<PAGE>
MFS WORLD GROWTH FUND
(A SERIES OF MFS SERIES TRUST VIII)
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
December 22, 1995
VIA EDGAR
- ---------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: MFS SERIES TRUST VII (FILE NO. 811-5262), ON BEHALF OF
MFS WORLD GROWTH FUND
-----------------------------------------------------
Ladies and Gentlemen:
Pursuant to the requirements of Section 30(b) of the Investment Company
Act of 1940 and Rule 30b2-1 thereunder, we hereby file a copy of the
Annual Report to Shareholders dated October 31, 1995 of MFS Bond Fund.
Very truly yours,
LORRAINE K. GRIP
Lorraine K. Grip
Senior Production Editor
/lkg
<PAGE>
Annual Report for
Year Ended
October 31, 1995
MFS(R) WORLD GROWTH FUND
Front cover
A photo of two airplanes.
<PAGE>
MFS(R) WORLD GROWTH FUND
TRUSTEES
A. Keith Brodkin* - Chairman and President
Richard B. Bailey* - Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Marshall N. Cohan - Private Investor
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School
The Hon. Sir J. David Gibbons, KBE - Chief Executive Officer, Edmund Gibbons
Ltd.; Chairman, Bank of N.T. Butterfield & Son Ltd.
Abby M. O'Neill - Private Investor; Director, Rockefeller Financial Services,
Inc. (investment adviser)
Walter E. Robb, III - President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); President, Benchmark Consulting Group, Inc.
(office services); Trustee, Landmark Funds (mutual funds)
Arnold D. Scott* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames* - President and Director, Massachusetts Financial Services
Company
J. Dale Sherratt - President, Insight Resources, Inc. (acquisition planning
specialists)
Ward Smith - Former Chairman (until 1994), NACCO Industries; Director,
Sundstrand Corporation
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
David Mannheim*
Toni Y. Shimura*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Deloitte & Touche LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
INVESTOR SERVICE
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any business day from 8
a.m. to 8 p.m. Eastern time. For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must be equipped with a Telecommunications
Device for the Deaf.)
For share prices, account balances and exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone telephone.
TOP-RATED SERVICE
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s
Broker/Dealer Survey, Main Office Operations Service Quality category. The firm
achieved a 3.49 overall score -- on a scale of 1 to 4 -- in the 1995 survey. A
total of 71 firms responded, offering input on the quality of service they
receive from 36 mutual fund companies nationwide. The survey contained questions
about service quality in 17 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
Every knowledgeable investor realizes how difficult the past year has been for
many overseas stock markets. Political and economic disruptions and volatile
currencies resulted in stock corrections in both emerging and developed foreign
markets. Our Fund reflected this volatility. During the 12 months ended October
31, 1995, the total return for Class A shares of the Fund was +5.47%, while the
total returns for Class B and Class C shares were +4.61% and +4.68%,
respectively. These returns assume the reinvestment of distributions but exclude
the effects of any sales charges. During this same period, the Morgan Stanley
Capital International World Index (the MSCI), a broad, unmanaged index of U.S.,
international and emerging market equities, returned +10.03%. As the Portfolio
Performance and Strategy section of this letter will discuss, a number of our
holdings in Japan and in emerging markets led us to underperform the MSCI, but
we anticipate that these investments will position us well in the year to come.
U.S. Outlook
Moderate, but sustainable, growth appears to be the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy growing
at an annual rate of 4.2% in the third quarter, this surprisingly strong growth
was mainly driven by a pickup in consumer spending and an increase in business
and government outlays. Although impressive, this growth rate is not expected to
continue in coming months. Recent retail sales have been disappointing, in part
because of rising levels of consumer debt. An extended period of lower mortgage
rates seems to have relieved much of the pent-up demand for housing. Growth is
not expected to get much help from the manufacturing sector, either, as order
flows from manufacturers have moderated. Export activity, meanwhile, is also
expected to remain modest as continued weakness abroad has limited demand for
many U.S. goods. However, the Federal Reserve Board's consistent and, so far,
successful efforts to fight inflation seem to be giving consumers and businesses
enough longer term confidence to help maintain modest growth in real (adjusted
for inflation) gross domestic product into 1996.
Global Outlook
As in the United States, a pattern of slow to moderate growth and low and
controlled inflation remains a dominant theme in major industrialized countries.
While the recent recovery of the dollar against the yen and the mark has added
some strength to the economies of Europe and Japan, the outlook is for sluggish
economic growth, in the near term at least. And although central banks in Europe
and Japan have lowered interest rates in an attempt to stimulate domestic
demand, many industrial companies in these countries are still struggling to
compete in a global marketplace in which the prices of their products are less
competitively priced. On
1
<PAGE>
LETTER TO SHAREHOLDERS - continued
the positive side, this does mean that there is little to no inflationary
pressure in these countries, and we believe that this, combined with further
reductions in interest rates, could help provide a foundation for stronger
economic growth in the long run.
Stock Market
After some volatility late in the third quarter, the U.S. stock market appears
to have stabilized. Although many companies reported solid third-quarter
results, there was some weakness in the earnings of retail, financial services
and even some technology companies. However, a slowdown in earnings may be a
positive development if it is an indication that the economy is not overheating
and that inflation--an enemy of long-term equity valuations--is under control.
While we see a deceleration of corporate earnings as the inevitable consequence
of traditional business cycles, we remain encouraged by the high absolute level
of profitability among U.S. companies. Also, many companies' increasing emphasis
on cost containment and growing use of technology have helped keep them highly
competitive and reasonably profitable. Looking ahead, we believe that a
stabilizing interest rate environment, coupled with reasonable earnings reports,
could justify current market valuations.
Although the U.S. stock market has been strong this year, many foreign
stock markets have lagged. Still, we believe investment opportunities exist in
several overseas markets. Valuations appear reasonable in Europe and Japan, for
example, and we anticipate substantial earnings increases in these markets over
the next several years.
Portfolio Performance and Strategy
Our Fund continues to focus on the fastest growing companies in the world in
what we consider the three most attractive markets with the best long-term
growth potential. While such high growth inherently predisposes to volatility,
we believe it also offers the greatest opportunity for capital appreciation. In
the United States, which represents about 47% of the Fund, emphasis is on
leading emerging growth companies that we believe can achieve earnings growth
rates of 20% or more through significant gains in market share in rapidly
growing markets. In other developed international markets such as Europe and
Japan, which represent about 36% of the Fund, the focus is on "world class"
companies with significant earnings leverage resulting from recovering
economies, improving fundamentals, business restructuring or new product
development. In emerging markets, which represent about 17% of the Fund,
emphasis is on companies which are global low-cost producers, or beneficiaries
of privatization, infrastructure growth, or burgeoning consumer demand.
The Fund's performance has been helped by its overweighting in the United
States, which has been one of the world's best markets over the past year, and
by its overweighting in technology, one of the best performing sectors. Our
2
<PAGE>
LETTER TO SHAREHOLDERS - continued
results in the United States were also due to an underweighting in health
maintenance organizations (HMOs) and nursing homes, which saw disappointments on
the cost and reimbursement fronts. The United States remains our favorite major
market because low interest rates and a moderate growth environment provide an
ideal background for emerging growth companies. Thanks to proprietary products
and technologies and to strong managements, such companies can show
above-average earnings growth. Therefore, our focus is on stocks in technology,
especially networking and software, along with leisure industries and business
services stocks where positive earnings growth is driven by strong demand.
Reflecting this theme, major holdings include HFS, a leading hotel and real
estate franchiser; Cadence Design, a leader in electronic design automation; and
Ceridian, a leading supplier of outsourcing services.
The economics of developed markets affects past performance and future
strategies. The Fund's performance was negatively affected by its investments in
Japan, where the strengthening yen hurt many of the export-oriented auto and
consumer electronics companies in which the Fund was overweighted. European
markets and economies were also negatively impacted by the weakening dollar. We
believe the outlook for international markets seems more favorable than it has
been in a long time given reasonable valuations, supportive interest rate
trends, and the likelihood of substantial improvement in corporate profits from
depressed levels. Our focus in developed foreign markets continues to be on
telecommunications, electronics, pharmaceutical and automotive com-panies with
significant earnings from recovering home and export economies, and new
products. Examples of these include electronics companies such as Sharp and NEC,
as well as industrial and health care leaders such as Mannesmann and Astra.
Emerging markets present more risks but also offer greater opportunity for
upside potential. The Fund's performance was hurt by its investments in Latin
American and Southeast Asian emerging markets, where currency devaluations and
rising interest rates contributed to declines of 20% to 50%. We have used these
pullbacks as opportunities to add to our holdings since we believe that many of
the difficulties in the emerging markets are behind them, and that a recovery in
growth lies ahead. In markets such as Hong Kong and China, our focus is on
companies producing consumer products such as bicycles and beer, which benefit
from increasing leisure time and disposable income. In Latin America, the
emphasis is on companies such as Usiminas, the Brazilian steel company, and
Telebras and Telefonos de Mexico, the Brazilian and Mexican phone companies,
which are benefiting from new infrastructure.
In summary, we believe the declines that many of the world's markets have
experienced over the past year have created some excellent values.
