of France 1.9%
- -------------------------------------------------------------------------------
United Kingdom 1.3%
- -------------------------------------------------------------------------------
Kingdom of Sweden 1.2%
- -------------------------------------------------------------------------------
OBJECTIVE AND POLICIES
The Fund's investment objective is to seek total return over the long term
through investments in equity and fixed-income securities. The Fund will also
seek to have low volatility of share price (i.e., net asset value per share) and
reduced risk (compared to an aggressive equity or fixed-income fund).
The Fund seeks to achieve its objective by allocating portfolio assets among
various asset classes of equity and fixed-income securities where the
opportunities for total return are expected to be most attractive. Under normal
circumstances, the Fund intends to invest at least 30% of its total assets in
equity securities and allocate its assets among at least three asset classes.
The assets will be allocated among some or all of the following five classes of
securities: U.S. equity securities, foreign equity securities, U.S.
investment-grade fixed-income securities, U.S. high-yield fixed-income
securities, and foreign fixed-income securities.
INVESTMENT PERSONNEL PROFILES
The Asset Allocation Committee consists of Messrs. Swanson and Nanberg as well
as A. Keith Brodkin and Jeffrey Shames, Chairman and President of MFS,
respectively, and John Ballen, Senior Vice President and Director of Equity
Portfolio Management at MFS. The individuals responsible for managing the assets
in the asset classes are as follows:
James Swanson joined the MFS investment staff in 1985. A graduate of Colgate
University and the Harvard University Graduate School of Business
Administration, he began his career at MFS as Vice President - Investments and
was named Senior Vice President in 1989. Mr. Swanson supervises quantitative
support and provides oversight of the Fund's investments.
Joan Batchelder rejoined MFS in October of 1983 after three years with a leading
investment counsel firm. She first joined MFS in 1978 and that year was named an
Investment Officer in the Fixed Income Department. A graduate of Colorado
College and recipient of a Master's Degree from the Maxwell School of Syracuse
University, she was appointed Assistant Vice President - Investments in 1979,
Vice President - Investments in 1980 and Senior Vice President in 1983. Ms.
Batchelder manages the Fund's U.S. high-yield fixed-income securities.
John Brennan joined the MFS investment staff in 1985. A graduate of the
University of Rhode Island and the Stanford University Graduate School of
Business Administration, he began his career at MFS as an industry specialist
and was promoted to Assistant Vice President - Investments in 1987. In 1988, he
was named Vice President - Investments and in 1991 he became Senior Vice
President. Mr. Brennan, along with Mr. Ballen, manages the Fund's U.S. equity
securities.
Geoff Kurinsky began his career at MFS in 1987 in the Fixed Income Department. A
graduate of the University of Massachusetts and Boston University's Graduate
School of Management, he was named Assistant Vice President in 1988, Vice
President in 1989 and Senior Vice President in 1993. Mr. Kurinsky manages the
Fund's U.S. investment-grade fixed-income securities.
David Mannheim began his career at MFS in 1988 as a research specialist and was
promoted to Assistant Vice President - Investments in 1991. In 1992, he was
named Vice President - Investments. Mr. Mannheim is a graduate of Amherst
College and of Massachusetts Institute of Technology's Sloan School of
Management. He manages the Fund's foreign equity securities.
Leslie Nanberg joined the MFS Fixed Income Department in 1980. A graduate of the
University of Illinois with graduate degrees from Northwestern University and
the Northwestern University Graduate School of Management, he was named
Assistant Vice President - Investments in 1981, Vice President - Investments in
1983 and Senior Vice President in 1986. In addition to serving as head of the
MFS International Fixed Income Department, he has senior responsibility for all
fixed-income assets under MFS management. Mr. Nanberg manages the Fund's foreign
fixed-income securities.
PERFORMANCE SUMMARY
Because mutual funds like MFS World Asset Allocation Fund are designed for
investors with long-term goals, we have provided cumulative results as well as
the average annual total returns for Class A, Class B and Class C shares for the
applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions)
7/22/94+ -
6 Months 1 Year 2/29/96
- ------------------------------------------------------------------------------
Cumulative Total Return* +11.02% +25.24% +26.49%
- ------------------------------------------------------------------------------
Average Annual Total Return* -- +25.24% +15.73%
- ------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the Securities and Exchange Commission
(the SEC), with all distributions reinvested and reflecting the maximum sales
charge of 4.75% on the initial investment for the 1-year period ended December
31, 1995 and for the period from July 22, 1994+ to December 31, 1995, were
+15.65% and +10.54%, respectively.
Class B Investment Results
(net asset value change including reinvested distributions)
7/22/94+ -
6 Months 1 Year 2/29/96
- ------------------------------------------------------------------------------
Cumulative Total Return++ +10.66% +24.34% +24.98%
- ------------------------------------------------------------------------------
Average Annual Total Return++ -- +24.34% +14.87%
- ------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested and reflecting the contingent deferred sales charge (CDSC) of 4% for
the 1-year period ended December 31, 1995, and 3% for the period from July 22,
1994+ to December 31, 1995, were +16.62% and +10.89%, respectively.
+Commencement of offering of this class of shares.
++These results do not include any CDSC. If the charge had been included, the
results would have been lower.
*These results do not include the sales charge. If the charge had been
included, the results would have been lower.
Class C Investment Results
(net asset value change including reinvested distributions)
7/22/94+ -
6 Months 1 Year 2/29/96 -
- ------------------------------------------------------------------------------
Cumulative Total Return++ +10.71% +24.45% +25.11%
- ------------------------------------------------------------------------------
Average Annual Total Return++ -- +24.45% +14.95%
- ------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested for the 1-year period ended December 31, 1995 and for the period from
July 22, 1994+ to December 31, 1995, were +20.64% and +13.55%, respectively.
All results represent past performance and are not an indication of future
results. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. All Class A share
results reflect the applicable expense subsidy which is explained in the Notes
to Financial Statements. Had the subsidy not been in effect, the results would
have been less favorable.
+Commencement of offering of this class of shares.
++Class C shares have no initial sales charge or CDSC but, along with Class B
shares, have higher annual fees and expenses than Class A shares.
