MFS WORLD GROWTH FUND
(A SERIES OF MFS SERIES TRUST VIII)
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
June 21, 1996
VIA EDGAR
- ---------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: MFS Series Trust VI (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 Semiannual
Report to Shareholders dated April 30, 1996 of MFS World Growth Fund.
Very truly yours,
APRIL ANDERSON
April Anderson
Senior Production Editor
<PAGE>
SEMIANNUAL REPORT
APRIL 30, 1996
MFS [Registration Mark] WORLD GROWTH FUND
[Cover: A photo of two men in a window]
<PAGE>
MFS [Registration Mark] 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 advisers)
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
Massachusetts Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
John W. Ballen*
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:
During the six months ended April 30, 1996, the total return for Class A
shares of the Fund was 17.31%, while the total returns for Class B and Class
C shares were 16.83% and 16.89%, respectively. These figures 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 global equities, returned 13.63%. A
discussion of the Fund's performance during this reporting period may be
found in the Portfolio Performance and Strategy section of this letter.
U.S. Outlook
We believe the U.S. economy will continue to show moderate growth in 1996,
although this growth may be somewhat uneven as we move from quarter to
quarter. Thus, while one quarter may experience an annualized rate of growth
in gross domestic product of less than 1%, another quarter may see annualized
growth in excess of 3% - but, for the year, we believe growth could stay
within our expected range of 2% to 2-1/2%. While some increase in consumer
spending took place in the early months of this year, consumers, who
represent two-thirds of the economy, remain in a somewhat weakened position,
due in part to an increase in consumer installment debt in excess of 30% over
the past two years. Meanwhile, growth is also being constrained by ongoing
economic doldrums in Europe and Japan, important markets for U.S. exports.
Here again, we are seeing a few tentative signs, particularly in Japan, of
modest recoveries that could lead to improved prospects for U.S. exporters.
Also, the "lag effect" of increases in short-term interest rates by the
Federal Reserve Board in 1994 and into 1995 is helping to keep growth in
check. This lag effect can last up to two years, and although the Fed did
reduce short-term rates late last year and earlier this year, we expect it to
continue its diligent anti-inflationary policies. Finally, it appears that
inflation is likely to remain under control this year, due in part to a
continued moderation in wage pressures and the subdued level of economic
growth. At the same time, we believe the current upward pressure on energy
prices bears close scrutiny, as energy is an important component of the
inflation outlook.
Global Outlook
We believe a "soft" upturn of the global business cycle could allow the
pattern of moderate growth to continue, and although structural
disinflationary forces remain in place, we expect cyclical forces will
continue to apply upward pressure on yields for at least the next few months.
However, we do not expect this moderate uptick in economic growth or slightly
higher interest rates to prevent global equity prices from making further
advances. We remain relatively positive about the outlook for Japan and its
prospects for recovery, thanks in part to a continuing accommodative stance
by the Bank of Japan and signs that
1
<PAGE>
LETTER TO SHAREHOLDERS - continued
Japanese investors are becoming more positive. At the same time, we are
neutral on Europe, favoring the larger core markets to the secondary markets,
and we expect many of the emerging markets to sustain their recoveries.
Stock Markets
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity markets this
year. Although we believe the equity markets represent fair value at current
levels, the expected slowdown in the growth of corporate earnings and the
increases in interest rates experienced so far this year raise near-term
concerns. Further increases in interest rates and an acceleration of
inflation, coupled with an additional slowdown in corporate earnings growth,
could have a negative effect on the stock markets. However, to the extent
that some earnings disappointments are taken as a sign that the economy is
not overheating, this may prove beneficial for the longer-term health of the
equity markets. We continue to believe that many of the technology-driven
productivity gains that U.S. companies have made in recent years will
continue to enhance corporate America's competitiveness and profitability.
Therefore, we remain quite constructive on the long-term viability of the
equity markets.
Portfolio Performance and Strategy
The Fund's focus continues to be investing in the fastest-growing companies
in the world, in what we consider the three most attractive markets with the
best long-term growth potential. These three markets are: U.S.
small-capitalization and emerging growth stocks, which represent 43% of the
Fund's assets; growth stocks in mature foreign markets, primarily Europe and
Japan, representing 32%; and stocks in emerging markets, representing 22%.
The Fund's performance was helped by its overweighting in the United States,
which has been one of the better performing markets over the past six months,
and by our overweighting in technology and financial services stocks. The
U.S. sector of the portfolio focuses on companies with dynamic earnings
growth which we believe can achieve significant market share gains in rapidly
growing markets. Thus, our holdings continue to be in technology, leisure,
and financial services, with stocks such as Cadence Design (a leading
developer of drafting and design software), HFS (the leading hotel and real
estate franchiser), and AccuStaff (a provider of temporary services in
technology, law, and finance). All of these holdings added significantly to
the Fund's performance during this period.
The Fund's performance was also helped by a recovery in the Japanese
market, where the economy finally showed signs of improvement and where the
weakening yen helped export-oriented blue-chip companies. European markets
continued to be disappointing, with earnings hurt by continued economic
sluggishness. This has created some attractive values for investors. Our focus
in
2
<PAGE>
LETTER TO SHAREHOLDERS - continued
mature foreign markets continues to be in "world-class" companies with
significant earnings leverage resulting from recovering home and export
economies and new products. Examples of these holdings include electronics
companies such as Sharp and Sony, as well as industrial leaders such as
Daimler-Benz, Nippon Steel, and Fiat.
The Fund's performance also benefited from the strong recovery in emerging
markets such as Brazil, Mexico, India, Eastern Europe, and Hong Kong/China.
Attractive valuations, the potential for a quick recovery from recession, and
strong investment flows all helped performance. Telebras (the leading Brazilian
telephone company), Usiminas (Brazilian steel), and PanAmerican Beverage (soft
drinks) were among the many names which contributed to solid performance during
the period. Our emphasis in this part of the portfolio continues to be on
companies which are global low-cost producers or beneficiaries of government
privatization and new infrastructure.
Our current outlook for our three target markets remains optimistic. In the
United States, we believe emerging growth companies that can deliver strong
relative earnings growth will continue to be rewarded by the market. In Europe
and Japan, valuations are still at attractive levels and the local economies now
appear poised to show improvement after several years of sluggishness. The Latin
American emerging markets appear to have turned the corner as a result of major
structural reforms, and local economies are expected to come out of recession
soon. Finally, many of the dollar-based economies of emerging Asian markets are
now much more competitive than Japan's.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
[Signature of [Signatures of John W. Ballen, David Mannheim,
A. Keith Brodkin] and Toni Y. Shimura]
A. Keith Brodkin John W. Ballen, David Mannheim, Toni Y. Shimura
Chairman and Portfolio Managers
President
May 10, 1996
3
<PAGE>
RESULTS OF SHAREHOLDER MEETING
At the special meeting of shareholders of MFS World Growth Fund, which was held
on March 18, 1996, the following action was taken:
Item 1. The approval of two new Sub-Investment Advisory Agreements, one
between Massachusetts Financial Services Company ("MFS") and Foreign &
Colonial Management Limited ("FCM"), and the other between FCM and its
subsidiary, Foreign & Colonial Emerging Markets Limited, containing
substantially the same terms and conditions as the current
Sub-Investment Advisory Agreement between MFS and Batterymarch
Financial Management, Inc., to become effective on or about April 1,
1996.
Number of Shares
----------------
For 13,174,007
Against 113,527
Abstain 521,866
PORTFOLIO MANAGER PROFILES
John Ballen began his career at MFS as an industry specialist in 1984 and was
promoted to Investment Officer in 1986, Vice President - Investments in 1987,
Director of Research in 1988 and Senior Vice President in 1990. In 1993, he
became Director of Equity Portfolio Management. He has been the Portfolio
Manager of MFS Emerging Growth Fund since 1987.
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.
PERFORMANCE SUMMARY
Because mutual funds like MFS World Growth Fund are designed for investors
with long-term goals, we have provided cumulative results as well as the
average annual total returns for Class A, Class B, and Class C shares for the
applicable time periods.
