<PAGE>
[LOGO] M F S(SM)
INVESTMENT MANAGEMENT
"We invented the mutual fund"(SM)
MFS(R) WORLD ASSEST
ALLOCATION(SM) FUND
SEMIANNUAL REPORT o FEBRUARY 28, 1998
THE ROTH IRA IS NOW AVAILABLE (see page 43)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
Letter to Shareholders .................................................... 4
Portfolio Weightings ...................................................... 5
Portfolio Managers' Profiles .............................................. 10
Fund Facts ................................................................ 11
Performance Summary ....................................................... 11
Portfolio Concentration ................................................... 13
Portfolio of Investments .................................................. 14
Financial Statements ...................................................... 26
Notes to Financial Statements ............................................. 33
Report of Ernst & Young LLP, Independent Auditors ......................... 42
Roth IRA .................................................................. 43
The MFS Family of Funds(R) ................................................ 44
Trustees and Officers ..................................................... 45
- -------------------------------------------------------------------------------
HIGHLIGHTS
- -------------------------------------------------------------------------------
o FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 8.26%, CLASS B SHARES 8.00%,
CLASS C SHARES 7.99%, AND CLASS I SHARES 8.50%. (SEE PERFORMANCE SUMMARY FOR
MORE INFORMATION.)
o IN LIGHT OF OUR ANALYSTS' STRONG EARNINGS ESTIMATES FOR A WIDE RANGE OF
INDUSTRIES, WE HAVE DOUBLED THE FUND'S U.S. STOCK ALLOCATION FROM 10% OF
ASSETS TO 20%. THE FUND'S ALLOCATION TO FOREIGN STOCKS IS 45% OF TOTAL
ASSETS, A SUBSTANTIAL OVERWEIGHTING RELATIVE TO MARKET-WEIGHTED BENCHMARKS.
o OUR POSITIVE OUTLOOK FOR BUSINESS GROWTH HAS LED US TO A SIMILAR
OVERWEIGHTING IN THE HIGH-YIELD CORPORATE SECTOR, WHICH HAS BEEN AMONG THE
BEST-PERFORMING FIXED-INCOME ASSET CLASSES IN RECENT YEARS IN TERMS OF BOTH
ABSOLUTE AND RISK-ADJUSTED RETURNS.
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- -------------------------------------------------------------------------------
<PAGE>
IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT(SM)
On February 2, 1998, Keith Brodkin, a friend
and leader to everyone at MFS, died
[Photo of A. Keith Brodkin] unexpectedly at age 62. His thoughtful letters
to shareholders on the markets and economy have
been an integral part of MFS shareholder reports
like this one for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $70 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders:
As investment managers we take a long-term view of the world's economies, as
well as of the stock and bond markets, and try to avoid getting caught up in
short-term fluctuations. However, it is hard to ignore unexpected events such as
the Asian economic turmoil or closely watched companies that miss their
quarterly earnings estimates. Given the potential for these events and their
possible impact on major market indices, we think it's important to offer some
perspective about recent market behavior and to let you know what MFS is doing
in an effort to provide you with favorable long-term investment performance.
The most notable recent event affecting investment markets has been the Asian
turmoil, which began in the summer of 1997 as a result of slowing growth rates
in the region and excess speculation in real estate markets. Since then, most
countries in the region have begun to implement the economic and regulatory
restructuring needed to put themselves on a stronger financial foundation.
While it may be a few years before some of these countries return to solid
economic footing, and while there will probably be a relatively short-term
impact on the U.S. economy, we believe the long-term outlook for the region is
quite positive.
The Asian situation has brought home the lesson that major events can quickly
impact investment markets around the world, including those of the United
States. Although U.S. equities have enjoyed a bull market lasting more than 15
years and have continued to set records in the first several weeks of 1998,
there have been brief bouts of volatility associated with the Asian turmoil, as
well as with perceived downturns for certain industries such as technology.
While we believe the long-term outlook for the equity markets is favorable,
other, unforeseen events can trigger fairly extended periods during which prices
decline or remain relatively flat. Since no one can predict market cycles, that
makes it that much more important to find companies that can keep growing in the
face of the occasional downturn and even gain market share. For us, this means
using original, bottom-up research to examine each company's earnings potential
and position as well as the overall prospects for its industry. To that end, MFS
continues to increase the research support available to portfolio managers of
MFS funds.
On the fixed-income side, MFS uses active portfolio management based on
extensive research and credit analysis to reduce the potential for price
declines and enhance the opportunity for price appreciation. For both equity and
fixed-income managers, this means visiting and meeting with thousands of
companies and issuers of credit every year, as well as attending many
presentations and closely following sources of industry research.
We believe this approach, based on thorough research, teamwork, innovative
thinking, and the free exchange of ideas, is the best way to get the most
performance for shareholders in MFS funds -- in any 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 Investment Management
March 16, 1998
JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED MFS IN 1983. AFTER
FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO MANAGER, HE WAS NAMED CHIEF
EQUITY OFFICER IN 1987 AND PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS IN
1993. MR. SHAMES WAS APPOINTED CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY
1998.
<PAGE>
LETTER TO SHAREHOLDERS
[Photo of James T. Swanson]
James T. Swanson
Dear Shareholders:
For the six months ended February 28, 1998, Class A shares of the Fund provided
a total return of 8.26%, Class B shares 8.00%, Class C shares 7.99%, and Class I
shares 8.50%. These returns assume the reinvestment of distributions but exclude
the effects of any sales charges and compare to returns of 17.62% for the
Standard & Poor's 500 Composite Index, a popular, unmanaged index of common
stock total return performance; 8.46% for the Morgan Stanley Capital
International EAFE (Europe, Australia, Far East) Index, an index of
international stocks; 5.72% for the Lehman Brothers Aggregate Bond Index, an
index of government and corporate bonds including U.S. Treasury,
government-agency, corporate, and mortgage-backed securities; and 3.82% for the
J.P. Morgan Non-Dollar Government Bond Index, an international bond index.
During much of this period, it had been our view that investors would be better
served by being underweighted in U.S. stocks and by holding relatively high cash
reserves, particularly in light of financial problems in Asia and signals of a
slowing in the U.S. economy. However, with the advent of more-recent
information, we have temporarily revised this view, in part based on our equity
analysts' strong earnings estimates for a wide range of industries. Furthermore,
Europe, particularly Germany and the United Kingdom, is showing signs of growth.
In light of these developments, we have doubled the Fund's U.S. stock allocation
from 10% of assets to 20%. Our allocation to foreign stocks is 45% of total
assets, a substantial overweighting relative to market- weighted benchmarks.
Our continued positive outlook for business growth has led us to a similar
overweighting in the high-yield corporate sector. This category of bonds, as
measured by the Lehman Brothers High Yield Bond Index (an unmanaged index of
noninvestment-grade corporate debt), has been among the best-performing
fixed-income asset classes in recent years in terms of both absolute and risk-
adjusted returns. Currently, the Fund holds 20% of assets in high-yield bonds,
its highest level since its inception.
In the global fixed-income area, we have opportunistically moved assets in and
out of U.S. government securities, increasing this share from 0% to 10% of
assets. Our allocation committee has also allowed us to take advantage of
volatility in the emerging-market debt arena when tactical opportunities present
themselves, adding to this class in weak periods and then selling into strength.
At present, we believe these emerging-debt opportunities are too rich to pursue.
The overriding objective of this Fund is to provide competitive total returns
with relatively low volatility over a reasonable business cycle while seeking to
mitigate market risks through research and broad diversification. What follows
is a closer view of our work from the various submanagers.
Respectfully,
/s/ James T. Swanson
James T. Swanson
On behalf of the Asset Allocation Committee
PORTFOLIO WEIGHTINGS
FIVE LARGEST U.S. EQUITY HOLDINGS
- ------------------------------------------------------------------------------
RITE AID CORP. (DRUG STORES) 0.5%
- ------------------------------------------------------------------------------
TYCO INTERNATIONAL LTD. (CONSUMER GOODS AND SERVICES) 0.5%
- ------------------------------------------------------------------------------
MICROSOFT CORP. (COMPUTER SOFTWARE -- SYSTEMS) 0.3%
- ------------------------------------------------------------------------------
BRISTOL-MYERS SQUIBB CO. (PHARMACEUTICALS) 0.3%
- ------------------------------------------------------------------------------
BMC SOFTWARE, INC. (COMPUTER SOFTWARE) 0.3%
- ------------------------------------------------------------------------------
U.S. STOCK MARKET -- 9.2%
Our holdings in U.S. equities range across a variety of industries and
incorporate both value and growth strategies. Major holdings in the portfolio
include Rite Aid, Tyco International, Microsoft, Bristol-Myers Squibb, and BMC
Software. Currently, our top four sectors are technology (21.0% of U.S.
equities), health care (15.6%), financial services (14.6%), and retailing
(12.9%). Our current outlook continues to be cautious. Given the current level
of interest rates, we believe equity valuations are high and leave little margin
for error.