PORTFOLIO OF INVESTMENTS - February 29, 1996
Stocks - 68.3%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Foreign Stocks - 44.9%
Australia - 2.6%
Australia & New Zealand Bank Group Ltd.
(Finance) 147,823 $ 726,654
Q.B.E. Insurance Group (Insurance) 387,000 2,005,937
Seven Network Ltd. (Media) 610,900 1,891,469
Woolworths Ltd. (Retail) 277,088 718,101
------------
$ 5,342,161
- -----------------------------------------------------------------------------
Canada - 1.0%
Canadian National Railway Co. (Railroad) 65,000 $ 1,121,445
Potash Corp. of Saskatchewan, Inc.
(Precious Metals and Minerals) 4,300 319,275
Rogers Communications, Inc., "B"
(Telecommunications)* 68,000 680,000
------------
$ 2,120,720
- -----------------------------------------------------------------------------
Finland - 0.4%
Aamulehti Yhtymae Oy II (Publishing) 37,400 $ 855,626
- -----------------------------------------------------------------------------
France - 3.4%
Accor (Lodging) 11,800 $ 1,661,477
Essilor International (Medical and Health
Products) 4,500 1,072,682
Michelin (C.G.D.E.) (Tire and Rubber) 28,000 1,253,820
Total S.A., "B" (Oils) 14,088 929,514
Union des Assurances Federales S.A.
(Insurance) 17,500 1,943,480
------------
$ 6,860,973
- -----------------------------------------------------------------------------
Germany - 1.4%
Adidas AG (Apparel and Textiles) 15,200 $ 971,642
Hornbach Baumarkt AG (Retail) 24,600 814,700
Volkswagen AG (Automotive) 2,950 1,121,421
------------
$ 2,907,763
- -----------------------------------------------------------------------------
Hong Kong - 3.1%
Cosco Pacific Ltd. (Packaging and
Containers)## 1,399,000 $ 1,112,904
Dah Sing Financial (Finance) 232,000 690,246
Giordano International Ltd. (Retail) 2,092,000 2,232,582
Liu Chong Hing Bank (Banks and Credit
Companies) 670,000 1,022,688
Peregrine Investment Holdings (Finance) 500,000 853,750
Wing Hang Bank (Banks and Credit Companies) 94,000 391,538
------------
$ 6,303,708
- -----------------------------------------------------------------------------
Italy - 1.3%
Telecom Italia Mobile (Telecommunications) 227,000 $ 416,091
Telecom Italia Mobile, di Risp
(Telecommunications) 1,955,000 2,183,930
------------
$ 2,600,021
- -----------------------------------------------------------------------------
Japan - 8.2%
Bridgestone Corp. (Tire and Rubber) 88,000 $ 1,372,254
Canon, Inc. (Consumer Goods) 29,000 532,185
DDI Corp. (Telecommunications) 453 3,320,938
Daiwa House Industry Co. (Home
Construction) 51,000 771,033
East Japan Railway Co. (Transportation) 223 1,138,642
Kinki Coca-Cola Bottling (Beverages) 49,000 647,613
Kirin Beverage Corp. (Beverages) 85,000 1,147,661
Matsushita Electric Industrial Co.
(Electrical Equipment) 83,000 1,325,850
Murata Manufacturing Co. Ltd. (Electrical
Equipment) 38,000 1,250,166
Nissen Co. (Retail) 800 14,453
Omron Corp. (Electronics) 83,000 1,830,938
Osaka Sanso Kogyo Ltd. (Chemicals) 299,000 1,117,303
Takeda Chemical Industries (Chemicals) 117,000 1,880,096
Teisan KK (Chemicals) 67,000 367,582
------------
$ 16,716,714
- -----------------------------------------------------------------------------
Malaysia - 0.7%
Maruichi Malaysia Steel Tube Berhad (Metal
Fabricate/Hardware) 99,000 $ 334,135
New Straits Time Press (Publishing) 226,000 1,064,347
------------
$ 1,398,482
- -----------------------------------------------------------------------------
Netherlands - 2.9%
Getronics NV (Computer Software and
Services) 41,869 $ 2,389,895
IHC Caland NV (Transportation - Marine) 39,500 1,499,116
Royal Dutch Petroleum Co. (Oils) 14,000 1,936,603
------------
$ 5,825,614
- -----------------------------------------------------------------------------
New Zealand - 1.3%
Lion Nathan Ltd. (Beverages) 1,183,000 $ 2,586,275
- -----------------------------------------------------------------------------
Singapore - 1.9%
Hong Leong Finance Ltd. (Finance) 464,000 $ 2,021,648
Mandarin Oriental International Ltd.* 247,900 324,749
Singapore Press Holdings (Publishing) 67,000 1,352,810
------------
$ 3,699,207
- -----------------------------------------------------------------------------
South Korea - 1.9%
Hanil Cement Manufacturing Co. (Building
Materials) 14,000 $ 769,821
Korea Electric Power Corp. (Utilities -
Electric) 39,500 1,654,880
Korea Mobile Telecommunications Corp.
(Telecommunications) 1,126 1,416,676
------------
$ 3,841,377
- -----------------------------------------------------------------------------
Spain - 3.2%
Acerinox S.A. (Iron and Steel) 19,740 $ 1,911,249
Cubiertas y Mzov S.A. (Engineering and
Construction) 24,000 1,553,021
Iberdrola S.A. (Utilities - Electric) 119,000 1,174,304
Repsol S.A. (Oils) 51,000 1,864,596
------------
$ 6,503,170
- -----------------------------------------------------------------------------
Sweden - 6.1%
ASEA AB, Free Shares, "B" (Electrical
Equipment) 30,500 $ 3,072,820
Astra AB, Free Shares, "B"
(Pharmaceuticals) 92,000 4,211,861
Ericsson LM, "B" (Telecommunications) 18,000 390,695
Marieberg Tidnings AB, "A" (Publishing) 42,000 1,120,081
Nobelpharma AB (Medical Supplies) 38,000 636,192
Sparbanken Svergie AB, "A" (Finance) 174,200 1,884,078
Volvo AB, "B" (Automotive) 56,000 1,198,898
------------
$ 12,514,625
- ----------------------------------------------------------------------------
Thailand - 0.6%
Total Access Communication Public Co. Ltd.