4
<PAGE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions) 11/18/93+-
6 Months 1 Year 4/30/96
================================================================================
Cumulative Total Return* +17.31% +28.72% +43.93%
- --------------------------------------------------------------------------------
Average Annual Total Return* -- +28.72% +16.03%
- --------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the
most recent calendar quarter as required by the Securities and Exchange
Commission (the SEC), with all distributions reinvested and reflecting the
maximum sales charge of 5.75% on the initial investment for the year ended
March 31, 1996 and for the period from November 18, 1993+ to March 31, 1996,
were +16.96% and +10.90%, respectively.
Class B Investment Results
(net asset value change including reinvested distributions) 11/18/93+-
6 Months 1 Year 4/30/96
================================================================================
Cumulative Total Return++ +16.83 +27.71% +41.13%
- --------------------------------------------------------------------------------
Average Annual Total Return++ -- +27.71% +15.10%
- --------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested and reflecting the contingent deferred sales charge (CDSC) of 4% for
the year ended March 31, 1996, and 3% for the period from November 18, 1993+ to
March 31, 1996, were +19.10% and +11.71%, respectively.
Class C Investment Results
(net asset value change including reinvested distributions) 1/03/94+-
6 Months 1 Year 4/30/96
================================================================================
Cumulative Total Return [ss] +16.89% +27.77% +32.28%
- --------------------------------------------------------------------------------
Average Annual Total Return [ss] -- +27.77% +12.80%
- --------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested for the year ended March 31, 1996 and for the period from January 3,
1994+ to March 31, 1996, were +23.23% and +10.32%, respectively.
All results represent past performance and are not an indication of future
results. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. All Class A share
results reflect the applicable expense subsidy which is explained in the Notes
to Financial Statements. Had the subsidy not been in effect, the results would
have been less favorable. The subsidy may be rescinded at any time.
+ Commencement of offering of this class of shares.
* These results do not include the sales charge. If the charge had been
included, the results would have been lower.
++ These results do not include any CDSC. If the charge had been included, the
results would have been lower.
[ss] Class C shares have no initial sales charge but, along with Class B shares,
have higher annual fees and expenses than Class A shares. Class C share
purchases made on or after April 1, 1996, will be subject to a 1% CDSC if
redeemed within 12 months of purchase.
PORTFOLIO OF INVESTMENTS - April 30, 1996
Stocks and Warrants - 97.4%
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - 54.4%
Argentina - 1.3%
Banco Frances del Rio Plata (Finance) 57,500 $ 550,330
CAPEX S.A. (Utilities - Electric) 48,000 352,835
Inversiones y Representacion
(Special Products and Services) 56,584 170,901
Irsa Inversiones, GDR (Special Products
and Services) 15,534 466,020
Mirgor Sacifia, ADR (Automotive)## 108,000 310,500
Perez Companc S.A. (Oil and Gas) 208,672 1,298,070
Telecom Argentina, ADR (Utilities - Telephone) 7,330 331,682
Telefonica de Argentina (Utilities - Telephone) 42,900 1,254,825
YPF Sociedad Anonima, ADR (Oils) 62,700 1,371,562
------------
$ 6,106,725
- --------------------------------------------------------------------------------
Australia - 1.5%
Australia & New Zealand Bank Group Ltd. (Finance) 167,600 $ 801,144
Broken Hill Property (Real Estate) 53,400 822,448
News Corp. Ltd. (Media) 281,000 1,648,079
News Corp., Pfd. (Media) 43,700 225,038
Sydney Harbour Casinos Ltd. (Entertainment)* 655,800 995,088
Western Mining Corp. Ltd. (Metals and Minerals) 377,060 2,751,005
------------
$ 7,242,802
- --------------------------------------------------------------------------------
Bangladesh - 0.1%
Bangladesh Fund (Finance) 27,200 $ 197,200
------------
Belize - 0.1%
BHI Corp. (Finance) 31,500 $ 456,750
------------
Brazil - 2.5%
Banco Bradesco S.A. (Finance) 74,114,623 $ 836,778
Brasmotor S.A. (Furniture and
Home Appliances)* 2,560,000 696,774
Centrais Eletricas Brasile, ADR
(Utilities - Electric) 63,200 774,200
Cia Brasileira Distribuicao Grupo
Pao de Acucar, GDS (Supermarkets)## 45,000 663,750
Cia Cervejaria Brahma (Beverages) 2,630,433 1,264,835
Cia Energetica de Brasilia
(Utilities - Electric)* 17,500,000 441,028
Cia Siderurgicas, "B," ADR (Iron and Steel) 23,400 558,675
Cia de Tecidos Norte de Minas -
Coteminas (Textiles) 470,000 197,096
Cia Vale do Rio Doce (Iron and Steel) 29,553 542,202
Itausa Investimentos Itau S.A
(Diversified Holding Company) 750,000 514,112
Petrol Brasileiros (Oils) 8,110,000 944,259
Rhodia-Ster S.A., GDR (Chemicals)## 36,000 319,500
Sider Paulista, Pfd., "B," (Iron and Steel) 168,000 194,758
Souza Cruz S.A. (Tobacco) 87,000 679,688
Telebras, ADR (Telecommunications) 39,490 2,127,524
Telecommunicacoes Sao Paulo
(Telecommunications)* 2,500,000 446,069
Usiminas, ADR (Iron and Steel)## 94,700 1,088,576
------------
$ 12,289,824
- --------------------------------------------------------------------------------
Canada - 0.7%
Echo Bay Mines Ltd. (Precious Metals
and Minerals) 147,200 $ 1,932,000
Loewen Group (Special Products
and Services)## 21,000 632,298
Placer Dome, Inc. (Precious Metals
and Minerals) 28,300 785,325
------------
$ 3,349,623
- --------------------------------------------------------------------------------
6
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
Chile - 0.4%
Banco Osorno y La Union, ADR (Finance) 30,000 $ 453,750
Maderas y Sinteticos Sociedad, ADR
(Forest and Paper Products) 29,700 471,488
Moneda Chile Fund (Finance) 63,000 567,000
Vina Concha y Toro S.A., ADR
(Special Products and Services) 15,800 264,650
------------
$ 1,756,888
- --------------------------------------------------------------------------------
China - 1.1%
China Southern Glass Co., "B"
(Building Materials) 402,740 $ 177,033
Dong Fang Electric Machinery (Electronics) 986,000 242,204
Huaxin Cement Co. (Construction Services)* 2,216,100 589,483
Jilin Chemical Industries (Chemicals) 2,643,000 529,639
Luoyong Glass Co. Ltd. (Building Materials) 372,000 95,226
Maanshan Iron & Steel Co. (Iron and Steel) 958,000 142,434
Qingling Motors Co. (Automotive) 408,000 133,190
Shandong Huaneng Power Co. Ltd.
(Utilities - Electric) 24,000 222,000
Shanghai Dajiang (Group) Co. Ltd., "B"
(Agriculture)* 607,000 327,780
Shanghai Dazhong Taxi Co., "B" (Automotive) 278,200 214,214
Shanghai Haixing Shipping Co. (Transportation) 682,000 50,258
Shanghai Lujiazui Finance & Trade Zone
Development Co. Ltd. "B" (Real Estate) 418,500 246,915
Shanghai New Asia (Group) Co. Ltd.
(Restaurants and Food Service) 972,500 573,775
Shanghai Petrochemical (Oils) 2,417,000 718,712
Shanghai Post & Telecommunications, "B"
(Telecommunications)* 366,800 196,605
Shanghai Shangling Electric Appliances Co.
Ltd., "B" (Furniture and Home Appliances) 152,000 98,496
Shanghai Yaohua Pilkington Glass Co Ltd., "B"
(Building Materials) 190,900 156,156
Shenzhen China Bicycles (Bicycles) 550,200 94,607
Shenzhen Konka Electronics Group Ltd.
