<PAGE>
[logo] MFS Annual Report
INVESTMENT MANAGEMENT for Year Ended
October 31, 1996
MFS{R) WORLD GROWTH FUND
[graphic omitted]
AMERICA LEARNS HOW "WE INVENTED THE MUTUAL FUND", (see page 36)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Portfolio Managers' Overview .............................................. 3
Fund Facts ................................................................ 4
Portfolio Managers' Profiles .............................................. 5
Portfolio Concentration ................................................... 5
Performance Summary ....................................................... 6
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 21
Notes to Financial Statements ............................................. 27
Independent Auditors' Report .............................................. 34
MFS Family of Funds ....................................................... 35
Trustees and Officers ..................................................... 37
HIGHLIGHTS
* FOR THE 12 MONTHS ENDED OCTOBER 31, 1996, THE NET ASSET VALUE OF CLASS A
SHARES PROVIDED A TOTAL RETURN OF 15.73%, CLASS B SHARES 14.77%, AND CLASS
C SHARES 14.88%.
* OVERWEIGHTING THE UNITED STATES, ONE OF THE BEST-PERFORMING WORLD MARKETS
OVER THE PAST YEAR, HELPED THE FUND'S PERFORMANCE, AS DID OUR
OVERWEIGHTING IN TWO STRONG SECTORS, TECHNOLOGY AND LEISURE.
* PERFORMANCE WAS ALSO HELPED BY AN OVERWEIGHTING IN EMERGING MARKETS,
ESPECIALLY IN LATIN AMERICAN COUNTRIES SUCH AS BRAZIL, MEXICO, AND PERU,
WHOSE ECONOMIES APPEAR TO BE COMING OUT OF RECESSION FASTER THAN EXPECTED.
* WHILE CONTINUED ECONOMIC SLOWDOWN IN EUROPE HURT SOME OF OUR MORE
CYCLICAL-GROWTH STOCK HOLDINGS, WE BELIEVE BUYING OPPORTUNITIES HAVE BEEN
CREATED BY THIS SLOWER-THAN-ANTICIPATED RECOVERY.
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
As we enter the final months of 1996, the U.S. economy appears to have settled
into a pattern of moderate growth and inflation -- two factors that we think can
be important contributors to a favorable long-term investment climate. During
the first quarter of 1996, real (inflation-adjusted) economic growth was 2.3% on
an annualized basis, followed by a rate of 4.7% in the second quarter. However,
this unexpectedly high level was followed by a more moderate 2.2% pace during
the third quarter. Overall, real growth in gross domestic product has surpassed
our expectations this year, and we now expect that growth for all of 1996 could
exceed 2.5%. Although individual consumers appear to be carrying an excessive
debt load, the consumer sector itself, which represents two-thirds of the
economy, continues to support the automobile and housing markets. Consumer
spending has also been positively impacted by widespread job growth and, more
recently, increasing wages. However, recent statistics appear to show a slowdown
in consumer spending. This is particularly true when considering overall retail
sales, which have been flat for several months. Furthermore, the economies of
Europe and Japan continue to be in the doldrums, weakening U.S. export markets
while subduing the capital spending plans of American corporations. Thus, while
economic growth should continue, we expect some slackening toward the end of the
year.
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 market this
year. Although we believe the equity market represents fair value at current
levels, the expected slowdown in corporate earnings growth and interest rate
increases earlier in the year have raised some near-term concerns, as was seen
in July's stock market correction. Further interest rate increases, and an
acceleration of inflation coupled with an additional slowdown in corporate
earnings growth, could have a negative effect on the stock market in the near
term. 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
equity market's longer-term health. We believe 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,
while we have some near-term concerns, we remain quite constructive on the
long-term viability of the equity market.
Outside the United States, we see similar economic backdrops, with slow to
moderate growth and low inflation in the developed countries of Europe and
Japan. We believe the long-term underperformance of many of these markets
relative to the United States has created some attractive valuations. European
markets such as the United Kingdom and Germany have recently eased monetary
policy, a trend which may continue as German and other central banks seek
economic stimulus. Meanwhile, corporate earnings growth is expected to improve
in these markets, which may lead to their outperforming the U.S. market.
Finally, as you may notice, this report to shareholders incorporates a number
of changes which we hope you will find informative and useful. Following the
Portfolio Managers' Overview, we have added new information on the Fund's
holdings, including a chart illustrating the portfolio's concentration in the
types of investments that meet its criteria. Near the back of the report,
telephone numbers and addresses are listed if you would like to contact MFS.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
November 12, 1996
<PAGE>
PORTFOLIO MANAGERS' OVERVIEW
Dear Shareholders:
The Fund's performance over the past year reflected our decision to continue
overweighting stocks in the U.S. and emerging markets. As a result, for the 12
months ended October 31, 1996, Class A shares of the Fund provided a total
return of 15.73%, Class B shares 14.77%, and Class C shares 14.88%. These
returns assume the reinvestment of distributions but exclude the effects of any
sales charges. During this same period, the Morgan Stanley Capitol International
(MSCI) World Index, a broad, unmanaged index of global equities, returned
16.83%.
The Fund invests in companies worldwide that are expected to grow much faster
than the overall U.S. economy, in what we consider the most attractive markets
with the best long-term growth potential. We have identified three of these
markets: U.S. small-capitalization and emerging growth stocks, which represent
43% of the Fund's assets; growth stocks in mature foreign markets such as Europe
and Japan, representing 33%; and stocks in emerging markets, representing 22%.
Overweighting the United States, one of the best-performing world markets over
the past year, helped the Fund's performance, as did our overweighting in two
strong sectors, technology and leisure. The U.S. sector of the portfolio focuses
on companies with dynamic earnings growth driven by leadership positions in
rapidly growing markets. Thus, our holdings include software and networking
companies such as Oracle, BMC Software, and Cisco, whose focus on increasing
productivity is driving earnings growth. In the consumer area, lodging companies
such as HFS and Promus Hotel significantly outperformed the market due to strong
demand and favorable pricing. Performance was also helped by an underweighting
in health maintenance organizations, where pricing and utilization trends have
continued to deteriorate.
The Fund's performance was helped by its overweighting in emerging markets,
especially in Latin American countries such as Brazil, Mexico and Peru, whose
economies appear to be coming out of recession faster than expected. Performance
was also helped by overweighting Hong Kong and China, where solid gross domestic
product growth prevailed in the face of slowing inflation, and by underweighting
the rest of emerging Asia, where economic growth rates are slowing from the
accelerated levels of the early 1990s. We also identified many companies in
Eastern Europe whose strong export growth drove earnings acceleration and
contributed to performance.
On the negative side, performance was hurt by the Fund's holdings in Japan, a
lackluster market. There, economic recovery was disappointing despite low
interest rates. The continued economic slowdown in Europe also hurt some of our
more cyclical-growth stock holdings. However, we believe buying opportunities
have been created by this slower-than-anticipated recovery. Our favorite area
now in developed foreign markets is continental Europe, where we expect
companies focusing on restructuring, turnaround, and unit growth to do well in
the anticipated slow economic recovery. Reflecting this strategy, major holdings
include ASDA, a U.K. retailer; Wolters Kluwer, a Dutch publisher; and
Novo-Nordisk, a Scandinavian pharmaceutical company.
Looking forward, the Fund must be attentive to three different economic
trends. First, we believe that U.S. growth in 1997 could be slower relative to
1996, making the higher earnings rates of U.S. emerging growth companies even
more valuable. Second, we expect Europe and Japan to continue their recoveries
from recession, with an accompanying acceleration in earnings growth. Third, we
anticipate robust earnings increases from companies in emerging markets, where
market reforms could enhance trade and open up further opportunities for
development. Recognizing these pervasive trends, we are constantly searching for
the fastest growing companies at the most attractive valuations.