-- Stephen Pesek
<PAGE>
PORTFOLIO WEIGHTINGS -- continued
FIVE LARGEST INTERNATIONAL EQUITY HOLDINGS
- ------------------------------------------------------------------------------
CANADIAN NATIONAL RAILWAY CO. (TRANSPORTATION -- CANADA) 2.2%
- ------------------------------------------------------------------------------
AKZO NOBEL N.V. (CHEMICALS -- NETHERLANDS) 1.9%
- ------------------------------------------------------------------------------
BRITISH AEROSPACE PLC (AEROSPACE AND DEFENSE -- UNITED KINGDOM) 1.8%
- ------------------------------------------------------------------------------
HENKEL KGAA (CHEMICALS -- GERMANY) 1.3%
- ------------------------------------------------------------------------------
SONY CORP. (ELECTRONICS -- JAPAN) 1.2%
- ------------------------------------------------------------------------------
INTERNATIONAL STOCK MARKETS -- 43.3%
Internationally, we emphasize stock selection as opposed to country or industry
selection. Priority is placed on companies that we believe will generate
above-average earnings growth and that are trading at attractive valuations,
regardless of their home country.
Broad regional exposures were as follows: 65% in Europe, 26% in Asia/Pacific,
and 9% in the Americas. The largest individual country exposures were the United
Kingdom (19%), Japan (18%), and the Netherlands (12%). Roughly 9% of our
international holdings were in emerging markets, 5% of which were in Southeast
Asia (including Hong Kong and Singapore) and 4% of which were in Latin America.
Over the past three months, the European and Americas weightings have increased
roughly 2% each at the expense of our Asia/Pacific weighting. This was due
primarily to the continued poor performance of Southeast Asian stock markets and
currency devaluations. We remain very comfortable with our holdings in Southeast
Asia, which for the most part have not been adversely impacted by the recent
turmoil in the region. We will continue to monitor developments in that part of
the world and, when appropriate, take the opportunity to increase holdings in
companies that we believe have attractive fundamentals and that trade at
depressed valuations.
Our overall focus remains on companies that we believe will generate
above-average and sustainable growth, regardless of the state of the global
economy. Examples of large holdings that fit this description are British
Aerospace; Sony, a Japanese consumer electronics company; Henkel, a German
consumer products company; and Akzo Nobel, a Dutch pharmaceutical and specialty
chemical company.
-- David R. Mannheim
<PAGE>
PORTFOLIO WEIGHTINGS -- continued
FIVE LARGEST HOLDINGS
- ------------------------------------------------------------------------------
BORDEN, INC. (FOOD AND BEVERAGE PRODUCTS) 0.6%
- ------------------------------------------------------------------------------
KAISER ALUMINUM & CHEMICAL CORP. (METALS AND MINERALS) 0.6%
- ------------------------------------------------------------------------------
IRON MOUNTAIN, INC. (BUSINESS SERVICES) 0.5%
- ------------------------------------------------------------------------------
THERMADYNE INDUSTRIES HOLDINGS CORP. (SPECIAL PRODUCTS AND SERVICES) 0.5%
- ------------------------------------------------------------------------------
HAYES WHEELS INTERNATIONAL, INC. (AUTOMOTIVE) 0.5%
- ------------------------------------------------------------------------------
U.S. HIGH-YIELD CORPORATE BOND MARKET -- 17.2%
This portion of the Fund has benefited from being in the right sectors and in
the right credits within those sectors. Three particular areas in which we've
been overweighted have been aerospace and defense, general industrials, and
telecommunications. At the same time, we have been underweighted in retailing
because retailers have had high default rates and a number of companies have
filed for bankruptcy.
Specifically, the aerospace sector has seen tremendous business in aircraft
manufacturing and retrofitting. After losing money for several years, the
airlines have become very profitable. Companies in the portfolio that are
dominant in the aircraft component business include MOOG, BE Aerospace, and
ArgoTech, all companies that get 60% to 70% of their revenues from retrofitting,
as opposed to new aircraft construction.
In the general industrial sector, the theme has been consolidation. We try to
buy niche companies with high market shares that generate a lot of free cash
flow. Many of these companies have improved their credit profiles by
deleveraging or have been bought out by investment-grade entities. Two examples
would be Tiphook and Clark Schwebel.
Meanwhile, the telecommunications industry appears poised to provide an
excellent investment opportunity. With the 1996 Telecommunications Act, Congress
deregulated both local and long-distance telephone service. The local telephone
business is a $100 billion market, and the long-distance business is an $80
billion market; we believe these businesses, along with Internet communications
companies and related telecommunications industries, are going to create
tremendous opportunities.
U.S. HIGH-YIELD CORPORATE BOND MARKET -- continued In general, the fixed-income
environment has been quite favorable, particularly for high-yield bonds, with a
low-inflation environment and steady economic growth. In this environment,
high-yield bonds are paying 3.5% more than U.S. Treasuries. (Principal value and
interest on Treasury securities are guaranteed by the U.S. government if held to
maturity.) With continued slow, steady growth, we believe credit quality will
continue to improve.
-- Robert J. Manning
U.S. GOVERNMENT BOND MARKET
Interest rates in the U.S. Treasury market continued to fall during the past six
months as inflationary expectations declined and the Federal Reserve Board took
no action on interest rates. Rates on 10-year U.S. Treasury securities fell from
6.35% to 5.60% during the period, hitting a low of 5.53% in early January.
Despite the lowest unemployment rate since the mid-1960s, we have seen no signs
of pressure on wages. We believe the disarray among the Asian tigers (South
Korea, Thailand, Malaysia, and Indonesia) and the resulting reduction in the
value of local currencies will further restrain inflation throughout 1998.
Despite our expectation for slightly lower interest rates, the Fund is not
allocating any money to the U.S. government bond market because we anticipate
better opportunities for capital appreciation in other sectors. If we see signs
of a slowdown in the U.S. economy that suggest the potential for significantly
lower interest rates, we will begin allocating assets to this sector.
-- Geoffrey L. Kurinsky
INTERNATIONAL BOND MARKETS
Given the prospects for global economic recovery, with yields at cyclical lows,
we reduced the global fixed-income allocation to zero in favor of domestic
fixed-income securities in the first quarter of last year. Over the past six
months, continued fiscal austerity combined with favorable monetary policies
throughout Europe has brought about substantial tightening of yield spreads, as
inflation has remained subdued. German yields have maintained their 70
basis-point (0.70%) spread to the United States, both falling roughly 60 basis
points (0.60%). Within Europe, yield convergence continued to occur between
Germany and the higher-yielding markets as European monetary union marches ever
closer. Over the past six months, the top-performing bond market has been the
United Kingdom, where rates have declined more than 100 basis points (1.00%). It
remains the strongest economy in the OECD (Organization for Economic Cooperation
and Development). The U.S. dollar has essentially marked time against its
European counterparts. Monetary conditions in Japan remain extremely
accommodative. The effects of the Asian financial crisis have potentially
lengthened the recovery time of the economy and, globally, it is still uncertain
how much the crisis in Asia will affect growth. The U.S. dollar has appreciated
by roughly 4% against the Japanese yen over the past six months.
-- Leslie J. Nanberg
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.
<PAGE>
- ------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILES
- ------------------------------------------------------------------------------
THE ASSET ALLOCATION COMMITTEE CONSISTS OF MESSRS. JOHN W. BALLEN, LESLIE J.
NANBERG, JEFFREY L. SHAMES, AND JAMES T. SWANSON. THE INDIVIDUALS RESPONSIBLE
FOR MANAGING THE ASSETS IN THE ASSET CLASSES ARE AS FOLLOWS:
GEOFFREY L. KURINSKY JOINED MFS IN 1987 IN THE FIXED INCOME DEPARTMENT AND WAS
NAMED ASSISTANT VICE PRESIDENT IN 1988, VICE PRESIDENT IN 1989, AND SENIOR VICE
PRESIDENT IN 1993. A GRADUATE OF THE UNIVERSITY OF MASSACHUSETTS AND THE BOSTON
UNIVERSITY GRADUATE SCHOOL OF MANAGEMENT, HE HAS MANAGED THE INVESTMENT-GRADE
FIXED-INCOME PORTION OF THE PORTFOLIO SINCE THE FUND'S INCEPTION.
DAVID R. MANNHEIM JOINED MFS IN 1988 AS A RESEARCH SPECIALIST AND WAS NAMED
INVESTMENT OFFICER IN 1990, ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1991,
VICE PRESIDENT -- INVESTMENTS IN 1992, AND SENIOR VICE PRESIDENT IN 1997. A
GRADUATE OF AMHERST COLLEGE AND THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN
SCHOOL OF MANAGEMENT, HE HAS MANAGED THE INTERNATIONAL STOCK PORTION OF THE
PORTFOLIO SINCE THE FUND'S INCEPTION.
ROBERT J. MANNING JOINED MFS IN 1984 AS A RESEARCH ANALYST IN THE HIGH YIELD
BOND DEPARTMENT AND WAS NAMED VICE PRESIDENT -- INVESTMENTS IN 1988, SENIOR VICE
PRESIDENT IN 1993, AND HIGH YIELD FIXED INCOME DEPARTMENT HEAD IN 1997. A
GRADUATE OF THE UNIVERSITY OF LOWELL AND THE BOSTON COLLEGE GRADUATE SCHOOL OF
MANAGEMENT, HE HAS MANAGED THE HIGH-YIELD FIXED-INCOME PORTION OF THE PORTFOLIO
SINCE JUNE 1997.
