<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) GLOBAL GROWTH
FUND
(FORMERLY MFS(R) WORLD GROWTH FUND)
ANNUAL REPORT o OCTOBER 31, 1998
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 26
Notes to Financial Statements ............................................. 33
Independent Auditors' Report .............................................. 39
Trustees and Officers ..................................................... 41
MFS CELEBRATES ITS DIAMOND ANNIVERSARY!
MARCH 21, 1999, MARKS THE 75TH ANNIVERSARY OF MFS' INVENTION OF
THE MUTUAL FUND. THE MUTUAL FUND INDUSTRY HAS BROUGHT THE POWER
OF INVESTING TO EVERY AMERICAN, OFFERING THEM THE OPPORTUNITY FOR
COLLEGE DEGREES, HOME OWNERSHIP, AND COMFORTABLE RETIREMENT.
IMAGINE TODAY'S WORLD WITHOUT MUTUAL
FUNDS. WE COULDN'T. AND WHILE THE MFS 75 YEARS
YEARS AHEAD WILL BRING A NUMBER OF [graphic omitted]
CHALLENGES, OUR 75 YEARS OF EXPERIENCE EXPERIENCE THE FUTURE(SM)
WILL HELP GUIDE A NEW GENERATION OF
INVESTORS INTO THE FUTURE.
- ------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- ------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
In 1999, MFS celebrates its 75th anniversary. The nation's first mutual
fund -- our Massachusetts Investors Trust (MIT) -- was introduced to the
public on March 21, 1924. Since then, MFS Investment Management(R), the
company that grew out of that original fund, has helped guide shareholders
through many economic and investment cycles, primarily by focusing on the
long-term opportunities created by an expanding global economy. As of October
31, 1998, MFS manages nearly $87 billion, and the firm's 2,000 people serve
3.8 million investors and their financial advisers worldwide. Meanwhile, MIT's
assets have grown to over $10 billion, and 56 mutual funds are offered in the
MFS Family of Funds(R).
One of the elements to the success of MIT did not exist before our founders
invented it in 1924. That is liquidity. This innovation means that if you want
to sell your investment in any MFS mutual fund, you have the security of
knowing that you may do so immediately and the money may be exchanged into
another MFS fund or that you may add other MFS funds to your portfolio as your
investment needs change. If you need your money for other purposes, it can
quickly be wired or mailed to you. This daily redemption feature, through
which new shares were created when people invested in MIT and were redeemed
when people sold, brought another important change to the industry. Now, the
price of a mutual fund's shares wasn't determined by supply and demand, but by
the value of the securities owned by each portfolio.
Another factor in our growth was the development of one of the industry's
first in-house research departments in 1932. Unlike many other companies that
rely on Wall Street research reports, which can be used by many investors at
the same time, MIT's managers built its long-term track record by visiting
companies, talking to managers and competitors, and "kicking the tires" so
they could judge the quality and potential of each company's products and
services for themselves. Today, MFS has more than 100 full-time portfolio
managers, stock analysts, and credit analysts who track the equity and bond
markets. That number includes nearly 40 equity analysts who specialize in
industries such as aviation, media, technology, automobiles, and utilities.
While MIT was the first mutual fund, it was not our only invention. We also
established the nation's first global bond fund, first high-yield municipal
bond fund, and first high-yield municipal closed-end bond fund.
We are proud of the record of MIT and of the funds in the MFS Family of Funds,
but we are also proud of our long-standing relationship with financial
advisers. Not only do we believe investors can benefit from the advice of
these experts but, as was shown during the market volatility of 1998, people
who work with financial advisers are less likely to abandon their carefully
designed, long-term investment strategies.
Our ability to service your investment and information needs is also extremely
important to us. Today, the MFS Service Center handles millions of transactions
and phone calls every year. Supporting the work of financial advisers, promptly
sending out statements and confirmations, and answering hundreds of investors'
questions every day are crucial elements in maintaining long-term relationships
with our fund shareholders. That link to our investors has also been enhanced by
our site on the World Wide Web: WWW.MFS.COM. Since 1996, this site has given
investors and the general public access to up-to- date information about MFS
products and services, as well as market outlooks and retirement information.
The site has rapidly become one of our primary vehicles for communicating with
our investors and educating the public about mutual funds in general and MFS in
particular.
If there is a common thread running through these milestones, it is our
always-increasing commitment to providing you with the best possible
investment management and shareholder service, just as we have done for the
past 75 years.
As we celebrate this anniversary, it is also a time for MFS to look ahead and
build on our 75 years of innovation and experience to help meet your
investment needs in the next century. We appreciate your confidence and
welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
November 16, 1998
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
For the 12 months ended October 31, 1998, Class A shares of the Fund provided
a total return of -1.99%, Class B shares -2.70%, Class C shares -2.73%, and
Class I shares -1.64%. These returns assume the reinvestment of distributions
but exclude the effects of any sales charges and compare to a 12.76% return
for the Morgan Stanley Capital International (MSCI) All Country World Index,
an unmanaged index of developed-country and emerging market equities.
Effective August 24, 1998, the name of the Fund was changed from MFS(R) World
Growth Fund to MFS(R) Global Growth Fund.
Q. WHAT DO YOU SEE AS SOME OF THE REASONS FOR THE FUND'S PERFORMANCE OVER THE
PAST YEAR?
A. From a big-picture standpoint, the Fund's performance was helped by its
overweighting in U.S. technology and European stocks and an underweighting
in Japanese companies. However, this performance was offset by the Fund's
overweighting in the emerging markets, which were abysmal performers across
the board.
Q. HOW WOULD YOU DESCRIBE THE PAST YEAR'S INVESTMENT ENVIRONMENT,
PARTICULARLY AS IT IMPACTED THE FUND?
A. The past year has been an extraordinarily volatile period that has presented
opportunities to buy stocks at prices that have not been seen for quite some
time. We are hopeful that this will bear fruit over the coming 12 months.
Without a doubt, the disruption created by Asia's economic problems was the
single most important factor affecting global markets during this period.
Concerns surrounding Asia spread swiftly to Russia, Latin America, and
emerging Europe, resulting in widespread currency devaluations, high
interest rates, and slowing local economies. This, in turn, dampened the
profit outlook for some of our technology and large-cap multinational
companies with exposure to Asia and Russia. No part of the world did more
poorly than the emerging markets themselves. On a more positive note,
though, there does appear to be the proverbial light at the end of the
tunnel. In recent weeks, the United States and Europe have embarked upon the
beginning of a concerted effort to reduce interest rates. This should help
sustain growth in the United States and Europe, which in turn should fuel a
recovery in the emerging markets.
Q. THE FUND HAS INVESTMENTS IN THREE MAJOR MARKETS, INCLUDING THE UNITED
STATES. WHAT U.S. INDUSTRIES AND STOCKS ARE YOU EMPHASIZING, AND WHY?