Respectfully,
/s/ John W. Ballen /s/ David Mannheim /s/ Toni Y. Shimura
John W. Ballen David Mannheim Toni Y. Shimura
Portfolio Manager Portfolio Manager Portfolio Manager
FUND FACTS
STRATEGY: THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK
CAPITAL APPRECIATION BY INVESTING IN SECURITIES
OF COMPANIES WORLDWIDE THAT ARE GROWING AT RATES
EXPECTED TO BE WELL ABOVE THE GROWTH RATE OF THE
OVERALL U.S. ECONOMY.
COMMENCEMENT OF
INVESTMENT OPERATIONS: NOVEMBER 18, 1993
SIZE: $474.8 MILLION NET ASSETS AS OF OCTOBER 31, 1996
<PAGE>
PORTFOLIO MANAGERS' PROFILES
JOHN BALLEN BEGAN HIS CAREER AT MFS AS AN INDUSTRY SPECIALIST IN 1984. A
GRADUATE OF HARVARD COLLEGE, THE UNIVERSITY OF NEW SOUTH WALES AND THE
STANFORD UNIVERSITY GRADUATE SCHOOL OF BUSINESS ADMINISTRATION, HE 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 AND ON MAY 1, 1995 HE BECAME
CHIEF EQUITY OFFICER. HE HAS BEEN PORTFOLIO MANAGER OF MFS WORLD GROWTH FUND
SINCE 1993.
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.
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1996
<TABLE>
TOP TEN HOLDINGS
<C> <C>
HFS, INC. ASTRA AB
Franchiser of hotels and real estate companies Swedish pharmaceutical manufacturer
ORACLE SYSTEMS CORP. COMPUTER ASSOCIATES INTERNATIONAL, INC.
Developer and manufacturer of Computer software company
database software
CISCO SYSTEMS, INC.
TECHNOLOGY SOLUTIONS CO. Computer network developer
Computer systems consulting company
SHARP CORP.
CADENCE DESIGN SYSTEMS, INC. Japanese consumer and industrial electronics
Computer software and systems company company
BMC SOFTWARE, INC. DAIMLER-BENZ AG
Computer software company German automaker
</TABLE>
<PAGE>
LARGEST SECTORS
Miscellaneous 64.2%
Technology 18.5%
Leisure 8.4%
Health Care 4.8%
Utilities & Communications 4.7%
*For a more complete breakdown refer to Portfolio of Investments.
TAX FORM SUMMARY
IN JANUARY 1997, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1996.
THE MFS WORLD GROWTH FUND HAS DESIGNATED $4,074,755 AS A LONG-TERM CAPITAL
GAIN DISTRIBUTION.
FOREIGN TAX CREDIT
THE FUND IS ESTIMATED TO HAVE DERIVED APPROXIMATELY 77.24% OF ITS ORDINARY
INCOME FROM DIVIDENDS PAID BY FOREIGN COMPANIES, AND TO HAVE PAID FOREIGN
TAXES EQUIVALENT TO APPROXIMATELY 8.84% OF ITS ORDINARY INCOME.
DIVIDENDS RECEIVED DEDUCTION
FOR THE YEAR ENDED OCTOBER 31, 1996, THE AMOUNT OF DISTRIBUTIONS FROM
ORDINARY INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 1.00%.
PERFORMANCE SUMMARY
The information on the following page illustrates the historical performance of
MFS World Growth Fund Class A shares and Class B shares in comparison to various
market indicators. Class A share results reflect the deduction of the 5.75%
maximum sales charge; benchmark comparisons are unmanaged and do not reflect any
fees or expenses. You cannot invest in an index. All results are historical and
assume the reinvestment of dividends and capital gains.
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from December 1, 1993 to October 31, 1996)
MFS World Consumer MFS World
Growth Fund MSCI Russell S&P 500 Price Index Growth Fund
Class A World 2000 Composite U.S. Class B
----------- ----- ------- --------- ----------- -----------
12/93 9422.00 10000.0 10000.0 10000.0 10000.0 10000.0
10/94 10954.0 11464.0 10305.0 10493.0 10254.0 11547.0
10/95 11553.0 12613.0 12193.0 13252.0 10542.0 12079.0
10/96 13370.0 14737.0 14218.0 16428.0 10860.0 13863.0
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 Year Life of Fund+
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS World Growth Fund (Class A) including 5.75% sales charge + 9.06% +10.36%
- ------------------------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class A) at net asset value +15.73% +12.60%
- ------------------------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class B) with CDSC +10.77% +10.87%
- ------------------------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class B) without CDSC +14.77% +11.69%
- ------------------------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class C) with CDSC +13.88% +11.80%
- ------------------------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class C) without CDSC +14.88% +11.80%
- ------------------------------------------------------------------------------------------------------------------------
Average global portfolio## +15.52% +11.25%
- ------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital International (MSCI) World Index +16.83% +14.21%
- ------------------------------------------------------------------------------------------------------------------------
Russell 2000 Total Return Index* +16.61% +12.82%
- ------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index** +24.08% +18.54%
- ------------------------------------------------------------------------------------------------------------------------
Consumer Price Index# + 3.01% + 2.87%
- ------------------------------------------------------------------------------------------------------------------------
<FN>
*The Russell 2000 Total Return Index is comprised of 2,000 of the smallest U.S.-domiciled company common stocks which
are traded in the United States on the New York Stock Exchange, the American Stock Exchange, and NASDAQ.
**The Standard & Poor's 500 Composite Index (the S&P 500) is a popular, unmanaged index of common stock performance.
#The Consumer Price Index is a popular measure of change in prices.
##Source: Lipper Analytical Services.
+Commencement of operations for class A and B shares is November 18, 1993.
</FN>
</TABLE>
Class A SEC results include the maximum 5.75% sales charge. Class B SEC results
reflect the applicable contingent deferred sales charge (CDSC), which declines
over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. 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. See
the prospectus for details.
Class C share performance includes the performance of the Fund's Class A shares
for periods prior to the commencement of offering of Class C shares on January
3, 1994. Sales charges and operating expenses for Class A and Class C shares
differ. The Class A share performance, which is included within the Class C
share SEC performance, has been adjusted to reflect the CDSC generally
applicable to Class C shares rather than the initial sales charge generally
applicable to Class A shares. Class C share performance has not been adjusted,
however, to reflect differences in operating expenses (e.g., Rule 12b-1 fees),
which generally are lower for Class A shares.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
<PAGE>
PORTFOLIO OF INVESTMENTS - October 31, 1996
Stocks - 84.7%
- ---------------------------------------------------------------------------
Issuer Shares Value
- ---------------------------------------------------------------------------
Foreign Stocks - 53.5%
Argentina - 0.7%
Banco de Galicia y Buenos Aires S.A. de
C.V., ADR (Banks and Credit Companies) 33,821 $ 613,006
Mirgor Sacifia, ADR (Auto Parts)##* 108,000 172,800
Perez Companc S.A. (Oils) 102,672 652,097
Telefonica de Argentina, ADR (Utilities
- Telephone) 25,100 583,575
YPF Sociedad Anonima, ADR (Oils) 56,000 1,274,000
------------
$ 3,295,478
- ---------------------------------------------------------------------------
Australia - 1.4%
Broken Hill Proprietary (Mining) 53,400 $ 708,405
News Corp. Ltd. (Media) 430,400 2,447,496
News Corp. Ltd., Preferred (Media) 43,700 192,088
Sydney Harbour Casinos Ltd., Preferred
(Entertainment)* 655,800 934,908
Western Mining Corp. Ltd., ADS (Metals
and Minerals) 377,060 2,368,148
------------
$ 6,651,045
- ---------------------------------------------------------------------------
Brazil - 2.9%
Banco Bradesco S.A., Preferred (Banks
and Credit Companies) 111,171,934 $ 947,986
Brasmotor S.A., Preferred (Furniture and
Home Appliances)* 2,560,000 869,697
CEMIG (Utilities - Electric) 17,500,000 557,043
Centrais Eletricas Brasile, ADR
(Utilities - Electric) 63,200 1,027,000
Cia Brasileira de Distribuicao Grupo Pao
de Acucar, GDS (Supermarkets)## 45,000 877,500
Cia Cervejaria Brahma, Preferred
(Beverages) 2,630,433 1,625,937
Cia de Tecidos Norte de Minas -
Coteminas (Textiles) 470,000 157,841
Cia Siderurgica de Tubarao (Steel) 23,400 409,500
Cia Vale do Rio Doce, Preferred (Iron
and Steel) 29,553 612,751
Itausa Investimentos Itau S.A.