LESLIE J. NANBERG JOINED MFS IN 1980 AND WAS NAMED ASSISTANT VICE PRESIDENT --
INVESTMENTS IN 1981, VICE PRESIDENT -- INVESTMENTS IN 1983, AND SENIOR VICE
PRESIDENT IN 1986. A GRADUATE OF THE UNIVERSITY OF ILLINOIS, NORTHWESTERN
UNIVERSITY, AND THE NORTHWESTERN UNIVERSITY GRADUATE SCHOOL OF MANAGEMENT, HE IS
A CHARTERED FINANCIAL ANALYST AND A MEMBER OF THE BOSTON SECURITY ANALYSTS
SOCIETY, INC., AS WELL AS OF THE FINANCIAL ANALYSTS FEDERATION. HE HAS MANAGED
THE INTERNATIONAL FIXED-INCOME PORTION OF THE PORTFOLIO SINCE THE FUND'S
INCEPTION.
STEPHEN PESEK JOINED MFS IN 1994 AS AN INDUSTRY SPECIALIST AND THAT YEAR WAS
NAMED VICE PRESIDENT -- INVESTMENTS. A GRADUATE OF THE UNIVERSITY OF
PENNSYLVANIA AND COLUMBIA UNIVERSITY, HE IS A CHARTERED FINANCIAL ANALYST AND
HAS MANAGED THE U.S. EQUITY PORTION OF THE PORTFOLIO SINCE SEPTEMBER 1997.
JAMES T. SWANSON JOINED MFS IN 1985 AS A VICE PRESIDENT -- INVESTMENTS AND WAS
NAMED SENIOR VICE PRESIDENT IN 1989. A GRADUATE OF COLGATE UNIVERSITY AND THE
HARVARD UNIVERSITY GRADUATE SCHOOL OF BUSINESS ADMINISTRATION, HE IS A CHARTERED
FINANCIAL ANALYST AND HAS OVERSEEN MFS() R WORLD ASSET ALLOCATION(SM) FUND SINCE
ITS INCEPTION.
<PAGE>
- ------------------------------------------------------------------------------
FUND FACTS
- ------------------------------------------------------------------------------
OBJECTIVE: SEEKS LONG-TERM TOTAL RETURN THROUGH INVESTMENTS IN
EQUITY AND FIXED-INCOME SECURITIES PLUS LOW SHARE
PRICE VOLATILITY AND REDUCED RISK COMPARED TO AN
AGGRESSIVE EQUITY/FIXED-INCOME FUND.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JULY 22, 1994
CLASS INCEPTION: CLASS A JULY 22, 1994
CLASS B JULY 22, 1994
CLASS C JULY 22, 1994
CLASS I JANUARY 7, 1997
SIZE: $333.3 MILLION NET ASSETS AS OF FEBRUARY 28, 1998
- ------------------------------------------------------------------------------
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, Class C, and Class I
shares for the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
AS OF FEBRUARY 28, 1998
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------------
Cumulative Total Return +8.26% +13.21% +63.00%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +13.21% +14.50%
- -------------------------------------------------------------------------------
SEC Results -- + 7.86% +12.96%
- -------------------------------------------------------------------------------
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------------
Cumulative Total Return +8.00% +12.63% +59.33%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +12.63% +13.78%
- -------------------------------------------------------------------------------
SEC Results -- + 8.63% +13.18%
- -------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, July
22, 1994, through February 28, 1998.
<PAGE>
PERFORMANCE SUMMARY - continued
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------------
Cumulative Total Return +7.99% +12.62% +59.53%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +12.62% +13.82%
- -------------------------------------------------------------------------------
SEC Results -- +11.62% +13.82%
- -------------------------------------------------------------------------------
CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------------
Cumulative Total Return +8.50% +13.54% +63.62%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +13.54% +14.62%
- -------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, July
22, 1994, through February 28, 1998.
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.
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. All results are historical and assume the
reinvestment of dividends and capital gains. Investment return and principal
value will fluctuate, and shares, when redeemed, may be worth more or less than
their original cost. Past performance is no guarantee of future results.
The Fund may invest in foreign and emerging market securities, which involves
special risks. These risks may increase share price volatility. See the
prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF FEBRUARY 28, 1998
LARGEST SECTORS
International Stocks ........................... 43.3%
U.S. High-Yield Corporate ...................... 17.2%
Cash ........................................... 13.0%
U.S. Stocks .................................... 9.2%
U.S. Government ................................ 8.6%
Contingent Promissory Note ..................... 5.1%
Foreign Bonds .................................. 2.9%
Other Sectors .................................. 0.4%
Convertibles ................................... 0.3%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS -- February 28, 1998
Stocks - 52.1%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 8.8%
Aerospace - 0.2%
Allied Signal, Inc. 7,800 $ 331,987
Lockheed Martin Corp. 2,400 280,050
------------
$ 612,037
- -----------------------------------------------------------------------------------------------------------
Airlines - 0.1%
Southwest Airlines Co. 6,300 $ 180,731
- -----------------------------------------------------------------------------------------------------------
Banks and Credit Companies
Compass Bancshares, Inc. 1,800 $ 82,800
- -----------------------------------------------------------------------------------------------------------
Business Machines - 0.1%
Affiliated Computer Services, Inc., "A"* 10,800 $ 347,625
Sun Microsystems, Inc.* 3,400 161,925
------------
$ 509,550
- -----------------------------------------------------------------------------------------------------------
Business Services - 0.3%
Cendant Corp.* 17,400 $ 652,500
Ceridian Corp.* 3,600 167,625
Computer Sciences Corp.* 950 99,453
Ikon Office Solutions, Inc. 4,000 130,750
------------
$ 1,050,328
- -----------------------------------------------------------------------------------------------------------
Cellular Telephones
Telephone & Data Systems, Inc. 1,200 $ 52,275
- -----------------------------------------------------------------------------------------------------------
Chemicals
Air Products & Chemicals, Inc. 700 $ 58,756
- -----------------------------------------------------------------------------------------------------------
Computer Hardware - Systems
EMC Corp.* 4,600 $ 175,950
- -----------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.4%
Dell Computer Corp.* 1,200 $ 167,850
Microsoft Corp.* 13,000 1,101,750
------------
$ 1,269,600
- -----------------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.9%
BMC Software, Inc.* 11,000 $ 841,500
Cadence Design Systems, Inc.* 13,300 464,669
Computer Associates International, Inc. 10,150 478,318
Compuware Corp.* 11,000 463,375
Oracle Corp.* 17,900 440,787
SunGard Data Systems, Inc.* 3,300 112,819
Synopsys, Inc.* 1,700 59,394
------------
$ 2,860,862
- -----------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.9%
Clorox Co. 1,300 $ 114,075
Gillette Co. 3,300 355,987
Newell Co. 5,100 233,963
Philip Morris Cos., Inc. 7,300 317,094
Revlon, Inc., "A"* 4,100 192,444
Service Corp. International 7,500 284,062
Tyco International Ltd. 31,420 1,594,565
------------
$ 3,092,190
- -----------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.2%
Black & Decker Corp. 4,100 $ 206,538
General Electric Co. 4,400 342,100
------------
$ 548,638
- -----------------------------------------------------------------------------------------------------------
Electronics - 0.4%
AES Corp.* 4,300 $ 189,200
Altera Corp.* 4,300 185,437
Analog Devices, Inc.* 5,900 190,275
Intel Corp. 2,300 206,281
Novellus Systems, Inc.* 1,800 86,288
Raytheon Co. 6,200 359,600
Xilinx, Inc.* 2,900 127,238
------------
$ 1,344,319
- -----------------------------------------------------------------------------------------------------------
Entertainment - 0.4%
CBS Corp. 3,000 $ 92,813
Clear Channel Communications, Inc.* 2,600 235,625
Harrah's Entertainment, Inc.* 4,900 103,206
Mirage Resorts, Inc.* 5,100 116,662
Time Warner, Inc. 2,500 168,750
Univision Communications, Inc., "A"* 8,000 307,000
Viacom, Inc., "B"* 7,700 369,600
------------
$ 1,393,656
- -----------------------------------------------------------------------------------------------------------
Financial Institutions - 0.5%
American Express Co. 1,500 $ 135,094
Associates First Capital Corp., "A" 3,900 312,000
Federal Home Loan Mortgage Corp. 9,300 439,425
Federal National Mortgage Assn. 2,700 172,294
Firstplus Financial Group, Inc.* 2,400 79,200
Franklin Resources, Inc. 4,700 239,700
Merrill Lynch & Co., Inc. 2,200 157,437
Morgan Stanley, Dean Witter, Discover & Co. 2,700 188,156
------------
$ 1,723,306
- -----------------------------------------------------------------------------------------------------------
Financial Services - 0.1%
CIT Group, Inc., "A"* 5,600 $ 184,800
Washington Mutual, Inc. 2,500 167,813
------------
$ 352,613
- -----------------------------------------------------------------------------------------------------------
Food and Beverage Products
McCormick & Co., Inc. 3,400 $ 97,538
- -----------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.1%
Kimberly-Clark Corp. 7,600 $ 423,225
- -----------------------------------------------------------------------------------------------------------
Insurance - 0.7%
Allstate Corp. 3,400 $ 317,050
Chubb Corp. 4,190 334,414
Conseco, Inc. 7,400 347,337
Lincoln National Corp. 5,100 427,125
Progressive Corp. 1,200 139,050
Reliastar Financial Corp. 7,600 361,475
Torchmark Corp. 5,800 270,063
------------
$ 2,196,514
- -----------------------------------------------------------------------------------------------------------
Medical and Health Products - 0.7%
American Home Products Corp. 4,300 $ 403,125
AmeriSource Health Corp., "A" 2,200 128,700
Boston Scientific Corp.* 3,800 227,050
Bristol-Myers Squibb Co. 8,400 841,575
Pfizer, Inc. 2,800 247,800
Warner-Lambert Co. 2,700 394,875
------------