A. The United States remains one of our favorite major markets because of its
low inflation, low and declining interest rates, reasonably good economic
growth, and high corporate profits. We continue to emphasize U.S. technology
companies, primarily software. We are especially enthusiastic about database
and application software companies such as BMC Software and Compuware that
are helping corporations worldwide increase productivity. Another area we
believe offers solid potential is food and drug retailing, where companies
are benefiting from industry consolidation and strong pharmaceutical drug
trends. We also own a number of companies in the emerging telecommunications
area, such as MCI WorldCom and Global Telesystems, both of which are
positioned to benefit from global deregulation and increasing competition.
Q. WHAT ABOUT DEVELOPED FOREIGN MARKETS? WHAT COUNTRIES AND WHAT KINDS OF
INDUSTRIES DO YOU LIKE THERE?
A. In our view, Europe offers the most opportunity of the developed markets.
European monetary union, which goes into effect in 1999, should be a
positive for the region, which is at an earlier stage in the economic cycle
than the United States. Favorite countries include the Netherlands, Italy,
and Sweden. Outside of Europe, we're finding more attractive ideas in Japan.
In general, we're looking for companies that we feel can generate 15% or
better annual growth at reasonable valuations. We've found quite a few of
these among consumer staples companies in Europe and the export- oriented
technology companies in Japan.
Q. THERE SEEM TO BE SIGNS OF RECOVERY IN ASIA AND SOME OF THE EMERGING
MARKETS. WHAT DO YOU SEE AS THE REASONS FOR THIS, AND ARE YOU FINDING
OPPORTUNITIES IN THESE MARKETS?
A. A number of important changes have taken place over the past few weeks that
we believe bode well for an eventual recovery in the emerging markets.
First, as mentioned earlier, the United States, Europe, and Japan have begun
to lower interest rates, which should help sustain or jump start growth in
the developed markets. This will help all world economies, since the
emerging markets depend on demand from the rest of the world. Second, Asian
currencies, in particular the Japanese yen, have strengthened versus the
U.S. dollar. This reduces the potential for another round of devaluations in
Asia and Latin America. A weaker dollar also improves the competitive
position of many of the emerging Asian economies, helping their future
economic growth. All of this means that many emerging economies may see
improvement after 1999, implying higher earnings and higher stock prices
down the road.
Q. HAVE THERE BEEN ANY SIGNIFICANT CHANGES IN THE FUND'S HOLDINGS OR
ALLOCATIONS OVER THE PAST YEAR?
A. Yes. Compared to a year ago, we have increased the European allocation
because we've found companies there with more compelling valuations than
those in the United States. The emerging markets represent a much smaller
percentage, in part due to a decline in value, but also due to concerns
about overweighting this area at this time.
Q. COULD YOU TALK ABOUT SOME STOCKS OR COUNTRIES THAT PERFORMED BETTER THAN
YOU EXPECTED?
A. A number of software and networking holdings such as Compuware, BMC
Software, and Cisco were among our best performers because of robust
earnings that held up well despite weakness among Asian customers. In
Europe, financial stocks such as Allied Irish Banks and Anglo Irish Bank
contributed handsomely to performance thanks to earnings driven by strong
local economies and a favorable interest-rate environment.
Q. NOW, WHAT ABOUT SOME STOCKS OR COUNTRIES THAT UNDERPERFORMED?
A. All of the emerging markets of Asia, Eastern Europe, and Latin America
performed poorly. Political uncertainty and devaluation caused our few
Russian and Eastern European stocks to be the hardest hit. In the United
States, Cendant was our biggest disappointment. Accounting irregularities at
its CUC subsidiary resulted in a major restatement of earnings. We continue
to believe in the company, which is now in the process of a major
restructuring and stock buyback program. In developed foreign markets, our
Japanese stocks underperformed despite attractive valuations. With the
recent plans enacted by the Japanese government to rejuvenate its economy,
we hope our Japanese holdings will be solid contributors to future
performance.
Q. WHAT KIND OF INVESTMENT ENVIRONMENT DO YOU SEE GOING FORWARD, AND HOW DO
YOU PLAN TO POSITION THE FUND FOR IT?
A. We see better times ahead. Global markets should be helped by the recent
concerted action of the U.S. Federal Reserve Board and the Group of Seven
nations to lower interest rates and keep the United States and Europe on a
growth track. We believe this should help the emerging markets move toward
recovery. We think there will be many fits and starts in this process, so
our strategy in the emerging markets is to invest in companies and countries
that we feel are positioned to come out of recession quickly. In the United
States, our focus is on companies that can generate high-quality visible
growth and companies likely to benefit from a recovery in overseas markets.
In Europe and Japan, we will continue to target companies generating 15%
growth trading at what we view as attractive valuations.
/s/ John W. Ballen /s/ David R. Mannheim
John W. Ballen David R. Mannheim
Portfolio Manager Portfolio Manager
/s/ Kevin R. Parke /s/ Toni Y. Shimura
Kevin R. Parke Toni Y. Shimura
Director of Equity Research* Portfolio Manager
*The committee of MFS research analysts is responsible for the day-to-day
management of a portion of the Fund under the general supervision of Mr.
Parke.
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILES
- --------------------------------------------------------------------------------
JOHN W. BALLEN IS PRESIDENT, CHIEF INVESTMENT OFFICER, AND A MEMBER OF THE
EXECUTIVE COMMITTEE AND BOARD OF DIRECTORS OF MFS INVESTMENT
MANAGEMENT(R). HE ALSO IS PORTFOLIO MANAGER OF MFS(R) EMERGING GROWTH
FUND, MFS(R) EMERGING GROWTH SERIES (PART OF MFS(R) VARIABLE INSURANCE
TRUST(SM)), AND THE EMERGING GROWTH SERIES OFFERED THROUGH MFS(R)/SUN LIFE
ANNUITY PRODUCTS.
MR. BALLEN JOINED THE MFS RESEARCH DEPARTMENT IN 1984 AS AN INDUSTRY
SPECIALIST. HE WAS NAMED INVESTMENT OFFICER IN 1986, VICE PRESIDENT --
INVESTMENTS IN 1987, DIRECTOR OF RESEARCH IN 1988, SENIOR VICE PRESIDENT
IN 1990, DIRECTOR OF EQUITY PORTFOLIO MANAGEMENT IN 1993, CHIEF EQUITY
OFFICER IN 1995, EXECUTIVE VICE PRESIDENT IN 1997, AND PRESIDENT AND A
MEMBER OF THE BOARD IN 1998. MR. BALLEN IS A GRADUATE OF HARVARD COLLEGE
AND EARNED A MASTER OF COMMERCE DEGREE FROM THE UNIVERSITY OF NEW SOUTH
WALES IN AUSTRALIA AND AN M.B.A. FROM STANFORD UNIVERSITY.
DAVID R. MANNHEIM IS A SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF MFS(R) GLOBAL EQUITY FUND, MFS(R)
INTERNATIONAL GROWTH FUND, MFS(R) GLOBAL ASSET ALLOCATION FUND, MFS(R)
MERIDIAN(SM) GLOBAL EQUITY FUND, MFS(R) GLOBAL GROWTH FUND, AND THE
INTERNATIONAL SERIES, THE WORLD GROWTH SERIES, AND THE WORLD ASSET
ALLOCATION SERIES OFFERED THROUGH MFS(R)/ SUN LIFE ANNUITY PRODUCTS.