(Telecommunications)* 150,000 $ 1,297,500
- -----------------------------------------------------------------------------
United Kingdom - 4.9%
ASDA Group PLC (Stores) 1,178,000 $ 1,884,800
Capital Radio PLC (Broadcasting) 90,600 926,630
Dalgety (Food Products) 187,400 1,223,632
PowerGen PLC (Utilities - Electric) 10,719 88,624
PowerGen PLC, 380 P/P (Utilities -
Electric)* 753,600 4,603,742
Storehouse PLC (Retail) 253,000 1,200,839
------------
$ 9,928,267
- -----------------------------------------------------------------------------
Total Foreign Stocks $ 91,302,203
- -----------------------------------------------------------------------------
U.S. Stocks - 23.4%
Aerospace - 0.3%
General Dynamics Corp. 8,200 $ 488,925
Raytheon Co. 2,900 145,362
------------
$ 634,287
- -----------------------------------------------------------------------------
Agricultural Products - 1.0%
AGCO Corp. 49,200 $ 1,334,550
Case Corp. 11,900 632,188
------------
$ 1,966,738
- -----------------------------------------------------------------------------
Airlines - 0.2%
Midwest Express Holdings, Inc.* 11,900 $ 357,000
- -----------------------------------------------------------------------------
Apparel and Textiles - 0.2%
Nike, Inc., "B" 6,800 $ 441,150
- -----------------------------------------------------------------------------
Automotive - 0.7%
General Motors Corp. 27,700 $ 1,419,625
- -----------------------------------------------------------------------------
Banks and Credit Companies - 0.6%
First Interstate Bancorp 8,200 $ 1,339,675
- -----------------------------------------------------------------------------
Business Services - 0.3%
ADT Ltd.* 46,500 $ 685,875
- -----------------------------------------------------------------------------
Computer Software - Personal Computers - 0.4%
Microsoft Corp.* 7,400 $ 730,288
- -----------------------------------------------------------------------------
Computer Software - Systems - 1.3%
Adobe Systems, Inc. 24,700 $ 827,450
BMC Software, Inc.* 16,500 919,875
Sybase, Inc.* 25,800 809,475
Synopsys, Inc.* 1,700 55,675
------------
$ 2,612,475
- -----------------------------------------------------------------------------
Consumer Goods and Services - 1.8%
Philip Morris Cos., Inc. 17,900 $ 1,772,100
Revlon, Inc., "A" 500 12,000
Tyco International Ltd. 52,800 1,907,400
------------
$ 3,691,500
- -----------------------------------------------------------------------------
Defense Electronics - 0.8%
Loral Corp. 33,100 $ 1,559,838
- -----------------------------------------------------------------------------
Electrical Equipment - 0.6%
Honeywell, Inc. 24,500 $ 1,298,500
- -----------------------------------------------------------------------------
Electronics - 1.0%
Altera Corp.* 6,400 $ 417,600
Analog Devices, Inc.* 22,500 604,688
Atmel Corp.* 18,000 481,500
LSI Logic Corp.* 17,100 472,388
------------
$ 1,976,176
- -----------------------------------------------------------------------------
Entertainment - 2.9%
American Radio System, "A"* 2,000 $ 61,000
Argosy Gaming Co.* 21,900 197,100
Casino America, Inc.* 27,500 166,719
Chancellor Corp., "A" 700 14,350
Comcast Corp., "A" 24,500 480,813
Harrah's Entertainment, Inc.* 82,300 2,232,388
Hasbro, Inc. 12,000 414,000
Heritage Media Corp., "A"* 800 28,900
Lin Television Corp.* 12,100 414,425
Mattel, Inc. 13,500 448,875
Showboat, Inc. 62,700 1,504,800
------------
$ 5,963,370
- -----------------------------------------------------------------------------
Financial Institutions - 1.6%
Federal Home Loan Mortgage Corp. 14,200 $ 1,171,500
Student Loan Marketing Assn. 24,500 2,024,312
------------
$ 3,195,812
- -----------------------------------------------------------------------------
Food and Beverage Products - 0.9%
General Mills, Inc. 8,800 $ 506,000
Interstate Bakeries Corp. 58,100 1,278,200
Nabisco Holdings Corp. 3,500 122,938
------------
$ 1,907,138
- -----------------------------------------------------------------------------
Forest and Paper Products - 0.8%
Fort Howard Corp.* 40,700 $ 936,100
Kimberly Clark Corp. 9,900 756,112
------------
$ 1,692,212
- -----------------------------------------------------------------------------
Insurance - 0.1%
Highlands Insurance Group* 1,490 $ 30,359
Penncorp Financial Group, Inc. 4,200 134,555
------------
$ 164,914
- -----------------------------------------------------------------------------
Machinery - 0.9%
Ingersoll-Rand Co. 18,200 $ 743,925
York International Corp. 21,800 1,043,675
------------
$ 1,787,600
- -----------------------------------------------------------------------------
Medical and Health Products - 0.2%
MediSense, Inc.* 16,400 $ 510,450
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 1.1%
Beverly Enterprises* 57,200 $ 693,550
Pacificare Health Systems, Inc., "A"* 2,300 213,900
Pacificare Health Systems, Inc., "B"* 5,500 517,000
Regency Health Services, Inc.* 32,000 396,000
St. Jude Medical, Inc.* 9,000 339,100
------------
$ 2,159,550
- -----------------------------------------------------------------------------
Oil Services - 0.4%
Halliburton Co. 14,900 $ 817,638
- -----------------------------------------------------------------------------
Oils - 1.0%
Mobil Corp. 6,500 $ 712,562
USX-Marathon Group 36,500 675,250
Union Pacific Resources Group* 28,800 741,600
------------
$ 2,129,412
- -----------------------------------------------------------------------------
Photographic Products - 0.5%
Eastman Kodak Co. 13,100 $ 936,650
- -----------------------------------------------------------------------------
Printing and Publishing - 0.6%
Scripps (E.W.) Co., "A" 13,100 $ 550,382
Tribune Co. 10,000 667,500
------------
$ 1,217,882
- -----------------------------------------------------------------------------
Railroads - 0.7%
Illinois Central Corp. 13,200 $ 491,700
Wisconsin Central Transportation Corp.* 11,500 853,875
------------
$ 1,345,575
- -----------------------------------------------------------------------------
Restaurants and Lodging - 1.2%
Felcor Suite Hotels, Inc. 41,800 $ 1,280,125