(Conglomerate) 750,000 591,356
Petrol Brasileiros (Oils) 8,110,000 1,049,966
Rhodia-Ster S.A., GDR (Chemicals)## 36,000 112,500
Sider Paulista, Pfd., "B" (Iron and
Steel)* 168,000 127,557
Souza Cruz S.A. (Tobacco) 87,000 523,372
Telebras, ADR (Telecommunications) 39,490 2,932,133
Telecommunicacoes Sao Paulo,
(Telecommunications) 107,140 18,251
Telecommunicacoes Sao Paulo, Preferred
(Telecommunications)* 2,500,000 457,510
Usinas Siderurgicas de Minas Gerais
S.A., ADR (Steel) ## 94,700 970,675
------------
$ 13,868,575
- ---------------------------------------------------------------------------
Canada - 1.0%
BioChem Pharma, Inc. (Biotechnology)* 36,400 $ 1,551,550
Echo Bay Mines Ltd. (Precious Metals and
Minerals) 147,200 1,150,000
Loewen Group, Inc. (Business Services)## 16,000 633,119
Placer Dome, Inc. (Precious Metals and
Minerals) 55,400 1,329,600
------------
$ 4,664,269
- ---------------------------------------------------------------------------
Chile - 0.1%
Moneda Chile Fund Ltd. (Finance)*+ 63,000 $ 567,000
- ---------------------------------------------------------------------------
China - 0.3%
Huaneng Power International, Inc., ADR
(Utilities - Electric) 19,800 $ 301,950
Qingling Motors Co., "H" (Automotive) 694,000 291,721
Shanghai Petrochemical Co., Ltd. (Oils) 2,417,000 648,664
Yizheng Chemical Fibre Co., Ltd.
(Textiles) 1,476,000 341,715
------------
$ 1,584,050
- ---------------------------------------------------------------------------
Colombia - 0.7%
Banco Industrial Colombiano, ADR (Banks
and Credit Companies) 127,000 $ 2,317,750
Cementos Diamante S.A., ADR
(Construction)## 90,700 1,258,462
------------
$ 3,576,212
- ---------------------------------------------------------------------------
Denmark - 0.4%
Novo-Nordisk A/S, "B"
(Biopharmaceuticals) 11,336 $ 1,882,494
- ---------------------------------------------------------------------------
France - 3.0%
Alcatel Alsthom Compagnie (Electrical
Equipment) 40,738 $ 3,465,711
Business Objects S.A. (Computer
Software)* 9,600 142,800
Compagnie de Suez (Banks and Credit
Companies) 44,380 1,905,958
Compagnie Financiere de Paribas (Banks
and Credit Companies) 27,700 1,778,205
Eaux (Compagnie Generale) (Utilities - Water) 27,576 3,287,597
Sidel (Machinery) 17,412 1,158,875
Valeo S.A. (Automotive) 39,092 2,340,181
------------
$ 14,079,327
- ---------------------------------------------------------------------------
Germany - 3.5%
Adidas AG (Stores) 9,450 $ 808,044
Daimler-Benz AG (Automotive) 90,530 5,301,790
Hoechst AG (Chemicals) 24,920 934,910
Mannesmann AG (Diversified Machinery) 8,541 3,308,372
SAP AG (Computer Software - Systems) 19,600 2,631,410
SAP AG, ADR (Computer Software -
Systems)## 8,000 354,000
Volkswagen AG (Automotive) 7,948 3,121,867
------------
$ 16,460,393
- ---------------------------------------------------------------------------
Hong Kong - 3.5%
Bank of East Asia (Banks and Credit
Companies) 252,360 $ 985,717
Cheung Kong Holdings (Restaurants) 245,000 1,964,639
China Light & Power (Utilities - Electric) 400 1,857
Citic Pacific Ltd. (Conglomerate) 200,000 972,619
Hang Seng Bank (Banks and Credit
Companies) 156,000 1,851,210
Henderson China Holdings Ltd. (Real
Estate)* 185,272 419,346
Hutchison Whampoa (Real Estate) 267,000 1,864,790
New World Development Co. (Real Estate) 605,000 3,521,218
Sun Hung Kai Properties (Real Estate) 173,000 1,969,037
Swire Pacific Air Ltd. (Transportation) 165,000 1,456,504
Wharf Holdings Ltd. (Real Estate) 308,000 1,270,769
Zhenhai Refining & Chemical Co. Ltd.
(Oils) 1,200,000 318,171
------------
$ 16,595,877
- ---------------------------------------------------------------------------
India - 0.9%
Gujarat Ambuja Cements Ltd. (Building
Materials) 50,000 $ 412,500
Hindalco Industries Ltd. (Mining)## 7,450 133,206
India Gateway Fund Ltd. (Finance)+* 107,000 520,020
ITC Ltd. (Conglomerate) 165,000 1,463,550
Mahanagar Telephone Nigam Ltd.
(Telecommunications) 190,000 1,209,578
Tata Engineering & Locomotive Co. Ltd.
(Autos and Trucks) 65,000 752,535
------------
$ 4,491,389
- ---------------------------------------------------------------------------
Indonesia - 0.3%
Industrial Development Bank (Banks and
Credit Companies) 280,000 $ 824,225
PT Gudang Garam (Tobacco) 144,000 575,184
------------
$ 1,399,409
- ---------------------------------------------------------------------------
Israel - 0.2%
Koor Industries Ltd., ADR (Conglomerate) 8,700 $ 151,163
NICE Systems Ltd., ADR
(Telecommunications)* 16,700 336,087
Teva Pharmaceutical Industries Ltd., ADR
(Pharmaceuticals) 8,700 364,313
------------
$ 851,563
- ---------------------------------------------------------------------------
Italy - 2.4%
Fiat S.p.A. (Automotive) 1,143,900 $ 3,055,675
Fila Holdings S.p.A., ADR (Apparel and
Textiles) 23,600 1,699,200
Gucci Group N.V. (Retail - Apparel)* 2,100 144,900
Instituto Nazionale delle Assicurazioni
(Insurance) 538,000 742,497
Luxottica Group S.p.A., ADR (Consumer
Goods and Services) 19,000 1,206,500
Olivetti Group (Computers)* 2,839,628 824,951
Pirelli S.p.A (Tire and Rubber) 1,435,400 2,543,627
Stet Societa Finanziaria Telefonica
S.p.A. (Telecommunications) 293,800 1,014,171
------------
$ 11,231,521
- ---------------------------------------------------------------------------
Japan - 11.3%
Canon, Inc. (Office Equipment) 16,000 $ 305,723
DDI Corp. (Telecommunications) 392 2,937,681
Daiei, Inc. (Retail) 245,000 2,168,902
Daiwa Securities Co. Ltd. (Finance) 253,000 2,727,583
Eisai Co. Ltd. (Pharmaceuticals) 77,000 1,376,808
Isetan Co. (Retail) 38,000 506,267
Ito-Yokado Co. Ltd. (Retail) 39,000 1,941,625
Japan Tobacco, Inc. (Consumer Goods and
Services) 31 218,459
Kawasaki Heavy Industries (Aerospace) 377,000 1,721,597
Komori Corp. (Printing Machinery) 63,000 1,413,621
Kyocera Corp. (Electronics) 21,000 1,382,330
Matsuzakaya Co., Ltd. (Retail) 69,000 725,743
Mitsubishi Trust & Banking (Finance) 132,000 1,943,729
Murata Manufacturing Co. Ltd.