$ 2,243,125
- -----------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.6%
HBO & Co. 9,900 $ 535,837
Healthsouth Corp.* 12,900 348,300
Tenet Healthcare Corp.* 8,500 317,156
Total Renal Care Holdings, Inc.* 11,200 360,500
United Healthcare Corp. 8,100 491,569
------------
$ 2,053,362
- -----------------------------------------------------------------------------------------------------------
Oil Services - 0.1%
Diamond Offshore Drilling, Inc. 1,900 $ 86,094
Noble Drilling Corp.* 5,800 164,575
------------
$ 250,669
- -----------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts
Boston Properties, Inc. 3,300 $ 112,200
- -----------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Promus Hotel Corp.* 4,070 $ 196,378
- -----------------------------------------------------------------------------------------------------------
Retail - 0.2%
Fred Meyer, Inc.* 11,500 $ 511,031
- -----------------------------------------------------------------------------------------------------------
Special Products and Services - 0.1%
Royal Caribbean Cruises Ltd. 3,700 $ 202,575
- -----------------------------------------------------------------------------------------------------------
Stores - 0.8%
CVS Corp. 6,700 $ 496,219
Linens 'N Things, Inc.* 3,600 181,350
Office Depot, Inc.* 12,000 330,750
Rite Aid Corp. 49,400 1,599,325
------------
$ 2,607,644
- -----------------------------------------------------------------------------------------------------------
Supermarkets - 0.2%
Kroger Co.* 3,800 $ 160,550
Safeway, Inc.* 19,201 669,635
------------
$ 830,185
- -----------------------------------------------------------------------------------------------------------
Telecommunications - 0.6%
Ascend Communications, Inc.* 3,900 $ 146,006
Bay Networks, Inc.* 7,300 247,287
Cellular Communications International 2,500 119,375
Century Telephone Enterprises, Inc. 4,600 280,600
Cisco Systems, Inc.* 6,150 405,131
Networks Associates Inc.* 500 32,313
Teleport Communications Group, Inc., "A"* 5,600 305,900
Tellabs, Inc.* 1,700 102,638
WorldCom, Inc.* 8,600 328,412
------------
$ 1,967,662
- -----------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.1%
LCI International, Inc.* 8,100 $ 267,300
MCI Communications Corp. 2,200 105,188
------------
$ 372,488
- -----------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 29,372,207
- -----------------------------------------------------------------------------------------------------------
Foreign Stocks - 43.3%
Australia - 1.3%
Q.B.E. Insurance Group Ltd. (Insurance) 542,410 $ 2,240,231
Seven Network Ltd. (Entertainment) 553,000 1,979,690
------------
$ 4,219,921
- -----------------------------------------------------------------------------------------------------------
Canada - 2.2%
Canadian National Railway Co. (Transportation) 118,500 $ 7,361,812
- -----------------------------------------------------------------------------------------------------------
Chile - 0.9%
Chilectra SA, ADR (Utilities - Electric) 105,000 $ 2,835,000
- -----------------------------------------------------------------------------------------------------------
Finland - 1.1%
Huhtamaki Oy Group (Food Company) 30,375 $ 1,473,309
TT Tieto Oy (Computer Software - Systems) 14,500 2,199,484
------------
$ 3,672,793
- -----------------------------------------------------------------------------------------------------------
France - 2.4%
Total SA, "B" (Oils) 21,800 $ 2,392,967
Television Francaise (Broadcasting) 20,000 2,169,090
Union des Assurances Federales SA (Insurance) 23,700 3,255,805
------------
$ 7,817,862
- -----------------------------------------------------------------------------------------------------------
Germany - 2.6%
Adidas AG (Apparel and Textiles) 11,300 $ 1,768,836
Henkel KGAA (Chemicals) 64,500 4,177,231
Schering Plough Corp. (Pharmaceuticals) 5,200 395,525
Wella AG (Cosmetics) 3,000 2,248,801
------------
$ 8,590,393
- -----------------------------------------------------------------------------------------------------------
Hong Kong - 1.1%
Li & Fung Ltd. (Wholesale) 694,000 $ 1,048,758
Liu Chong Hing Bank (Banks and Credit Companies) 507,000 762,894
Peregrine Investment Holdings (Finance) 509,000 0
Wing Hang Bank Ltd. (Banks and Credit Companies) 678,400 1,840,073
------------
$ 3,651,725
- -----------------------------------------------------------------------------------------------------------
Italy - 1.0%
ERG S.P.A. (Oils)* 259,000 $ 1,139,910
Instituto Nazionale delle Assicurazioni (Insurance) 463,000 1,258,384
Telecom Italia S.P.A., Saving Shares (Telecommunications) 306,000 898,415
------------
$ 3,296,709
- -----------------------------------------------------------------------------------------------------------
Japan - 7.8%
Canon, Inc. (Office Equipment) 90,000 $ 2,065,433
Eisai Co. Ltd. (Pharmaceuticals) 132,000 2,316,525
Fuji Photo Film Co. (Photographic Products) 53,000 2,083,300
Kinki Coca-Cola Bottling Co. (Beverages) 56,000 653,696
Kirin Beverage Corp. (Beverages) 96,000 1,821,965
Nitto Denko Corp. (Industrial Goods and Services) 92,000 1,461,129
NTT Data Communications Systems Co. (Telecommunications) 33 1,606,369
Osaka Sanso Kogyo Ltd. (Chemicals) 320,000 698,801
Rohm Co. (Electronics) 15,000 1,488,922
Sankyo Co. Ltd. (Pharmaceuticals) 44,000 1,184,468
Sony Corp. (Electronics) 46,000 4,164,218
Takeda Chemical Industries (Pharmaceuticals) 71,000 1,973,319
TDK Corp. (Electronics) 19,000 1,455,968
Tokyo Broadcasting System, Inc. (Broadcasting) 132,000 1,708,568
Ushio, Inc. (Electronics) 153,000 1,213,746
------------
$ 25,896,427
- -----------------------------------------------------------------------------------------------------------
Malaysia - 0.3%
New Straits Times Press Berhad (Printing and Publishing) 597,000 $ 924,701
- -----------------------------------------------------------------------------------------------------------
Mexico - 0.2%
TV Azteca, SA de CV, ADR (Broadcasting)* 32,800 $ 674,450
- -----------------------------------------------------------------------------------------------------------
Netherlands - 5.2%
Akzo Nobel N.V. (Chemicals) 30,900 $ 6,275,193
Benckiser N.V. (Consumer Goods and Services)* 64,300 2,760,655
IHC Caland N.V. (Transportation)* 25,134 1,458,878
Ing Groep N.V. (Financial Services)* 51,000 2,700,880
Koninklijke Ten Cate (Diversified Operations)* 67,838 2,225,883
Royal Dutch Petroleum Co. (Oils) 37,000 2,024,597
------------
$ 17,446,086
- -----------------------------------------------------------------------------------------------------------
Peru - 0.3%
Telefonica del Peru SA, ADR (Telecommunications) 60,500 $ 1,145,719
- -----------------------------------------------------------------------------------------------------------
Philippines
Alsons Cement Corp. (Building Materials)## 2,105,250 $ 115,894
- -----------------------------------------------------------------------------------------------------------
Portugal - 2.0%
Banco Espirito Santo e Comercial de Lisboa SA
(Banks and Credit Companies) 43,500 $ 1,765,492
Banco Totta E Acores (Banks and Credit Companies) 85,726 2,375,900
Portugal Telecom SA (Utilities - Telephone) 34,500 1,808,468
Telecel - Comunicacaoes Pessoais SA (Telecommunications)* 5,100 678,629
------------
$ 6,628,489
- -----------------------------------------------------------------------------------------------------------
Singapore - 0.7%
Hong Leong Finance Ltd. (Finance)+ 897,000 $ 1,109,119
Mandarin Oriental International, Ltd. (Restaurants and Lodgings)* 73,999 61,789
Overseas Union Bank (Finance) 335,000 1,263,370
------------
$ 2,434,278
- -----------------------------------------------------------------------------------------------------------
Spain - 1.0%
Acerinox SA (Iron and Steel) 11,000 $ 1,654,829
Repsol SA (Oils) 41,000 1,829,334
------------
$ 3,484,163
- -----------------------------------------------------------------------------------------------------------
Sweden - 2.9%
Astra AB (Pharmaceuticals) 132,000 $ 2,582,250
Skandia Forsakrings AB (Insurance) 39,000 2,203,500
Sparbanken Sverige AB, "A" (Banks and Credit Companies) 97,000 2,982,750
Volvo AB, "B" (Automobiles) 64,250 1,738,766
------------
$ 9,507,266
- -----------------------------------------------------------------------------------------------------------
Switzerland - 1.6%
Ciba Specialty AG (Chemicals)* 24,066 $ 2,926,057
Novartis AG (Pharmaceuticals) 1,375 2,514,259
------------
$ 5,440,316
- -----------------------------------------------------------------------------------------------------------
United Kingdom - 8.3%
ASDA Group PLC (Supermarkets) 638,000 $ 2,112,523
Avis Europe PLC (Auto Rental)## 465,000 1,583,683
British Aerospace PLC (Aerospace and Defense)* 194,000 6,090,110
British Petroleum PLC (Oils)* 209,566 2,889,415
British Petroleum PLC, ADR (Oils) 2,125 175,711
Capital Radio PLC (Broadcasting) 56,000 589,675
Carlton Communicatons PLC (Broadcasting) 138,000 969,509
Corporate Services Group PLC (Business Services) 157,800 625,704
Danka Business Systems, ADR (Business Services) 8,700 155,513
Jarvis Hotels PLC (Restaurants and Lodging)+ 339,800 922,470
Kwik-Fit Holdings PLC (Automotive) 179,400 1,133,440
Lloyds TSB Group PLC (Banks and Credit Companies)* 151,256 2,274,594
Lucas Variety (Automotive) 680,000 2,618,001
PowerGen PLC (Utilities - Electric)* 152,997 2,135,894
SmithKline-Beecham PLC, ADR (Medical and Health Products) 1,500 92,813
Tomkins PLC (Diversified Operations) 592,000 3,418,801
------------
$ 27,787,856
- -----------------------------------------------------------------------------------------------------------
Venezuela - 0.4%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications) 36,000 $ 1,275,750
- -----------------------------------------------------------------------------------------------------------
Total Foreign Stocks $144,207,610
- -----------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $143,735,935) $173,579,817