Promus Hotel Corp.* 45,600 1,185,600
------------
$ 2,465,725
- -----------------------------------------------------------------------------
Special Products and Services - 0.4%
Stanley Works 14,800 $ 836,200
- -----------------------------------------------------------------------------
Stores - 0.3%
Office Depot, Inc.* 26,300 $ 549,012
- -----------------------------------------------------------------------------
Telecommunications - 0.6%
Cabletron Systems, Inc.* 12,200 $ 916,525
Cellular Communications International,
Inc.* 8,000 264,000
------------
$ 1,180,525
- -----------------------------------------------------------------------------
Total U.S. Stocks $ 47,572,792
- -----------------------------------------------------------------------------
Total Stocks (Identified Cost, $122,225,562) $138,874,995
- -----------------------------------------------------------------------------
Bonds - 23.2%
- -----------------------------------------------------------------------------
Foreign Denominated - 14.3%
Australia - 0.5%
Commonwealth of Australia, 9.5s, 2003 AUD 1,325 $ 1,064,623
- -----------------------------------------------------------------------------
Belgium - 0.6%
Kingdom of Belgium, 9s, 1998 BEF 10,000 $ 364,789
Kingdom of Belgium, 8.75s, 2002 10,000 375,787
Kingdom of Belgium, 7.25s, 2004 10,000 343,889
Kingdom of Belgium, 8.5s, 2007 5,000 183,985
------------
$ 1,268,450
- -----------------------------------------------------------------------------
Canada - 0.7%
Government of Canada, 7.5s, 2003 CAD 1,800 $ 1,320,770
- -----------------------------------------------------------------------------
Denmark - 1.1%
Kingdom of Denmark, 9s, 2000 DKK 2,968 $ 575,479
Kingdom of Denmark, 8s, 2001 9,099 1,696,047
------------
$ 2,271,526
- -----------------------------------------------------------------------------
Finland - 0.4%
Government of Finland, 10s, 2001 FIM 3,000 $ 743,615
- -----------------------------------------------------------------------------
France - 1.9%
Government of France, 5.75s, 1998 FRF 1,740 $ 351,106
Government of France, 7s, 1999 7,480 1,561,269
Government of France, 7s, 2000 6,400 1,334,576
Government of France, 7.75s, 2000 2,830 605,286
------------
$ 3,852,237
- -----------------------------------------------------------------------------
Germany - 3.0%
German Unity Fund, 8.5s, 2001 DEM 642 $ 492,469
Republic of Germany, 6.375s, 1999 563 401,432
Republic of Germany, 6.5s, 2003 7,467 5,174,344
------------
$ 6,068,245
- -----------------------------------------------------------------------------
Italy - 2.0%
Republic of Italy, 8.5s, 1999 ITL 4,030,000 $ 2,525,641
Republic of Italy, 9.5s, 1999 1,175,000 751,019
Republic of Italy, 8.5s, 2004 1,320,000 767,084
------------
$ 4,043,744
- -----------------------------------------------------------------------------
New Zealand - 0.6%
Government of New Zealand, 8s, 2001 NZD 1,800 $ 1,216,309
- -----------------------------------------------------------------------------
Spain - 1.0%
Government of Spain, 8.3s, 1998 ESP 257,400 $ 2,062,656
- -----------------------------------------------------------------------------
Sweden - 1.2%
Kingdom of Sweden, 11s, 1999 SEK 5,000 $ 804,874
Kingdom of Sweden, 10.25s, 2000 10,100 1,619,711
------------
$ 2,424,585
- -----------------------------------------------------------------------------
United Kingdom - 1.3%
United Kingdom Gilts, 8s, 2000 GBP 1,000 $ 1,575,119
United Kingdom Gilts, 7s, 2001 750 1,123,923
------------
$ 2,699,042
- -----------------------------------------------------------------------------
Total Foreign Denominated $ 29,035,802
- -----------------------------------------------------------------------------
U.S. Dollar Denominated - 8.9%
Financial Institutions - 0.2%
American Annuity Group, Inc., 11.125s, 2003 $ 500 $ 545,000
- -----------------------------------------------------------------------------
Industrials - 8.6%
Automotive - 0.1%
Harvard Industries, Inc., 11.125s, 2005 $ 250 $ 261,250
- -----------------------------------------------------------------------------
Building - 0.7%
American Standard, Inc., 0s to 1998,
10.5s to 2005 $ 1,000 $ 870,000
Nortek, Inc., 9.875s, 2004 100 96,000
USG Corp., 9.25s, 2001 500 538,750
------------
$ 1,504,750
- -----------------------------------------------------------------------------
Chemicals - 0.4%
Arcadian Partners L.P., 10.75s, 2005 $ 295 $ 324,500
UCC Investors Holdings, Inc., 10.5s, 2002 500 525,000
------------
$ 849,500
- -----------------------------------------------------------------------------
Consumer Goods and Services - 0.8%
Fieldcrest Cannon, Inc., 11.25s, 2004 $ 500 $ 490,000
Revlon Consumer Products Corp., 10.5s,
2003 500 520,000
Westpoint Stevens, Inc., 9.375s, 2005 500 500,000
------------
$ 1,510,000
- -----------------------------------------------------------------------------
Entertainment - 0.3%
SCI Television, Inc., 11s, 2005 $ 500 $ 535,000
- -----------------------------------------------------------------------------
Forest and Paper Products - 0.7%
Fort Howard Corp., 9.25s, 2001 $ 500 $ 512,500
Gaylord Container Co., 0s, 2005 700 719,250
Repap New Brunswick, 10.625s, 2005 100 97,000
------------
$ 1,328,750
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 1.1%
Community Health System, 10.25s, 2003 $ 500 $ 540,000
Integrated Health Services, Inc., 10.75s,
2004 500 530,000
Tenet Healthcare Corp., 10.125s, 2005 1,100 1,214,125
------------
$ 2,284,125
- -----------------------------------------------------------------------------
Oil Services - 0.2%
Amerigas Partners L.P., 10.125s, 2007 $ 100 $ 107,000
Global Marine, Inc., 12.75s, 1999 300 333,000
------------
$ 440,000
- -----------------------------------------------------------------------------
Oils - 0.3%
Gulf Canada Resources Ltd., 9.25s, 2004 $ 500 $ 522,500
- -----------------------------------------------------------------------------
Special Products and Services - 1.0%
IMO Industries, Inc., 12s, 2001 $ 750 $ 768,750
Mark IV Industries, Inc., 8.75s, 2003 250 265,000