3
<PAGE>
LETTER TO SHAREHOLDERS - continued
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
[A photo of [A photo of [A photo of
A. Keith Brodkin, David Mannheim, Toni Y. Shimura,
Chairman and President] Portfolio Manager] Portfolio Manager]
[Signature] [Signature] [Signature]
A. Keith Brodkin David Mannheim Toni Y. Shimura
Chairman and President Portfolio Manager Portfolio Manager
November 10, 1995
PORTFOLIO MANAGER PROFILES
David Mannheim began his career at MFS in 1988 as a research specialist and was
promoted to Assistant Vice President-Investments in 1991 and Vice President-
Investments in 1992. In 1993, he was named Portfolio Manager of MFS World Growth
Fund. Mr. Mannheim is a graduate of Amherst College and of Massachusetts
Institute of Technology's Sloan School of Management.
Toni Shimura joined the MFS Research Department in 1987. A graduate of Wellesley
College and of Massachusetts Institute of Technology's Sloan School of
Management, she was promoted to Investment Officer in 1990, Assistant Vice
President-Investments in 1991, and Vice President-Investments in 1992. In 1993,
she was named Portfolio Manager of MFS World Growth Fund.
OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation by investing in
securities of companies worldwide that are growing at rates expected to be well
above the growth rate of the overall U.S. economy. Dividend and interest income
from portfolio securities, if any, is incidental to the Fund's investment
objective of capital appreciation.
4
<PAGE>
OBJECTIVE AND POLICIES - continued
The Fund's policy is to invest primarily in securities in three market sectors:
U.S. emerging growth companies; foreign growth companies; and emerging market
securities. The U.S. emerging growth and foreign growth sectors may include
securities of more established companies which represent opportunities for
long-term growth. Under normal conditions, the Fund will be invested in at least
three different countries, one of which will be the United States. For defensive
reasons or during times of international political or economic uncertainty or
turmoil, most or all of the Fund's investments may be in the United States.
While the Fund primarily invests in equity securities, it may also invest in
fixed-income securities.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
For the year ended October 31, 1995, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to 0.4%.
The Fund is estimated to have derived approximately 40% of its ordinary income
from dividends paid by foreign companies, and to have paid foreign taxes
equivalent to approximately 5.6% of its ordinary income.
PERFORMANCE
The information on the following page illustrates the historical performance of
MFS World Growth Fund Class A and Class B shares in comparison to various market
indicators. Class A share results reflect the deduction of the 5.75% maximum
sales charge. Class B share results reflect the deduction of the current maximum
contingent deferred sales charge (CDSC) of 4%. Benchmark comparisons are
unmanaged and do not reflect any fees or expenses. You cannot invest in an
index. All results reflect the reinvestment of all dividends and capital gains.
Please note that effective January 3, 1994, Class C shares were offered.
Information on Class C share performance appears on the next page.
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value of an investment in a mutual
fund will vary with changes in market conditions, and shares, when redeemed, may
be worth more or less than their original cost. All Class A share results
reflect the applicable expense subsidy which is explained in the Notes to
Financial Statements. Had the subsidy not been in effect, the results would have
been less favorable.
5
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from December 1, 1993 to October 31, 1995)
[Line graph representing the growth of a $10,000 investment for the period from
December 1, 1993 to October 31, 1995. The graph is scaled from $9,000 to $14,000
in $1,000 segments. The years are marked in 6 month segments from 1993 to 1995.
There are six lines drawn to scale representing MFS World Growth Fund (Class A),
MFS World Growth Fund (Class B), S&P 500, MSCI World Index, Russell 2000 Index
and the Consumer Price Index.]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
Life of Class
through
1 Year 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C>
MFS World Growth Fund (Class A) including
5.75% sales charge - 0.57% + 7.72%*
- --------------------------------------------------------------------------------
MFS World Growth Fund (Class A) at net asset value + 5.47% +11.05%*
- --------------------------------------------------------------------------------
MFS World Growth Fund (Class B) with CDSC+ + 0.61% + 8.28%*
- --------------------------------------------------------------------------------
MFS World Growth Fund (Class B) without CDSC + 4.61% +10.17%*
- --------------------------------------------------------------------------------
MFS World Growth Fund (Class C) + 4.68% + 7.01%#
- --------------------------------------------------------------------------------
Average global portfolio fund + 5.25% + 6.84%
- --------------------------------------------------------------------------------
Morgan Stanley Capital International (MSCI) World Index +10.03% + 9.10%
- --------------------------------------------------------------------------------
Russell 2000 Total Return Index++ +18.35% + 8.60%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index++ +26.41% +14.58%
- --------------------------------------------------------------------------------
Consumer Price Index[ss] + 2.81% + 2.71%
- --------------------------------------------------------------------------------
<FN>
* For the period from the commencement of offering of Class A and Class B
shares, November 18, 1993 to October 31, 1995. Benchmark comparisons begin
on November 1, 1993.
+ These returns reflect the maximum CDSC of 4%.
# For the period from the commencement of offering of Class C shares, January
3, 1994 to October 31, 1995. Class C shares have no initial sales charge or
CDSC but, along with Class B shares, have higher annual fees and expenses
than Class A shares.
++ The Standard & Poor's 500 Composite Index (the S&P 500) is a popular,
unmanaged index of common stock performance.
+++ The Russell 2000 Total Return Index is comprised of 2,000 of the smallest
U.S.-domiciled company common stocks which are traded in the U.S. on the
New York Stock Exchange, the American Stock Exchange, and NASDAQ.
[ss] The Consumer Price Index is a popular measure of change in prices.
</FN>
</TABLE>
In the above table, we have included the average annual total returns of all
global portfolio funds (including the Fund) tracked by Lipper Analytical
Services, Inc. (an independent firm which rates mutual fund performance) for the
applicable time periods. Because these returns do not reflect any applicable
sales charges, we have also included the Fund's results at net asset value (no
sales charge) for comparison.
6
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - October 31, 1995
Stocks and Warrants - 88.3%
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - 52.6%
Argentina - 0.8%
Banco Frances del Rio Plata (Finance) 50,000 $ 363,500
Buenos Aires Embotelladora S.A., ADR (Bevera 16,000 366,000
CAPEX S.A. (Utilities - Electric) 48,000 309,600
Cia Naviera Perez Companc S.A.C.F.I.M.F A
(Oil and Gas) 67,400 297,234
Inversiones y Representacion
(Special Products and Services)* 55,000 115,500
Irsa Inversiones, GDR (Special Products
and Services 15,100 317,100
Mirgor Sacifia, ADR (Automotive)## 108,000 216,000
Telecom Argentina, ADR (Utilities - Telephone) 7,330 281,288
YPF Sociedad Anonima, ADR (Oils) 56,000 959,000
------------
$ 3,225,222
- --------------------------------------------------------------------------------
Australia - 1.8%
Australia & New Zealand Bank Group Ltd. (Finance) 440,000 $ 1,841,620
News Corp. Ltd. (Media) 87,400 440,305
News Corp., Pfd. (Media) 43,700 199,534
Sydney Harbour Casinos Ltd. (Entertainment)* 1,511,200 1,863,037
Western Mining Holding, ADS (Metals and Minerals) 462,200 2,961,603
------------
$ 7,306,099
- --------------------------------------------------------------------------------
Bangladesh - 0.1%
Bangladesh Fund (Finance)*+ 27,200 $ 244,800
- --------------------------------------------------------------------------------
Brazil - 2.2%
Aracruz Celulose S.A., ADR
(Forest and Paper Products) 60,000 $ 555,000
Banco Bradesco S.A. (Finance) 74,114,623 678,183
Brasmotor S.A. (Furniture and Home Appliances) 2,560,000 598,939
Centrais Eletricas Brasile, ADR
Cia Vale do Rio Doce (Iron and Steel) 3,694,200 595,405
Companhia Brasileira Distribuicao Grupo Pao
de Acucar, GDS (Supermarkets)*## 45,000 495,000
Companhia Siderurgicas, ADR, "B"
Iochpe Maxion S.A., ADR (Automotive) 52,400 406,100
Petrol Brasileiros (Oils) 4,610,000 397,916
Rhodia-Ster S.A., GDR (Chemicals)## 36,000 486,000
Sadia Concordia S.A. (Food Products) 508,000 401,455
Sider Paulista, "B" (Iron and Steel)* 168,000 251,554
Telecom Brasileiras S.A., ADR (Telecommunications) 35,290 1,411,600
Usiminas, ADR (Iron and Steel)## 68,700 644,062
-------------
$ 9,085,234
- --------------------------------------------------------------------------------
Canada - 0.9%
Echo Bay Mines Ltd. (Precious Metals and Minerals) 235,600 $ 2,120,400
Placer Dome, Inc. (Precious Metals and Minerals) 63,700 1,393,437
------------
$ 3,513,837
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - continued
Chile - 0.8%
Banco Osorno y La Union, ADR (Finance) 30,000 $ 405,000
Compania de Telefonos Chile S.A., ADR
(Utilities - Telephone) 6,500 468,000
Enersis S.A., ADR (Utilities - Electric) 24,500 615,562
Maderas y Sinteticos Sociedad, ADR
(Forest and Paper Products) 22,100 395,037
Moneda Chile Fund (Finance)*+ 63,000 630,000
Sociedad Quimica y Minera de Chile, ADR, "B"
(Chemicals) 10,700 464,112
Vina Concha y Toro S.A., ADR
(Special Products and Services) 15,800 276,500
------------
$ 3,254,211
- --------------------------------------------------------------------------------
China - 1.1%
Chengdu Telecommunications (Electronics) 464,000 $ 99,031
China Harbin Power Plant Equipment (Electronics) 350,000 80,586
China Southern Glass, "B" (Containers) 402,740 224,010
Dong Fang Electric Machinery (Electronics) 434,000 129,119
Guangzhou Shipyard International Co. Ltd.