MR. MANNHEIM JOINED MFS IN 1988 AND WAS NAMED INVESTMENT OFFICER IN
1990, ASSISTANT VICE PRESIDENT IN 1991, VICE PRESIDENT AND PORTFOLIO
MANAGER OF MFS GLOBAL EQUITY FUND IN 1992, AND SENIOR VICE PRESIDENT IN
1997. HE IS A GRADUATE OF AMHERST COLLEGE AND THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT.
TONI Y. SHIMURA IS A VICE PRESIDENT -- INVESTMENTS OF MFS INVESTMENT
MANAGEMENT(R) AND A PORTFOLIO MANAGER OF MFS(R) GLOBAL GROWTH FUND, MFS(R)
EMERGING GROWTH SERIES, PART OF MFS(R) VARIABLE INSURANCE TRUST(SM), AND
THE WORLD GROWTH SERIES AND EMERGING GROWTH SERIES OFFERED THROUGH
MFS(R)/SUN LIFE ANNUITY PRODUCTS.
MS. SHIMURA JOINED MFS IN 1987 AS A MEMBER OF THE RESEARCH DEPARTMENT.
SHE WAS NAMED INVESTMENT OFFICER IN 1990, ASSISTANT VICE PRESIDENT --
INVESTMENTS IN 1991, VICE PRESIDENT -- INVESTMENTS IN 1992, AND A
PORTFOLIO MANAGER IN 1993. MS. SHIMURA IS A GRADUATE OF WELLESLEY
COLLEGE AND THE SLOAN SCHOOL OF MANAGEMENT AT THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY.
- -----------------------------------------------------------------------------
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
- --------------------------------------------------------------------------------
FUND FACTS
- --------------------------------------------------------------------------------
OBJECTIVE: SEEKS CAPITAL APPRECIATION BY INVESTING IN
SECURITIES OF COMPANIES WORLDWIDE GROWING AT
RATES MANAGERS EXPECT TO BE WELL ABOVE THE
GROWTH RATE OF THE U.S. ECONOMY.
COMMENCEMENT OF
INVESTMENT OPERATIONS: NOVEMBER 18, 1993
CLASS INCEPTION: CLASS A NOVEMBER 18, 1993
CLASS B NOVEMBER 18, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $479.1 MILLION NET ASSETS AS OF OCTOBER 31, 1998
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary for more information.)
It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from December 1, 1993, through October 31, 1998)
MFS Standard Russell
Global & Poor's MSCI All 2000 Consumer
Growth 500 MSCI Country Total Price
Fund Composite World World Return Index
- Class A Index Index Index Index - U.S.
- ---------------------------------------------------------------------------
12/93 $ 9,420 $10,000 $10,000 $10,000 $10,000 $10,000
10/94 10,950 10,490 11,460 11,600 10,310 10,250
10/95 11,550 13,260 12,610 12,430 12,190 10,540
10/96 13,370 16,450 14,740 14,370 14,220 10,860
10/97 15,400 21,740 17,280 16,630 18,390 11,080
10/98 15,093 26,518 19,989 17,184 16,210 11,235
<PAGE>
PERFORMANCE SUMMARY -- continued
AVERAGE ANNUAL TOTAL RETURNS THROUGH OCTOBER 31, 1998
CLASS A
10 Years/
1 Year 3 Years Life*
- ------------------------------------------------------------------------------
Average Annual Total Return - 1.99% + 9.32% +10.00%
- ------------------------------------------------------------------------------
SEC Results - 7.62% + 7.18% + 8.69%
- ------------------------------------------------------------------------------
CLASS B
10 Years/
1 Year 3 Years Life*
- ------------------------------------------------------------------------------
Average Annual Total Return - 2.70% + 8.47% + 9.14%
- ------------------------------------------------------------------------------
SEC Results - 6.22% + 7.62% + 8.85%
- ------------------------------------------------------------------------------
CLASS C
10 Years/
1 Year 3 Years Life*
- ------------------------------------------------------------------------------
Average Annual Total Return - 2.73% + 8.49% + 9.19%
- ------------------------------------------------------------------------------
SEC Results - 3.61% + 8.49% + 9.19%
- ------------------------------------------------------------------------------
CLASS I
10 Years/
1 Year 3 Years Life*
- ------------------------------------------------------------------------------
Average Annual Total Return - 1.64% + 9.52% +10.12%
- ------------------------------------------------------------------------------
COMPARATIVE INDICES
10 Years/
1 Year 3 Years Life
- ------------------------------------------------------------------------------
MSCI All Country World Index** +12.76% +14.69% +13.64%
- ------------------------------------------------------------------------------
MSCI World Index+*** +15.73% +16.59% +15.13%
- ------------------------------------------------------------------------------
Russell 2000 Total Return Index+## -11.88% + 9.96% +10.33%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index++ +22.06% +25.99% +21.95%
- ------------------------------------------------------------------------------
Consumer Price Index+# + 1.37% + 2.14% + 2.40%
- ------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
November 18, 1993, through October 31, 1998.
** Source: Lipper Analytical Services, Inc. "Life" refers to the period from
December 1, 1993, through October 31, 1998.
+ Source: CDA/Wiesenberger. "Life" refers to the period from December 1, 1993,
through October 31, 1998.
++ Standard & Poor's 500 Composite Index is an unmanaged index of common stock
total return performance.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
*** The MSCI World Index is an unmanaged market-capitalization-weighted total
return index which measures the performance of 23 developed-country global
stock markets.
## The Russell 2000 Total Return Index is an unmanaged index comprised of 2,000
of the smallest U.S.-domiciled company common stocks that are traded in the
United States.
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
C results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of C. Operating expenses of C
are not significantly different than those of B. The B performance included in
the C SEC performance has been adjusted to reflect the CDSC generally
applicable to C rather than the CDSC generally applicable to B.
I results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of B for periods prior to the inception of I. Because operating
expenses of B are greater than those of I, I performance generally would have
been higher than B performance. The B performance included in the
I performance has been adjusted to reflect the fact that I have no CDSC. These
results represent the percentage change in net asset value.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.
All results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility.