Wolverine Tube, Inc., 10.125s, 2002 1,000 1,065,000
------------
$ 2,098,750
- -----------------------------------------------------------------------------
Steel - 0.5%
AK Steel Holdings Corp., 10.75s, 2004 $ 500 $ 561,250
Jorgensen (Earle M.) Co., 10.75s, 2000 500 487,500
------------
$ 1,048,750
- -----------------------------------------------------------------------------
Supermarkets - 0.4%
Dominick's Finer Foods, 10.875s, 2005 $ 250 $ 271,250
Ralph's Grocery Co., 10.45s, 2004 500 486,250
------------
$ 757,500
- -----------------------------------------------------------------------------
Telecommunications - 2.1%
Cablevision Systems Corp., 9.25s, 2005 $ 500 $ 522,500
Century Communications, 9.5s, 2005 425 438,812
K-III Communications Corp., 10.625s, 2002 750 798,750
MFS Communications, Inc., 0s, 2004 1,000 785,000
Marcus Cable Operations Co., 0s, 2004 1,000 750,000
Paging Network, Inc., 8.875s, 2006 1,000 1,015,000
------------
$ 4,310,062
- ----------------------------------------------------------------------------
Total Industrials $ 17,450,937
- -----------------------------------------------------------------------------
Utilities - Electric - 0.1%
Kenetech Corp., 12.75s, 2002 $ 500 $ 195,000
- -----------------------------------------------------------------------------
Total U.S. Dollar Denominated $ 18,190,937
- -----------------------------------------------------------------------------
Total Bonds (Identified Cost, $46,800,878) $ 47,226,739
- -----------------------------------------------------------------------------
Short-Term Obligations - 7.6%
- -----------------------------------------------------------------------------
AT&T Corp., due 3/08/96 $ 6,000 $ 5,993,968
General Electric Capital Corp., due 3/01/96 9,420 9,420,000
- -----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 15,413,968
- -----------------------------------------------------------------------------
Call Options Purchased
- -----------------------------------------------------------------------------
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
- -----------------------------------------------------------------------------
Japanese Bonds
March/107.489 JPY 116,900 $ 0
March/115.828 295,000 0
May/110.292 214,000 5,778
May/115.893 233,000 2,330
- -----------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $68,984) $ 8,108
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $184,509,392) $201,523,810
- -----------------------------------------------------------------------------
Put Options Written
- -----------------------------------------------------------------------------
Japanese Bonds
March/107.489 JPY 116,900 $ (27,355)
May/110.292 214,000 (37,236)
May/115.893 233,000 (30,290)
- -----------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $51,267) $ (94,881)
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.9% $ 1,860,719
- -----------------------------------------------------------------------------
Net Assets - 100.0% $203,289,648
- -----------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GBP = British Pounds
BEF = Belgian Francs HKD = Hong Kong Dollars
CAD = Canadian Dollars ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner MYR = Malaysian Ringgits
ESP = Spanish Pesetas NLG = Dutch Guilders
FIM = Finnish Markkaa NZD = New Zealand Dollars
FRF = French Francs SEK = Swedish Kronor
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
February 29, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $184,509,392) $201,523,810
Cash 459,456
Net receivable for forward foreign currency contracts 280,827
Receivable for Fund shares sold 831,535
Receivable for investments sold 3,336,276
Interest and dividends receivable 1,493,776
Deferred organization expenses 24,028
Other assets 1,632
------------
Total assets $207,951,340
------------
Liabilities:
Payable for Fund shares reacquired $ 66,030
Payable for investments purchased 3,646,469
Written options outstanding, at value (premiums received,
$51,267) 94,881
Net payable for forward foreign currency exchange
contracts purchased 245,159
Net payable for forward foreign currency exchange
contracts sold 344,004
Payable to affiliates -
Management fee 3,346
Shareholder servicing agent fee 1,038
Distribution fee 110,464
Accrued expenses and other liabilities 150,301
------------
Total liabilities $ 4,661,692
------------
Net assets $203,289,648
============
Net assets consist of:
Paid-in capital $180,454,124
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 16,662,851
Accumulated undistributed net realized gain on investments
and foreign currency transactions 7,082,190
Accumulated distributions in excess of net investment
income (909,517)
------------
Total $203,289,648
============
Shares of beneficial interest outstanding 11,678,264
============
Class A shares:
Net asset value and redemption price per share
(net assets of $72,681,764 / 4,167,949 shares of
beneficial interest outstanding) $17.44
======
Offering price per share (100/95.25 of net asset value per
share) $18.31
======
Class B shares:
Net asset value and offering price per share
(net assets of $105,177,203 / 6,047,148 shares of
beneficial interest outstanding) $17.39
======
Class C shares:
Net asset value, offering price, and redemption price per
share (net assets of $25,430,681 / 1,463,167 shares of
beneficial interest outstanding) $17.38
======
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 and
Class B shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Six Months Ended February 29, 1996
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 2,829,639
Dividends 790,675
Foreign taxes withheld (92,782)
-----------
Total investment income $ 3,527,532
-----------
Expenses -
Management fee $ 535,578
Trustees' compensation 17,705
Shareholder servicing agent fee (Class A) 48,404
Shareholder servicing agent fee (Class B) 101,747
Shareholder servicing agent fee (Class C) 16,118
Distribution and service fee (Class A) 161,666
Distribution and service fee (Class B) 462,485