(Transportation) 310,000 94,233
Huaxin Cement Co. (Construction)* 913,700 244,871
Jilin Chemical Industries (Chemicals) 1,789,000 374,886
Luoyang Glass Co. Ltd. (Building Materials) 346,000 117,484
Maanshan Iron & Steel Co. (Iron and Steel) 958,000 174,726
Shanghai Dajiang (Group) Co. Ltd., "B"
(Agriculture) 607,000 333,850
Shanghai Dazhong Taxi Co., "B" (Automotive) 278,200 225,342
Shanghai Haixing Shipping Co. (Transportation) 682,000 70,574
Shanghai Lujiazui, "B" (Finance) 418,500 297,135
Shanghai New Asia (Group) Co. Ltd.
(Restaurants and Food Service) 768,500 368,880
Shanghai Petrochemical (Oils) 990,000 284,930
Shanghai Post & Telecommunications, "B"
(Telecommunications) 632,800 353,102
Shanghai Shangling Electric Appliances Co. Ltd., "B"
(Furniture and Home Appliances) 152,000 130,720
Shanghai Yaohua Pilkington Glass Co. Ltd., "B"
(Building Materials) 190,900 187,082
Shenzhen China Bicycles (Bicycles)* 458,500 124,546
Shenzhen Konka Electronics Group Ltd.
(Electronics) 234,000 142,261
Yizheng Chemical Fibre Co. Ltd. (Chemicals) 764,000 222,356
------------
$ 4,279,724
- --------------------------------------------------------------------------------
Colombia - 0.3%
Banco Industrial Colombian, ADR (Finance) 16,200 $ 218,700
Cadenalco Gran Cadena de Almacenes Colombia,
ADR (Retail) ## 23,000 299,000
Cementos Diamante S.A., ADR (Construction)## 19,800 336,600
Corp. Financiera del Valle S.A., ADR (Finance)## 16,404 196,848
------------
$ 1,051,148
- --------------------------------------------------------------------------------
Denmark - 0.3%
Novo-Nordisk A/S, "B" (Biopharmaceuticals) 11,336 $ 1,442,424
- --------------------------------------------------------------------------------
France - 2.1%
Alcatel Alsthom Compagnie (Electrical Equipment)* 8,380 $ 716,741
Compagnie Bancaire S.A. (Finance)* 32,707 3,396,302
Eaux (Compagnie Generale) (Construction)* 14,053 1,308,159
LaFarge-Coppee S.A. (Building Materials)* 20,713 1,374,927
Michelin (C.G.D.E.), "B" (Tire and Rubber) 25,131 1,016,563
Sidel (Machinery) 2,612 908,382
------------
$ 8,721,074
- --------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - continued
Germany - 2.5%
Daimler-Benz AG (Automotive) 9,053 $ 4,362,852
Kaufhof Holdings AG (Consumer Goods) 2,383 815,829
Mannesmann AG (Diversified Machinery) 9,611 3,162,707
Volkswagen AG (Automotive) 5,648 1,779,166
------------
$ 10,120,554
- --------------------------------------------------------------------------------
Greece - 0.4%
Aegek (Engineering and Construction) 7,360 $ 42,360
Aegek (Engineering and Construction) 40,480 426,702
Alpha Credit Bank (Finance) 5,340 321,159
Hellenic Bottling Co. S.A. (Beverages) 10,950 349,342
Papastratos Cigarette S.A. (Tobacco Products) 8,300 297,004
Silver & Baryte Ores Mining (Mining) 9,430 191,079
------------
$ 1,627,646
- --------------------------------------------------------------------------------
Hong Kong - 4.5%
Amway Asia Pacific Ltd. (Consumer Goods) 30,000 $ 982,500
China Light & Power (Utilities - Electric) 47,400 252,610
Citic Pacific Ltd. (Conglomerate) 205,800 642,892
Esprit Asia Holdings (Apparel and Textiles) 732,000 248,550
Giordano International Ltd. (Retail - Apparel) 1,054,000 872,561
Guoco Group Ltd. (Finance) 68,000 314,896
HSBC Holdings PLC (Finance)* 67,600 983,727
Hang Seng Bank (Finance) 221,000 1,851,004
Hong Kong Telecommunications (Telecommunications) 325,600 568,582
Hong Kong & China Gas Ltd. (Utilities - Gas) 248,400 403,246
Hutchison Whampoa (Real Estate) 850,000 4,683,860
International Maritime Carrier Holdings
(Transportation) 246,000 147,966
Jardine Matheson Holdings Ltd. (Conglomerate)* 5,600 34,160
New World Development Co. (Real Estate)* 484,000 1,884,461
New World Infrastructure Ltd.
(Engineering and Construction)* 806 1,417
Oriental Press Group (Publishing) 148,000 60,782
Sun Hung Kai Properties (Real Estate) 439,000 3,506,525
Swire Pacific Air Ltd. (Transportation - Air) 7,000 52,517
Television Broadcasting Ltd. (Media) 70,000 280,695
Varitronix International Ltd. (Electronics) 149,000 284,284
Yue Yuen Industrial Holdings (Shoes and Leather) 334,000 87,487
------------
$ 18,144,722
- --------------------------------------------------------------------------------
Hungary - 0.3%
Fotex (Retail) 112,200 $ 104,192
Magyar Olaj Es Gaz (Miscellaneous)* 4,650 420,138
OTP Bank (Finance)* 22,723 147,821
Richter Gedeon Rt (Pharmaceuticals)* 10,565 168,406
Zalakeramia Rt (Miscellaneous Manufacturing) 8,100 175,952
------------
$ 1,016,509
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - continued
India - 1.0%
Bajaj Auto Ltd., GDR (Automotive) 18,400 $ 494,500
Core Healthcare, GDR (Consumer Goods and Services) 54,000 216,000
Great Eastern Shipping Co., GDR
(Transportation - Marine) 50,800 431,800
India Gateway Fund Ltd. (Finance)*+ 80,000 476,000
India Gateway Fund Ltd., Warrants (Finance)*+ 16,000 --
India Magnum Fund NV (Finance)*+ 24,600 1,143,654
Indian Petrochemical Corp. Ltd., GDR (Chemicals)*# 22,000 247,500
NEPC Micon, GDR (Utilities - Electric)*## 177,000 230,100
Raymond Ltd., GDR (Textiles)* 17,700 278,775
Reliance Industries, GDS
(Consumer Goods and Services) 29,000 452,400
South Indian Viscose Ltd. (Apparel and Textiles)*# 19,600 196,000
------------
$ 4,166,729
- --------------------------------------------------------------------------------
Indonesia - 0.8%
Astra International (Automotive) 191,800 $ 384,444
Bank International Indonesia (Finance) 127,000 444,779
Hanjaya Mandala Sampoerna (Retail) 63,000 582,819
Indocement Tunggal Prakar (Retail) 90,500 334,889
Indofoods Suksesi Makmur (Food Processing) 92,000 425,550
Indosat (Telecommunications) 22,500 76,321
Inti Indorayan Utama (Forest and Paper Products) 75,000 92,511
Kalbe Farma (Pharmaceuticals) 85,200 270,237
Mayora Indah (Food Processing) 243,000 173,953
PT Gudang Garam (Tobacco) 20,500 178,359
PT Indosat, ADR (Telecommunications) 7,500 248,437
Semen Gresik (Building Materials) 67,000 174,141
------------
$ 3,386,440
- --------------------------------------------------------------------------------
Ireland - 0.1%
Navan Resources PLC (Mining)* 137,650 $ 324,260
- --------------------------------------------------------------------------------
Israel - 0.1%
ECI Telecommunications Limited Designs
(Telecommunications) 30,000 $ 570,000
- --------------------------------------------------------------------------------
Italy - 2.3%
Banco Commerciale Italiana (Finance) 298,900 $ 583,700
De Rigo S.p.A., ADR (Retail)* 34,800 717,750
Fiat S.p.A. (Automotive) 915,600 2,988,655
Luxottica Group S.p.A., ADR
(Consumer Goods and Services) 42,000 2,047,500
Olivetti Group (Computers) 1,518,400 1,136,411
Pirelli S.p.A. (Tire and Rubber) 888,500 1,151,137
Stet Societa Finanziaria Telefonica S.p.A
(Telecommunications) 236,200 670,718
------------
$ 9,295,871
- --------------------------------------------------------------------------------
Japan - 14.5%
DDI Corp. (Telecommunications) 501 $ 4,064,282
Daiei, Inc. (Retail) 235,000 2,460,612
Daiwa Securities Co. Ltd. (Finance) 260,000 3,053,136
Hokuetsu Bank (Finance) 3,000 15,852
Ito Yokado Co. Ltd. (Retail) 25,000 1,367,550
Kawasaki Heavy Industries (Aerospace - Defense) 377,000 1,578,979
Komori Corp. (Printing Machinery) 89,000 2,107,642
Kyocera Corp. (Electronics) 17,000 1,394,069
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - continued
Japan - continued
Matsuzakaya Co. Ltd. (Retail) 69,000 $ 630,648
Mitsubishi Trust & Banking (Finance) 124,000 1,735,199
Murata Manufacturing Co. Ltd. (Electrical Equipment) 17,000 597,220
NEC Corp. (Electronics - Semiconductor) 394,000 5,205,010
NTT Data Communications Systems Co.