<PAGE>
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1998
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 20.8%
FINANCIAL SERVICES 11.6%
UTILITIES & COMMUNICATIONS 11.2%
CONGLOMERATES, SPECIAL PRODUCTS/SERVICES 10.5%
HEALTH CARE 8.7%
<TABLE>
TOP 10 STOCK HOLDINGS
<S> <C>
TYCO INTERNATIONAL LTD. 3.6% BMC SOFTWARE, INC. 2.2%
Security systems, packaging, and electronic Computer software company
equipment conglomerate
COMPUTER ASSOCIATES INTERNATIONAL, INC. 2.2%
CISCO SYSTEMS, INC. 3.3% Computer software company
Computer network developer
COMPUWARE CORP. 2.1%
MCI WORLDCOM, INC. 2.8% Computer software company
Telecommunications company
SECOM CO. 1.2%
MICROSOFT CORP. 2.7% Japanese security-services company
Computer software and systems company
GLOBAL TELE-SYSTEMS GROUP, INC. 1.1%
ORACLE CORP. 2.2% U.S. operator of telecommunications systems
Database software developer and manufacturer in Europe
</TABLE>
Portfolio information is as of October 31, 1998. The portfolio is actively
managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - October 31, 1998
Stocks - 95.0%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - 52.7%
Argentina - 0.6%
Banco de Galicia y Buenos Aires S.A. de C.V., ADR
(Banks and Credit Cos.) 8,314 $ 141,858
Perez Companc S.A. (Oils) 97,076 479,709
Siderca S.A. (Steel) 132,100 184,999
Telecom S.A., ADR (Telecommunications) 5,600 180,600
Telefonica de Argentina, ADR (Uitlities - Telephone) 20,600 681,087
YPF Sociedad Anonima, ADR (Oils) 42,150 1,219,716
------------
$ 2,887,969
- ------------------------------------------------------------------------------------------------------
Australia - 0.7%
QBE Insurance Group Ltd. (Insurance)* 801,376 $ 3,168,981
- ------------------------------------------------------------------------------------------------------
Bermuda
Ace Ltd. (Insurance) 800 $ 27,100
Global Crossing Ltd. (Telecommunications)* 3,400 97,750
------------
$ 124,850
- ------------------------------------------------------------------------------------------------------
Brazil - 2.3%
Companhia Vale do Rio Doce Cia, Preferred, "B"
(Mining) 54,353 $ 820,148
Banco Bradesco S.A., Preferred (Banks and Credit
Cos.) 44,374,000 252,949
CEMIG (Utilities - Electric) 28,349,730 551,357
Centrais Eletricas Brasileiras S.A. (Utilities -
Electric) 55,000 514,250
Centrais Eletricas Brasileiras S.A., ADR (Utilities -
Electric) 74,600 760,174
Companhia Cervejaria Brahma, Preferred (Beverages) 721,433 338,673
Companhia Paranaense de Energia, Preferred, "B"
(Utilities - Electric) 33,389,000 260,305
Embratel Participacoes S.A. (Telecommunications)* 17,073,285 131,674
Itausa Investimentos Itau S.A., Preferred
(Conglomerate) 638,000 336,944
Petroleo Brasileiro S.A., Preferred (Oils) 6,722,000 845,251
Tele Centro Sul Participacoes S.A
(Telecommunications)* 17,073,285 78,718
Tele Norte Lests Participacoes S.A
(Telecommunications)* 17,073,285 95,893
Tele Sudeste Celular Participacoes S.A
(Telecommunications)* 17,073,285 32,919
Telebras Telecomunicacoes Brasileiras S.A
(Telecommunications)* 25,630,000 1,090,387
Telebras Telecomunicacoes Brasileiras S.A., Preferred
(Telecommunications)* 14,070,000 1,073,325
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 39,393 2,991,406
Telecomunicacoes do Rio de Janeiro S.A
(Telecommunications) 1,841,000 57,565
Telecomunicacoes do Rio de Janeiro S.A., Preferred,
"B" (Telecommunications)* 3,241,000 100,526
Telesp Celular Participacoes S.A
(Telecommunications)* 17,073,285 55,675
Telesp Participacoes S.A. (Telecommunications)* 20,223,285 362,795
Unibanco S.A. (Banks and Credit Cos.) 9,606,000 315,261
------------
$ 11,066,195
- ------------------------------------------------------------------------------------------------------
Canada - 0.8%
Canadian National Railway Co. (Railroads) 69,632 $ 3,512,064
Legacy Hotel Real Estate Investment Trust
(Real Estate Investment Trust)*## 57,500 238,728
------------
$ 3,750,792
- ------------------------------------------------------------------------------------------------------
Chile - 0.3%
Embotelladora Andina S.A. (Consumer Goods and
Services) 108,409 $ 1,273,806
- ------------------------------------------------------------------------------------------------------
China - 0.3%
Huaneng Power International, Inc., ADR (Utilities -
Electric)* 67,780 $ 931,975
Qingling Motors Co. (Automotive) 1,632,000 301,364
------------
$ 1,233,339
- ------------------------------------------------------------------------------------------------------
Colombia - 0.1%
Cementos Diamante S.A., ADR (Construction)## 51,338 $ 277,225
- ------------------------------------------------------------------------------------------------------
Egypt - 0.4%
Commercial International Bank, GDR
(Banks and Credit Cos.)## 53,667 $ 415,919
Egypt Gas (Utilities - Gas) 4,100 353,438
Madinet Nasar City (Housing) 9,250 286,953
Misr Elgadida for Housing and Recreation (Housing) 3,120 285,337
North Cairo Mills (Food Products) 10 124
Suez Cement Co., GDR (Construction)## 33,235 488,554
------------
$ 1,830,325
- ------------------------------------------------------------------------------------------------------
Finland - 0.9%
AO Mosenergo (Conglomerate) 43,782 $ 76,619
Helsingin Puhelin Oyj (Telecommunications) 39,531 2,166,082
Pohjola Insurance Group (Insurance) 29,395 1,202,178
Tieto Corp. (Computer Software - Systems) 35,870 1,089,559
------------
$ 4,534,438
- ------------------------------------------------------------------------------------------------------
France - 3.6%
Alcatel Alsthom Compagnie (Telecommunications) 15,661 $ 1,744,997
Alcatel Alsthom Compagnie, ADR (Telecommunications) 13,000 286,000
Sanofi S.A. (Medical and Health Products) 23,492 3,678,950
Societe Nationale D'exploitation Industrelle des
Tabacs et Allumettes (Tobacco) 36,000 2,138,460
Societe Industrielle de Transports Automobiles S.A
(Hazardous Waste) 8,600 2,222,990
Television Francaise (Entertainment) 15,144 2,502,465
Thomson CSF (Aerospace and Defense) 73,484 2,552,906
Total S.A., "B" (Oils) 17,456 2,014,130
------------
$ 17,140,898
- ------------------------------------------------------------------------------------------------------
Germany - 1.7%
Henkel KGaA (Chemicals) 56,343 $ 4,812,879
Mannesmann AG (Conglomerate) 16,566 1,630,099
SAP AG, Preferred (Computer Software - Systems) 200 97,434
Wella AG (Consumer Goods and Services)* 2,513 1,805,294
------------
$ 8,345,706
- ------------------------------------------------------------------------------------------------------
Greece - 1.3%
Alpha Credit Bank (Banking) 5,240 $ 418,675
Athens Medic Center, GDR
(Medical and Health Technology and Services) 74,100 1,322,556
Attica Enterprises S.A., GDR (Transportation) 13,950 102,071
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 121,519 2,762,384
Intracom S.A. (Telecommunications) 4,150 173,052
National Bank of Greece, GDR (Banks and Credit Co.) 2,759 391,987
Stet Hellas Telecommunications S.A
(Telecommunications)* 27,000 708,750
Strintzis Shipping (Shipping) 17,800 84,088
Titan Cement Co., GDR (Building Materials) 2,400 148,327
------------
$ 6,111,890
- ------------------------------------------------------------------------------------------------------
Hong Kong - 0.2%
Guangdong Kelon Electric Holdings
(Consumer Goods and Services) 566,000 $ 482,386
Zhenhai Refining and Chemical Co., Ltd. (Oils) 1,802,000 367,660
------------
$ 850,046
- ------------------------------------------------------------------------------------------------------
Hungary - 0.6%
Magyar Olaj Es Gazipari KT (Gas) 34,830 $ 780,545
Magyar Olaj Es Gazipari KT, GDR (Oils)## 9,000 203,400
Magyar Tavkozlesi Rt., ADR (Telecommunications) 53,915 1,448,966
OTP Bank Rt. (Banks and Credit Cos.) 10,034 356,767
------------
$ 2,789,678
- ------------------------------------------------------------------------------------------------------
India - 0.9%
Bajaj Auto Ltd. (Automotive) 13,500 $ 176,729
Bharat Heavy Electricals Ltd. (Utilities - Electric) 37,000 206,868
EIH Ltd. (Restaurants and Lodging) 9,350 53,271
Formula System (1985) Ltd. (Computer Software -
Systems)* 14,368 307,438
Hindustan Lever Ltd. (Consumer Goods and Services) 25,000 947,400
Hindustan Petroleum Corp. Ltd. (Oils) 50,000 315,603
Industrial Development Bank of India Ltd.