(Electrical Equipment) 17,000 545,359
NEC Corp. (Electronics - Semiconductor) 135,000 1,467,263
Nichido Fire & Marine Ltd. (Insurance) 250,000 1,555,789
Nikon Corp. (Consumer Goods) 40,000 441,756
Nippon Steel Corp. (Steel) 950,000 2,764,484
Nippon Telephone & Telegraph Co.
(Telecommunications) 371 2,585,196
Nissan Motor Co. (Automotive) 419,000 3,162,056
NKK Corp. (Steel)* 422,000 1,057,867
Nomura Securities (Finance) 33,000 543,781
NTT Data Communications Systems Co.
(Computer Software - Systems) 92 2,717,504
Obayashi Corp. (Engineering and
Construction) 165,000 1,269,787
Pioneer Electronics Corp. (Electronics) 77,000 1,518,538
Rohm Co. (Electronics) 6,000 354,983
Sharp Corp. (Electronics) 359,000 5,443,685
Sony Corp. (Electronics) 50,100 2,999,237
Sumitomo Bank (Banks and Credit
Companies) 131,000 2,296,433
Sumitomo Realty & Development (Real
Estate) 386,000 2,801,367
Taisei Corp. (Engineering and
Construction) 149,000 914,191
------------
$ 53,809,344
- ---------------------------------------------------------------------------
Malaysia - 1.7%
DCB Holdings Berhad (Finance) 135,000 $ 462,292
Genting Berhad (Leisure) 142,000 1,062,470
Malayan Bank Berhad (Banks and Credit
Companies) 71,000 702,692
Petronas Gas Berhad (Gas)## 152,000 619,794
Renong Berhad (Conglomerate) 662,000 1,043,056
Resorts World Berhad (Entertainment) 344,000 1,974,664
Rothmans of Pall Mall (Tobacco Products) 61,000 601,306
Sime Darby Berhad (Conglomerate) 255,000 903,504
Tenaga Nasional Berhad (Utilities - Electric) 155,000 619,755
------------
$ 7,989,533
- ---------------------------------------------------------------------------
Mexico - 2.1%
Cemex S.A. de C.V., "B" (Construction) 291,506 $ 993,191
Cifra S.A. de C.V. (Retail) 490,300 631,419
Corporacion GEO S.A. de C.V. (Home
Builders)##* 45,000 807,435
Empresas ICA Sociedad Controladora S.A.,
ADR (Construction) 58,500 760,500
Fomento Economico Mexicano S.A. de C.V.,
"B" (Brewery) 110,000 335,584
Gruma S.A., "B" (Food Products)* 374,000 1,865,792
Grupo Carso S.A. de C.V. (Conglomerate)* 138,300 337,190
Grupo Carso S.A. de C.V., "A1"
(Conglomerate)* 171,300 781,752
Grupo Financiero Banamex, "B" (Finance) 292,200 621,080
Grupo Financiero Banamex, "L"
(Finance)## 11,997 24,600
Grupo Financiero Inbursa S.A. de C.V.,
"B" (Finance) 4,825 15,685
Kimberly-Clark de Mexico S.A. de C.V.
(Forest and Paper Products) 30,000 581,395
Telefonos de Mexico S.A. (Utilities -
Telecommunications) 1,021,000 1,549,755
Tubos de Acero de Mexico S.A. (Steel)* 60,000 667,500
------------
$ 9,972,878
- ---------------------------------------------------------------------------
Netherlands - 0.4%
Wolters Kluwer (Publishing) 14,320 $ 1,835,768
- ---------------------------------------------------------------------------
Pakistan - 0.6%
Cherat Cement Co. (Construction)* 16,500 $ 8,542
Fauji Fertilizer (Chemicals)* 176,600 345,887
Hub Power Co. (Utilities - Electric)* 1,694,500 1,441,681
Pakistan Synthetic (Textiles) 9,000 2,897
Pakistan Telecom (Telecommunications)* 11,910 962,787
Sui Northern Gas (Oil Services) 284,200 296,042
------------
$ 3,057,836
- ---------------------------------------------------------------------------
Peru - 0.9%
Compania de Minas Buenaventura S.A.
(Mining) 104,430 $ 815,162
CrediCorp. Ltd. (Finance) 112,282 1,964,935
Telefonica del Peru S.A. (Utilities -
Telephone) 594,954 1,261,534
------------
$ 4,041,631
- ---------------------------------------------------------------------------
Philippines - 0.5%
Ayala Land, Inc., "B" (Real Estate) 854,700 $ 912,027
Manila Electric Co., "B" (Utilities -
Electric) 47,387 348,540
Philippine Long Distance Telephone Co., ADR
(Utilities - Telephone) 6,185 370,327
Pilipino Telephone (Utilities - Telephone) 385,000 341,130
San Miguel Corp., "B", ADR (Food and
Beverage Products) 9,768 362,610
------------
$ 2,334,634
- ---------------------------------------------------------------------------
Poland - 1.2%
Bank Rozwoju Eksportu S.A. (Banks and
Credit Companies) 25,000 $ 742,882
Bank Slaski S.A. w Katowicach (Banks and
Credit Companies) 14,000 1,295,374
Bydgoska Fabryka Kabli S.A. (Wire and
Cable Products) 130,000 906,762
Elektrim Spolka Akcyjna S.A. (Electrical
Equipment) 156,373 1,307,746
Stomil Olsztyn S.A. (Tire and Rubber) 51,960 551,035
Wielkopolski Bank Kredytowy S.A. (Banks
and Credit Companies) 135,000 840,747
------------
$ 5,644,546
- ---------------------------------------------------------------------------
Portugal - 0.7%
Banco Espirito Santo e Comercial de
Lisboa S.A. (Banks and Credit Companies) 28,500 $ 499,609
Cimpor Cimentos Portugal (Building Materials) 34,946 732,625
Engil SGPS (Engineering and Construction) 36,079 366,785
Portugal Telecom S.A. (Utilities - Telephone) 33,250 862,398
Sonae Investimentos SGPS S.A. (Forest
and Paper Products) 34,180 999,228
------------
$ 3,460,645
- ---------------------------------------------------------------------------
Russia - 1.4%
Fleming Russia Securities Fund,
Preferred (Finance)*+ 110,200 $ 1,116,326
Lukoil Holding Co., ADR (Oils) 59,900 2,336,100
Mosenergo, ADR (Utilities - Electric)## 112,200 3,141,600
------------
$ 6,594,026
- ---------------------------------------------------------------------------
Singapore - 1.2%
City Developments Ltd. (Real Estate) 267,000 $ 2,104,901
Development Bank of Singapore Ltd.
(Banks and Credit Companies) 62,000 744,176
Fraser & Neave Ltd. (Beverages) 102,000 1,014,204
Keppel Corp. (Transportation) 167,000 1,245,383
Overseas Chinese Banking Corp. Ltd.