(Computer Software) 92 2,304,726
Nichido Fire & Marine Ltd. (Insurance) 247,000 1,849,055
Nikon Corp. (Jewelry - Watches and Gemstones) 194,000 2,771,699
Nippon Steel Corp. (Steel) 908,000 3,012,153
Nippon Telephone & Telegraph Co.
(Telecommunications) 353 2,898,199
Nissan Motor Co. Ltd. (Automotive) 462,000 3,119,483
Obayashi Corp. (Engineering and Construction) 224,000 1,668,108
Pioneer Electronics Corp. (Electronics) 87,000 1,336,627
Sankyo Co. Ltd. (Pharmaceuticals) 2,000 44,035
Sharp Corp. (Electronics) 374,000 5,196,985
Sony Corp. (Electronics) 61,800 2,781,876
Sumitomo Bank (Finance) 159,000 2,816,224
Sumitomo Realty & Development (Real Estate) 447,000 2,939,465
Tokyo Ohka Kogyo Ltd. (Chemicals) 61,100 1,865,466
------------
$ 58,814,300
- --------------------------------------------------------------------------------
Malaysia - 1.6%
DCB Holdings Berhad (Finance) 300,000 $ 850,393
Genting Berhad (Leisure)+ 67,000 577,677
IOI Corp. Berhad (Retail) 378,000 354,188
IOI Corp. Berhad (Retail)* 94,500 62,131
IOI Properties (Real Estate) 20,000 42,125
Lion Land Berhad (Finance) 290,000 313,976
Magnum Corp. Berhad (Entertainment) 8,000 13,606
O.Y.L. Industries Berhad (Real Estate) 31,000 233,110
Petronas Gas Berhad (Gas)*## 166,200 562,724
Renong Berhad (Conglomerate) 715,000 1,092,204
Resorts World Berhad (Entertainment) 284,000 1,386,456
Sungei Way Holdings Berhad (Construction) 114,000 383,740
Telekom Malaysia (Telecommunications) 77,000 551,732
------------
$ 6,424,062
- --------------------------------------------------------------------------------
Mexico - 1.3%
Alfa S.A. de C.V. (Diversified Holding Company) 41,000 $ 467,746
Cemex S.A., "A" (Construction) 133,506 394,876
Cemex S.A., "B" (Construction) 58,000 179,718
Cifra S.A. de C.V. (Retail) 490,300 501,348
Corporacion GEO S.A. de C.V., ADR (Home Builders)* 45,000 482,026
Grupo Carso (Conglomerate)* 117,300 616,238
Grupo Financiaro Banamex, "B" (Finance) 147,200 252,935
Grupo Financiaro Banamex, "L" (Finance) 7,360 12,128
Grupo Sidek S.A. de C.V., ADR (Transportation)* 44,200 110,500
Kimberly-Clark de Mexico, S.A. de C.V
(Forest and Paper Products) 27,100 354,971
Panamerican Beverage (Beverages) 18,000 492,750
Telefonos de Mexico S.A. (Telecommunications) 899,000 1,243,405
------------
$ 5,108,641
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - continued
Netherlands - 0.8%
Wolters Kluwer (Publishing)* 34,290 $ 3,116,482
- --------------------------------------------------------------------------------
New Zealand - 0.4%
Sky City Ltd. (Entertainment)* 70,000 $ 1,455,740
- --------------------------------------------------------------------------------
Norway - 0.1%
Tomra Systems A/S (Environmental Control) 90,000 $ 568,147
- --------------------------------------------------------------------------------
Pakistan - 0.3%
Cherat Cement Co. (Construction)* 66,000 $ 108,984
Dewan Salman Fibre, Rights (Apparel and Textiles)* 3,881 --00
Engro Chemical (Chemicals) 78,900 313,609
Fauji Fertilizer (Chemicals) 176,600 283,874
Pakistan Synthetic (Apparel and Textiles)* 9,000 6,181
Pakistan Telecommunications (Telecommunications)* 125,000 122,019
Pakistan Telecommunications (Telecommunications)* 1,200 117,138
Sui Northern Gas (Oil Services)* 204,000 208,675
------------
$ 1,160,480
- --------------------------------------------------------------------------------
Peru - 0.3%
Backus & Johnson (Beverages) 198,486 $ 355,472
Corp. Banco Credito del Peru (Finance) 19,673 324,605
Telefonica del Peru, "B" (Telecommunications) 263,953 471,552
------------
$ 1,151,629
- --------------------------------------------------------------------------------
Philippines - 0.7%
Ayala Corp. (Real Estate) 188,300 $ 192,068
C&P Homes, Inc. (Homebuilders)* 555,000 357,822
Filinvest Land, Inc. (Real Estate)* 826,000 222,555
International Container Terminal Services
(Transportation) 364,500 154,329
JG Summit Holdings, "B" (Miscellaneous) 670,000 188,259
Manila Electric Co. (Utilities - Electric) 36,452 272,197
Metropolitan Bank & Trust Co. (Finance) 15,714 290,327
Petron Corp. (Oils) 400,375 177,225
Philippine Long Distance Telephone Co., ADR
(Utilities - Telephone) 6,185 347,133
SM Prime Holdings, Inc. (Real Estate) 1,308,700 352,613
San Miguel Corp., ADR, "B"
(Food and Beverage Products) 8,880 293,040
Southeast Asia Cement (Building Materials)* 1,088,000 142,385
------------
$ 2,989,953
- --------------------------------------------------------------------------------
Poland - 0.1%
Elektrim (Special Products and Services) 66,000 $ 220,897
- --------------------------------------------------------------------------------
Portugal - 0.4%
Cimpor Cimentos de Portugal S.A
(Building Materials) 24,120 $ 392,439
Engil SGPS (Engineering and Construction)* 24,579 228,518
Engil Sociedade de Construcao Civil, S.A
(Engineering and Construction) 11,433 161,832
Portugal Telecom (Telecommunications)* 26,000 492,218
Sonae Investimentos SGPS, S.A
(Forest and Paper Products) 9,600 221,841
------------
$ 1,496,848
- --------------------------------------------------------------------------------
Singapore - 1.3%
City Developments Ltd. (Real Estate) 243,000 $ 1,505,842
Development Bank of Singapore Ltd. (Finance) 62,000 711,331
Fraser & Neave Ltd. (Beverages) 85,000 1,005,311
Keppel Corp. (Transportation) 167,000 1,371,954
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - continued
Singapore - continued
Oversea - Chinese Banking Corp. Ltd. (Finance) 52,000 $ 611,331
------------
$ 5,205,769
- --------------------------------------------------------------------------------
South Africa - 0.1%
Southern Africa Minerals Corp.
(Precious Metals and Minerals)* 260,000 $ 208,929
- --------------------------------------------------------------------------------
South Korea - 0.9%
Cho Sun Brewery (Beverages) 6,040 $ 219,464
Commercial Bank of Korea (Finance) 13,000 139,328
Korea Electric Power Corp. (Utilities - Electric) 10,420 471,903
Korea Electric Power Corp., ADR
(Utilities - Electric) 5,000 123,750
Korea Mobile Telecommunications (Telecommunication 440 411,101
Korea Mobile Telecommunications, GDR
(Telecommunications)*## 28,000 1,029,000
L.G. Electronics Co. (Electronics)* 3,227 138,763
L.G. Electronics Co., GDR (Electronics)*## 6,400 93,600
Pohang Iron & Steel Ltd. (Iron and Steel) 880 76,601
Samsung Electronics, GDR (Electronics)* 2,938 336,767
Samsung Electronics, GDR (Electronics)* 12,361 794,194
------------
$ 3,834,471
- --------------------------------------------------------------------------------
Spain - 0.9%
Banco de Santander S.A. (Finance) 40,560 $ 1,769,407
Iberdrola S.A. (Utilities - Electric) 82,700 623,894
Telefonica de Espania (Utilities - Telephone) 105,480 1,332,014
------------
$ 3,725,315
- --------------------------------------------------------------------------------
Sri Lanka - 0.2%
Ceylon Grain Elevators (Agriculture) 40,000 $ 38,095
DFCC Sri Lanka (Finance) 57,066 328,265
Puttalam Cement Co. (Building Materials)* 950,000 271,428
------------
$ 637,788
- --------------------------------------------------------------------------------
Sweden - 1.7%
Astra AB, Free Shares, "A" (Pharmaceuticals) 121,280 $ 4,462,656
Astra AB, Free Shares, "B" (Pharmaceuticals) 14,090 509,960
Skandinaviska Enskilda Banken, "A" (Finance) 298,030 2,013,503
------------
$ 6,986,119
- --------------------------------------------------------------------------------
Taiwan - 0.2%
Acer, Inc., GDR (Computers)*## 8,700 $ 113,100
Asia Cement, GDS (Constructi on Services) 7,040 114,400
ROC Taiwan Fund (Finance)* 8,900 85,662
Siliconware Precision Industries Co., GDR
(Special Products and Services)*## 7,200 114,300
Tung Ho Steel Enterprise Corp., GDR (Steel)##* 29,656 281,732
Yageo Corp., GDR (Electronics) 16,769 155,113
Yageo Corp., GDR (Electronics)*## 1,200 10,800
------------
$ 875,107
- --------------------------------------------------------------------------------
Thailand - 0.9%
Bangkok Bank Ltd. (Finance) 65,800 $ 679,968
Banpu Public Co. Ltd. (Mining) 12,167 290,151
Electricity Generating Power Co. Ltd.