Distribution and service fee (Class C) 107,451
Custodian fee 101,722
Postage 25,022
Auditing fees 21,500
Printing 15,949
Amortization of organization expenses 3,417
Legal fees 1,481
Miscellaneous 80,298
-----------
Total expenses $ 1,700,543
Fees paid indirectly (3,914)
Preliminary reduction of expenses by distributor (Class A) (16,215)
-----------
Net expenses $ 1,680,414
-----------
Net investment income $ 1,847,118
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 8,210,876
Written option transactions (1,586)
Foreign currency transactions 586,529
Futures contracts 69,649
-----------
Net realized gain on investments and foreign currency
transactions $ 8,865,468
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 8,970,063
Written options (32,472)
Translation of assets and liabilities in foreign currencies (1,031,345)
Futures contracts (118,652)
-----------
Net unrealized gain on investments $ 7,787,594
-----------
Net realized and unrealized gain on investments and
foreign currency $16,653,062
-----------
Increase in net assets from operations $18,500,180
===========
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------
Six Months Ended Year Ended
February 29, 1996 August 31, 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 1,847,118 $ 3,797,951
Net realized gain on investments and foreign currency
transactions 8,865,468 4,195,488
Net unrealized gain on investments and foreign
currency translation 7,787,594 7,977,967
------------ ------------
Increase in net assets from operations $ 18,500,180 $ 15,971,406
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (837,029) $ (1,026,466)
From net investment income (Class B) (884,121) (1,012,521)
From net investment income (Class C) (211,903) (239,932)
From net realized gain on investments and foreign
currency transactions (Class A) (2,800,463) (258,501)
From net realized gain on investments and foreign
currency transactions (Class B) (4,012,442) (350,041)
From net realized gain on investments and foreign
currency transactions (Class C) (929,505) (82,468)
------------ ------------
Total distributions declared to shareholders $ (9,675,463) $ (2,969,929)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 36,171,529 $118,013,307
Net asset value of shares issued to shareholders in
reinvestment of distributions 8,241,951 2,475,151
Cost of shares reacquired (11,537,601) (27,084,609)
------------ ------------
Increase in net assets from Fund share transactions $ 32,875,879 $ 93,403,849
------------ ------------
Total increase in net assets $ 41,700,596 $106,405,326
Net assets:
At beginning of period 161,589,052 55,183,726
------------ ------------
At end of period (including accumulated distributions
in excess of net investment income of $(909,517)
and $(823,582), respectively) $203,289,648 $161,589,052
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
Year Ended August 31,
Six Months Ended ----------------------------------
February 29, 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $16.63 $15.33 $15.00
------ ------ ------
Income from investment operations# -
Net investment income $ 0.21(S) $ 0.55(S) $ 0.04(S)
Net realized and unrealized gain on investments
and foreign currency transactions 1.57 1.17 0.29
------ ------ ------
Total from investment operations $ 1.78 $ 1.72 $ 0.33
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.23) $(0.37) $ --
From net realized gain on investments and foreign
currency transactions (0.74) (0.05) --
------ ------ ------
Total distributions declared to shareholders $(0.97) $(0.42) --
------ ------ ------
Net asset value - end of period $17.44 $16.63 $15.33
====== ====== ======
Total return(+) 11.02%++ 11.48% 2.20%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.50%+(S) 1.47%(S) 1.50%+(S)
Net investment income 2.46%+(S) 3.49%(S) 2.43%(S)
Portfolio turnover 96% 118% 1%
Average commission rate### $0.0134 -- --
Net assets at end of period (000 omitted) $72,682 $58,663 $25,254
*For the period from the commencement of investment operations, July 22, 1994 to August 31, 1994.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction
for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning on or after September 1,
1995.
(+)Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
(S)The investment adviser and distributor did not impose a portion of their management fee and
distribution fee, respectively, for certain of the periods indicated. If these fees had been incurred
by the Fund, the net investment income per share and ratios would have been:
Net investment income $ 0.20 $ 0.52 $ 0.02
Ratios (to average net assets):
Expenses## 1.55%+ 1.67% 2.62%+
Net investment income 2.41%+ 3.29% 1.31%+
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
Year Ended August 31,
Six Months Ended ----------------------------------
February 29, 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $16.58 $15.31 $15.00
----- ------ ------
Income from investment operations# -
Net investment income $ 0.15 $ 0.43 $ 0.02(S)
Net realized and unrealized gain on investments
and foreign currency transactions 1.57 1.17 0.29
------ ------ ------
Total from investment operations $ 1.72 $ 1.60 $ 0.31
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.17) $(0.28) --
From net realized gain on investments and
foreign currency transactions (0.74) (0.05) --
------ ----- ------
Total distributions declared to shareholders $(0.91) $(0.33) $ --
------ ------ ------
Net asset value - end of period $17.39 $16.58 $15.31
====== ====== ======
Total return 10.66% 10.65% 2.07%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.12%+ 2.24% 2.57%+(S)
Net investment income 1.84%+ 2.75% 1.39%+(S)
Portfolio turnover 96% 118% 1%
Average commission rate### $0.0134 -- --
Net assets at end of period (000 omitted) $105,177 $83,601 $26,495
*For the period from the commencement of investment operations, July
22, 1994 to August 31, 1994.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses
are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years
beginning on or after September 1, 1995.