(Banks and Credit Cos.) 130,000 118,014
Infosys Technologies Ltd. (Computer-Software)* 2,300 131,747
ITC Ltd. (Conglomerate) 29,000 479,734
Larsen & Toubro Ltd. (Conglomerate) 32,500 111,099
Larsen & Toubro Ltd., GDR (Conglomerate) 15,150 51,789
Mahanagar Telephone Nigam Ltd. (Telecommunications) 100,000 432,624
Reliance Industries Ltd. (Conglomerate) 90,000 247,872
State Bank of India (Banks and Credit Cos.) 126,000 463,489
Tata Engineering and Locomotive Co. Ltd. (Automotive) 470 1,254
Tata Iron and Steel Co. Ltd. (Steel) 1,718 3,290
Tata Iron and Steel Co. Ltd., ADR (Steel) 11,819 22,632
------------
$ 4,070,853
- ------------------------------------------------------------------------------------------------------
Ireland - 1.9%
Allied Irish Banks PLC (Banks and Credit Cos.) 274,877 $ 3,945,675
Anglo Irish Bank PLC (Banks and Credit Cos.)* 1,490,290 3,615,218
Elan Corp. PLC, ADR (Health Products)* 23,700 1,660,481
------------
$ 9,221,374
- ------------------------------------------------------------------------------------------------------
Israel - 0.5%
Bank Hapoalim (Banks and Credit Cos.) 259,262 $ 468,985
Bezek Israeli Telecommunications Corp. Ltd.
(Telecommunications) 103,250 296,993
Discount Investment Corp. (Financial Services) 12,701 290,542
ECI Telecom Ltd. (Telecommunications) 22,565 747,466
Makhteshim-Agam Industries Ltd. (Chemicals)* 153,957 273,439
Super Sol Ltd. (Supermarkets) 78,009 201,694
Teva Pharmaceutical Industries Ltd., ADR
(Pharmaceuticals) 7,858 309,900
------------
$ 2,589,019
- ------------------------------------------------------------------------------------------------------
Italy - 3.1%
Banca Carige S.p.A. (Banks and Credit Cos.) 122,109 $ 1,050,272
Banca Nazionale del Lavoro S.p.A. (Banks and Credit
Cos.)* 393,640 1,047,222
ERG S.p.A. (Oils) 451,298 1,378,430
Industrie Natuzzi S.p.A., ADR (Consumer Goods and
Services) 77,237 1,404,748
Istituto Mobiliare Italiano S.p.A. (Banks and Credit
Cos.) 258,868 3,985,017
Mediaset S.p.A. (Entertainment) 359,014 2,277,557
Telecom Italia S.p.A. (Telecommunications) 305,620 2,212,338
Telecom Italia S.p.A., Saving Shares
(Telecommunications) 477,112 1,693,354
------------
$ 15,048,938
- ------------------------------------------------------------------------------------------------------
Japan - 8.4%
Aeon Credit Service Co. Ltd. (Financial Services) 36,300 $ 2,184,867
Bridgestone Corp. (Tire and Rubber) 85,000 1,874,678
Canon, Inc. (Special Products and Services) 83,000 1,573,646
Fujimi, Inc. (Electronics) 40,000 1,341,359
Itoen Ltd. (Conglomerate) 7,000 291,917
Keyence Corp. (Electronics) 21,530 2,162,256
Kinki Coca-Cola Bottling Co. (Beverages) 96,000 1,254,686
Kirin Beverage Corp. (Beverages) 118,000 2,272,743
Meitec Corp. (Computer Software - Systems) 83,700 1,619,304
Nippon Broadcasting System Co. (Broadcasting) 16,000 543,422
Nippon Telephone & Telegraph Co. (Utilities -
Telephone) 156 1,223,319
NTT Data Corp. (Telecommunications) 440 1,865,176
Olympus Optical Co. (Conglomerate) 166,000 1,712,812
Osaka Sanso Kogyo Ltd. (Chemicals) 424,000 678,108
Rohm Co. (Electronics) 24,000 2,125,537
Secom Co. (Consumer Goods and Services) 74,000 5,503,869
Softbank Corp. (Computer - Software) 10,900 250,155
Sony Corp. (Electronics) 33,500 2,131,556
Takeda Chemical Industries Co.