(Utilities - Electric) 75,900 259,435
Italian Thai Development (Construction) 17,100 193,020
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks and Warrants - continued
Thailand - continued
Land & House Public Co. Ltd. (Real Estate) 17,800 $ 287,233
Loxley Public Co. Ltd. (Miscellaneous Distributor) 10,000 190,779
Muramoto Electronics (Electronics) 30,800 101,605
Phatra Thanakit Co. (Finance) 48,200 377,400
Shinawatra Computer Co. Ltd. (Computers) 10,400 254,626
Siam Cement Public Co. Ltd. (Building Materials) 4,500 245,389
Siam City Cement Public Co. Ltd.
(Building Materials) 8,600 142,193
Siam Makro (Retail) 74,000 258,823
Thai Military Bank (Finance) 40,400 158,966
Thai Theparos Food Product Public Co. Ltd.
(Food Processing) 55,900 181,075
------------
$ 3,620,663
- --------------------------------------------------------------------------------
Turkey - 0.4%
Arcelik A.S. (Furniture and Home Appliances) 883,028 $ 146,339
Eczactibasi Yapi (Furniture and Home Appliances)## 1,000,000 118,931
Ege Biracilik ve Malt Sanayii A.S. (Beverages) 322,460 114,737
Kaplamin Turkey (Forest and Paper Products)* 833,000 251,735
Migros Turk (Retail) 585,000 672,937
Netas Tele Komunik (Telecommunications) 509,300 176,253
------------
$ 1,480,932
- --------------------------------------------------------------------------------
United Kingdom - 3.1%
ASDA Group PLC (Retail) 3,114,000 $ 5,046,314
BPB Industries (Building Materials) 303,500 1,336,336
Fleming Russia Securities Fund (Finance)*+ 143,400 932,100
Huntingdon International Holdings PLC, ADR
(Consumer Goods and Services)* 101,900 458,550
Korea Europe Fund (Finance)+ 23 103,500
Sears PLC (Retail) 897,700 1,440,552
Smith (W.H.) Group PLC (Retail) 94,900 569,390
Tarmac PLC (Engineering and Construction)* 551,000 749,172
Vodafone Group PLC (Telecommunications)* 505,700 2,090,723
------------
$ 12,726,637
- --------------------------------------------------------------------------------
Venezuela
Mavesa S.A., ADR (Food and Beverage Products)## 1,097 $ 4,113
- --------------------------------------------------------------------------------
Total Foreign Stocks and Warrants
(Identified Cost, $217,336,863) $212,589,526
- --------------------------------------------------------------------------------
U.S. Stocks and Warrants - 35.7%
Airlines
Midwest Express Holdings* 1,300 $ 32,662
- --------------------------------------------------------------------------------
Apparel and Textiles - 0.1%
Team Rental Group, Inc.* 33,000 $ 346,500
- --------------------------------------------------------------------------------
Automotive - 1.6%
APS Holding Corp.* 168,600 $ 3,456,300
Harvard Industries, Inc., "B"* 112,000 3,094,000
------------
$ 6,550,300
- --------------------------------------------------------------------------------
Biotechnology - 0.1%
Integra Lifesciences* 45,000 $ 315,000
- --------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks and Warrants - continued
Business Machines - 0.9%
Affiliated Computer Services, Inc., "A"* 104,800 $ 3,510,800
National Instruments Corp.* 12,000 225,000
------------
$ 3,735,800
- --------------------------------------------------------------------------------
Business Services - 6.2%
ADT Ltd.* 170,000 $ 2,380,000
CUC International, Inc.* 50,000 1,731,250
Ceridian Corp.* 170,000 7,395,000
Computer Sciences Corp.* 25,000 1,671,875
Franklin Quest Co.* 12,700 303,212
Global Directmail* 10,700 291,575
HPR, Inc.* 1,100 28,600
Interim Services, Inc.* 124,000 3,689,000
National Data Corp. 7,500 198,750
Paychex, Inc. 35,000 1,518,125
Reynolds & Reynolds Co., "A" 20,000 712,500
Techno Solutions Co.* 247,100 4,077,150
Transaction System Architects, "A"* 44,700 1,162,200
------------
$ 25,159,237
- --------------------------------------------------------------------------------
Cellular Telephones - 0.2%
Cellular Communications of Puerto Rico, Inc.* 24,000 $ 693,750
- --------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.7%
Acclaim Entertainment, Inc.* 53,000 $ 1,252,125
Autodesk, Inc. 15,000 510,000
Electronic Arts, Inc.* 45,000 1,648,125
First Data Corp. 60,001 3,967,566
Pure Software, Inc.* 1,800 66,150
Smith Micro Software* 2,100 25,725
Spectrum Holobyte, Inc.* 169,200 1,734,300
Symantec Corp.* 65,000 1,580,312
------------
$ 10,784,303
- --------------------------------------------------------------------------------
Computer Software - Systems - 5.6%
Adobe Systems, Inc. 18,800 $ 1,071,600
BDM International, Inc.* 3,300 82,500
BMC Software, Inc.* 60,000 2,137,500
Cadence Design Systems, Inc.* 240,000 7,740,000
Computer Associates International, Inc. 66,000 3,630,000
Cooper & Chyan Technology, Inc. 1,500 21,188
DST Systems, Inc. 4,900 102,900
Informix Corp.* 55,000 1,601,875
Integrated Measurement* 2,200 29,700
Logic Works, Inc.* 3,900 59,475
Oracle Systems Corp.* 80,000 3,490,000
Sybase, Inc.* 70,000 2,747,500
------------
$ 22,714,238
- --------------------------------------------------------------------------------
Construction Services - 0.2%
Shaw Group, Inc.* 110,000 $ 976,250
- --------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks and Warrants - continued
Consumer Goods and Services - 2.3%
Callaway Golf Co. 160,000 $ 2,620,000
Department 56, Inc.* 45,000 2,041,875
Oakley, Inc.* 3,000 103,500
Service Corp. International 20,000 802,500
Sola International, Inc.* 72,000 1,764,000
Tyco International Ltd. 32,000 1,944,000
USA Detergents, Inc.* 1,400 35,700
------------
$ 9,311,575
- --------------------------------------------------------------------------------
Electronics - 1.2%
CP Clare Corp.* 2,100 $ 54,337
ESS Technology, Inc.* 14,900 447,000
LSI Logic Corp.* 95,000 4,476,875
------------
$ 4,978,212
- --------------------------------------------------------------------------------
Entertainment - 1.3%
GT Bicycles, Inc.* 5,700 $ 57,712
Grand Casinos, Inc.* 10,000 397,500
Harrah's Entertainment, Inc.* 55,000 1,361,250
Heritage Media Corp., "A"* 85,000 2,358,750
Showboat, Inc. 40,000 960,000
Sinclair Broadcasting Group, "A"* 6,000 124,500
Young Broadcasting, Inc.* 7,400 225,700
------------
$ 5,485,412
- --------------------------------------------------------------------------------
Financial Institutions - 0.6%
BHI Corp. 31,500 $ 492,187
Franklin Resources, Inc. 5,000 253,750
Salomon, Inc. 50,000 1,806,250
------------
$ 2,552,187
- --------------------------------------------------------------------------------
Food and Beverage Products
Rocky Mountain Chocolate Factory* 5,000 $ 75,000
- --------------------------------------------------------------------------------
Insurance - 0.1%
Compdent Corp.* 14,000 $ 435,750
- --------------------------------------------------------------------------------
Machinery - 0.2%
Computational Systems, Inc.* 2,200 $ 32,725
SI Handling Systems, Inc.++ 82,500 618,750
------------
$ 651,475
- --------------------------------------------------------------------------------
Medical and Health Products - 1.6%
Boston Scientific Corp.* 48,000 $ 2,022,000
IDEC Pharmaceuticals Corp.* 45,000 534,375
MediSense, Inc.* 135,000 2,885,625
Uromed Corp.* 100,000 1,062,500
------------
$ 6,504,500
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.8%
Advantage Health Corp.* 80,000 $ 2,720,000
Community Care America, Inc.* 9,600 129,600
Community Health Systems, Inc.* 73,300 2,327,275
Health Management Associates, Inc., "A"* 70,000 1,505,000
Renal Care Holdings* 2,000 31,000
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks and Warrants - continued
Medical and Health Technology and Services - continued
St. Jude Medical, Inc.* 7,800 $ 415,350
United Dental Care, Inc.* 1,700 51,850
------------
$ 7,180,075
- --------------------------------------------------------------------------------
Printing and Publishing - 0.7%
Nelson (Thomas), Inc. 26,800 $ 445,550
Pulitzer Publishing Co. 50,000 2,262,500
------------
$ 2,708,050
- --------------------------------------------------------------------------------
Railroad - 0.3%
Wisconsin Central Transportation Corp.* 17,900 $ 1,078,475
- --------------------------------------------------------------------------------
Restaurants and Lodging - 3.0%
HFS, Inc.* 140,000 $ 8,575,000
HomeTown Buffet, Inc.* 4,500 59,062
Promus Hotel Corp.* 92,850 2,042,700
Quantum Restaurant Group, Inc.* 17,700 223,462
Renaissance Hotel Group* 60,000 1,170,000
------------
$ 12,070,224
- --------------------------------------------------------------------------------
Special Products and Services
Central Package Corp.* 2,900 $ 71,775
- --------------------------------------------------------------------------------
Stores - 1.0%
Corporate Express, Inc.* 20,000 $ 522,500
Hollywood Entertainment Corp.* 25,000 668,750
Micro Warehouse, Inc.* 25,000 1,112,500
Office Depot, Inc.* 40,000 1,145,000
OfficeMax, Inc.* 25,000 618,750
------------
$ 4,067,500
- --------------------------------------------------------------------------------
Telecommunications - 3.1%
3Com Corp.* 65,264 $ 3,067,408
Accom, Inc.* 1,300 11,212
Bay Networks, Inc.* 50,000 3,312,500
Cabletron Systems, Inc.* 20,000 1,572,500
Cisco Systems, Inc.* 35,000 2,712,500
International Business Communications*+ 40,300 399,776
Midcom Communication* 7,800 117,000
Tel-Save Holdings, Inc.* 2,300 31,912
WorldCom, Inc.* 40,000 1,305,000
------------
$ 12,529,808
- --------------------------------------------------------------------------------
Utilities - Telephone - 0.9%
Frontier Corp. 65,000 $ 1,755,000
MCI Communications Corp. 75,000 1,870,312
------------
$ 3,625,312
- --------------------------------------------------------------------------------
Total U.S. Stocks and Warrants
(Identified Cost, $128,589,406) $144,633,370
- --------------------------------------------------------------------------------
Total Stocks and Warrants
(Identified Cost, $345,926,269) $357,222,896
- --------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Convertible Bonds - 0.5%
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Dollar Denominated - 0.5%
Argosy Gaming Corp., 12s, 2001 $ 200 $ 196,000
Ballarpur Industries, 4s, 1999 450 429,750
Land & General Berhad, 4.5s, 2004 ## 500 552,500
Renong Berhad, 2.5s, 2005 320 361,600
Teco Electric & Machinery Ltd., 2.75s, 2004 ## 250 193,750
United Micro Electric, 1.25s, 2004 ## 126 171,360
------------
$ 1,904,960
- --------------------------------------------------------------------------------
Foreign Denominated
Michelin, 2.294s, 2001 FRF 1,062 $ 56,161
- --------------------------------------------------------------------------------
Total Convertible Bonds
(Identified Cost, $2,076,876) $ 1,961,121
- --------------------------------------------------------------------------------
Short-Term Obligations - 10.6%
================================================================================
Federal Home Loan Mortgage Corp.,
due 11/01/95 - 11/13/95 $ 20,710 $ 20,699,559
Federal National Mortgage Assn.,
due 11/02/95 5,295 5,294,171
Ford Motor Credit Corp.,
due 11/03/95 6,335 6,332,987
Raytheon Co., due 11/02/95 7,500 7,498,810
Tennessee Valley Authority, due 11/06/95 2,985 2,982,662
- --------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 42,808,189
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $390,811,334) $ 20,710 $401,992,206
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.6% 2,336,521
================================================================================
Net Assets - 100.0% $404,328,727
- --------------------------------------------------------------------------------
<FN>
* Non-income producing security.