(Electronics) 234,000 124,037
Yizheng Chemical Fibre Co. Ltd. (Chemicals) 1,476,000 395,964
------------
$ 5,328,728
- --------------------------------------------------------------------------------
Colombia - 0.2%
Banco Industrial Colombian, ADR
(Banks and Credit Companies) 26,000 $ 507,000
Cadenalco Gran Cadena de Almacenes
Colombia, ADR (Retail)## 23,000 391,000
Cementos Diamante S.A., ADR (Construction)## 11,100 216,450
------------
$ 1,114,450
- --------------------------------------------------------------------------------
Czech Republic - 0.1%
SPT Telecom (Telecommunications)* 3,800 $ 465,368
- --------------------------------------------------------------------------------
Denmark - 0.3%
Novo-Nordisk A/S, "B" (Biopharmaceuticals) 11,336 $ 1,471,934
- --------------------------------------------------------------------------------
France - 2.9%
Alcatel Alsthom Compagnie (Electrical Equipment) 40,738 $ 3,828,419
Compagnie Bancaire S.A. (Finance) 20,889 2,306,414
Compagnie Financiere de Paribas (Finance) 27,700 1,780,427
Eaux (Compagnie Generale) (Construction) 27,576 2,996,754
Sidel (Machinery) 4,353 1,035,326
Valeo S.A. (Automotive) 39,092 2,167,956
------------
$ 14,115,296
- --------------------------------------------------------------------------------
7
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
Germany - 1.9%
Daimler-Benz AG (Automotive) 9,053 $ 4,954,599
Mannesmann AG (Diversified Machinery) 6,791 2,318,186
Volkswagen AG (Automotive) 5,648 1,948,285
------------
$ 9,221,070
- --------------------------------------------------------------------------------
Greece - 0.4%
Aegek S.A. (Engineering and Construction) 40,480 $ 257,940
Aegek S.A., Pfd. (Engineering and Construction) 7,360 35,703
Alpha Credit Bank (Finance) 7,120 356,951
Ergo Bank (Finance) 6,000 302,405
Hellenic Bottling Co. S.A. (Beverages) 11,550 415,468
Papastratos Cigarette S.A. (Tobacco Products) 8,300 252,156
Silver & Baryte Ores Mining (Mining) 9,430 176,582
------------
$ 1,797,205
- --------------------------------------------------------------------------------
Hong Kong - 3.3%
Amoy Properties Ltd. (Real Estate) 148,000 $ 166,468
Bank of East Asia (Finance) 27,360 91,969
China Light & Power (Utilities - Electric) 63,900 301,540
Citic Pacific Ltd. (Conglomerate) 205,800 808,853
Ek Chor China Motorcycle Co. Ltd. (Leisure) 7,500 110,625
Giordano International Ltd. (Retail - Apparel) 184,000 170,088
Gold Peak Industries (Holdings) Ltd. (Electronics) 145,000 75,454
Guoco Group Ltd. (Finance) 119,000 592,323
HSBC Holdings PLC (Finance) 47,600 710,788
Hang Seng Bank (Finance) 156,000 1,583,234
Henderson China Holdings Ltd. (Real Estate)* 272 754
Henderson Land Development (Real Estate) 68,000 487,925
Hong Kong Telecommunications (Telecommunications) 325,600 620,908
Hong Kong & China Gas Ltd. (Utilities - Gas) 335,280 550,506
Hong Kong & China Gas Ltd., Warrants
(Utilities - Gas) 27,940 --
Hutchison Whampoa (Real Estate) 599,000 3,717,226
Jardine Matheson Holdings Ltd. (Conglomerate) 5,600 44,800
Liu Chong Hing Bank (Finance) 131,000 181,220
New World Development Co. (Real Estate) 524,000 2,350,778
New World Infrastructure Ltd.
(Engineering and Construction)* 806 1,792
Sun Hung Kai Properties (Real Estate) 323,000 3,079,750
Swire Pacific Air Ltd. (Transportation - Air) 7,000 59,730
Varitronix International Ltd. (Electronics) 149,000 273,543
Yue Yuen Industrial Holdings (Shoes and Leather) 590,000 143,404
------------
$ 16,123,678
- --------------------------------------------------------------------------------
Hungary - 0.3%
Magyar Olaj Es Gaz (Oil and Gas) 46,500 $ 502,048
OTP Bank (Finance) 22,723 240,720
Richter Gedeon Rt (Pharmaceuticals) 10,565 368,305
Zalakeramia Rt (Miscellaneous Manufacturing) 8,100 298,822
------------
$ 1,409,895
- --------------------------------------------------------------------------------
8
<PAGE>
PORTFOLIO OF INVESTMENTS-continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
India - 1.5%
Bajaj Auto Ltd., GDR (Automotive)* 24,600 $ 861,000
Great Eastern Shipping, GDR
(Transportation - Marine) 70,400 440,000
Gujarat Ambuja Cements Ltd. (Building Materials) 61,100 709,982
Hindalco Industries Ltd. (Metals and Mining) 14,900 659,325
India Gateway Fund Ltd. (Finance) 80,000 511,200
India Gateway Fund Ltd., Pfd. (Finance)* 27,000 172,530
India Gateway Fund Ltd., Warrants (Finance) 16,000 --
India Magnum Fund NV (Finance) 27,900 1,454,148
NEPC Micon, GDR (Utilities - Electric) 204,900 215,145
Petro Chemical Co., GDS (Oils) 30,700 590,975
Reliance Industries, GDS
(Consumer Goods and Services)* 55,300 884,800
SIV Industries Ltd., GDR (Textiles)## 91,200 319,200
South Indian Viscose Ltd., Warrants
(Apparel and Textiles) 19,600 196
Steel Authority of India Ltd. (Iron and Steel)##* 40,000 617,400
------------
$ 7,435,901
- --------------------------------------------------------------------------------
Indonesia - 1.2%
Astra International (Automotive) 191,800 $ 284,240
Bank International Indonesia (Finance) 137,000 675,290
Hanjaya Mandala Sampoerna (Retail) 46,000 508,806
Indian Petrochemical, GDS (Oils) 3,100 61,225
Indocement Tunggal Prakar (Retail) 164,500 635,954
Indofoods Suksesi Makmur (Food Processing) 112,000 515,979
Indosat (Telecommunications) 34,500 120,039
Inti Indorayan Utama (Forest and
Paper Products) 157,000 193,890
Kalbe Farma (Pharmaceuticals) 53,200 154,253
Mayora Indah (Food Processing) 243,000 167,010
PT Gudang Garam (Tobacco) 96,000 690,722
PT Indosat (Telecommunications) 7,500 261,562
PT Mulia Industrindo (Building Materials) 173,500 335,374
Raymond Ltd., GDR (Textiles) 23,200 493,000
Semen Gresik (Building Materials) 126,500 438,783
Telekomunikasi Indonesia (Telecommunications) 63,000 104,865
------------
$ 5,640,992
- --------------------------------------------------------------------------------
Ireland - 0.2%
Elan Corp. PLC, ADR (Pharmaceuticals)* 11,000 $ 727,375
Navan Resources PLC (Mining)* 137,650 414,578
------------
$ 1,141,953
- --------------------------------------------------------------------------------
Italy - 3.7%
Banco Commerciale Italiana (Finance) 382,300 $ 861,521
Fiat S.p.A. (Automotive) 970,900 3,309,886
Fila Holdings S.p.A., ADR
(Apparel and Textiles)* 46,000 3,139,500
Gucci Group NV (Apparel and Textiles) 20,700 1,125,562
Luxottica Group S.p.A., ADR
(Consumer Goods & Services) 40,100 3,228,050
Olivetti Group (Computers)* 3,379,700 2,163,700
Pirelli S.p.A. (Tire and Rubber) 888,500 1,387,925
Stet Societa Finanziaria Telefonica
S.p.A. (Telecommunications) 293,800 993,127
Telecom Italia Mobile, di Risp
(Telecommunications) 988,900 1,386,485
------------
$ 17,595,756
- --------------------------------------------------------------------------------
9
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
Japan - 13.9%
DDI Corp. (Telecommunications) 501 $ 4,294,422
Daiei, Inc. (Retail) 235,000 3,181,731
Daiwa Securities Co. Ltd. (Finance) 260,000 3,991,228
Eisai Co. Ltd. (Pharmaceuticals) 30,150 595,066
Hokuetsu Bank (Finance) 3,000 16,991
Isetan (Retail) 26,000 384,249
Ito Yokado Co. Ltd. (Retail) 25,000 1,470,728
Kawasaki Heavy Industries (Aerospace - Defense) 377,000 1,944,670
Komori Corp. (Printing Machinery) 89,000 2,359,077
Kyocera Corp. (Electronics) 15,000 1,127,002
Matsuzakaya Co. Ltd. (Retail) 69,000 934,210
Mitsubishi Trust & Banking (Finance) 124,000 2,139,969
Murata Manufacturing Co. Ltd.