- -----------------------------------------------------------------------------------------------------------
BONDS - 28.7%
- -----------------------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------------------------------------
U.S. Bonds - 25.8%
Aerospace - 0.4%
BE Aerospace, Inc., 9.875s, 2006 $ 1,250 $ 1,343,750
- -----------------------------------------------------------------------------------------------------------
Automotive - 0.5%
Hayes Wheels International, Inc., 9.125s, 2007 $ 1,500 $ 1,590,000
- -----------------------------------------------------------------------------------------------------------
Broadcasting - 0.4%
Jacor Communications Co., 8s, 2010 $ 1,300 $ 1,296,750
- -----------------------------------------------------------------------------------------------------------
Building - 1.2%
Building Materials Corp., 8s, 2007## $ 1,525 $ 1,545,969
Nortek, Inc., 9.875s, 2004 900 938,250
Nortek, Inc., 9.25s, 2007 250 258,750
Williams Scotsman, Inc., 9.875s, 2007 1,300 1,365,000
------------
$ 4,107,969
- -----------------------------------------------------------------------------------------------------------
Business Services - 0.5%
Iron Mountain, Inc., 10.125s, 2006 $ 1,500 $ 1,665,000
- -----------------------------------------------------------------------------------------------------------
Chemicals - 1.1%
Harris Chemical North America, Inc., 10.25s, 2001 $ 1,500 $ 1,571,250
NL Industries, Inc., 11.75s, 2003 750 834,375
Sterling Chemicals, Inc., 11.25s, 2007 1,250 1,293,750
------------
$ 3,699,375
- -----------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.8%
E & S Holdings Corp., 10.375s, 2006 $ 800 $ 720,000
Kindercare Learning Centers, Inc., 9.5s, 2009 650 667,875
Revlon, Inc., 10.5s, 2003 800 840,000
Westpoint Stevens, Inc., 9.375s, 2005 500 528,125
------------
$ 2,756,000
- -----------------------------------------------------------------------------------------------------------
Containers - 1.4%
Gaylord Container Corp., 9.75s, 2007 $ 1,500 $ 1,500,000
Silgan Holdings, Inc., 9s, 2009 1,500 1,560,000
Stone Container Corp., 9.875s, 2001 1,500 1,516,875
------------
$ 4,576,875
- -----------------------------------------------------------------------------------------------------------
Entertainment - 0.7%
Albritton Communications Co., 9.75s, 2007 $ 1,000 $ 1,052,500
AMC Entertainment, Inc., 9.5s, 2009 100 104,500
Cinemark USA, Inc., 9.625s, 2008 1,000 1,060,000
------------
$ 2,217,000
- -----------------------------------------------------------------------------------------------------------
Finance - 0.4%
APP International Finance Co., 11.75s, 2005 $ 1,500 $ 1,350,000
- -----------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.8%
Borden, Inc., 9.25s, 2019 $ 2,000 $ 2,086,580
Specialty Foods Corp., 10.25s, 2001 700 700,000
------------
$ 2,786,580
- -----------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.4%
U.S. Timberlands, 9.625s, 2007 $ 1,300 $ 1,352,000
- -----------------------------------------------------------------------------------------------------------
Industrial - 0.4%
AGCO Corp., 8.5s, 2006 $ 650 $ 672,750
Esi Tractebel, 7.99s, 2011## 700 702,625
------------
$ 1,375,375
- -----------------------------------------------------------------------------------------------------------
Information, Paging, and Technology - 0.4%
Paging Network, Inc., 8.875s, 2006 $ 1,300 $ 1,274,000
- -----------------------------------------------------------------------------------------------------------
Media - 0.7%
Comcast Cellular Holdings, Inc., 9.5s, 2007 $ 1,500 $ 1,575,000
Jones Intercable, Inc., 8.875s, 2007 750 795,000
------------
$ 2,370,000
- -----------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.3%
Tenet Healthcare Corp., 10.125s, 2005 $ 560 $ 613,200
Tenet Healthcare Corp., 8.625s, 2007 240 249,600
------------
$ 862,800
- -----------------------------------------------------------------------------------------------------------
Metal Fabrication - 0.4%
Metals USA, Inc., 8.625s, 2008## $ 1,300 $ 1,300,000
- -----------------------------------------------------------------------------------------------------------
Metals and Minerals - 0.6%
Kaiser Aluminum & Chemical Corp., 9.875s, 2002 $ 2,000 $ 2,060,000
- -----------------------------------------------------------------------------------------------------------
Oil Services
Falcon Drilling, Inc., 8.875s, 2003 $ 150 $ 157,500
- -----------------------------------------------------------------------------------------------------------
Real Estate - 0.4%
Prime Hospitality Corp., 9.25s, 2006 $ 1,300 $ 1,379,625
- -----------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Red Roof Inns, Inc., 9.625s, 2003 $ 250 $ 258,750
- -----------------------------------------------------------------------------------------------------------
Retail - 0.7%
Cole National Group, Inc., 8.625s, 2007 $ 900 $ 913,500
K Mart Corp., 8.125s, 2006 1,300 1,345,500
------------
$ 2,259,000
- -----------------------------------------------------------------------------------------------------------
Special Products and Services - 1.2%
IMO Industries, Inc., 11.75s, 2006 $ 750 $ 840,000
Polymer Group, Inc., 9s, 2007 1,500 1,533,750
Thermadyne Industries Holdings Corp., 10.75s, 2003 1,520 1,596,000
------------
$ 3,969,750
- -----------------------------------------------------------------------------------------------------------
Steel - 0.6%
Alaska Steel Holdings Corp., 9.125s, 2006 $ 1,000 $ 1,057,500
WCI Steel, Inc., 10s, 2004 750 783,750
------------
$ 1,841,250
- -----------------------------------------------------------------------------------------------------------
Supermarkets - 0.5%
Pathmark Stores, Inc., 9.625s, 2003 $ 750 $ 727,500
Ralph's Grocery Co., 10.45s, 2004 800 912,000
------------
$ 1,639,500
- -----------------------------------------------------------------------------------------------------------
Telecommunications - 2.3%
Cablevision Systems Corp., 9.25s, 2005 $ 750 $ 798,750
Chancellor Media Corp., 8.75s, 2007 750 766,875
EchoStar Satellite Broadcasting Corp., 0s to
2000, 13.125s, 2004 1,400 1,239,000
Fox/Liberty Networks LLC, Inc., 8.875s, 2007## 700 724,500
Hollinger International Publishing, Inc., 9.25s, 2007 1,300 1,391,000
Western Wireless Corp., 10.5s, 2007 750 825,000
NEXTEL Communications, Inc., 0s to 2002, 9.75s, 2007 850 531,250
Qwest Communications International, Inc., 0s to
2003, 8.29s, 2008## 2,250 1,468,125
------------
$ 7,744,500
- -----------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 8.6%
U.S. Treasury Bonds, 6.125s, 2027 $ 28,000 $ 28,783,160
- -----------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 86,016,509
- -----------------------------------------------------------------------------------------------------------
Foreign Bonds - 2.9%
Bermuda - 0.5%
Flag Limited, 8.25s, 2008 (Telecommunications)## $ 1,600 $ 1,636,000
- -----------------------------------------------------------------------------------------------------------
Brazil - 0.2%
Federal Republic of Brazil, 4.5s, 2014 $ 855 $ 691,681
- -----------------------------------------------------------------------------------------------------------
Canada - 0.6%
Gulf Canada, 9.25s, 2004 (Oils) $ 500 $ 526,270
Rogers Cablesystems, Inc., 9.625s, 2002
(Telecommunications) 1,300 1,397,500
------------
$ 1,923,770
- -----------------------------------------------------------------------------------------------------------
Indonesia - 0.1%
PT Indah Kiat Pulp & Paper Corp., 8.875s, 2000
(Forest & Paper Products)## $ 500 $ 429,515
- -----------------------------------------------------------------------------------------------------------
Philippines - 0.8%
Bangko Sentral Ng Philipinas, 8.6s, 2027
(Banks & Credit Companies) $ 3,000 $ 2,598,360
- -----------------------------------------------------------------------------------------------------------
Russia - 0.5%
Ministry of Finance, Russia, 10s, 2007 $ 2,000 $ 1,860,000
- -----------------------------------------------------------------------------------------------------------
United Kingdom - 0.2%
Colt Telecom Group PLC, 8.875s, 2007
(Telecommunications) DEM 1,000 $ 595,271
- -----------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 9,734,597
- -----------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $95,214,024) $ 95,751,106
- -----------------------------------------------------------------------------------------------------------
Convertible Bond - 0.3%
- -----------------------------------------------------------------------------------------------------------
Exide Corp., 2.9s, 2005## (Identified Cost $1,023,261) $ 1,600 $ 1,030,000
- -----------------------------------------------------------------------------------------------------------
Preferred Stock - 0.4%
- -----------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------
Entertainment - 0.4%
Time Warner, Inc., 10.25## (Identified Cost $1,093,406) 1,133 $ 1,297,285
- -----------------------------------------------------------------------------------------------------------
Contingent Promissory Note - 5.1%
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -----------------------------------------------------------------------------------------------------------
Cargill, COLT (Commodity Option Linked Trading),
due 2002 (Illiquid) (Identified Cost $17,622,115) $ 17,000 $ 16,853,352
- -----------------------------------------------------------------------------------------------------------
Warrants
- -----------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------
Peregrine Investment Holdings, Exp. 5/15/98
(Finance)* (Identified Cost, $0) 46,800 $ 61
- -----------------------------------------------------------------------------------------------------------
Short-Term Obligations - 13.0%