(S)The investment adviser and the distributor did not impose a portion
of their management fee and distribution fee, respectively, for
certain of the periods indicated. If these fees had been incurred by the
Fund, the net investment income per share and ratios would have been:
Net investment income -- -- $ 0.01
Ratios (to average net assets):
Expenses -- -- 3.21%+
Net investment income -- -- 0.75%+
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
Year Ended August 31,
Six Months Ended ----------------------------------
February 29, 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $16.58 $15.31 $15.00
------ ------ ------
Income from investment operations# -
Net investment income $ 0.16 $ 0.46 $ 0.03(S)
Net realized and unrealized gain on investments
and foreign currency transactions 1.56 1.16 0.28
------ ------ -----
Total from investment operations $ 1.72 $ 1.62 $ 0.31
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.18) $(0.30) --
From net realized gain on investments and foreign
currency transactions (0.74) (0.05) --
------ ------ ------
Total distributions declared to shareholders $(0.92) $(0.35) $ --
------ ------ ------
Net asset value - end of period $17.38 $16.58 $15.31
====== ====== ======
Total return 10.71%++ 10.72% 2.07%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.05%+ 2.18% 2.50%+(S)
Net investment income 1.90%+ 2.91% 1.68%+(S)
Portfolio turnover 96% 118% 1%
Average commission rate### $0.0134 -- --
Net assets at end of period (000 omitted) $25,431 $19,325 $3,435
*For the period from the commencement of investment operations, July 22, 1994
to August 31, 1994.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
(S)The investment adviser and the distributor did not impose a portion of their
management fee and distribution fee, respectively, for certain of the periods
indicated. If these fees had been incurred by the Fund, the net investment
income per share and ratios would have been:
Net investment income -- -- $ 0.02
Ratios (to average net assets):
Expenses -- -- 3.18%+
Net investment income -- -- 1.00%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS World Asset Allocation Fund (the Fund) is a non-diversified series of MFS
Series Trust I (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
Investment Valuations - Equity securities listed on securities exchanges or
reported through NASDAQ system are valued at last sale prices. Unlisted equity
securities or listed equity securities for which last sale prices are not
available are valued at 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. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency and
translated into U.S. dollars at the closing daily exchange rate. Futures
contracts, options and options on futures contracts listed on commodities
exchanges are valued at closing settlement prices. Over-the-counter options are
valued by brokers through the use of a pricing model which takes into account
closing bond valuations, implied volatility and short-term repurchase rates.
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 Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
investment operations of the Fund.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities, currency or contracts based on financial indices at a
fixed price on a future date. The Fund is required to deposit either in cash or
securities an amount equal to a certain percentage of the contract amount.
Subsequent payments are made or received by the Fund each day, depending on the
daily fluctuations in the value of the underlying security, and are recorded for
financial statement purposes as unrealized gains or losses by the Fund. The
Fund's investment in futures contracts is designed to hedge against anticipated
future changes in interest or exchange rates or securities prices. Investments
in interest rate futures for purposes other than hedging may be made to modify
the duration of the portfolio without incurring the additional transaction costs
involved in buying and selling the underlying securities. Investments in
currency futures for purposes other than hedging may be made to change the
Fund's relative position in one or more currencies without buying and selling
portfolio assets. Investments in equity-indexed contracts, or contracts on
related options, for purposes other than hedging may be made when the Fund has
cash on hand and wishes to participate in anticipated market appreciation while
cash is being invested. Should interest or exchange rates or securities prices
move unexpectedly, the Fund may not achieve the anticipated benefits of the
futures contracts and may realize a loss.
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 these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Fund may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It 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 for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. 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.
The Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds, whereby interest income on PIK bonds is recorded
ratably by the Fund at a constant yield to maturity. Legal fees and other
related expenses incurred to preserve and protect the value of a security owned
are added to the cost of the security; other legal fees are expensed. Capital
infusions, which are generally non-recurring, incurred to protect or enhance the
value of high-yield debt securities, are reported as an addition to the cost
basis of the security. Costs that are incurred to negotiate the terms or
conditions of capital infusions or that are expected to result in a plan of
reorganization are reported as realized losses. Ongoing costs incurred to
protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are reported as operating expenses.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. This fee is reduced according to an expense
offset arrangement with Investors Bank & Trust Co., the dividend disbursing
agent, which provides for partial reimbursement of custody fees based on a
formula developed to measure the value of cash deposited by the Fund with the
custodian and with the dividend disbursing agent. This amount is shown as a
reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return, and consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV. Foreign taxes have been provided for on interest
and dividend income earned on foreign investments in accordance with the
applicable country's tax rates and to the extent unrecoverable are recorded as a
reduction of investment income. Distributions to shareholders are recorded on
the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as 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 accumulated net realized
gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the 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.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate of
0.60% of average daily net assets.
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 of the 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 its independent trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $2,805 for the period ended
February 29, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$47,967 for the period ended February 29, 1996, as its portion of the sales
charge on sales of Class A shares of the Fund. The Trustees have adopted
separate distribution plans for Class A, Class B and Class C shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.50%
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
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, a distribution fee to
MFD of up to 0.25% per annum of the Fund's average daily net assets attributable
to Class A shares, commissions to dealers and payments to MFD wholesalers for
sales at or above a certain dollar level, and other such distribution-related
expenses that are approved by the Fund. MFD retains the service fee for accounts
not attributable to a securities dealer which amounted to $866 for the period
ended February 29, 1996. MFD waived a portion of its fee, which is reflected as
a preliminary reduction of expenses in the Statement of Operations. Fees, net of
waiver, incurred under the distribution plan during the period ended February
29, 1996 were 0.45% of average daily net assets attributable to Class A shares
on an annualized basis.
The Class B and Class C distribution plans provide 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 additional
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 $87 and $1,319 for Class B and Class C
shares, respectively, for the period ended February 29, 1996. Fees incurred
under the distribution plans during the period ended February 29, 1996 were
1.00% of average daily net assets attributable to Class B and Class C shares on
an annualized basis.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 months following the share 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 period ended February 29, 1996 were $35 and $65,335
for Class A and Class B 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 average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22% and up to 0.15% attributable
to Class A, Class B and Class C shares, respectively.