## SEC Rule 144A security.
+ Restricted security.
++ Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer.
</FN>
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. Dollar. A list of abbreviations is shown below.
DEM = Deutsche Marks
FRF = French Francs
JPY = Japanese Yen
NLG = Dutch Guilders
See notes to financial statements
18
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
================================================================================
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value -
Unaffiliated issuers (identified cost, $390,178,834) $401,373,456
Affiliated issuer (identified cost, $632,500) 618,750
------------
Total investments, at value (identified cost, $390,811,334) $401,992,206
Cash 32,870
Foreign currency, at value (identified cost, $549) 558
Receivable for investments sold 10,147,534
Receivable for Fund shares sold 865,677
Interest and dividends receivable 398,838
Deferred organization expenses 21,274
Other assets 6,335
------------
Total assets $413,465,292
------------
Liabilities:
Payable for investments purchased $ 6,048,337
Payable for Fund shares reacquired 2,064,809
Payable for forward foreign currency exchange contracts sold 633,921
Net payable for closed forward foreign
currency exchange contracts 22,503
Payable to affiliates -
Management fee 29,506
Shareholder servicing agent fee 6,323
Distribution fee 106,380
Accrued expenses and other liabilities 224,786
------------
Total liabilities $ 9,136,565
------------
Net assets $404,328,727
------------
Net assets consist of:
Paid-in capital $358,006,766
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 10,522,145
Accumulated undistributed net realized gain
on investments and foreign currency transactions 35,417,804
Accumulated undistributed net investment income 382,012
------------
Total $404,328,727
------------
Shares of beneficial interest outstanding 22,417,627
============
Class A shares:
Net asset value and redemption price per share
(net assets of $143,542,571/7,902,613 shares of
beneficial interest outstanding) $18.16
======
Offering price per share (100/94.25) $19.27
======
Class B shares:
Net asset value and offering price per share
(net assets of $247,436,898/13,771,603 shares of
beneficial interest outstanding) $17.97
======
Class C shares:
Net asset value, offering price and redemption price per share
(net assets of $13,349,258/743,411 shares of
beneficial interest outstanding) $17.96
======
</TABLE>
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements
19
<PAGE>
Financial Statements - continued
<TABLE>
<CAPTION>
Statement of Operations
================================================================================
Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends (including $5,500 received from affiliated issuer) $ 3,811,599
Interest 2,931,502
Foreign taxes withheld (413,759)
============
Total investment income $ 6,329,342
============
Expenses -
Management fee $ 3,459,664
Trustees' compensation 35,864
Shareholder servicing agent fee (Class A) 201,262
Shareholder servicing agent fee (Class B) 523,350
Shareholder servicing agent fee (Class C) 18,519
Distribution and service fee (Class A) 469,620
Distribution and service fee (Class B) 2,378,864
Distribution and service fee (Class C) 123,462
Custodian fee 401,756
Postage 86,717
Printing 84,606
Auditing fees 83,376
Legal fees 12,176
Amortization of organization expenses 6,455
Miscellaneous 553,071
============
Total expenses $ 8,438,762
Reduction of expenses by distributor (134,184)
Fees paid indirectly (18,088)
============
Net expenses $ 8,286,490
============
Net investment loss $ (1,957,148)
============
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 36,093,702
Foreign currency transactions 2,126,600
============
Net realized gain on investments $ 38,220,302
============
Change in unrealized depreciation -
Investments $(15,916,585)
Translation of assets and liabilities in foreign currencies (215,847)
============
Net unrealized loss on investments $(16,132,432)
============
Net realized and unrealized gain
on investments and foreign currency $ 22,087,870
============
Increase in net assets from operations $ 20,130,722
============
</TABLE>
See notes to financial statements
20
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
================================================================================
Year Ended October 31, 1995 1994*
- --------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,957,148) $ (1,588,322)
Net realized gain on investments and
foreign currency transactions 38,220,302 4,811,224
Net unrealized gain (loss) on investments and
foreign currency (16,132,432) 26,654,577
------------ ------------
Increase in net assets from operations $ 20,130,722 $ 29,877,479
============ ============
Distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions (Class A) $ (1,679,929) $ --
From net realized gain on investments and
foreign currency transactions (Class B) (1,881,561) --
From net realized gain on investments and
foreign currency transactions (Class C) (124,750) --
------------ ------------
Total distributions declared to shareholders $ (3,686,240) $ --
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $196,631,074 $442,273,385
Net asset value of shares issued to
shareholders in reinvestment
of distributions 2,741,334 --
Cost of shares reacquired (191,833,455) (91,805,572)
------------ ------------
Increase in net assets from
Fund share transactions $ 7,538,953 $350,467,813
------------ ------------
Total increase in net assets $ 23,983,435 $380,345,292
Net assets:
At beginning of period 380,345,292 --
------------ ------------
At end of period (including accumulated
undistributed net investment income of
$382,012 and $209,806, respectively) $404,328,727 $380,345,292
------------ ------------
<FN>
* For the period from the commencement of investment operations, November 18,
1993 to October 31, 1994.
</FN>
</TABLE>
See notes to financial statements
21
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
==================================================================================================================================
Year Ended October 31, 1995 1994* 1995 1994* 1995 1994**
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 17.45 $ 15.00 $ 17.32 $ 15.00 $ 17.34 $ 16.04
-------- -------- -------- -------- ------- -------
Income from investment operations +++ -
Net investment loss [ss] $ -- $ (0.02) $ (0.14) $ (0.15) $ (0.13) $ (0.13)
Net realized and unrealized gain on
investments and foreign currency
transactions 0.93 2.47 0.92 2.47 0.92 1.43
-------- -------- -------- -------- ------- -------
Total from investment operations $ 0.93 $ 2.45 $ 0.78 $ 2.32 $ 0.79 $ 1.30
Less distributions declared to shareholders
from net realized gain on investments
and foreign currency transactions $ (0.22) $ -- $ (0.13) $ -- $ (0.17) $ --
-------- -------- -------- -------- ------- -------
Net asset value - end of period $ 18.16 $ 17.45 $ 17.97 $ 17.32 $ 17.96 $ 17.34
======== ======== ======== ======== ======= =======
Total return # 5.47% 16.33%++ 4.61% 15.47%++ 4.68% 8.10%++
Ratios (to average net assets)/Supplemental data [ss]:
Expenses ## 1.63% 1.57%+ 2.45% 2.39%+ 2.38% 2.31%+
Net investment income (loss) 0.02% (0.14)%+ (0.80)% (0.95)%+ (0.72)% (0.83)%+
Portfolio turnover 149% 100% 149% 100% 149% 100%
Net assets at end of period (000 omitted) $143,543 $131,503 $247,437 $236,971 $13,349 $11,872
<FN>
* For the period from the commencement of offering of Class A and Class B shares, November 18, 1993 to October 31, 1994.