(Banks and Credit Companies) 63,000 720,384
------------
$ 5,829,048
- ---------------------------------------------------------------------------
South Africa - 0.6%
De Beers Centenary AG (Diamonds -
Precious Stones) 21,100 $ 622,572
Free State Consolidated Gold Mines Ltd.
(Gold Mining) 20,000 174,691
Iscor Ltd. (Steel) 225,000 160,577
Liberty Life Association of Africa Ltd.
(Insurance) 14,800 404,367
Nedcor Ltd. (Financial Services) 17,000 248,083
Sappi Ltd. (Forest and Paper Products) 17,500 154,719
Sasol Ltd. (Oils) 50,000 609,821
South African Breweries Ltd. (Beverages) 22,500 584,789
------------
$ 2,959,619
- ---------------------------------------------------------------------------
South Korea - 0.6%
Cho Sun Brewery (Beverages) 7,251 $ 193,595
Commerce Bank of Korea (Banks and Credit
Companies) 18,000 155,097
Hana Bank (Banks and Credit Companies) 10,000 151,699
Hana Bank (New) (Banks and Credit
Companies) 1,731 20,797
Korea Electric Power Corp. (Utilities -
Electric) 10,420 307,289
Korea Europe Fund (Finance)+ 42 126,000
Korea Mobile Telecommunications
(Telecommunications) 272 272,825
L.G. Chemicals (Chemicals) 24,000 289,806
New Korea Trust (Finance) 92,000 1,150,000
Samsung Electronics, GDR (Electronics)## 11,380 238,980
Samsung Electronics, GDR (Electronics)## 3,429 54,864
Samsung Electronics, GDR (Electronics)## 200 6,900
Samsung Electronics, GDR (Electronics)## 664 29,880
Shinhan Bank (Banks and Credit
Companies) 1,280 20,660
------------
$ 3,018,392
- ---------------------------------------------------------------------------
Spain - 0.9%
Banco de Santander S.A. (Banks and
Credit Companies) 6,985 $ 357,715
Telefonica de Espania (Utilities -
Telephone) 185,780 3,718,505
------------
$ 4,076,220
- ---------------------------------------------------------------------------
Sweden - 1.4%
Astra AB, Free Shares, "A"
(Pharmaceuticals) 142,890 $ 6,561,664
Astra AB, Free Shares, "B"
(Pharmaceuticals) 402 18,338
------------
$ 6,580,002
- ---------------------------------------------------------------------------
Switzerland - 1.1%
Ciba-Geigy AG (Medical and Health
Products) 1,905 $ 2,336,420
Roche Holdings AG (Pharmaceuticals) 104 783,175
Sandoz AG (Pharmaceuticals) 2,022 2,327,012
------------
$ 5,446,607
- ---------------------------------------------------------------------------
Taiwan - 0.7%
GVC Corp., GDR (Computers)##* 1,099 $ --
Taipei Fund (Finance) 338 2,784,444
Yageo Corp. (Electronics)* 23,476 217,153
Yageo Corp. (Electronics)##* 51,680 478,040
------------
$ 3,479,637
- ---------------------------------------------------------------------------
Thailand - 0.9%
Bank of Ayudhya Public Co. Ltd. (Banks
and Credit Companies) 148,000 $ 423,487
National Petrochemical PCL (Chemicals) 185,000 192,164
Phatra Thanakit Co. (Finance) 48,200 178,540
Robinson Department Store Public Co.
Ltd. (Retail) 110,000 184,325
Siam Cement Public Co. Ltd. (Building
Materials) 5,100 174,318
Siam City Cement Public Co. Ltd.
(Building Materials) 8,600 53,935
TelecomAsia Corp., Ltd. (Utilities -
Telephone) 225,000 432,150
Thai Euro Fund (Finance)+ 85,000 2,530,450
------------
$ 4,169,369
- ---------------------------------------------------------------------------
Turkey - 0.1%
Aksa Akrilik Kimya Sanayii A.S.
(Textiles) 378,000 $ 52,052
Alarko Holding A.S. (Conglomerate) 492,600 87,032
Arcelik A.S. (Furniture and Home
Appliances) 441,515 43,592
Turkiye Garanti Bankasi (Finance) 2,750,000 137,186
------------
$ 319,862
- ---------------------------------------------------------------------------
United Kingdom - 3.7%
ASDA Group PLC (Retail) 1,639,300 $ 3,119,597
Cadbury Schweppes PLC (Food and Beverage
Products) 107,200 892,727
Danka Business Systems, ADR (Business
Services) 49,400 1,957,475
Glaxo Wellcome PLC (Pharmaceuticals) 34,882 547,498
Huntingdon International Holdings PLC, ADR
(Consumer Goods and Services) 46,000 373,750
Ladbroke Group PLC (Leisure) 439,400 1,425,795
Pace Micro Technology (Electronics) 373,800 1,386,207
Rentokil Group PLC (Commercial Services) 276,100 1,852,442
Safeway PLC (Supermarkets) 398,800 2,364,323
Vodafone Group PLC (Telecommunications) 912,600 3,525,317
------------
$ 17,445,131
- ---------------------------------------------------------------------------
Venezuela - 0.2%
Mavesa S.A., ADR (Food and Beverage
Products)## 1,645 $ 10,281
Siderurgica Venezolana Sivensa Saica
S.A.C.A., ADR (Conglomerate) 250,000 882,812
-------------
$ 893,093
- ---------------------------------------------------------------------------
Total Foreign Stocks $254,156,423
- ---------------------------------------------------------------------------
U.S. Stocks - 31.2%
Apparel and Textiles - 0.1%
Nine West Group, Inc.* 5,200 $ 259,350
- ---------------------------------------------------------------------------
Automotive - 0.2%
APS Holding Corp.* 41,000 $ 850,750
Harvard Industries, Inc., "B"* 24,000 225,000
United Auto Group, Inc. 700 24,063
------------
$ 1,099,813
- ---------------------------------------------------------------------------
Business Machines - 1.0%
Affiliated Computer Services, Inc., "A"* 48,900 $ 2,689,500
Sun Microsystems, Inc.* 33,100 2,019,100
------------
$ 4,708,600
- ---------------------------------------------------------------------------
Business Services - 5.2%
Abacus Direct Corp. 900 $ 23,625
AccuStaff, Inc.* 22,700 607,225
ADT Ltd.* 78,500 1,550,375
Alco Standard Corp. 11,000 510,125
Computer Sciences Corp.* 19,700 1,462,725
CUC International, Inc.* 114,650 2,808,925
DST Systems, Inc.* 54,600 1,678,950
Employee Solutions, Inc.* 53,400 1,181,475
Equity Corp. International* 22,450 516,350
Ingram Micro, Inc. 2,900 52,200
International Network Services* 800 28,600
Learning Tree International, Inc.* 116,300 4,913,675
SABRE Group Holdings, Inc. 11,900 362,950
Superior Consultant, Inc. 2,700 66,150
Technology Solutions Co.* 220,000 8,552,500
Thermo Fibergen, Inc.* 21,700 273,962
------------
$ 24,589,812
- ---------------------------------------------------------------------------
Computer Software - Personal Computers - 1.0%
Autodesk, Inc. 1,000 $ 22,875
First Data Corp. 33,901 2,703,605
Microsoft Corp.* 5,200 713,700
Transaction System Architects, Inc.* 32,200 1,336,300
------------
$ 4,776,480
- ---------------------------------------------------------------------------
Computer Software - Systems - 8.0%
Adobe Systems, Inc. 5,400 $ 186,975
BMC Software, Inc.* 87,700 7,279,100
Cadence Design Systems, Inc.* 210,700 7,690,550
Computer Associates International, Inc. 95,650 5,655,306
Compuware Corp.* 24,400 1,287,100
Informix Corp.* 64,700 1,435,531