(Medical and Health Products) 124,000 4,040,929
Terumo Corp. (Pharmaceuticals) 181,000 3,812,984
Ushio, Inc. (Electronics) 237,000 1,809,596
------------
$ 40,272,919
- ------------------------------------------------------------------------------------------------------
Jordan - 0.1%
Arab Bank Corp. (Banks and Credit Cos.) 2,280 $ 652,807
- ------------------------------------------------------------------------------------------------------
Luxembourg - 0.2%
Egypt Trust (Investment Trust)* 88,050 $ 876,098
- ------------------------------------------------------------------------------------------------------
Mauritius - 0.3%
Mauritius Commercial Bank Ltd. (Banks and Credit
Cos.) 91,880 $ 408,355
New Mauritius Hotels Ltd. (Restraurants and Lodging) 185,000 388,687
Rogers & Co. Ltd. (Conglomerate) 44,492 260,660
State Bank of Mauritius Ltd. (Banks and Credit Cos.) 600,000 416,970
------------
$ 1,474,672
- ------------------------------------------------------------------------------------------------------
Mexico - 1.0%
Cemex S.A. (Construction) 88,301 $ 211,116
Cifra S.A. de C.V. (Retail) 241,335 328,005
Corporacion GEO S.A. de C.V. (Housing)* 33,500 230,815
Desc S.A. de C.V., "B" (Conglomerate) 185,000 169,216
Fomento Economico Mexicano S.A. (Beverages) 17,240 449,317
Grupo Carso S.A., "A1" (Conglomerate) 252,300 876,042
Grupo Modelo S.A. de C.V. (Brewery) 204,000 431,071
Grupo Television S.A. de C.V., GDR (Entertainment)* 12,100 328,213
Kimberly-Clark de Mexico SA de C.V
(Forest and Paper Products) 70,000 205,556
Organiz Soriana S.A., "B" (Real Estate) 100,000 297,619
Telefonos de Mexico S.A. (Utilities - Telephone) 538,000 1,409,048
------------
$ 4,936,018
- ------------------------------------------------------------------------------------------------------
Morocco - 0.3%
Banque Marocaine Commerce (Banks and Credit Cos.) 3,950 $ 297,809
Brasseries Maroc (Consumer Goods and Services) 969 315,810
Ona Omnium Nord Africain S.A. (Conglomerate) 2,200 285,609
Societe Nationale d'Investissement (Conglomerate) 2,000 217,058
Wafabank (Banks and Credit Cos.) 2,071 269,987
------------
$ 1,386,273
- ------------------------------------------------------------------------------------------------------
Netherlands - 5.0%
Akzo Nobel N.V. (Chemicals) 71,100 $ 2,764,344
Benckiser N.V., "B" (Consumer Goods and Services) 80,873 4,586,543
Brunel International N.V. (Human Resources)* 35,089 992,181
Elsag Bailey Process Automation N.V. (Machinery)* 2,000 73,250
Fugro N.V. (Engineering)* 54,389 1,473,830
Hunter Douglas N.V., ADR (Consumer Goods and
Services)* 57,538 2,064,503
IHC Caland N.V. (Marine Equipment)* 23,167 1,048,365
ING Groep N.V. (Financial Services)* 95,243 4,610,918
Koninklijke Ahold N.V. (Supermarkets)* 76,143 2,532,255
Koninklijke Ahrend Groep N.V
(Consumer Goods and Services)* 97,438 1,977,668
Moolen Van Der (Financial Services)* 22,962 1,604,745
------------
$ 23,728,602
- ------------------------------------------------------------------------------------------------------
Pakistan
Hub Power Co. Ltd. (Utilities - Electric) 1,040,000 $ 206,505
Pakistan Telecom, "A" (Telecommunications) 200 70
Sui Northern Gas (Oils)* 1,380 208
------------
$ 206,783
- ------------------------------------------------------------------------------------------------------
Peru - 0.5%
Alicorp S.A. (Consumer Goods and Services)* 338,495 $ 55,147
Compania de Minas Buenaventura S.A. (Mining) 71,230 406,399
CPT Telefonica del Peru S.A., "B" (Utilities -
Telephone) 760,954 991,794
Credicorp Ltd. Holdings Co. (Banks and Credit Cos.) 34,811 234,973
Telefonica del Peru S.A., ADR (Telecommunications) 64,500 838,500
------------
$ 2,526,813
- ------------------------------------------------------------------------------------------------------
Poland - 0.6%
Bank Handlowy w Warszawie (Banks and Credit Cos.)+ 16,879 $ 187,435
Bank Handlowy w Warszawie, GDR
(Banks and Credit Cos.)## 10,030 114,342
Bank Rozwoju Eksportu S.A. (Banks and Credit Cos.) 11,400 239,860
BIG Bank Gdanski S.A. (Banks and Credit Cos.) 30,832 494,854
Bydgoska Fabryka Kabli S.A. (Electrical Equipment) 103,116 334,479
Elektrim Spolka Akcyjna S.A. (Electrical Equipment) 75,333 902,587
Orbis S.A. (Restaurants and Lodging) 38,523 339,975
WBK Wielkopolski S.A. (Consumer Goods and Services) 47,000 304,909
------------
$ 2,918,441
- ------------------------------------------------------------------------------------------------------
Portugal - 1.4%
Banco Pinto & Sotto Mayor S.A. (Banks and Credit
Cos.) 191,011 $ 3,642,566
BPI - SGPS S.A. (Banks and Credit Cos.) 76,430 2,332,203
Portugal Telecom S.A. (Utilities - Telephone) 20,336 958,796
------------
$ 6,933,565
- ------------------------------------------------------------------------------------------------------
Russia - 0.2%
JSC Surgutneftegaz Co., ADR (Oils) 97,580 $ 195,160
Lukoil Oil Co., ADR (Oils) 34,367 555,371
Rostelecom, GDR (Telecommunications)* 15,500 182,125
Unified Energy Systems, GDR (Utilities - Electric) 30,777 98,486
------------
$ 1,031,142
- ------------------------------------------------------------------------------------------------------
Singapore - 0.4%
City Developments Ltd. (Real Estate) 61,000 $ 221,818
Development Bank of Singapore Ltd. (Banks and Credit
Cos.) 23,000 144,592
Natsteel Electronics Ltd. (Electronics) 486,000 1,000,456
Overseas Union Bank Ltd. (Banks and Credit Cos.) 33,000 89,898
Overseas-Chinese Banking Corp. Ltd. (Finance) 31,000 135,655
Singapore Press Holdings Ltd. (Printing and
Publishing) 16,000 138,059
Singapore Telecommunications, Ltd.
(Telecommunications) 45,000 77,935
United Overseas Bank (Banks and Credit Cos.) 5,933 27,974
------------
$ 1,836,387
- ------------------------------------------------------------------------------------------------------
South Africa - 1.3%
Anglo American Corp. of South Africa Ltd. (Mining) 30,783 $ 1,007,343
DeBeers Centenary AG (Diamonds - Precious Stones) 17,167 239,969
Dimension Data Holdings Ltd. (Financial Institutions) 126,168 581,096
Imperial Holdings Ltd. (Conglomerate) 48,831 380,672
JD Group Ltd. (Stores)* 39,310 183,165
Liberty Life Association of Africa Ltd. (Insurance) 35,531 611,286
Nedcor Ltd. (Banks and Credit Cos.)* 37,649 755,679
Real Africa Holdings Ltd. (Conglomerate) 201,307 642,162
Sasol Ltd. (Oils) 70,080 344,748
South African Breweries Ltd. (Brewery) 65,288 1,272,999
------------
$ 6,019,119
- ------------------------------------------------------------------------------------------------------
South Korea - 1.0%
Pohang Iron & Steel Co. (Construction) 52,050 $ 2,931,860
Samsung Electronics (Electronics) 35,595 1,458,369
SK Telecom Ltd. (Telecommunications) 650 445,507
------------
$ 4,835,736
- ------------------------------------------------------------------------------------------------------
Spain - 0.3%
Telefonica de Espana (Utilities - Telephone) 32,673 $ 1,476,588