(Electrical Equipment) 17,000 658,085
NEC Corp. (Electronics - Semiconductor) 196,000 2,485,507
NKK Corp. (Steel)* 477,000 1,491,762
NTT Data Communications Systems Co.
(Computer Software) 92 3,210,526
Nichido Fire & Marine Ltd. (Insurance) 259,350 2,176,087
Nikon Corp. (Jewelry - Watches and Gemstones) 58,000 779,748
Nippon Steel Corp. (Steel) 1,100,000 3,964,530
Nippon Telephone & Telegraph Co.
(Telecommunications) 353 2,729,624
Nissan Motor Co. Ltd. (Automotive) 462,000 3,894,050
Obayashi Corp. (Engineering and Construction) 224,000 2,078,108
Pioneer Electronics Corp. (Electronics) 87,000 1,941,075
Sharp Corp. (Electronics) 374,000 6,490,084
Sony Corp. (Electronics) 50,100 3,248,284
Sumitomo Bank (Finance) 123,000 2,627,002
Sumitomo Realty & Development (Real Estate) 447,000 3,588,615
Taisei Corp. (Engineering and Construction) 200,000 1,544,622
Tokyo Ohka Kogyo Ltd. (Chemicals) 60,600 1,837,414
------------
$ 67,184,466
- --------------------------------------------------------------------------------
Malaysia - 2.2%
Berjaya Sports Toto Berhad (Leisure) 164,000 $ 526,252
DCB Holdings Berhad (Finance) 358,000 1,306,726
Genting Berhad (Leisure) 67,000 601,981
Lion Land Berhad (Finance) 475,000 602,062
Magnum Corp. Berhad (Entertainment) 12,000 20,793
Malayan Cement Berhad (Building Materials) 235,000 584,413
Malaysian Oxygen Berhad (Chemicals) 132,000 704,183
O.Y.L. Industries Berhad (Real Estate) 58,000 525,771
Petronas Gas Berhad (Gas)## 186,000 820,665
Renong Berhad (Conglomerate) 662,000 1,152,412
Renong Berhad, Rights (Conglomerate) 215,150 00
Resorts World Berhad (Entertainment) 284,000 1,720,107
Rothmans of Pall Mall Berhad (Tobacco) 61,000 623,922
Telekom Malaysia Berhad (Telecommunications) 129,000 1,215,956
------------
$ 10,405,243
- --------------------------------------------------------------------------------
10
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
Mexico - 1.7%
ALFA S.A. de C.V. (Diversified Holding Company) 64,000 $ 937,745
Cemex S.A., "A" (Construction) 133,506 533,663
Cemex S.A., "B" (Construction) 146,000 624,024
Cifra S.A. de C.V. (Retail) 490,300 654,174
Corporacion GEO S.A. de C.V. (Home Builders)## 45,000 711,765
Fomento Economico Mexicano S.A
de C.V. (Brewery) 110,000 332,748
Grupo Carso S.A. de C.V. (Conglomerate)* 138,300 1,055,226
Grupo Financiaro Banamex, "B" (Finance) 147,200 340,319
Grupo Financiaro Banamex, "L" (Finance)## 11,996 24,721
Kimberly-Clark de Mexico S.A. de C.V
(Forest and Paper Products) 27,100 497,718
PanAmerican Beverage (Beverages) 18,000 789,750
Telefonos de Mexico S.A
(Utilities - Telecommunications) 986,000 1,669,742
------------
$ 8,171,595
- --------------------------------------------------------------------------------
Netherlands - 0.5%
Wolters Kluwer (Publishing) 23,610 $ 2,580,019
- --------------------------------------------------------------------------------
Pakistan - 0.3%
Cherat Cement Co. (Construction) 16,500 $ 14,259
Dewan Salman Fibre, Rights (Apparel and Textiles) 3,881 --
Engro Chemical (Chemicals) 94,680 340,916
Fauji Fertilizer (Chemicals) 176,600 386,619
Hub Power Co. (Utilities - Electric)* 350,000 341,780
Pakistan Synthetic (Apparel and Textiles) 9,000 3,889
Pakistan Telecommunications (Telecommunications) 2,900 289,037
Sui Northern Gas (Oil Services) 284,200 291,852
------------
$ 1,668,352
- --------------------------------------------------------------------------------
Peru - 0.3%
Backus & Johnson (Beverages) 198,486 $ 266,211
Southern Peru Copper (Metals and Minerals) 33,350 625,312
Telefonica del Peru, "B" (Telecommunication 333,953 746,499
------------
$ 1,638,022
- --------------------------------------------------------------------------------
Philippines - 1.0%
C&P Homes, Inc. (Homebuilders) 752,000 $ 648,275
Fil-Estate Land, Inc. (Real Estate) 208,000 219,157
International Container Terminal Services
(Transportation) 705,800 493,519
Manila Electric Co. (Utilities - Electric) 36,452 340,777
Metropolitan Bank & Trust Co. (Finance) 18,114 489,286
Petron Corp. (Oils) 400,375 172,575
Philippine Long Distance Telephone Co.,
ADR (Utilities - Telephone) 6,185 310,796
Pilipino Telephone (Telecommunications) 509,700 751,856
SM Prime Holdings, Inc. (Real Estate) 1,308,700 381,077
San Miguel Corp., "B," ADR
(Food and Beverage Products) 9,768 322,344
Southeast Asia Cement (Building Materials) 3,654,000 539,000
------------
$ 4,668,662
- --------------------------------------------------------------------------------
Poland - 0.1%
Elektrim (Special Products and Services) 66,000 $ 421,804
- --------------------------------------------------------------------------------
Portugal - 0.4%
Banco Totta & Acores (Finance) 14,718 $ 283,093
Cimpor Cimentos Portugal (Building Materials) 28,020 526,278
11
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
Portugal - continued
Engil SGPS (Engineering and Construction) 24,579 $ 214,465
Portugal Telecom (Telecommunications) 26,000 565,009
Sonae Investimentos SGPS, S.A
(Forest and Paper Products) 10,480 242,093
------------
$ 1,830,938
- --------------------------------------------------------------------------------
Russia - 0.2%
Fleming Russia Securities (Finance) 143,400 $ 950,742
- --------------------------------------------------------------------------------
Singapore - 1.4%
City Developments Ltd. (Real Estate) 267,000 $ 2,336,606
Development Bank of Singapore Ltd. (Finance) 62,000 785,201
Fraser & Neave Ltd. (Beverages) 102,000 1,132,124
Keppel Corp. Ltd. (Transportation - Marine) 167,000 1,509,000
Overseas Chinese Banking Corp. Ltd. (Finance) 63,000 865,101
------------
$ 6,628,032
- --------------------------------------------------------------------------------
South Korea - 0.9%
Cho Sun Brewery (Beverages) 7,251 $ 249,713
Commercial Bank of Korea (Finance) 18,000 210,486
Korea Electric Power Corp. (Utilities - Electric) 10,420 502,201
Korea Mobile Telecommunications
(Telecommunications) 272 381,122
Korea Mobile Telecommunications, GDR
(Telecommunications)## 37,500 2,137,500
Pohang Iron & Steel Ltd. (Iron and Steel) 880 69,545
Samsung Electronics Co., GDS (Electronics)## 14,809 592,360
Samsung Electronics, GDR (Electronics) 864 65,448
------------
$ 4,208,375
- --------------------------------------------------------------------------------
Spain - 1.1%
Banco de Santander S.A. (Finance) 24,040 $ 1,117,392
Repsol S.A. (Oils) 20,190 740,750
Telefonica de Espania (Utilities - Telephone) 185,780 3,309,412
------------
$ 5,167,554
- --------------------------------------------------------------------------------
Sri Lanka - 0.1%
Ceylon Grain Elevators (Agriculture) 40,000 $ 27,422
DFCC Sri Lanka (Finance) 57,066 323,409
Puttalam Cement Co. (Building Materials) 950,000 260,512
------------
$ 611,343
- --------------------------------------------------------------------------------
Sweden - 1.7%
Astra AB, Free Shares, "A" (Pharmaceuticals) 121,280 $ 5,387,006
Astra AB, Free Shares, "B" (Pharmaceuticals) 14,090 621,697
Skandinaviska Enskilda Banken, "A" (Finance) 298,030 2,239,242
------------
$ 8,247,945
- --------------------------------------------------------------------------------
Switzerland - 0.5%
Ciba-Geigy AG (Medical and Health Products) 643 $ 744,227
Roche Holding AG (Pharmaceuticals) 104 815,711
Sandoz AG (Pharmaceuticals) 668 727,557
------------
$ 2,287,495
- --------------------------------------------------------------------------------
Taiwan - 0.3%
Acer, Inc., GDR (Computers)##* 31,700 $ 362,965
Asia Cement, GDS (Construction Services)* 16,040 328,820
GVC Corp., GDR (Computers)## 3,140 29,045
12
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
Taiwan - continued
ROC Taiwan Fund (Finance) 8,900 $ 95,675
Siliconware Precision Industries Co., GDR
(Special Products and Services)* 13,000 172,250
Siliconware Precision Industries Co., GDR
(Special Products and Services)##* 12,200 166,225
Yageo Corp., GDR (Electronics) 16,769 159,306
Yageo Corp., GDR (Electronics)## 1,200 11,400
------------
$ 1,325,686
- --------------------------------------------------------------------------------
Thailand - 0.9%
Bangkok Bank Ltd. (Finance) 65,800 $ 953,736
Banpu Public Co. Ltd. (Mining) 10,667 283,879
Electricity Generating Power Co. Ltd.