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -----------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 3/05/98 - 4/01/98 $ 31,180 $ 31,114,371
General Electric Capital Corp., due 3/02/98 9,490 9,488,497
Student Loan Marketing Assn., due 3/03/98 2,885 2,884,127
- -----------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 43,486,995
- -----------------------------------------------------------------------------------------------------------
Call Options Purchased
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- -----------------------------------------------------------------------------------------------------------
Deutsche Marks/British Pounds/March/2.775
(Identified Cost, $688,187) DEM 61,111 $ 0
- -----------------------------------------------------------------------------------------------------------
Put Options Purchased - 0.2%
- -----------------------------------------------------------------------------------------------------------
Australian Dollars/December/0.71 AUD 19,606 $ 133,421
Canadian Dollars/May/1.43 CAD 47,140 213,592
Japanese Yen/April/130 JPY 8,122,652 430,501
- -----------------------------------------------------------------------------------------------------------
Total Put Options Purchased (Identified Cost, $1,506,066) $ 777,514
- -----------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $304,369,989) $332,776,130
- -----------------------------------------------------------------------------------------------------------
Call Options Written - (0.6)%
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED) VALUE
- -----------------------------------------------------------------------------------------------------------
German Marks/British Pounds/March/2.675 DEM 58,908 $ --
Japanese Yen/May/119 JPY 4,019,108 (297,414)
Swiss Francs/German Marks/March/.847 CHF 55,447 (1,817,780)
- -----------------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $1,316,136) $ (2,115,194)
- -----------------------------------------------------------------------------------------------------------
Put Options Written - (0.3)%
- -----------------------------------------------------------------------------------------------------------
Canadian Dollars/May/1.38 CAD 45,492 $ (981,080)
Japanese Yen/April/132 JPY 2,223,745 (68,936)
- -----------------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $981,417) $ (1,050,016)
- -----------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.1% 3,660,387
- -----------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $333,271,307
- -----------------------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
+Restricted security.
Abbreviation have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviation is shown below.
AUD = Australian Dollars FRF = French Francs
CAD = Canadian Dollars JPY = Japanese Yen
CHF = Swiss Francs MYR = Malaysian Ringitts
DEM = German Marks NLG = Dutch Guilders
ESP = Spanish Pesetas SEK = Swedish Kronor
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
FEBRUARY 28, 1998
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $304,369,989) $332,776,130
Cash 6,927
Net receivable for forward foreign currency exchange
contracts sold 131,543
Net receivable for forward foreign currency exchange
contracts purchased 485,092
Net receivable for foreign currency exchange contracts
subject to master netting agreement 2,412,604
Receivable for Fund shares sold 134,910
Receivable for investments sold 2,134,777
Interest and dividends receivable 2,074,357
Other assets 95,658
Deferred organization expenses 12,722
------------
Total assets $340,264,720
------------
Liabilities:
Payable for Fund shares reacquired $ 1,243,465
Payable for investments purchased 2,150,330
Written options outstanding, at value
(premiums received, $2,297,553) 3,165,210
Payable to affiliates -
Management fee 11,010
Distribution fee 248,052
Accrued expenses and other liabilities 175,346
------------
Total liabilities $ 6,993,413
------------
Net assets $333,271,307
============
Net assets consist of:
Paid-in capital $296,197,172
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 30,565,056
Accumulated undistributed net realized gain on
investments and foreign currency transactions 7,615,368
Distributions in excess of net investment income (1,106,289)
------------
Total $333,271,307
============
Shares of beneficial interest outstanding 18,284,796
==========
Class A shares:
Net asset value per share
(net assets of $113,837,874 / 6,232,711 shares of
beneficial interest outstanding) $18.26
======
Offering price per share (100 / 95.25 of net asset value
per share) $19.17
======
Class B shares:
Net asset value and offering price per share
(net assets of $170,418,796 / 9,357,755 shares of
beneficial interest outstanding) $18.21
======
Class C shares:
Net asset value and offering price per share
(net assets of $48,977,886 / 2,692,320 shares of
beneficial interest outstanding) $18.19
======
Class I shares:
Net asset value per share
(net assets of $36,751 / 2,010 shares of beneficial
interest outstanding) $18.28
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- -------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 28, 1998
- -------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 5,473,321
Dividends 1,085,402
Foreign taxes withheld (109,145)
------------
Total investment income $ 6,449,578
------------
Expenses -
Management fee $ 999,432
Trustees' compensation 18,495
Shareholder servicing agent fee 207,110
Distribution and service fee (Class A) 276,846
Distribution and service fee (Class B) 841,960
Distribution and service fee (Class C) 269,896
Administrative fee 22,179
Custodian fee 101,719
Postage 42,159
Auditing fees 25,015
Printing 14,635
Amortization of organization expenses 4,497
Legal fees 2,603
Miscellaneous 121,424
------------
Total expenses $ 2,947,970
Fees paid indirectly (13,633)
------------
Net expenses $ 2,934,337
------------
Net investment income $ 3,515,241
------------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $ 10,955,586
Written option transactions 480,019
Foreign currency transactions 800,669
Futures contracts 264,911
------------
Net realized gain on investments and foreign
currency transactions $ 12,501,185
------------
Change in unrealized appreciation -
Investments $ 8,106,259
Written options 287,813
Translation of assets and liabilities in foreign currencies 1,294,758
------------
Net unrealized gain on investments and foreign
currency translation $ 9,688,830
------------
Net realized and unrealized gain on investments and
foreign currency $ 22,190,015
------------
Increase in net assets from operations $ 25,705,256
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<TABLE>
- --------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,515,241 $ 6,576,284
Net realized gain on investments and foreign currency
tranactions 12,501,185 21,501,570
Net unrealized gain on investments and foreign currency
translation 9,688,830 13,721,560
------------ ------------
Increase in net assets from operations $ 25,705,256 $ 41,799,414
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (2,374,483) $ (2,207,631)
From net investment income (Class B) (2,935,441) (2,457,334)
From net investment income (Class C) (1,009,544) (857,364)
From net investment income (Class I) (782) (256)
From net realized gain on investments and foreign
currency transactions (Class A) (8,254,320) (5,984,967)
From net realized gain on investments and foreign
currency transactions (Class B) (12,783,360) (9,094,467)
From net realized gain on investments and foreign
currency transactions (Class C) (3,852,339) (2,927,754)
From net realized gain on investments and foreign
currency transactions (Class I) (2,604) --
In excess of net investment income (Class A) (282,357) --
In excess of net investment income (Class B) (723,617) --
In excess of net investment income (Class C) (100,176) --
In excess of net investment income (Class I) (139) --
------------ ------------
Total distributions declared to shareholders $(32,319,162) $(23,529,773)
------------ ------------
Net increase in net assets from Fund share transactions $ 2,954,236 $ 74,522,757
------------ ------------
Total increase in net assets $ (3,659,670) $ 92,792,398
Net assets:
At beginning of period 336,930,977 244,138,579
------------ ------------
At end of period (including accumulated undistributed net
investment income [distribution in excess of] $(1,106,289)
and $2,805,009, respectively) $333,271,307 $336,930,977
============ ============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ---------------------------------------------------------
1998 1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $18.75 $17.68 $16.63 $15.33 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.22 $ 0.46 $ 0.43 $ 0.55 $ 0.04
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.18 2.19 1.85 1.17 0.29
------ ------ ------ ------ ------
Total from investment operations $ 1.40 $ 2.65 $ 2.28 $ 1.72 $ 0.33
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income
$(0.41) $(0.40) $(0.49) $(0.37) $ --
From net realized gain on investments and
foreign currency transactions (1.43) (1.18) (0.74) (0.05) --
In excess of net investment income (0.05) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.89) $(1.58) $(1.23) $(0.42) $ --
------ ------ ------ ------ ------
Net asset value - end of period $18.26 $18.75 $17.68 $16.63 $15.33
====== ====== ====== ====== ======
Total return(+) 8.26%++ 15.67% 14.23% 11.48% 2.20%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.44%+ 1.43% 1.48% 1.47% 1.50%+
Net investment income 2.45%+ 2.51% 2.45% 3.49% 2.43%+
Portfolio turnover 44% 128% 202% 118% 1%
Average commission rate### $0.0244 $ 0.00 $0.0219 -- --
Net assets at end of period (000 omitted) $113,838 $111,959 $86,457 $58,663 $25,254
*For the period from the commencement of the Fund's investment operations, July 22, 1994, through August 31, 1994.