Oracle Systems Corp.* 253,000 10,705,062
Parametric Technology Corp.* 30,300 1,480,913
Sybase, Inc.* 36,900 650,363
Synopsys, Inc.* 5,400 243,000
USCS International, Inc.* 19,500 351,000
Viasoft, Inc.* 12,900 635,325
Xionics Document Technologies* 45,700 582,675
------------
$ 38,182,900
- ---------------------------------------------------------------------------
Construction Services - 0.4%
Shaw Group, Inc. 87,000 $ 2,142,375
- ---------------------------------------------------------------------------
Consumer Goods and Services - 0.9%
Carson, Inc. 70,600 $ 1,147,250
Service Corp. International 12,600 359,100
Tyco International Ltd. 53,800 2,669,825
------------
$ 4,176,175
- ---------------------------------------------------------------------------
Electronics - 1.3%
Altera Corp. 36,600 $ 2,269,200
Analog Devices, Inc. 12,300 319,800
Intel Corp. 12,000 1,318,500
Linear Technology Corp. 17,600 589,600
LSI Logic Corp.* 36,700 972,550
VLSI Technology, Inc.* 17,600 303,600
Xilinx, Inc.* 7,000 229,250
------------
$ 6,002,500
- ---------------------------------------------------------------------------
Entertainment - 1.4%
Cox Radio, Inc. 62,700 $ 1,136,437
Harrah's Entertainment, Inc.* 115,000 1,926,250
Hollywood Entertainment Corp. 67,700 1,404,775
Jacor Communications, Inc.* 34,600 968,800
LIN Television Corp.* 23,200 878,700
Sinclair Broadcast Group, Inc. 13,300 405,650
------------
$ 6,720,612
- ---------------------------------------------------------------------------
Financial Institutions - 0.3%
Corporate Express, Inc. 41,500 $ 1,353,938
- ---------------------------------------------------------------------------
Food and Beverage Products - 0.1%
Earthgrains Co. 6,900 $ 365,700
- ---------------------------------------------------------------------------
Machinery - 0.1%
S I Handling Systems, Inc. 26,000 $ 351,000
- ---------------------------------------------------------------------------
Medical and Health Products - 0.1%
Ventritex, Inc.* 11,800 $ 269,188
- ---------------------------------------------------------------------------
Medical and Health Technology and Services - 1.3%
Columbia Healthcare Corp. 600 $ 21,450
Foundation Health Corp. 700 20,912
HealthSource, Inc.* 18,100 221,725
HealthSouth Corp.* 65,800 2,467,500
Pacificare Health Systems, Inc., "B"* 9,900 695,475
St. Jude Medical, Inc.* 10,500 414,750
United Healthcare Corp. 61,400 2,325,525
------------
$ 6,167,337
- ---------------------------------------------------------------------------
Oil Services - 0.1%
Barrett Resources Corp.* 10,800 $ 414,450
National Oilwell, Inc. 1,400 32,550
------------
$ 447,000
- ---------------------------------------------------------------------------
Pollution Control - 0.3%
Republic Industries, Inc. 900 $ 28,013
USA Waste Services, Inc.* 40,600 1,299,200
------------
$ 1,327,213
- ---------------------------------------------------------------------------
Printing and Publishing
Pulitzer Publishing Co. 800 $ 50,800
- ---------------------------------------------------------------------------
Railroads - 0.1%
Wisconsin Central Transportation Corp.* 19,700 $ 709,200
- ---------------------------------------------------------------------------
Restaurants and Lodging - 5.1%
Applebee's International, Inc. 74,400 $ 1,813,500
HFS, Inc.* 246,700 18,070,775
Promus Hotel Corp.* 93,250 2,960,687
Renaissance Hotel Group 65,000 1,194,375
U.S. Franchise Services, Inc. 1,500 21,750
------------
$ 24,061,087
- ---------------------------------------------------------------------------
Stores - 0.7%
General Nutrition Cos., Inc.* 40,800 $ 744,600
Micro Warehouse, Inc.* 8,600 197,800
Office Depot, Inc.* 60,600 1,189,275
Staples, Inc.* 76,500 1,424,812
------------
$ 3,556,487
- ---------------------------------------------------------------------------
Technology
Spectrum Holobyte, Inc.* 20,100 $ 113,063
- ---------------------------------------------------------------------------
Telecommunications - 3.5%
3Com Corp.* 28,700 $ 1,940,838
Advanced Fibre Communications 900 51,413
Bay Networks, Inc.* 900 18,225
Cabletron Systems, Inc.* 33,100 2,064,612
Cisco Systems, Inc.* 91,300 5,649,187
Glenayre Technologies, Inc.* 73,200 1,884,900
Heritage Media Corp. 12,300 187,575
International Business Communications
Systems Inc.+*(+) 40,300 399,776
Sterling Commerce, Inc.* 11,000 309,375
Tel-Save Holdings, Inc. 2,450 61,250
U.S. Robotics Corp.* 500 31,438
Univision Communications, Inc. 14,400 486,000
WorldCom, Inc. 156,000 3,802,500
------------
$ 16,887,089
- ---------------------------------------------------------------------------
Total U.S. Stocks $148,317,719
- ---------------------------------------------------------------------------
Total Stocks (Identified Cost, $354,125,273) $402,474,142
- ---------------------------------------------------------------------------
Warrants - 0.5%
- ---------------------------------------------------------------------------
Issuer Shares Value
- ---------------------------------------------------------------------------
Hong Kong & China Gas Ltd.* 27,900 $ 10,284
India Gateway Fund Ltd.+* 16,000 --
Intel Corp.* 31,300 2,218,877
- ---------------------------------------------------------------------------
Total Warrants (Identified Cost, $1,798,666) $ 2,229,161
- ---------------------------------------------------------------------------
Convertible Bonds - 0.1%
- ---------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ---------------------------------------------------------------------------
Republic of Italy, 5s, 2001 (Insurance) $ 305 $ 305,000
Ventritex, Inc., 5.75s, 2001 (Medical and
Health Products) 80 115,800
- ---------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $385,000) $ 420,800
- ---------------------------------------------------------------------------
Short-Term Obligations - 13.9%
- ---------------------------------------------------------------------------
Federal Farm Credit Bank, due 11/01/96 -
11/13/96 $24,485 $ 24,462,712
Federal Home Loan Bank, due 11/12/96 11,370 11,351,830
Federal National Mortgage Assn.,
due 11/06/96 - 11/18/96 20,325 20,301,108
Student Loan Marketing Assn., due 11/01/96 9,790 9,790,000
- ---------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 65,905,650
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $422,214,589) $471,029,753
Other Assets, Less Liabilities - 0.8% 3,738,340
- ---------------------------------------------------------------------------
Net Assets - 100.0% $474,768,093
- ---------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
+Restricted security.