(Utilities - Electric) 75,900 297,576
Italian Thai Development Public Co. Ltd.
(Engineering and Construction) 26,900 247,151
Land & House Public Co. Ltd. (Real Estate) 17,800 274,920
Loxley Public Co. Ltd. (Miscellaneous Distributor) 14,000 198,487
Muramoto Electronics (Electronics)* 30,800 100,630
Phatra Thanakit Co. (Finance) 48,200 419,944
Shinawatra Computer Co. Ltd. (Computers) 10,400 248,766
Siam Cement Co. (Building Materials) 5,100 262,564
Siam City Cement Public Co. Ltd.
(Building Materials) 8,600 117,160
Siam Makro Public Co. Ltd.
(Wholesale - Special Line) 103,000 497,644
Thai Military Bank (Finance) 65,100 314,530
Thai Theparos Food Product Public Co. Ltd.
(Food Processing) 34,000 169,657
------------
$ 4,386,644
- --------------------------------------------------------------------------------
Turkey - 0.4%
Aksa Akrilik Kimya Sanayii A.S. (Textiles) 420,000 $ 153,529
Alarko Holding A.S. (Diversified Holding Company) 492,600 176,794
Arcelik A.S. (Furniture and Home Appliances) 883,031 102,118
Brisa Bridgestone Sabanci Lastik San
ve Tic A.S. (Tire and Rubber) 800,000 297,753
Eczactibasi Yapi
(Furniture and Home Appliances)## 1,000,000 110,328
Ege Biracilik ve Malt Sanayii A.S. (Beverages) 375,460 134,752
Kaplamin (Forest and Paper Products) 833,000 168,858
Migros Turk (Retail) 452,000 516,708
Netas Telekomunik (Telecommunications) 509,300 132,013
Turkiye Garanti Bankasi (Finance) 3,300,000 201,781
Turkiye Garanti Bankasi, Rights (Finance) 2,200,000 --
------------
$ 1,994,634
- --------------------------------------------------------------------------------
United Kingdom - 2.8%
ASDA Group PLC (Retail) 1,639,300 $ 2,799,094
Argyll Group PLC (Retail - Grocery) 398,800 1,991,849
BPB Industries PLC(Building Materials) 62,400 311,663
Grand Metropolitan PLC
(Food and Beverage Products) 107,900 709,359
Huntingdon International Holdings PLC, ADR
(Consumer Goods and Services) 46,000 327,750
Korea Europe Fund (Finance) 42 189,000
Ladbroke Group PLC (Leisure) 439,400 1,292,320
Orange PLC (Telecommunications)* 241,700 865,400
13
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
Foreign Stocks and Warrants - continued
United Kingdom - continued
Rentokil Group PLC (Commercial Services) 140,000 $ 806,659
Smith (W.H.) Group PLC (Retail) 94,900 703,844
Vodafone Group PLC (Telecommunications) 912,600 3,645,089
------------
$ 13,642,027
- --------------------------------------------------------------------------------
Venezuela
Mavesa S.A., ADR (Food and Beverage Products)## 1,097 $ 4,799
- --------------------------------------------------------------------------------
Total Foreign Stocks and Warrants
(Identified Cost, $234,415,561) $262,286,415
- --------------------------------------------------------------------------------
U.S. Stocks - 43.0%
Advertising
Outdoor Systems* 1,000 $ 23,000
- --------------------------------------------------------------------------------
Apparel and Textiles - 0.1%
Nine West Group* 10,000 $ 428,750
- --------------------------------------------------------------------------------
Automotive - 0.4%
APS Holding Corp.* 66,000 $ 1,204,500
Harvard Industries, Inc., "B"* 33,000 721,875
------------
$ 1,926,375
- --------------------------------------------------------------------------------
Banks and Credit Companies - 0.1%
Creditcorp 32,751 $ 556,767
- --------------------------------------------------------------------------------
Biotechnology - 0.7%
Guidant Corp. 47,600 $ 2,671,550
Integra Lifesciences* 45,000 573,750
------------
$ 3,245,300
- --------------------------------------------------------------------------------
Business Machines - 0.7%
Affiliated Computer Co., "A"* 63,000 $ 3,000,375
Sun Microsystem, Inc.* 11,000 596,750
------------
$ 3,597,125
- --------------------------------------------------------------------------------
Business Services - 7.9%
ADT Ltd.* 55,600 $ 945,200
AccuStaff, Inc.* 121,800 3,623,550
BDM International* 12,000 558,000
CUC International, Inc.* 101,400 3,333,525
Carbo Ceramics, Inc.* 1,400 30,100
Career Horizons, Inc.* 31,000 1,092,750
Ceridian Corp.* 70,000 3,342,500
Computer Sciences, Inc.* 21,400 1,583,600
COREstaff, Inc.* 21,500 833,125
DST Systems, Inc.* 69,300 2,546,775
Employee Solutions* 65,000 2,518,750
Equity Corp. International* 12,700 363,538
First USA Paymentech* 900 39,150
Global DirectMail* 13,000 510,250
IntelliQuest Information* 1,400 53,900
Interim Services, Inc.* 124,000 5,378,500
Learning Tree International* 116,300 2,907,500
Loewen Group, Inc. 11,300 337,587
Paychex, Inc. 20,000 1,355,000
Reynolds & Reynolds Co., "A" 15,000 693,750
14
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Stocks - continued
Business Services - continued
Techno Solutions Co. 150,000 $ 4,050,000
Transaction System Architects, "A"* 35,600 1,904,600
Walsh International, Inc.* 2,400 29,700
------------
$ 38,031,350
- --------------------------------------------------------------------------------
Chemicals - 0.1%
Praxair, Inc 13,000 $ 502,125
- --------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.5%
Autodesk, Inc. 51,700 $ 2,106,775
Electronic Arts, Inc.* 7,400 197,950
First Data Corp. 39,501 3,002,076
Microsoft Corp.* 9,000 1,020,375
Spectrum HoloByte Industries* 70,000 498,750
Symantec Corp.* 25,000 403,125
------------
$ 7,229,051
- --------------------------------------------------------------------------------
Computer Software - Systems - 8.9%
Adobe Systems, Inc. 39,500 $ 1,698,500
AXENT Technologies* 1,000 18,000
BMC Software, Inc. * 117,000 7,122,375
Cadence Design Systems, Inc.* 165,000 8,621,250
Computer Association International 67,700 4,967,488
Compuware Corp.* 65,800 1,875,300
Control Data Systems* 30,500 716,750
Forte Software, Inc.* 800 49,400
I2 Technologies, Inc.* 600 24,450
Informix Corp.* 17,900 472,112
Oracle Systems Corp.* 300,700 10,148,625
Planning Sciences International 1,100 26,538
Sapient Corp.* 600 31,650
Softquad International, Inc.* 13,200 94,050
Sybase, Inc.* 136,600 3,739,425
Sykes Enterprises* 500 17,750
System Software Associates 140,900 3,363,988
------------
$ 42,987,651
- --------------------------------------------------------------------------------
Construction Services - 0.3%
Shaw Group, Inc.* 75,700 $ 1,485,612
- --------------------------------------------------------------------------------
Consumer Goods and Services - 0.6%