+Annualized.
++Not annualized.
#Per share data are 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/or the distributor voluntarily waived a portion of their management fee and/or distribution fee,
respectively, for certain of the periods indicated. If the fee had been incurred by the Fund, the net investment income per share
and the ratios would have been:
Net investment income -- $ 0.45 $ 0.42 $ 0.52 $ 0.02
Ratios (to average net assets):
Expenses## -- 1.46% 1.53% 1.67% 2.62%+
Net investment income -- 2.48% 2.40% 3.29% 1.31%+
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights -- continued
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, -------------------------------------------------------------
1998 1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.70 $17.63 $16.58 $15.31 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.18 $ 0.36 $ 0.32 $ 0.43 $ 0.02
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.17 2.19 1.85 1.17 0.29
------ ------ ------ ------ ------
Total from investment operations $ 1.35 $ 2.55 $ 2.17 $ 1.60 $ 0.31
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income
$(0.33) $(0.30) $(0.38) $(0.28) $ --
From net realized gain on investments and
foreign currency transactions (1.43) (1.18) -- -- --
In excess of net investment income (0.08) -- (0.74) (0.05) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.84) $(1.48) $(1.12) $(0.33) --
------ ------ ------ ------ ------
Net asset value - end of period $18.21 $18.70 $17.63 $16.58 $15.31
====== ====== ====== ====== ======
Total return 8.00%++ 15.01% 13.58% 10.65% 2.07%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.94%+ 1.98% 2.10% 2.24% 2.57%+
Net investment income 1.94%+ 1.96% 1.83% 2.75% 1.39%+
Portfolio turnover 44% 128% 202% 118% 1%
Average commission rate### $0.0244 $ 0.00 $0.0219 -- --
Net assets at end of period (000 omitted) $170,419 $166,865 $124,399 $83,601 $26,495
* For the period from the commencement of the Fund's investment operations, July 22, 1994, through August 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are 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/or the distributor voluntarily waived a portion of their management fee and/or distribution fee,
respectively, for certain of the periods indicated. If the fee had been incurred by the Fund, the net investment income per
share and the 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>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, -------------------------------------------------------------
1998 1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.67 $17.62 $16.58 $15.31 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.18 $ 0.36 $ 0.33 $ 0.46 $ 0.03
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.17 2.18 1.85 1.16 0.28
------ ------ ------ ------ ------
Total from investment operations $ 1.35 $ 2.54 $ 2.18 $ 1.62 $ 0.31
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.36) $(0.31) $(0.40) $(0.30) $ --
From net realized gain on investments and
foreign currency transactions (1.43) (1.18) (0.74) (0.05) --
In excess of net investment income (0.04) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.83) $(1.49) $(1.14) $(0.35) $ --
------ ------ ------ ------ ------
Net asset value - end of period $18.19 $18.67 $17.62 $16.58 $15.31
====== ====== ====== ====== ======
Total return 7.99%++ 15.06% 13.62% 10.72% 2.07%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.94%+ 1.96% 2.03% 2.18% 2.50%+
Net investment income 1.94%+ 2.00% 1.89% 2.91% 1.68%+
Portfolio turnover 44% 128% 202% 118% 1%
Average commission rate### $0.0244 $ 0.00 $0.0219 -- --
Net assets at end of period (000 omitted) $48,978 $58,074 $33,283 $19,325 $3,435
* For the period from the commencement of the Fund's investment operations, July 22, 1994, through August 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are 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/or the distributor voluntarily waived a portion of their management fee and/or distribution
fee, respectively, for certain of the periods indicated. If the fee had been incurred by the Fund, the net investment
income per share and the 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>
FINANCIAL STATEMENTS -- continued
Financial Highlights -- continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED PERIOD ENDED
FEBRUARY 28, AUGUST 31,
1998 1997**
- -----------------------------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.74 $17.56
------ ------
Income from investment operations# -
Net investment income $ 0.27 $ 0.28
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.21 1.16
------ ------
Total from investment operations $ 1.48 $ 1.44
------ ------
Less distributions declared to shareholders -
From net investment income $(0.43) $(0.26)
From net realized gain on investments and foreign currency
transactions (1.43) --
In excess of net investment income (0.08) --
------ ------
Total distributions declared to shareholders $(1.94) $(0.26)
------ ------
Net asset value - end of period $18.28 $18.74
====== ======
Total return 8.50%++ 8.22%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.94%+ 0.97%+
Net investment income 2.95%+ 3.43%+
Portfolio turnover 44% 128%
Average commission rate $0.0244 $ 0.00
Net assets at end of period (000 omitted) $37 $34
** For the period from the inception of Class I, January 7, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
</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
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 - 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 foreign currency and translated into U.S. dollars at the
closing daily exchange rate. Futures and options contracts listed on commodities
exchanges are reported at market value using closing settlement prices.
Over-the-counter options on securities are valued by brokers. Over-the-counter
currency options are valued through the use of a pricing model which takes into
account foreign currency exchange spot and forward rates, implied volatility,
and short-term repurchase rates. 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.
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 result 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 Fund
operations.
Written Options - The Fund may also write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, the Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security 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 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 or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, 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 equity index 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 the cash is being
invested. Should 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 into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or 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.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return and, consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as 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.
Capital gains taxes have been provided on unrealized and realized gains from
securities transactions in countries where such a capital gains tax is
applicable. Realized and unrealized gain is reported net of any capital gains
tax in the Statement of Operations.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of the Fund 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.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.60% of
average daily net assets.
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal,
shareholder servicing, compliance, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee at the following annual percentages of the Fund's
average daily net assets, provided that the administrative fee is not assessed
on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0150%
Next $1 billion 0.0150%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $4,045 for the period ended
February 28, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$27,547 for the period ended February 28, 1998, as its portion of the sales
charge on sales of Class A shares of the Fund. The Trustees have adopted a
distribution plan for Class A, Class B, and Class C shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.50% 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 $18,145 for the period ended February
28, 1998. Fees incurred under the distribution plan during the period ended
February 28, 1998, were 0.50% of average daily net assets attributable to Class
A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be 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 $17,968 and $1,624 for Class B and Class C shares,
respectively, for the period ended February 28, 1998. Fees incurred under the
distribution plan during the period ended February 28, 1998, were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis, respectively.
Purchases over $1 million of Class A shares and certain purchases by retirement
plans are subject to a contingent deferred sales charge in the event of a
shareholder redemption within 12 months following such 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. A contingent
deferred sales charge is imposed on shareholder redemptions of Class C shares in
the event of a shareholder redemption within 12 months of purchase. MFD receives
all contingent deferred sales charges. Contingent deferred sales charges imposed
during the period ended February 28, 1998, were $739, $159,835, and $7,781 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 was calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.13% until January 1, 1998, at which time the new effective annual rate of
0.1125% went into effect.