** For the period from the commencement of offering of Class C shares, January 3, 1994 to October 31, 1994.
+ Annualized.
++ Not annualized.
+++ Per share data is based on average shares outstanding.
# Total returns for Class A shares do not include the applicable sales charge. If the sales charge had been included, the
results would have been lower.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[ss] The distributor did not impose a portion of its distribution fee for the periods indicated. If this fee had been incurred by
the Fund, the net investment loss per share and ratios would have been:
Net investment loss +++ $ -- $ (0.04) -- -- -- --
Ratios (to average net assets):
Expenses## 1.73% 1.67%+ -- -- -- --
Net investment loss (0.08)% (0.24)%+ -- -- -- --
</FN>
</TABLE>
See notes to financial statements
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS World Growth Fund (the Fund) is a non-diversified series of MFS Series Trust
VIII (the Trust). The Trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed issues
and forward contracts, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency and
translated into U.S. dollars at the closing daily exchange rate. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the Fund to obtain those securities in the
event of a default under the repurchase agreement. The Fund monitors, on a daily
basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
operations of the Fund.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Fund may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Fund may enter into
contracts with the intent of changing the relative exposure of the Fund's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend and interest payments received in additional securities are recorded on
the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure 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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
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 return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended October 31, 1995, $2,129,354 was reclassified from
accumulated net realized gain on investments to accumulated undistributed net
investment income, due to differences between book and tax accounting for
passive foreign investment companies, short-term capital gains and currency
transactions. This change had no effect on the net assets or net asset value per
share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.90% of
average daily net assets. The advisory agreement permits the adviser to engage
one or more sub-advisers and the adviser has engaged Oechsle International
Advisers, L.P., a Delaware Limited Partnership, and Batterymarch Financial
Management, Inc., a Maryland corporation, to assist in the performance of its
services.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $4,489 for the year ended
October 31, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$75,546 for the year ended October 31, 1995, as its portion of the sales charge
on sales of Class A shares of the Fund. The Trustees have adopted separate
distribution plans for Class A, Class B and Class C shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up
to 0.35% per annum of its average daily net assets attributable to Class A
shares in order that MFD may
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
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 0.10% 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 $41,508 for the year ended October 31, 1995.
MFD is waiving the 0.10% distribution fee for an indefinite period. Fees
incurred under the distribution plan during the year ended October 31, 1995 were
0.25% of average daily net assets attributable to Class A shares on an
annualized basis.
The Class B and Class C distribution plans provide that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per annum,
of the Fund's average daily net assets attributable to Class B and Class C
shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD all or a portion of the service fee attributable to Class B and Class C
shares, and will pay to such securities dealers all of the distribution fee
attributable to Class C shares. The service fee is intended to be additional
consideration for services rendered by the dealer with respect to Class B and
Class C shares. MFD retains the service fee for accounts not attributable to a
securities dealer which amounted to $15,326 and $4,034 for Class B and Class C
shares, respectively, for the year ended October 31, 1995. Fees incurred under
the distribution plans during the year ended October 31, 1995, were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 months following the shareholder purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the year ended October 31, 1995 were $1,700 and $732,574
for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22% and up to 0.15% attributable
to Class A, Class B and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. Government securities,
purchased option transactions and short-term obligations, aggregated
$563,812,762 and $542,122,762, respectively.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
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 $390,811,395
------------
Gross unrealized appreciation $ 41,374,495
Gross unrealized depreciation (30,193,684)
------------
Net unrealized appreciation $ 11,180,811
============
(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:
<TABLE>
<CAPTION>
Class A Shares
1995 1994*
--------------------------- --------------------------
Year Ended October 31, Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,928,735 $101,800,639 9,816,517 $157,514,885
Shares issued to shareholders in
reinvestment of distributions 80,625 1,312,572 -- --
Shares reacquired (5,642,373) (97,398,576) (2,280,891) (37,853,320)
---------- ------------- ---------- -------------
Net increase 366,987 $ 5,714,635 7,535,626 $119,661,565
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
1995 1994*
--------------------------- -------------------------
Year Ended October 31, Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,294,273 $ 88,484,082 16,702,222 $269,173,872
Shares issued to shareholders in
reinvestment of distributions 83,849 1,359,205 -- --
Shares reacquired (5,291,911) (89,028,777) (3,016,830) (49,857,102)
---------- ------------ ---------- ------------
Net increase 86,211 $ 814,510 13,685,392 $219,316,770
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
1995 1994**
--------------------------- -------------------------
Year Ended October 31, Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 375,273 $ 6,346,353 931,213 $ 15,584,628
Shares issued to shareholders in
reinvestment of distributions 4,294 69,557 -- --
Shares reacquired (320,994) (246,375)
---------- ------------ ---------- ------------
Net increase 58,573 $ 1,009,808 684,838 $ 11,489,478
========== ============ ========== ============
<FN>
* For the period from the commencement of offering of Class A and Class B
shares, November 18, 1993 to October 31, 1994.
** For the period from the commencement of offering of Class C shares, January
3, 1994 to October 31, 1994.
</FN>
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended October 31,1995 was $5,510.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange contracts
and futures contracts. The notional or contractual amounts of these instruments
represent the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered. A
summary of obligations under these financial instruments at October 31, 1995, is
as follows:
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
Settlement Contracts In Exchange Contracts Net Unrealized
Date to Deliver for at Value Depreciation
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 12/20/95 DEM 9,854,000 $ 6,653,315 $ 7,015,585 $ (362,270)
12/20/95 FRF 36,830,000 7,154,235 7,537,812 (383,577)
12/20/95 JPY 956,200,000 9,707,180 9,428,132 279,048
12/20/95 NLG 4,700,000 2,819,554 2,986,676 (167,122)
------------ ------------ ------------
$ 26,334,284 $ 26,968,205 $ (633,921)
============ ============ ============
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net payable of $22,503 at October 31, 1995.
At October 31, 1995, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Transactions in Securities of Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the year ended October
31, 1995 is set forth below.
<TABLE>
<CAPTION>
Beginning Acquisition Disposition Ending Realized
------------- -------------
Share Share Share Share Gain Dividend Ending
Affiliate Amount Amount Cost Amount Cost Amount (Loss) Income Value
- --------- ------ ------ ---- ------ ---- ------ ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SI Handling
Systems, Inc. 55,000 27,500 $-- -- $-- 82,500 $-- $5,500 $618,750
========
</TABLE>
28
<PAGE>
(9) 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 October 31, 1995, the
Fund owned the following restricted securities (constituting 2.86% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933 (the 1933 Act). The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees. Certain of these securities
may be offered and sold to "qualified institutional buyers" under Rule 144A of
the 1933 Act.
<TABLE>
<CAPTION>
Date of Share/Par
Description Acquisition Amount Cost Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acer, Inc., GDR+ 10/20/95 8,700 $ 113,013 $ 113,100
Bangladesh Fund 11/14/94 - 11/18/94 27,200 298,730 244,800
Cadenalco Gran Cadena de Almacenes
Colombia, ADR+ 12/16/94 23,000 356,500 299,000
Cementos Diamante S.A., ADR+ 5/17/94 19,800 303,732 336,600
Companhia Brasileira Distribuicao
Grupo Pao de Acucar, GDS+ 9/21/95 45,000 495,000 495,000
Corp. Financiera del Valle S.A., ADR+ 11/23/93 16,404 311,350 196,848
Corporacion GEO S.A. de C.V., ADR+ 7/24/94 45,000 638,000 482,026
Eczactibasi Yapi+ 6/06/95 1,000,000 151,004 118,931
Fleming Russia Securities Fund 7/07/95 143,400 1,161,540 932,100
Genting Berhad 3/30/95 67,000 716,589 577,677
India Gateway Fund Ltd. 5/02/95 80,000 812,000 476,000
India Gateway Fund Ltd., Warrants 1/02/95 16,000 -- --
India Magnum Fund NV 11/19/93 24,600 1,336,750 1,143,654
Indian Petrochemical Corp. Ltd., GDR+ 12/08/94 22,000 305,250 247,500
International Business Communications 8/29/95 40,300 399,776 399,776
Korea Europe Fund 11/02/94 - 12/30/94 23 100,625 103,500
Korea Mobile Telecommunications+ 1/06/95 - 3/02/95 28,000 728,812 1,029,000
L.G. Electronics Co., GDR+ 9/19/95 6,400 80,000 93,600
Land & General Berhad, 4.5s, 2004+ 7/15/94 - 10/31/95 500,000 531,500 552,500
Mavesa S.A., ADR+ 11/22/93 1,097 -- 4,113
Mirgor Sacifia+ 10/20/94 108,000 503,250 216,000
Moneda Chile Fund 8/22/95 63,000 630,000 630,000
NEPC Micon, GDR+ 11/03/94 177,000 519,810 230,100
Petronas Gas Berhad+ 7/31/95 166,200 542,165 562,724
Rhodia-Ster S.A, GDR+ 12/19/94 36,000 502,249 486,000
Siliconware Precision Industries Co., GDR+ 9/19/95 7,200 109,440 114,300
South Indian Viscose Ltd.+ 7/28/94 19,600 374,360 196,000
Teco Electric & Machinery Ltd.,
2.75s, 2004+ 11/04/94 - 1/03/95 250,000 245,240 193,750
Tung Ho Steel Enterprise Corp.,
GDR+ 9/09/94 - 10/19/94 29,656 461,601 281,732
United Micro Electric, 1.25s, 2004+ 6/06/95 126,000 221,985 171,360
Usiminas, ADR+ 9/20/94 68,700 912,336 644,062
Yageo Corp., GDR+ 3/27/95 1,200 9,607 10,800
-----------
$11,582,553
===========
<FN>
+ = SEC Rule 144A security.