META Group, Inc.* 700 $ 20,825
Service Corp. International 7,600 403,750
Sola International, Inc.* 13,000 425,750
Tyco International Ltd. 55,000 2,124,375
------------
$ 2,974,700
- --------------------------------------------------------------------------------
Electrical Equipment - 0.3%
California Amplifier 46,600 $ 1,654,300
- --------------------------------------------------------------------------------
Electronics - 0.9%
Altera Corp.* 32,100 $ 1,693,275
LSI Logic Corp.* 36,700 1,321,200
Xilinx, Inc.* 35,100 1,294,312
------------
$ 4,308,787
- --------------------------------------------------------------------------------
15
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Stocks - continued
Entertainment - 2.3%
American Radio Systems, "A"* 20,000 $ 675,000
Grand Casinos, Inc.* 67,700 2,191,788
Harrah's Entertainment, Inc.* 115,000 3,967,500
Heritage Media Corp.* 55,000 2,110,625
Infinity Broadcasting, "A"* 4,300 124,700
LIN Television Corp.* 19,000 631,750
Penske Motorsports* 1,100 33,275
Showboat, Inc.* 8,000 256,000
Sinclair Broadcast Group, "A"* 32,000 1,220,000
------------
$ 11,210,638
- --------------------------------------------------------------------------------
Machinery - 0.1%
SI Handling Systems, Inc. 26,000 $ 243,750
- --------------------------------------------------------------------------------
Medical and Health Products - 0.8%
Arterial Vascular Engineering* 1,200 $ 52,800
BioChem Pharma, Inc.* 30,000 1,365,000
Boston Scientific Corp.* 13,700 590,812
CardioThoracic Systems* 400 9,450
Cohr, Inc. 1,400 31,150
IDEC Pharmaceuticals* 45,000 1,305,000
LanVision Systems, Inc.* 2,000 36,750
Neorx Corp.* 38,000 270,750
Transition System, Inc.* 2,300 55,775
------------
$ 3,717,487
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 5.2%
Columbia/HCA Health 7,200 $ 382,500
Community Health Systems * 54,800 2,376,950
Foundation Health* 13,800 539,925
Health Management Associates, "A"* 38,000 1,216,000
Healthsource, Inc. 54,600 1,863,225
HEALTHSOUTH Corp.* 160,000 5,940,000
IDX Systems Corp.* 18,500 679,875
Orthodontic Centers of America* 2,900 114,550
Oxford Health Plans* 24,400 1,232,200
PacifiCare Health Systems, "A"* 21,600 1,749,600
PacifiCare Health Systems, "B"* 21,100 1,769,762
Pharmaceutical Product Development* 900 38,025
Renal Treatment Centers* 8,600 249,400
Schein (Henry), Inc.* 1,600 57,600
Total Renal Care Holdings* 9,500 363,375
United Dental Care, Inc.* 1,700 66,725
United Healthcare 110,000 6,435,000
Western Staff Services, Inc. 900 14,288
------------
$ 25,089,000
- --------------------------------------------------------------------------------
Oils - 0.4%
Belco Oil & Gas Co.* 3,900 $ 112,612
Louisiana Land & Exploration 13,700 741,512
SEACOR Holdings, Inc.* 23,000 948,750
------------
$ 1,802,874
------------
16
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Stocks and Warrants - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Stocks - continued
Pollution Control - 0.3%
Republic Industries, Inc.* 8,200 $ 268,550
Sanifill, Inc.* 22,500 975,938
------------
$ 1,244,488
- --------------------------------------------------------------------------------
Printing and Publishing - 0.1%
Pulitzer Publishing Co. 7,200 $ 410,400
- --------------------------------------------------------------------------------
Restaurants and Lodging - 4.6%
Applebee's International, Inc. 110,800 $ 2,936,200
Bristol Hotel Co.* 2,700 79,312
HFS, Inc.* 280,000 14,385,000
Host Marriott Corp.* 62,000 829,250
Planet Hollywood International, "A"* 2,000 50,750
Promus Hotel Corp.* 92,850 2,634,649
Renaissance Hotels Group N.V.* 65,000 1,235,000
------------
$ 22,150,161
- --------------------------------------------------------------------------------
Special Products and Services - 0.1%
Central Package Corp. 4,350 $ 121,800
CompuServe Corp.* 4,200 119,700
YES! Entertainment Corp.* 31,100 365,425
------------
$ 606,925
- --------------------------------------------------------------------------------
Stores - 2.4%
BT Office Products International* 19,800 $ 344,025
Corporate Express, Inc.* 30,000 1,121,250
General Nutrition* 37,000 721,500
Hollywood Entertainment Corp.* 67,700 1,117,050
Micro Warehouse, Inc.* 69,900 3,005,700
Office Depot, Inc.* 217,200 4,859,850
OfficeMax, Inc.* 21,000 551,250
------------
$ 11,720,625
- --------------------------------------------------------------------------------
Telecommunications - 4.2%
Bay Networks, Inc.* 18,100 $ 570,150
CSG Systems International, Inc.* 1,200 38,400
Cabletron Systems, Inc.* 106,300 8,012,362
Cisco Systems, Inc.* 43,900 2,277,312
ECI Telecom Ltd. 50,000 1,306,250
Glenayre Technologies* 57,000 2,650,500
International Business Communications* 40,300 399,776
Premiere Technologies* 1,700 64,175
Sterling Commerce* 12,300 430,500
Tel-Save Holdings, Inc.* 3,450 57,788
Tellabs, Inc.* 15,000 $ 828,750
WorldCom, Inc.* 75,000 3,525,000
------------
$ 20,160,963
- --------------------------------------------------------------------------------
Total U.S. Stocks (Identified Cost, $165,890,439) $207,308,204
- --------------------------------------------------------------------------------
Total Stocks and Warrants (Identified Cost, $400,306,000) $469,594,619
- --------------------------------------------------------------------------------
17
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Convertible Bonds - 0.1%
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
Teco Electric & Machinery, 2.75s, 2004
(Electrical Equipment)## $ 210 $ 173,775
Teco Electric & Machinery, 2.75s, 2004
(Electrical Equipment) 40 33,000
United Micro Electric, 1.25s, 2004
(Electronics)## 126 154,980
- --------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $466,695) $ 361,755
Short-Term Obligation - 1.5%
================================================================================
General Electric Capital Corp.,
due 5/01/96, at Amortized Cost $ 7,375 $ 7,375,000
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $408,147,695) $477,331,374
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.0% 4,677,956
================================================================================
Net Assets - 100.0% $482,009,330
- --------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A security.
+ Restricted security.
++ Security valued by or at the direction of the Trustees.