- ------------------------------------------------------------------------------------------------------
Sweden - 1.4%
Celsius AB (Aerospace) 60,200 $ 965,028
Saab AB, "B" (Aerospace)* 280,800 2,232,659
Securitas AB (Consumer Goods and Services)* 81,880 1,008,051
Volvo AB (Automotive) 109,038 2,356,195
------------
$ 6,561,933
- ------------------------------------------------------------------------------------------------------
Switzerland - 1.9%
Barry Callebaut AG (Food and Beverage Products)* 6,700 $ 1,499,335
Hiestand Holding AG (Food Products) 3,499 981,994
Julius Baer Holdings (Banks and Credit Cos.) 684 2,096,455
Kuoni Reisen Holdings AG (Transportation) 402 1,436,987
Nestle S.A. (Food and Beverage Products) 525 1,116,691
UBS AG (Banks and Credit Cos.)* 6,900 1,893,169
------------
$ 9,024,631
- ------------------------------------------------------------------------------------------------------
Taiwan - 0.4%
Taipei Fund (Finance)* 238 $ 1,999,200
- ------------------------------------------------------------------------------------------------------
Thailand - 0.2%
Electricity Generating Public Co. Ltd. (Utilities -
Electric) 84,000 $ 221,533
PTT Exploration and Production Public Co. Ltd. (Oil
Services) 4,000 36,977
PTT Exploration and Production Public Co. Ltd., ADR
(Oil Services) 32,000 307,993
Thai Farmers Bank (Banks and Credit Cos.) 400,000 505,710
------------
$ 1,072,213
- ------------------------------------------------------------------------------------------------------
Turkey - 0.6%
Akbank (Banks and Credit Cos.) 21,935,389 $ 323,823
Arcelik A.S. (Consumer Goods and Services) 16,202,514 371,450
Cimsa Cimento Sanayi ve Ticaret A.S. (Construction
Services) 14,420,238 310,554
Haci Omer Sabanci Holdings A.S., ADR (Conglomerate)## 72,311 280,205
Turkiye Is Bankasi (Banks and Credit Cos.) 27,363,810 750,891
Vestel Electronic (Electronics)* 3,498,923 285,612
Yapi ve Kredi Bankasi (Banks and Credit Cos.) 48,906,583 552,108
------------
$ 2,874,643
- ------------------------------------------------------------------------------------------------------
United Kingdom - 7.0%
ARM Holdings PLC, ADR (Computer Software - Systems)* 10,400 $ 488,800
British Aerospace PLC (Aerospace and Defense)* 569,758 4,213,164
British Petroleum PLC (Oils)* 304,112 4,461,993
Capital Radio PLC (Broadcasting) 150,600 1,267,327
CBT Group PLC, ADR (Computer Software - Personal
Computers)* 15,100 180,256
Glaxo Wellcome PLC (Pharmaceuticals)* 122,100 3,791,310
ICON PLC, ADR (Biotechnology)* 100 2,800
Jarvis Hotels PLC (Restaurants and Lodging)+ 1,157,160 1,974,646
Kwik-Fit Holdings PLC (Automotive Repair Centers) 291,092 2,410,633
LucasVarity PLC (Automotive) 1,187,590 4,053,147
Next PLC (Stores) 280,753 2,371,982
Reuters Group PLC (Computer - Services) 27,650 284,489
Sema Group PLC (Computer Software - Systems) 308,701 2,499,649
Taylor Nelson Sofres PLC (Market Research) 1,965,084 2,876,636
Williams PLC (Conglomerate) 388,248 2,421,155
------------
$ 33,297,987
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $252,258,892
- ------------------------------------------------------------------------------------------------------
U.S. Stocks - 42.3%
Advertising
Outdoor Systems, Inc.* 700 $ 15,444
- ------------------------------------------------------------------------------------------------------
Aerospace - 0.1%
Gulfstream Aerospace Corp.* 10,500 $ 464,625
- ------------------------------------------------------------------------------------------------------
Airlines
Atlas Air, Inc.* 400 $ 13,800
- ------------------------------------------------------------------------------------------------------
Automotive
Dura Automotive Systems, Inc.* 300 $ 7,163
- ------------------------------------------------------------------------------------------------------
Biotechnology
Waters Corp.* 1,600 $ 117,600
- ------------------------------------------------------------------------------------------------------
Business Machines - 0.5%
Affiliated Computer Services, Inc., "A"* 7,800 $ 288,600
Sun Microsystems, Inc.* 36,100 2,102,825
------------
$ 2,391,425
- ------------------------------------------------------------------------------------------------------
Business Services - 1.1%
BISYS Group, Inc.* 15,600 $ 682,500
Ceridian Corp.* 8,600 493,425
Computer Learning Centers, Inc.* 1,300 11,619
Computer Sciences Corp. 17,900 944,225
DST Systems, Inc.* 12,900 645,000
First Data Corp. 900 23,850
Fiserv, Inc.* 500 23,250
Galileo International, Inc. 400 15,175
Global Directmail Corp.* 900 12,825
Learning Tree International, Inc.* 42,800 385,200
Metamor Worldwide, Inc.* 600 15,413
Modis Professional Services, Inc.* 7,300 128,662
National Data Corp. 300 10,163
Policy Management Systems Corp.* 36,300 1,649,381
Professional Detailing, Inc.* 400 9,350
Renaissance Worldwide, Inc.* 5,400 50,962
Technology Solutions Co.* 22,900 274,800
------------
$ 5,375,800
- ------------------------------------------------------------------------------------------------------
Computer Hardware - Personal Computers
Compaq Computer Corp. 400 $ 12,650
- ------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.6%
Autodesk, Inc. 500 $ 15,594
Microsoft Corp.* 117,900 12,482,662
Verio, Inc.* 700 9,713
------------
$ 12,507,969
- ------------------------------------------------------------------------------------------------------
Computer Software - Services - 0.5%
EMC Corp.* 26,700 $ 1,718,812
Equant N.V.* 12,600 551,250
Mobius Management Systems, Inc.* 11,400 132,525
------------
$ 2,402,587
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 9.4%
Aspen Technology, Inc.* 500 $ 7,000
BMC Software, Inc.* 206,900 9,944,131
Cadence Design Systems, Inc.* 165,500 3,537,562
Cambridge Technology Partners, Inc.* 14,400 318,600
Computer Associates International, Inc. 252,275 9,933,328
Compuware Corp.* 179,600 9,732,075
Learning Co., Inc.* 600 15,488
Network Associates, Inc.* 21,900 930,750
Oracle Corp.* 339,440 10,034,695
Siebel Systems, Inc.* 500 10,219
Synopsys, Inc.* 9,100 411,775
------------
$ 44,875,623
- ------------------------------------------------------------------------------------------------------
Conglomerates
Sodexho Marriott Services, Inc.* 700 $ 22,575
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 3.4%
Carson, Inc., "A"* 48,500 $ 145,500
Tyco International Ltd. 262,500 16,258,594
------------
$ 16,404,094
- ------------------------------------------------------------------------------------------------------
Electrical Equipment
Micrel, Inc.* 400 $ 13,150
- ------------------------------------------------------------------------------------------------------
Electronics - 1.8%
Altera Corp.* 44,500 $ 1,852,312
Amkor Technology, Inc.* 208,500 1,016,437
Analog Devices, Inc.* 38,100 757,237
Applied Materials, Inc.* 26,500 919,219
Cable Design Technologies Corp.* 1,150 18,975
Intel Corp. 22,750 2,029,016
KLA-Tencor Corp.* 8,200 302,375