(+)Security valued by or at the direction of the Trustees.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- -----------------------------------------------------------------------------
October 31, 1996
- -----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $422,214,589) $471,029,753
Cash 105,848
Foreign currency, at value (identified cost, $83,730) 80,886
Receivable for investments sold 5,080,597
Receivable for Fund shares sold 413,471
Interest and dividends receivable 327,685
Deferred organization expenses 14,884
Other assets 166,494
------------
Total assets $477,219,618
------------
Liabilities:
Payable for investments purchased $ 1,645,108
Payable for Fund shares reacquired 348,852
Payable to affiliates -
Management fee 11,652
Shareholder servicing agent fee 2,482
Distribution fee 132,597
Accrued expenses and other liabilities 310,834
------------
Total liabilities $ 2,451,525
------------
Net assets $474,768,093
============
Net assets consist of:
Paid-in capital $403,766,324
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 48,810,073
Accumulated undistributed net realized gain on investments
and foreign currency transactions 22,567,448
Accumulated net investment loss (375,752)
------------
Total $474,768,093
============
Shares of beneficial interest outstanding 25,052,300
==========
Class A shares:
Net asset value per share
(net assets of $172,106,103 / 9,014,099 shares of
beneficial interest outstanding) $19.09
======
Offering price per share (100/94.25) $20.25
======
Class B shares:
Net asset value and offering price per share
(net assets $282,668,221 / 14,977,356 shares of beneficial
interest outstanding) $18.87
======
Class C shares:
Net asset value and offering price per share
(net assets of $19,993,769 / 1,060,845 shares of beneficial
interest outstanding) $18.85
======
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
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- -----------------------------------------------------------------------------
Year Ended October 31, 1996
- -----------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 4,727,103
Interest 1,228,398
Foreign taxes withheld (448,080)
-----------
Total investment income $ 5,507,421
------------
Expenses -
Management fee $ 4,060,523
Trustees' compensation 39,476
Shareholder servicing agent fee (Class A) 243,118
Shareholder servicing agent fee (Class B) 597,943
Shareholder servicing agent fee (Class C) 25,948
Distribution and service fee (Class A) 568,157
Distribution and service fee (Class B) 2,717,921
Distribution and service fee (Class C) 172,983
Custodian fee 430,870
Printing 111,407
Postage 84,802
Auditing fees 83,238
Legal fees 24,492
Amortization of organization expenses 6,390
Miscellaneous 507,759
-----------
Total expenses $ 9,675,027
Reduction of expenses by distributor (162,960)
Fees paid indirectly (70,021)
-----------
Net expenses $ 9,442,046
-----------
Net investment loss $(3,934,625)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $26,049,429
Foreign currency transactions 876,983
-----------
Net realized gain on investments and foreign currency
transactions $26,926,412
-----------
Change in unrealized appreciation -
Investments $37,634,292
Translation of assets and liabilities in foreign currencies 653,636
-----------
Net unrealized gain on investments and foreign currency
translation $38,287,928
-----------
Net realized and unrealized gain on investments and
foreign currency $65,214,340
-----------
Increase in net assets from operations $61,279,715
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (3,934,625) $ (1,957,148)
Net realized gain on investments and foreign currency
transactions 26,926,412 38,220,302
Net unrealized gain (loss) on investments and foreign
currency translation 38,287,928 (16,132,432)
------------ ------------
Increase in net assets from operations $ 61,279,715 $ 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 $332,230,172 $196,631,074
Net asset value of shares issued to shareholders in
reinvestment of distributions 28,656,096 2,741,334
Cost of shares reacquired (315,137,560) (191,833,455)
------------ ------------
Increase in net assets from Fund share transactions $ 45,748,708 $ 7,538,953
------------ ------------
Total increase in net assets $ 70,439,366 $ 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 $375,752 and $382,012, respectively) $474,768,093 $404,328,727
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1995 1994*
- -------------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $18.16 $17.45 $15.00
------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.07) $ -- $(0.02)
Net realized and unrealized gain on investments and
foreign currency transactions 2.73 0.93 2.47
------ ------ ------
Total from investment operations $ 2.66 $ 0.93 $ 2.45
------ ------ ------
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) --
------ ------ ------
Total distributions declared to shareholders $(1.73) $(0.22) $ --
------ ------ ------
Net asset value - end of period $19.09 $18.16 $17.45
====== ====== ======
Total return(+) 15.73% 5.47% 16.33%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.58% 1.63% 1.57%+
Net investment income (loss) (0.35)% 0.02% (0.14)%+
Portfolio turnover 95% 149% 100%
Average commission rate### $0.0130 $ -- $ --
Net assets at end of period (000 omitted) $172,106 $143,543 $131,503
<FN>
*For the period from the commencement of offering of Class A shares, November 18, 1993 to October 31, 1994.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
(+)Total returns for Class A shares do not include the applicable sales charge. If the sales charge had been
included, the results would have been lower.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for
fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
(S)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 $(0.09) $ -- $(0.04)
Ratios (to average net assets):
Expenses## 1.68% 1.73% 1.67%+
Net investment loss (0.45)% (0.08)% (0.24)%+
</FN>
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1995 1994*
- -------------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period
$17.97 $17.32 $15.00
------ ------ ------
Income from investment operations# -
Net investment loss $(0.21) $(0.14) $(0.15)
Net realized and unrealized gain on investments and
foreign currency transactions 2.70 0.92 2.47
------ ------ ------
Total from investment operations $ 2.49 $ 0.78 $ 2.32
------ ------ ------
Less distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions $(1.59) $(0.13) $ --
------ ------ ------
Net asset value - end of period $18.87 $17.97 $17.32
====== ====== ======
Total return 14.77% 4.61% 15.47%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.39% 2.45% 2.39%+
Net investment loss (1.16)% (0.80)% (0.95)%+
Portfolio turnover 95% 149% 100%
Average commission rate### $0.0130 $ -- $ --
Net assets at end of period (000 omitted) $282,668 $247,437 $236,971
<FN>
*For the period from the commencement of offering of Class B shares, November 18, 1993 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>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------
Year Ended October 31, 1996 1995 1994*
- -------------------------------------------------------------------------------------------------
Class C
- -------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $17.96 $17.34 $16.04
------ ------ ------
Income from investment operations# -
Net investment loss $(0.20) $(0.13) $(0.13)
Net realized and unrealized gain on investments and
foreign currency transactions 2.70 0.92 1.43
------ ------ ------
Total from investment operations $ 2.50 $ 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 $18.85 $17.96 $17.34
====== ====== ======
Total return 14.88% 4.68% 8.10%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.32% 2.38% 2.31%+
Net investment loss (1.10)% (0.72)% (0.83)%+
Portfolio turnover 95% 149% 100%
Average commission rate### $0.0130 $ -- $ --
Net assets at end of period (000 omitted) $19,994 $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>
See notes to financial statements
<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
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are 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 result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Fund
operations.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded 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
expects to pass through to shareholders foreign income taxes paid. The election
increases the taxable distributions of the Fund by the amount of the foreign
taxes paid. An individual shareholder who itemizes deductions, or a corporate
shareholder, will be able to claim an offsetting deduction or a tax credit (but
not both) on their federal income tax returns. Individuals who do not itemize
deductions may claim a foreign tax credit but not a deduction. The foreign
source income is considered passive income for the purpose of computing the
foreign tax credit limitations.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended October 31, 1996, $3,290,695 was reclassified from
accumulated undistributed net realized gain on investments and foreign currency
transactions and $10,850 and $3,279,845 were reclassified to paid-in capital and
accumulated net investment loss, respectively, due to differences between book
and tax accounting for investment losses and currency transactions. This change
had no effect on the net assets or net asset value per share. At October 31,
1996, accumulated undistributed net investment income (realized gain on
investments and foreign currency transactions) under book accounting was
different from tax accounting due to temporary differences in accounting for
passive foreign investment companies, short-term capital gains and currency
transactions.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B, and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.90% of
average daily net assets. The advisory agreement permits the adviser to engage
one or more sub-advisers and the adviser has engaged Oechsle International
Advisers, L.P. ("Oechsle"), 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. Effective November
1, 1996, Oechsle was terminated 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 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 $7,202 for the year ended
October 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$80,312 for the year ended October 31, 1996, as its portion of the sales charge
on sales of Class A shares of the Fund. The Trustees have adopted separate
distribution plans for Class A, Class B, and Class C shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
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 who enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.10% per annum of the Fund's average daily net assets attributable
to Class A shares, commissions to dealers and payments to MFD wholesalers for
sales at or above a certain dollar level, and other such distribution-related
expenses that are approved by the Fund. The Class A distribution fee is
currently being waived on a voluntary basis and may be imposed at the discretion
of MFD. MFD retains the service fee for accounts not attributable to a
securities dealer which amounted to $74,728 for the year ended October 31, 1996.