See notes to financial statements
18
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
================================================================================
April 30, 1996
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $408,147,695) $ 477,331,374
Cash 46,273
Foreign currency, at value (identified cost, $160,077) 158,478
Net receivable for forward foreign currency
exchange contracts sold 353,568
Receivable for investments sold 4,584,345
Receivable for Fund shares sold 3,609,284
Interest and dividends receivable 940,020
Deferred organization expenses 18,043
Other assets 57,433
-------------
Total assets $ 487,098,818
-------------
Liabilities:
Payable for investments purchased $ 4,028,102
Payable for Fund shares reacquired 384,180
Net payable for forward foreign currency
exchange contracts purchased 178,380
Payable to affiliates -
Management fee 35,138
Shareholder servicing agent fee 7,503
Distribution fee 118,291
Accrued expenses and other liabilities 337,894
-------------
Total liabilities $ 5,089,488
-------------
Net assets $ 482,009,330
-------------
Net assets consist of:
Paid-in capital $ 403,129,478
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 69,356,394
Accumulated undistributed net realized gain on
investments and foreign currency transactions 11,000,154
Accumulated net investment loss (1,476,696)
-------------
Total $ 482,009,330
-------------
Shares of beneficial interest outstanding 25,028,350
-------------
Class A shares:
Net asset value and redemption price per share
(net assets of $173,106,641 / 8,944,416 shares
of beneficial interest outstanding) $19.35
-------------
Offering price per share (100/94.25) $20.53
-------------
Class B shares:
Net asset value and offering price per share
(net assets of $290,203,239 / 15,108,724 shares
of beneficial interest outstanding) $19.21
-------------
Class C shares:
Net asset value, offering price and redemption price per share
(net assets of $18,699,450 / 975,210 shares of
beneficial interest outstanding) $19.17
-------------
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A,
Class B and Class C shares.
See notes to financial statements
19
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
================================================================================
Six Months Ended April 30, 1996
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 2,235,674
Interest 668,861
Foreign taxes withheld (176,419)
-------------
Total investment income $ 2,728,116
-------------
Expenses -
Management fee $ 1,915,978
Trustees' compensation 19,106
Shareholder servicing agent fee (Class A) 113,727
Shareholder servicing agent fee (Class B) 284,978
Shareholder servicing agent fee (Class C) 11,299
Distribution and service fee (Class A) 265,902
Distribution and service fee (Class B) 1,295,356
Distribution and service fee (Class C) 75,323
Custodian fee 176,648
Postage 47,867
Auditing fees 40,388
Printing 30,316
Legal fees 8,890
Amortization of organization expenses 3,231
Miscellaneous 277,627
-------------
Total expenses $ 4,566,636
Preliminary reduction of expenses by distributor (76,356)
Fees paid indirectly (6,440)
-------------
Net expenses $ 4,483,840
-------------
Net investment loss $ (1,755,724)
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 11,867,236
Foreign currency transactions 201,187
-------------
Net realized gain on investments and
foreign currency transactions $ 12,068,423
-------------
Change in unrealized appreciation -
Investments $ 58,002,807
Translation of assets and liabilities in foreign currencies 831,442
-------------
Net unrealized gain on investments and foreign currency $ 58,834,249
-------------
Net realized and unrealized gain on investments
and foreign currency $ 70,902,672
-------------
Increase in net assets from operations $ 69,146,948
-------------
See notes to financial statements
20
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
================================================================================
Six Months Year Ended
Ended October 31,
April 30, 1996 1995
- --------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,755,724) $ (1,957,148)
Net realized gain on investments and
foreign currency transactions 12,068,423 38,220,302
Net unrealized gain (loss) on investments
and foreign currency translation 58,834,249 (16,132,432)
------------- -------------
Increase in net assets from operations $ 69,146,948 $ 20,130,722
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (102,984) $ --
From net realized gain on investments and
foreign currency transactions (Class A) (13,664,586) (1,679,929)
From net realized gain on investments and
foreign currency transactions (Class B) (21,606,221) (1,881,561)
From net realized gain on investments and
foreign currency transactions (Class C) (1,215,266) (124,750)
------------- -------------
Total distributions declared to shareholders $ (36,589,057) $ (3,686,240)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 166,084,176 $ 196,631,074
Net asset value of shares issued
to shareholders in reinvestment
of distributions 27,804,861 2,741,334
Cost of shares reacquired (148,766,325) (191,833,455)
------------- -------------
Increase in net assets from
Fund share transactions $ 45,122,712 $ 7,538,953
------------- -------------
Total increase in net assets $ 77,680,603 $ 23,983,435
Net assets:
At beginning of period 404,328,727 380,345,292
------------- -------------
At end of period (including accumulated net
investment loss and accumulated
undistributed net investment income of
$1,476,696 and $382,012, respectively) $ 482,009,330 $ 404,328,727
============= =============
See notes to financial statements
21
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
====================================================================================================================================
Six Months Year Ended Six Months Year Ended
Ended October 31, Ended October 31,
April 30, ------------------- April 30, ------------------
1996 1995 1994* 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 18.16 $ 17.45 $ 15.00 $ 17.97 $ 17.32 $ 15.00
-------- -------- -------- -------- -------- --------
Income from investment operations# -
Net investment loss [ss] $ (0.03) $ -- $ (0.02) $ (0.10) $ (0.14) $ (0.15)
Net realized and unrealized gain on
investments and foreign currency
transactions 2.95 0.93 2.47 2.93 0.92 2.47
-------- -------- -------- -------- -------- --------
Total from investment operations $ 2.92 $ 0.93 $ 2.45 $ $ 0.78 $ 2.32
-------- -------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.01) $ -- $ -- $ -- $ -- $ --
From net realized gain
on investments and foreign
currency transactions (1.72) (0.22) -- (1.59) (0.13) --
-------- -------- -------- -------- -------- --------
Total distributions declared
to shareholders $ (1.73) $ (0.22) $ -- $ (1.59) $ (0.13) $ --
-------- -------- -------- -------- -------- --------
Net asset value - end of period $ 19.35 $ 18.16 $ 17.45 $ 19.21 $ 17.97 $ 17.32
======== ======== ======== ======== ======== ========
Total return+++ 17.31%++ 5.47% 16.33%++ 16.83%++ 4.61% 15.47%++
Ratios (to average net assets)/Supplemental data: [ss]
Expenses## 1.57%+ 1.63% 1.57%+ 2.39%+ 2.45% 2.39%+
Net investment income (loss) (0.30)%+ 0.02% (0.14)%+ (1.11)%+ (0.80)% (0.95)%+
Portfolio turnover 44% 149% 100% 44% 149% 100%
Average commission rate### $ 0.0140 -- -- $ 0.0140 -- --
Net assets at end of period (000 omitted) $173,107 $143,543 $131,503 $290,203 $247,437 $236,971
<FN>
* For the period from the commencement of offering of Class A and Class B shares, November 18,
1993 to October 31, 1994.
+ Annualized.
++ Not annualized.
+++ Total returns for Class A shares do not include the sales charge. If the charge had been included, the results would have been
lower.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
[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) $ -- $ (0.04) $ -- $ -- $ --
Ratios (to average net assets):
Expenses## 1.67%+ 1.73% 1.67%+ -- -- --
Net investment loss (0.40)%+ (0.08)% (0.24)%+ -- -- --
</FN>
</TABLE>
See notes to financial statements
22
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
=======================================================================================
Six Months
Ended Year Ended October 31,
April 30, ----------------------
1996 1995 1994**
- ---------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 17.96 $ 17.34 $ 16.04
------- ------- -------
Income from investment operations# -
Net investment loss $ (0.09) $ (0.13) $ (0.13)
Net realized and unrealized gain on
investments and foreign currency transaction 2.91 0.92 1.43
------- ------- -------
Total from investment operations $ 2.82 $ 0.79 $ 1.30
------- ------- -------
Less distributions declared to shareholders
from net realized gain on investments
and foreign currency transactions $ (1.61) $ (0.17) $ --
------- ------- -------
Net asset value - end of period $ 19.17 $ 17.96 $ 17.34
======= ======= =======
Total return 16.89%++ 4.68 8.10%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.32%+ 2.38 2.31%+
Net investment loss (1.03)%+ (0.72)% (0.83)%+
Portfolio turnover 44% 149% 100%
Average commission rate### $0.0140 -- --
Net assets at end of period (000 omitted) $18,699 $13,349 $11,872
<FN>
** 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.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or
after September 1, 1995.
</FN>
</TABLE>
23
<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
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Investments in foreign
securities are vulnerable to the affects of changes in the relative values of
the local currency and the U.S. dollar and to the effects of changes in each
country's legal, political and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are 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.
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.