(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 $28,805,000 $ 306,434
----------- ------------
Investments (non-U.S. government securities) $87,001,157 $174,594,889
----------- ------------
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 $304,369,989
------------
Gross unrealized appreciation $ 37,865,298
Gross unrealized depreciation (9,459,156)
------------
Net unrealized appreciation $ 28,406,142
============
(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
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
---------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,980,444 $ 36,201,169 5,682,250 $104,763,615
Shares issued to shareholders
in reinvestment of
distributions 580,355 9,935,236 420,579 7,433,254
Shares reacquired (2,299,167) (42,373,570) (5,021,414) (93,197,777)
----------- ------------ ---------- ------------
Net increase 261,632 $ 3,762,835 1,081,415 $ 18,999,092
=========== ============ ========== ============
<CAPTION>
Class B Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
---------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 976,510 $ 17,972,360 2,743,292 $ 50,100,639
Shares issued to shareholders
in reinvestment of
distributions 821,584 14,004,242 554,995 9,772,491
Shares reacquired (1,364,786) (24,797,934) (1,428,097) (26,314,959)
----------- ------------ ---------- ------------
Net increase 433,308 $ 7,178,668 1,870,190 $ 33,558,171
=========== ============ ========== ============
<CAPTION>
Class C Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
---------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 333,740 $ 6,178,520 1,647,309 $ 30,004,358
Shares issued to shareholders
in reinvestment of
distributions 198,900 3,395,618 173,083 3,043,659
Shares reacquired (951,293) (17,564,923) (598,498) (11,114,875)
----------- ------------ ---------- ------------
Net increase (decrease) (418,653) $ (7,990,785) 1,221,894 $ 21,933,142
=========== ============ ========== ============
<CAPTION>
Class I Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 PERIOD ENDED AUGUST 31, 1997*
---------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 2,194 $ 39,686
Shares issued to shareholders
in reinvestment of
distributions 205 3,518 13 255
Shares reacquired -- -- (402) (7,589)
----------- ------------ ---------- ------------
Net increase 205 $ 3,518 1,805 $ 32,352
=========== ============ ========== ============
* For the period from the inception of Class I, January 7, 1997, through August 31, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
period ended February 28, 1998, was $1,002.
(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.
Written Option Transactions
<TABLE>
<CAPTION>
1998 CALLS 1998 PUTS
--------------------------------------- --------------------------------------
PRINCIPAL AMOUNTS PRINCIPAL AMOUNTS
OF CONTRACTS OF CONTRACTS
(000 OMITTED) PREMIUMS (000 OMITTED) PREMIUMS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OUTSTANDING, BEGINNING OF PERIOD -
Finnish Markka/Deutsche Marks -- $ -- 170,385 $142,065
Norwegian Krona/Deutsche Marks -- -- 114,683 156,225
Swiss Francs/Deutsche Marks 55,447 386,669 -- --
Options written -
Canadian Dollars -- -- 45,492 758,199
Deutsche Marks/British Pounds 58,908 295,191 64,964 266,739
Japanese Yen 7,869,346 1,370,549 2,223,745 223,218
Options terminated in closing transactions -
Finnish Markka/Deutsche Marks -- -- (170,385) (142,065)
Deutsche Marks/British Pounds -- -- (64,964) (266,739)
Japanese Yen (3,850,238) (736,273) -- --
Norwegian Krona/Deutsche Marks -- -- (114,683) (156,225)
---------- --------
OUTSTANDING, END OF PERIOD $1,316,136 $981,417
========== ========
OPTIONS OUTSTANDING, END OF
PERIOD CONSIST OF:
Canadian Dollars -- $ -- 45,492 $758,199
Deutsche Marks/British Pounds 58,908 295,191 -- --
Japanese Yen 4,019,108 634,276 2,223,745 223,218
Swiss Francs/Deutsche Marks 55,447 386,669 -- --
---------- --------
OUTSTANDING, END OF PERIOD $1,316,136 $981,417
========== ========
</TABLE>
At February 28, 1998, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
CONTRACTS NET UNREALIZED
TO DELIVER/ CONTRACTS APPRECIATION
SETTLEMENT DATE RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 5/15/98 CAD 9,483,802 6,608,921 $ 6,672,907 $(63,986)
5/15/98 CHF 21,001,294 14,778,965 14,776,469 2,496
5/15/98 DEM 37,840,895 21,286,435 20,946,638 339,797
5/15/98 FRF 42,407,932 7,147,143 6,998,369 148,774
5/15/98 JPY 3,773,644,226 29,660,834 30,283,973 (623,139)
5/15/98 MYR 29,042,606 8,040,143 7,860,672 179,471
5/15/98 NLG 24,534,992 12,243,010 12,051,711 191,299
5/15/98 SEK 149,516,319 18,697,954 18,741,123 (43,169)
----------- ------------ ---------
118,463,405 $118,331,862 $ 131,543
=========== ============ =========
Purchases 5/18/98 ESP 945,236,067 6,297,376 $ 6,161,994 $(135,382)
5/15/98 GBP 6,314,781 10,380,363 10,350,879 (29,484)
5/15/98 MYR 41,814,519 10,542,450 11,317,535 775,085
5/15/98 SEK 82,021,137 10,406,066 10,280,939 (125,127)
----------- ------------ ---------
37,626,255 $ 38,111,347 $ 485,092
=========== ============ =========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $1,167,513 with Deutsche Bank,
$851,871 with Swiss Bank, $490,545 with Merrill Lynch, and a net payable $74,547
with First Boston and $22,778 with Bankers Trust at February 28, 1998.
At February 28, 1998, 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 28, 1998,
the Fund owned the following restricted securities (constituting 0.61% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations supplied
by a pricing service of brokers or, if not available, in good faith by or at the
direction of the Trustees.
DATE OF SHARE
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- --------------------------------------------------------------------------------
Hong Leong Finance Ltd. 6/12/95 897,000 $2,823,994 $1,109,119
Jarvis Hotels PLC 7/02/96 339,800 850,801 922,470
----------
$2,031,589
==========
<PAGE>
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 (the Fund), including the schedule of portfolio of
investments, as of February 28, 1998, and the related statement of operations
for the six month period then ended, the statement of changes in net assets for
the six month period then ended and for the year ended August 31, 1997, and the
financial highlights for the six month period ended February 28, 1998, and for
each of the three years in the period ended August 31, 1997, and for the period
from July 22, 1994 (commencement of operations) to August 31, 1994. 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 and the financial highlights. Our procedures included confirmation of
securities owned as of February 28, 1998, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
World Asset Allocation Fund at February 28, 1998, the results of its operations
for the six month period then ended, the changes in its net assets for the six
month period then ended, and for the year ended August 31, 1997, and the
financial highlights for the six month period ended February 28, 1998, and for
each of the three years in the period ended August 31, 1997, and for the period
from July 22, 1994 (commencement of operations) to August 31, 1994, in
conformity with generally accepted accounting principles.
[Graphic Omitted]
Boston, Massachusetts
April 8, 1998
--------------------------------------------
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 ASSET ALLOCATION(SM) FUND
<TABLE>
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Assistant Secretary
Former Chairman and Director (until 1991), MFS James R. Bordewick, Jr.*
Investment Management
CUSTODIAN
Marshall N. Cohan - Private Investor State Street Bank and Trust Company
Lawrence H. Cohn, M.D. - Chief of Cardiac AUDITORS
Surgery, Brigham and Women's Hospital; Ernst & Young LLP
Professor of Surgery, Harvard Medical School
INVESTOR INFORMATION
The Hon. Sir J. David Gibbons, KBE - Chief For MFS stock and bond market outlooks,
Executive Officer, Edmund Gibbons Ltd. call toll free: 1-800-637-4458 anytime from
a touch-tone telephone.
Abby M. O'Neill - Private Investor
For information on MFS mutual funds, call your
Walter E. Robb, III - President and Treasurer, financial adviser or, for an information kit,
Benchmark Advisors, Inc. (corporate financial call toll free: 1-800-637-2929 any business day
consultants); President, Benchmark Consulting from 9 a.m. to 5 p.m. Eastern time (or leave a
Group, Inc. (office services) message anytime).
Arnold D. Scott* - Senior Executive INVESTOR SERVICE
Vice President, Director, and Secretary, MFSService Center, Inc.
MFS Investment Management P.O. Box 2281
Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman, Chief
Executive Officer, and Director, For general information, call toll free:
MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt - President, Insight
Resources, Inc. (acquisition planning For service to speech- or hearing-impaired,
specialists) Ward Smith - Former Chairman call toll free: 1-800-637-6576 any business day
(until 1994), NACCO Industries (holding from 9 a.m. to 5 p.m. Eastern time. (To use
company) this service, your phone must be equipped with
a Telecommunications Device for the Deaf.) For
INVESTMENT ADVISER share prices, account balances, and exchanges,
Massachusetts Financial Services Company call toll free: 1-800-MFS-TALK (1-800-637-8255)
500 Boylston Street anytime from a touch-tone telephone.
Boston, MA 02116-3741
WORLD WIDE WEB
DISTRIBUTOR www.mfs.com
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741 [Dalbar Logo] For the fourth year in a row, MFS
earned a #1 ranking in the DALBAR, Inc.
ASSET ALLOCATION COMMITTEE Broker/Dealer Survey, Main Office Operations
John W. Ballen* Service Quality Category. The firm achieved a
Leslie J. Nanberg* 3.42 overall score on a scale of 1 to 4 in the
Jeffrey L. Shames* 1997 survey. A total of 111 firms responded,
James T. Swanson* offering input on the quality of service they
received from 29 mutual fund companies
TREASURER nationwide. The survey contained questions
W. Thomas London* about service quality in 11 categories,
including "knowledge of operations contact,"
ASSISTANT TREASURERS "keeping you informed," and "ease of doing
Mark E. Bradley* business" with the firm.
Ellen Moynihan*
James O. Yost*
</TABLE>
*Affiliated with the Investment Adviser
<PAGE>
MFS(R) WORLD ASSET ----------------
ALLOCATION(SM) FUND Bulk Rate
U.S. Postage
Paid
MFS
----------------
[LOGO] MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
500 Boylston Street
Boston, MA 02116-3741
[DALBAR
LOGO]
TOP-RATED SERVICE
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MWA-3 4/98 42M 88/288/388/888