Fees incurred under the distribution plan during the year ended October 31, 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 who 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 $79,446 and $16,824 for Class B and Class C
shares, respectively, for the year ended October 31, 1996. Fees incurred under
the distribution plans during the year ended October 31, 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 of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class C shares in the event of a shareholder redemption within 12 months of
purchases made on or after April 1, 1996. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
October 31, 1996 were $1,528, $538,744, and $1,141 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 shares at an
effective annual rate of up to 0.15%, up to 0.22%, and up to 0.15% attributable
to Class A, Class B, and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$406,387,052 and $424,126,648, 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 $424,065,523
============
Gross unrealized appreciation $ 75,936,798
Gross unrealized depreciation (28,972,568)
------------
Net unrealized appreciation $ 46,964,230
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Class A Shares
Year Ended October 31, 1996 October 31, 1995
---------------------------- ---------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 13,198,505 $248,410,300 5,928,735 $101,800,639
Shares issued to
shareholders in
reinvestment of
distributions 703,305 12,156,888 80,625 1,312,572
Shares reacquired (12,790,324) (241,363,733) (5,642,373) (97,398,576)
---------- ------------ --------- ------------
Net increase 1,111,486 $ 19,203,455 366,987 $ 5,714,635
========== ============ ========= ============
Class B Shares
Year Ended October 31, 1996 October 31, 1995
---------------------------- ---------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,986,473 $ 73,258,330 5,294,273 $ 88,484,082
Shares issued to
shareholders in
reinvestment of
distributions 923,243 15,760,023 83,849 1,359,205
Shares reacquired (3,703,963) (68,245,006) (5,291,911) (89,028,777)
--------- ------------ --------- ------------
Net increase 1,205,753 $ 20,773,347 86,211 $ 814,510
========= ============ ========= ============
Class C Shares
Year Ended October 31, 1996 October 31, 1995
---------------------------- ---------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 574,128 $10,561,542 375,273 $ 6,346,353
Shares issued to
shareholders in
reinvestment of
distributions 43,379 739,185 4,294 69,557
Shares reacquired (300,073) (5,528,821) (320,994) (5,406,102)
------- ----------- ------- -----------
Net increase 317,434 $ 5,771,906 58,573 $ 1,009,808
======= =========== ======= ===========
(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 year ended October 31,
1996 was $5,032.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include 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. At October 31, 1996 the Fund did not
hold any of these financial instruments.
(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 October 31, 1996, the
Fund owned the following restricted securities (constituting 1.11% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations supplied
by a pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees.
<TABLE>
<CAPTION>
Date of
Description Acquisition Shares Cost Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fleming Russia Securities Fund, Preferred 7/07/95 110,200 $ 892,620 $1,116,326
India Gateway Fund Ltd. 6/02/94-2/02/96 107,000 941,870 520,020
India Gateway Fund Ltd., Warrants 6/02/94 16,000 -- --
International Business Communications Systems, Inc. 8/29/95 40,300 399,776 399,776
Korea Europe Fund 11/02/94-1/09/96 42 186,125 126,000
Moneda Chile Fund Ltd. 8/22/95 63,000 630,000 567,000
Thai Euro Fund 6/12/96-10/25/96 85,000 2,817,562 2,530,450
----------
$5,259,572
==========
</TABLE>
<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 October 31, 1996, the related statement of operations for the
year then ended, the statement of changes in net assets for the years ended
October 31, 1996 and 1995, and the financial highlights for the years ended
October 31, 1996 and 1995 and for the period from November 18, 1993
(commencement of operations) to October 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 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 October 31, 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
November 29, 1996
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) WORLD GROWTH FUND
<TABLE>
<C> <C>
TRUSTEES ASSISTANT SECRETARY
A. Keith Brodkin* - Chairman and President James R. Bordewick, Jr.*
Richard B. Bailey* - Private Investor; CUSTODIAN
Former Chairman and Director (until 1991), Deloitte & Touche LLP
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; AUDITORS
Director, Cambridge Trust Company Ernst & Young LLP
Marshall N. Cohan - Private Investor INVESTOR INFORMATION
For MFS stock and bond market outlooks,
Lawrence H. Cohn, M.D. - Chief of Cardiac call toll free: 1-800-637-4458
Surgery, Brigham and Women's Hospital; anytime from a touch-tone telephone.
Professor of Surgery, Harvard Medical School
For information on MFS mutual funds,
The Hon. Sir J. David Gibbons, KBE - Chief call your financial adviser or, for an
Executive Officer, Edmund Gibbons Ltd.; information kit, call toll free:
Chairman, Bank of N.T. Butterfield & Son Ltd. 1-800-637-2929 any business day from
9 a.m. to 5 p.m. Eastern time (or leave
Abby M. O'Neill - Private Investor; a message anytime).
Director, Rockefeller Financial Services, Inc.
(investment advisers) INVESTOR SERVICE
MFS Service Center, Inc.
Walter E. Robb, III - President and Treasurer, P.O. Box 2281
Benchmark Advisors, Inc. (corporate financial Boston, MA 02107-9906
consultants); President, Benchmark Consulting
Group, Inc. (office services); Trustee, For general information, call toll free:
Landmark Funds (mutual funds) 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Arnold D. Scott* - Senior Executive
Vice President, Director and Secretary, For service to speech- or hearing-impaired,
Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
Jeffrey L. Shames* - President and Director, (To use this service, your phone must
Massachusetts Financial Services Company be equipped with a Telecommunications
Device for the Deaf.)
J. Dale Sherratt - President, Insight Resources,
Inc. (acquisition planning specialists) For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
Ward Smith - Former Chairman (until 1994), (1-800-637-8255) anytime from a touch-tone
NACCO Industries; Director, Sundstrand Corporation telephone.
INVESTMENT ADVISER WORLD WIDE WEB
Massachusetts Financial Services Company www.mfs.com
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc. [DALBAR For the third year in a row,
500 Boylston Street LOGO] MFS earned a #1 ranking in
Boston, MA 02116-3741 TOP RATED DALBAR, Inc. Broker/Dealer
SERVICE Survey, Main Office Operations
PORTFOLIO MANAGERS Service Quality Category. The
John W. Ballen* firm achieved a 3.48 overall score on a
David Mannheim* scale of 1 to 4 in the 1996 survey. A total
Toni Y. Shimura* of 110 firms responded, offering input on the
quality of service they received from 29
TREASURER mutual fund companies nationwide. The survey
W. Thomas London* contained questions about service quality in
15 categories, including "knowledge of phone
ASSISTANT TREASURER service contacts," "accuracy of transaction
James O. Yost* processing," and "overall ease of doing
business with the firm."
SECRETARY
Stephen E. Cavan*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-------------
MFS(R) WORLD GROWTH FUND [DALBAR LOGO: #1 BULK RATE
TOP RATED SERVICE] U.S. POSTAGE
PAID
500 Boylston Street PERMIT #55638
Boston, MA 02116 BOSTON, MA
-------------
[LOGO: M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)]
(C)1996 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116
MWF-2 12/96 86M 09/209/309