24
<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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return, and consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
that only distributions in excess of tax basis earnings and profits are reported
in the financial statements as a tax return of capital. Differences in the
recognition or classification of income between the financial statements and tax
earnings and profits which result in temporary over-distributions for financial
statement purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate of
0.90% 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. ("Batterymarch"), a Maryland corporation, to assist
in the performance of its services. Effective April 1, 1996, Foreign & Colonial
Management Limited and its subsidiary, Foreign & Colonial Emerging Markets
Limited, replaced Batterymarch as a sub-adviser to the Fund.
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 $3,306 for the period ended
April 30, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$41,834 as its portion of the sales charge on sales of Class A shares of the
Fund. The Trustees have adopted a 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 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
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
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 $24,403 for the period ended April 30, 1996. MFD is waiving the 0.10%
distribution fees for an indefinite period. Fees incurred under the distribution
plan during the period ended April 30, 1996 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 $10,994 and $1,798 for Class B and Class C
shares, respectively, for the period ended April 30, 1996. Fees incurred under
the distribution plans during the period ended April 30, 1996 were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis.
Purchases over $1 million into Class A shares and certain purchases by
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within twelve months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class C shares in the event of a shareholder redemption within twelve months of
purchases made on or after April 1, 1996. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the period ended
April 30, 1996 were $735, $296,685 and $101 for Class A, Class B and Class C
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets of each class of share 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
$221,596,773 and $180,694,602, respectively.
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 $ 408,147,695
=============
Gross unrealized appreciation $ 87,242,676
Gross unrealized depreciation (18,058,997)
-------------
Net unrealized appreciation $ 69,183,679
=============
(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
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
--------------------------- ----------------------------
Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C>
Shares sold 6,280,351 $ 113,120,236 5,928,735 $ 101,800,639
Shares issued to shareholders in
reinvestment of distributions 658,950 11,307,537 80,625 1,312,572
Shares reacquired (5,897,498) (106,363,243) (5,642,373) (97,398,576)
---------- ------------- ---------- -------------
Net increase 1,041,803 $ 18,064,530 366,987 $ 5,714,635
========== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
--------------------------- ----------------------------
Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C>
Shares sold 2,625,100 $ 46,823,428 5,294,273 $ 88,484,082
Shares issued to shareholders in
reinvestment of distributions 923,148 15,758,139 83,849 1,359,205
Shares reacquired (2,211,127) (39,626,186) (5,291,911) (89,028,777)
---------- ------------- ---------- -------------
Net increase 1,337,121 $ 22,955,381 86,211 $ 814,510
========== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
--------------------------- ----------------------------
Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C>
Shares sold 343,079 $ 6,140,512 375,273 $ 6,346,353
Shares issued to shareholders in
reinvestment of distributions 43,379 739,185 4,294 69,557
Shares reacquired (154,659) (2,776,896) (320,994) (5,406,102)
--------- ------------- --------- -------------
Net increase 231,799 $ 4,102,801 58,573 $ 1,009,808
========= ============= ========= =============
</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 equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the period ended April 30,
1996 was $2,410.
(7) Financial Instruments
The Fund regularly trades financial instruments with off-balance sheet risk in
the normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the 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 April 30, 1996, is as follows:
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
Net Unrealized
Settlement Contracts to In Exchange Contracts Appreciation
Date Deliver/Receive for at Value (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 6/20/96 DEM 9,280,000 $ 6,315,444 $ 6,074,428 $ 241,016
6/20/96 FRF 46,044,000 9,143,969 8,923,051 220,918
6/20/96 JPY 986,209,000 9,357,268 9,465,634 (108,366)
----------- ----------- ----------
$24,816,681 $24,463,113 $ 353,568
=========== =========== ==========
Purchases 6/20/96 DEM 9,280,000 $ 6,178,233 $ 6,074,428 $(103,805)
6/20/96 FRF 46,044,000 8,997,626 8,923,051 (74,575)
----------- ----------- ----------
$15,175,859 $14,997,479 $(178,380)
=========== =========== =========
</TABLE>
DEM = Deutsche Marks
FRF = French Francs
JPY = Japanese Yen
At April 30, 1996, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At April 30, 1996, the
Fund owned the following restricted securities (constituting 3.14% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933 (the 1933 Act). The Fund does
29
<PAGE>
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 Shares/Par
Description Acquisition Amount Cost Value
=================================================================================================
<S> <C> <C> <C> <C>
Acer, Inc., GDR+ 10/20/95- 1/25/96 31,700 $ 403,513 $ 362,965
Bangladesh Fund 11/14/94-11/18/94 27,200 298,730 197,200
Cadenalco Gran Cadena de Almacenes
Colombia, ADR+ 11/17/95 23,000 356,500 391,000
Cementos Diamante S.A., ADR+ 5/17/94 11,100 170,274 216,450
Cia Brasileira Distribuicao
Grupo Pao de Acucar, GDS+ 9/21/95 45,000 495,000 663,750
Corporation GEO S.A. de C.V., ADR+ 7/24/94 45,000 638,000 711,765
Eczactibasi Yapi+ 6/06/95 1,000,000 151,198 110,328
Fleming Russia Securities Fund 7/07/95 143,400 1,161,540 950,742
Grupo Financiaro Banamex, "L"+ 6/28/95 11,996 27,394 24,721
GVC Corp, GDR+ 3/20/96 3,140 32,743 29,045
Hindalco Industries Ltd. 1/17/96- 1/25/96 14,900 448,950 659,325
India Gateway Fund Ltd. 5/02/95 80,000 812,000 511,200
India Magnum Fund NV 11/19/93- 1/24/96 27,900 1,484,150 1,454,148
International Business Communications 8/29/95 40,300 399,776 399,776
Korea Europe Fund 11/02/94- 1/9/96 42 186,125 189,000
Korea Mobile
Telecommunications, GDR+ 1/06/95- 1/25/96 37,500 1,229,485 2,137,500
Loewen Group+ 3/19/96 21,000 603,269 632,298
Mavesa S.A., ADR+ 11/22/93 1,097 9,632 4,799
Mirgor Sacifia, ADR+ 10/20/94 108,000 503,250 310,500
Petronas Gas Berhad+ 7/31/95 186,000 632,323 820,665
Reliance Industries, GDS 11/06/95 55,300 1,061,175 884,800
Rhodia-Ster S.A., GDR+ 12/19/94 36,000 502,249 319,500
Samsung Electronics Co., GDS+ 3/13/95- 7/10/95 14,809 413,882 592,360
Siliconware Precision Industries
Co., GDR+ 9/19/95-12/05/95 12,200 185,065 166,225
SIV Industries Ltd., GDR+ 7/28/94- 1/25/96 91,200 515,510 319,200
Steel Authority of India Ltd.+ 3/07/96 40,000 519,000 617,400
Teco Electric & Machinery,
2.75s, 2004+ 11/04/94- 1/03/95 210,000 207,650 173,775
Teco Electric & Machinery,
2.75s, 2004 11/04/94- 1/03/94 40,000 37,300 33,000
United Micro Electric, 1.25s, 2004+ 6/06/95 126,000 221,745 154,980
Usiminas, ADR+ 9/20/94 94,700 1,139,836 1,088,576
Yageo Corp., GDR+ 3/27/95 1,200 9,196 11,400
-----------
</TABLE>
+ SEC Rule 144A restriction.
30
<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 (a series of MFS Series
Trust VIII) as of April 30, 1996, the related statement of operations for the
six months then ended, the statement of changes in net assets for the six months
then ended and the year ended October 31, 1995, and the financial highlights for
the six months ended April 30, 1996 and for each of the years in the two-year
period ended October 31, 1995. 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
April 30, 1996 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 April 30, 1996, 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
June 7, 1996
------------------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
31
<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.
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
32
<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.
33
<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
34
<PAGE>
MFS INVESTMENT OPPORTUNITIES
MUTUAL FUNDS
MFS Family of Funds[Registration Mark], shown on the following 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.
35
<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>
MFS [Registration Mark] WORLD GROWTH FUND [DALBAR LOGO] Bulk Rate
U.S. Postage
PAID
500 Boylston Street Permit #55638
Boston, MA 02116 Boston, MA
[MFS LOGO]
THE FIRST NAME IN MUTUAL FUNDS
MWF-3 6/96/57M 9/209/309
<PAGE>