(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 $ 7,167,266 $ 15,036,578
============ ============
Investments (non-U.S. government securities) $166,290,309 $147,563,600
============ ============
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $184,930,739
============
Gross unrealized appreciation $ 20,444,406
Gross unrealized depreciation (3,851,335)
------------
Net unrealized appreciation $ 16,593,071
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Class A Shares
Period Ended Year Ended
February 29, 1996 August 31, 1995
------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 705,306 $12,007,076 2,594,208 $ 39,819,615
Shares issued to
shareholders in
reinvestment of
distributions 192,493 3,210,143 72,285 1,112,578
Shares reacquired (256,841) (4,368,360) (787,357) (12,300,613)
--------- ----------- --------- -------------
Net increase 640,958 $10,848,859 1,879,136 $ 28,631,580
========= =========== ========= =============
Class B Shares
Period Ended Year Ended
February 29, 1996 August 31, 1995
------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,084,238 $18,391,232 3,914,029 $ 59,970,108
Shares issued to
shareholders in
reinvestment of
distributions 245,885 4,092,939 72,092 1,107,833
Shares reacquired (323,766) (5,496,144) (675,931) (10,554,603)
---------- ------------ ---------- -------------
Net increase 1,006,357 $16,988,027 3,310,190 $ 50,523,338
========= =========== ========= =============
Class C Shares
Period Ended Year Ended
February 29, 1996 August 31, 1995
------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 339,280 $ 5,773,221 1,198,363 $ 18,223,584
Shares issued to
shareholders in
reinvestment of
distributions 56,438 938,869 16,620 254,740
Shares reacquired (98,477) (1,673,097) (273,394) (4,229,393)
---------- ------------ ---------- -------------
Net increase 297,241 $ 5,038,993 941,589 $ 14,248,931
======= ============ ========= =============
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the period ended February
29, 1996 was $1,098.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange contracts
and futures contracts. The notional or contractual amounts of these instruments
represent the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered. A
summary of obligations under these financial instruments at February 29, 1996,
is as follows:
Written Option Transactions
1996 Calls 1996 Puts
-------------------------------- -------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF PERIOD -
British Pounds -- -- 785 $ 14,524
Deutsche Marks -- -- 3,557 21,419
Italian Lire/
Deutsche Marks -- -- 337,563 2,711
Japanese Yen 92,111 21,847 358,824 47,638
Options written -
Deutsche Marks -- -- 2,171 5,799
Japanese Yen -- -- 1,307,000 137,575
Options terminated in closing transactions -
Deutsche Marks -- -- (4,490) (23,846)
Japanese Yen (92,111) (21,847) (1,101,924) (133,946)
Options expired -
British Pounds -- -- (785) (14,524)
Deutsche Marks -- -- (1,238) (3,372)
Italian Lire/
Deutsche Marks -- -- (337,563) (2,711)
------ ------ --------- --------
OUTSTANDING,
END OF PERIOD -- -- 563,900 $ 51,267
====== ====== ========= ========
OPTIONS OUTSTANDING AT END OF PERIOD
CONSIST OF -
Japanese Yen -- -- 563,900 $ 51,267
====== ====== ========= ========
At February 29, 1996, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
Net Unrealized
Settlement Contracts to Contracts Appreciation
Date Deliver/Receive In Exchange for at Value (Depreciation)
- --------------------------------------------------------------------------------
Sales
3/18/96 AUD 4,579,000 $ 3,371,518 $ 3,496,799 $(125,281)
3/20/96 BEF 40,007,949 1,326,656 1,326,729 (73)
4/26/96 CAD 2,489,312 1,778,588 1,785,667 (7,079)
3/01/96
- - 5/31/96 DEM 33,882,434 23,122,321 23,126,381 (4,060)
3/07/96 FIM 3,599,593 797,111 792,012 5,099
5/31/96 FRF 51,700,712 10,240,172 10,277,273 (37,101)
4/15/96 GBP 6,695,676 10,274,314 10,240,349 33,965
12/04/96 HKD 13,267,240 1,708,595 1,712,979 (4,384)
3/07/96 ITL 2,296,668,291 1,421,514 1,473,251 (51,737)
6/07/96 JPY 3,046,232,817 29,688,814 29,341,201 347,613
4/29/96 NLG 1,926,698 1,188,000 1,174,229 13,771
3/18/96 NZD 1,860,872 1,218,525 1,249,520 (30,995)
3/21/96 SEK 92,823,535 13,249,541 13,733,283 (483,742)
----------- ----------- ---------
$99,385,669 $99,729,673 $(344,004)
=========== =========== =========
Purchases
3/18/96 AUD 634,105 $ 472,161 $ 484,241 $ 12,080
3/14/96
- - 4/29/96 DEM 36,802,883 25,295,546 25,078,596 (216,950)
4/12/96 DKK 8,446,329 1,490,707 1,487,824 (2,883)
3/27/96 ESP 366,567,840 2,988,000 2,956,431 (31,569)
5/31/96 GBP 950,924 1,461,000 1,453,009 (7,991)
3/07/96
- - 5/31/96 ITL 4,262,721,315 2,721,926 2,707,022 (14,904)
6/07/96 JPY 1,434,648,000 13,800,000 13,818,476 18,476
3/06/96 MYR 12,316 4,839 4,832 (7)
3/18/96 NZD 1,188,000 799,762 797,706 (2,056)
3/21/96 SEK 318,574 46,488 47,133 645
----------- ----------- ---------
$49,080,429 $48,835,270 $(245,159)
=========== =========== =========
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded from above
amounted to a net receivable of $280,827 at February 29, 1996.
At February 29, 1996, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) 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 February 29,
1996, the Fund owned the following restricted security (constituting 0.55% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). The Fund does not have the right to
demand that such security be registered. The value of this security is
determined by a valuation supplied by a pricing service or broker or, if not
available, in good faith by or at the direction of the Trustees. This security
may be offered and sold to "qualified institutional buyers" under Rule 144A of
the 1933 Act.
Date of
Description Acquisition Shares Cost Value
- ------------------------------------------------------------------------------
Cosco Pacific Ltd. 11/07/95 - 2/27/96 1,399,000 $829,194 $1,112,974
==========
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust I and Shareholders of MFS World Asset
Allocation Fund:
We have audited the accompanying statement of assets and liabilities of MFS
World Asset Allocation Fund (one of the portfolios constituting the MFS Series
Trust I) including the schedule of portfolio investments, as of February 29,
1996, and the related statement of operations for the six months then ended, the
statement of changes in net assets for the six months ended February 29, 1996
and for the year ended August 31, 1995, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996, by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
World Asset Allocation Fund at February 29, 1996, the results of its operations
for the six months then ended, the changes in its net assets for the six months
ended February 29, 1996 and the year ended August 31, 1995, and the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
Boston, Massachusetts
March 29, 1996
---------------------------------------------
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.
<PAGE>
MFS(R) WORLD Bulk Rate
ASSET ALLOCATION U. S. Postage
FUND [DALBAR LOGO] P A I D
Permit #55638
Boston, MA
500 Boylston Street
Boston, MA 02116
[MFS LOGO]
MAA-3 4/96 21M 88/288/388