</FN>
</TABLE>
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust VIII and Shareholders of MFS World Growth
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS World Growth Fund as of October 31, 1995,
the related statement of operations for the year then ended, and the statement
of changes in net assets and the financial highlights for the year ended October
31, 1995 and for the period from November 18, 1993 (commencement of operations)
to October 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. Our procedures included confirmation of the securities owned at
October 31, 1995 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS World Growth
Fund at October 31, 1995, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 4, 1995
----------------------------------------------------------------------
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.
30
<PAGE>
It's Easy to Contact Us
[GRAPHIC OMITTED]
MFS AUTOMATED INFORMATION
ACCOUNT INFORMATION:
Call 1-800-MFS-TALK (1-800-637-8255) anytime.
MARKET OUTLOOK:
Call 1-800-637-4458 anytime for the MFS outlook
on the bond and stock markets.
[GRAPHIC OMITTED]
MFS PERSONAL SERVICE
ACCOUNT SERVICE:
Call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
PRODUCT INFORMATION:
Call 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time.
IRA SERVICE:
Call 1-800-637-1255 any business day
from 8 a.m. to 6 p.m. Eastern time.
SERVICE FOR THE HEARING-IMPAIRED:
Call 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time (TDD required).
[GRAPHIC OMITTED]
MFS MAILING ADDRESSES
FOR PERSONAL ACCOUNTS:
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
FOR IRA ACCOUNTS:
MFS Service Center, Inc.
J.W. McCormack Station
P.O. Box 4501
Boston, MA 02101-9817
31
<PAGE>
A WORD ABOUT MFS PRODUCTS AND SERVICES
MAKING ADDITIONAL INVESTMENTS AT YOUR CONVENIENCE
There are several easy ways to make additional single investments of at
least $50:
o send a check with the lower portion of your account statement
o contact your financial adviser to purchase shares on your behalf
o wire additional investments through your bank; call us first for
instructions.
MAKING ADDITIONAL INVESTMENTS AUTOMATICALLY
By investing a set amount at regular intervals, over time you will buy more
shares when prices are low, and fewer shares when prices are high. Because
dollar cost averaging involves periodic purchases regardless of fluctuating
share prices, you should consider your financial ability to continue investing
in periods of low prices. MFS offers two dollar-cost-averaging programs. See the
prospectus for further details. Dollar cost averaging does not assure a profit
or avoid a loss.
THE AUTOMATIC INVESTMENT PLAN offers a simple way to make regular investments of
at least $50 through automatic withdrawals from your checking account.
THE AUTOMATIC EXCHANGE PLAN automatically exchanges shares from any MFS fund
with $5,000 or more into the same class of shares in up to four other MFS funds.
You choose the amounts of the exchanges (as little as $50) and their frequency.
<TABLE>
<CAPTION>
A HYPOTHETICAL EXAMPLE OF AUTOMATIC MONTHLY INVESTING
COMPOUNDING AT 8% YEAR
Amount 5 Years 10 15 20 25
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$50 3,671 9,064 16,989 28,633 45,742
$75 5,506 13,596 25,483 42,950 68,613
$100 7,341 18,128 33,978 57,266 91,484
$200 14,683 36,257 67,956 114,532 182,968
</TABLE>
For illustration only. Not indicative of future performance of any MFS fund.
For applications or further information call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
If you are a participant in a retirement plan, check with your plan sponsor
regarding the availability of these options.
32
<PAGE>
A FINANCIAL ADVISER CAN HELP YOU BE A BETTER INVESTOR
Financial advisers can be valuable resources for their clients, providing
ongoing education and guidance about investments, as well as a wide range of
services. Here are just some of the ways your financial adviser may be able to
help you be a better investor:
# Day-to-day monitoring of your portfolio
# Tax recordkeeping
# In-depth information on fund managers, their track records and their tenure
# Risk/reward analyses of current or potential holdings
# Asset allocation advice
# Construction of a detailed personal financial profile
# Order and confirmation processing
# Information on a fund group's range of shareholder services
# Portfolio adjustments based on lifestyle changes
# Assistance with business retirement planning
# Evaluation of lump-sum distribution options
# Recommendations on a selection of fund groups
# Specialized research and investment information not readily available
to individuals
# In-depth knowledge of markets and products, kept current by ongoing tracking
# Estate, tax, insurance, and business planning
# Help with possible savings on sales charges through breakpoints, rights of
accumulation, and letters of intent
33
<PAGE>
MFS INVESTMENT OPPORTUNITIES
MUTUAL FUNDS
MFS Family of Funds[Registration Mark], shown on the facing page, falls into the
eight general categories below, all offer full-time professional management, a
diversified portfolio, and a wide array of shareholder services.
STOCK FUNDS seek growth of capital rather than income through investments in
stocks.
STOCK AND BOND FUNDS seek current income and growth of capital through
investments in both stocks and bonds.
BOND FUNDS seek current income through investments in debt securities.
WORLD FUNDS seek stock, balanced, and bond fund objectives through investments
in U.S. and foreign stocks and bonds.
LIMITED-MATURITY FUNDS seek current income and preservation of capital through
investments in debt securities with remaining
maturities of five years or less.
NATIONAL TAX-FREE BOND FUNDS seek current income exempt from federal income tax
through investments in debt securities issued by states and municipalities. [1]
STATE TAX-FREE BOND FUNDS seek current income exempt from federal and state
income taxes through investments in debt securities issued by a single state and
its municipalities. [1]
MONEY MARKET FUNDS seek preservation of capital and current income through
investments in short-term debt securities. [2]
To determine which MFS fund may be appropriate for you, please contact your
financial adviser, who can help you relate these investment opportunities to
your financial goals. If you prefer, you may call MFS Investor Information for
literature [3] on MFS products and services: 1-800-637-2929, from 9 a.m. to
5 p.m. Eastern time any business day (leave a message any time).
[1] A small portion of the income may be subject to federal, state and/or
alternative minimum tax.
[2] Investments in money market funds are not issued or guaranteed by the U.S.
government and there is no assurance that the fund will be able to maintain
a stable net asset value.
[3] Including a prospectus containing more complete information including
charges and expenses. Read the prospectus carefully before investing.
34
<PAGE>
THE MFS FAMILY OF FUNDS [Registration Mark]
AMERICA'S OLDEST MUTUAL FUND GROUP
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or, leave a message any
time). This material should be read carefully before investing or sending money.
STOCK
================================================================================
Massachusetts Investors Trust
- --------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Capital Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Emerging Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Gold & Natural Resources Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Growth Opportunities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Managed Sectors Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] OTC Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Research Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Value Fund
- --------------------------------------------------------------------------------
STOCK AND BOND
================================================================================
MFS [Registration Mark] Total Return Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Utilities Fund
- --------------------------------------------------------------------------------
BOND
================================================================================
MFS [Registration Mark] Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Mortgage Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Securities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] High Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Intermediate Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Strategic Income Fund
(formerly MFS [Registration Mark] Income & Opportunity Fund)
- --------------------------------------------------------------------------------
LIMITED MATURITY BOND
================================================================================
MFS [Registration Mark] Government Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Limited Maturity Fund
- --------------------------------------------------------------------------------
WORLD
================================================================================
MFS [Registration Mark] World Asset Allocation Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Equity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Governments Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Total Return Fund
- --------------------------------------------------------------------------------
NATIONAL TAX-FREE BOND
================================================================================
MFS [Registration Mark] Municipal Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal High Income Fund
(closed to new investors)
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Income Fund
- --------------------------------------------------------------------------------
STATE TAX-FREE BOND
================================================================================
Alabama, Arkansas, California, Florida, Georgia, Louisiana, Maryland,
Massachusetts, Mississippi, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Texas, Virginia, Washington, West Virginia
- --------------------------------------------------------------------------------
MONEY MARKET
================================================================================
MFS [Registration Mark] Cash Reserve Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Money Market Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Money Market Fund
- --------------------------------------------------------------------------------
<PAGE>
RESULTS OF SHAREHOLDER MEETING
At the special meeting of shareholders of MFS World Growth Fund, which was held
on January 18, 1995, the following action was taken:
Item 1. The approval of a new sub-investment advisory agreement between
Massachusetts Financial Services Company (MFS) and Batterymarch Financial
Management, Inc. (BFM, Inc.), containing substantially the same terms and
conditions and identical fees as the current sub-investment advisory agreement
between MFS and Batterymarch Financial Management (Batterymarch), to become
effective upon the later of the acquisition of substantially all of the
operating assets and business of Batterymarch by BFM, Inc. or approval of such
new sub-investment advisory agreement by shareholders.
Number of Shares
========================
For 11,081,141.919
Against 134,166.983
Abstain 553,590.733
<PAGE>
MFS (R) WORLD [Dalbar Logo] Bulk Rate
GROWTH FUND TOP RATED SERVICE U.S. Postage
P A I D
500 Boylston Street Permit #55638
Boston, MA 02116 Boston, MA
[MFS Logo]
THE FIRST NAME IN MUTUAL FUNDS
MWF-2 12/95/54M 9/209/309
<PAGE>