Lattice Semiconductor Corp.* 13,500 459,000
Linear Technology Corp. 5,100 304,088
Novellus Systems, Inc.* 400 15,525
Xilinx, Inc.* 23,000 1,027,094
------------
$ 8,701,278
- ------------------------------------------------------------------------------------------------------
Energy - 0.1%
BJ Services Co.,* 21,500 $ 439,406
- ------------------------------------------------------------------------------------------------------
Entertainment - 2.8%
CBS Corp. 2,300 $ 64,256
Clear Channel Communications, Inc.* 36,500 1,663,031
Cox Radio, Inc., "A"* 43,500 1,628,531
Gemstar International Group Ltd.* 6,000 327,750
Hearst-Argyle Television, Inc.* 600 16,650
Heftel Broadcasting Corp., "A"* 300 12,338
Jacor Communications, Inc.* 24,300 1,336,500
MediaOne Group, Inc.* 58,700 2,483,744
Premier Parks, Inc.* 700 15,531
Time Warner, Inc. 44,900 4,167,282
Univision Communications, Inc., "A"* 5,700 168,150
USA Networks, Inc.* 500 11,250
Viacom, Inc., "B"* 25,391 1,520,286
------------
$ 13,415,299
- ------------------------------------------------------------------------------------------------------
Financial Institutions
Associates First Capital Corp., "A" 200 $ 14,100
Franklin Resources, Inc. 1,600 60,500
U.S. Trust Corp. 2,600 165,588
------------
$ 240,188
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.1%
Coors Adolph Co. 1,500 $ 75,000
Keebler Foods Co.* 500 14,375
Suiza Foods Corp.* 9,900 322,987
United States Foodservice Co.* 2,100 99,750
------------
$ 512,112
- ------------------------------------------------------------------------------------------------------
Insurance
Life Re Corp. 2,100 $ 195,956
- ------------------------------------------------------------------------------------------------------
Machinery - 0.1%
SI Handling Systems, Inc. 19,050 $ 242,888
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - 1.4%
Allegiance Corp. 37,000 $ 1,375,937
Allergan, Inc. 5,500 343,406
AmeriSource Health Corp., "A"* 200 10,488
Boston Scientific Corp.* 18,700 1,017,981
Centocor, Inc.* 4,800 213,600
King Pharmaceuticals, Inc.* 1,400 21,788
McKesson Corp. 42,100 3,241,700
PSS World Medical, Inc.* 15,700 347,362
------------
$ 6,572,262
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.1%
Cardinal Health, Inc. 19,000 $ 1,796,687
Guidant Corp. 26,800 2,050,200
HBO & Co. 47,500 1,246,875
Health Management Associates, Inc., "A"* 1,050 18,703
HealthSouth Corp.* 6,500 78,813
Medtronic, Inc. 32,500 2,112,500
Orthodontic Centers of America, Inc.* 900 17,044
PacifiCare Health Systems, Inc., "B"* 300 23,625
Schein (Henry), Inc.* 300 11,606
Steris Corp.* 3,000 69,000
Total Renal Care Holdings, Inc.* 567 13,892
United Healthcare Corp. 56,500 2,461,281
------------
$ 9,900,226
- ------------------------------------------------------------------------------------------------------
Office Equipment
Steelcase, Inc. 600 $ 10,800
- ------------------------------------------------------------------------------------------------------
Oil Services - 1.2%
Cooper Cameron Corp.* 35,200 $ 1,223,200
Diamond Offshore Drilling, Inc. 38,200 1,172,263
Global Industries, Inc.* 11,200 107,800
Noble Drilling Corp.* 58,300 1,002,031
Transocean Offshore, Inc. 26,300 971,456
Weatherford International, Inc.* 38,400 1,044,000
------------
$ 5,520,750
- ------------------------------------------------------------------------------------------------------
Oils
Newfield Exploration Co.* 4,300 $ 104,544
- ------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.5%
Bergen Brunswig Corp. 900 $ 43,931
Sepracor, Inc.* 27,500 1,887,188
Watson Pharmaceuticals, Inc.* 5,800 322,625
------------
$ 2,253,744
- ------------------------------------------------------------------------------------------------------
Pollution Control
Waste Management, Inc. 2,400 $ 108,300
- ------------------------------------------------------------------------------------------------------
Printing and Publishing
Mail-Well, Inc.* 400 $ 5,225
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.0%
Applebee's International, Inc. 900 $ 18,337
Brinker International, Inc.* 700 16,931
Buffets, Inc.* 1,600 17,300
CEC Entertainment, Inc.* 500 14,125
Cendant Corp.* 362,954 4,151,286
CKE Restaurants, Inc. 400 10,525
IHOP, Inc.* 300 11,775
Outback Steakhouse, Inc.* 500 17,313
Papa John's International, Inc.* 400 15,188
Promus Hotel Corp.* 10,461 333,444
------------
$ 4,606,224
- ------------------------------------------------------------------------------------------------------
Special Products and Services - 0.1%
Newport News Shipbuilding, Inc. 16,600 $ 436,787
- ------------------------------------------------------------------------------------------------------
Stores - 3.5%
Boise Cascade Office Products Corp.* 900 $ 8,269
Borders Group, Inc.* 700 17,762
CompUSA, Inc.* 22,400 310,800
Consolidated Stores Corp.* 425 6,986
Corporate Express, Inc.* 49,250 575,609
CSK Auto Corp.* 500 13,031
CVS Corp. 78,900 3,604,744
General Nutrition Cos., Inc.* 1,000 14,563
Home Depot, Inc. 9,400 408,900
Micro Warehouse, Inc.* 50,550 1,102,622
Office Depot, Inc.* 161,700 4,042,500
Republic Industries, Inc.* 13,200 212,025
Rite Aid Corp. 79,100 3,139,281
Staples, Inc.* 100,200 3,269,025
TJX Cos., Inc. 900 17,044
------------
$ 16,743,161
- ------------------------------------------------------------------------------------------------------
Supermarkets - 1.7%
Albertsons, Inc. 4,400 $ 244,475
Kroger Co.* 16,500 915,750
Meyer (Fred), Inc.* 83,950 4,475,584
Safeway, Inc.* 56,700 2,710,969
------------
$ 8,346,778
- ------------------------------------------------------------------------------------------------------
Telecommunications - 8.3%
Alltel Corp. 13,900 $ 650,694
American Tower Corp., "A"* 7,000 153,125
Aspect Telecommunications Corp.* 3,500 52,938
Cellular Communications International, Inc.* 12,800 795,600
Century Telephone Enterprises, Inc. 36,950 2,099,222
Cisco Systems, Inc.* 241,450 15,211,350
Global Tele-Systems Group, Inc.* 122,262 4,898,121
Hyperion Telecommunications, Inc., "A"* 1,300 12,675
International Business Communications Systems, Inc.*+ 40,300 0
Iridium World Communications Co.* 6,300 299,250
Lucent Technologies, Inc. 300 24,056
MCI WorldCom, Inc.* 231,117 12,769,214
Qwest Communications International, Inc.* 37,700 1,475,012
Sprint Corp. 16,100 1,235,675
Tel-Save Holdings, Inc.* 3,400 30,494
------------
$ 39,707,426
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $202,687,859
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $425,382,496) $454,946,751
- ------------------------------------------------------------------------------------------------------
Bond
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Brazil
Compania Vale Rio Doce (Mining) EE (Indentified Cost, $0) BRL 29 $ --
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.5%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 11/02/98 $ 13,850 $ 13,847,923
Tennessee Valley Authority, due 11/03/98 3,000 2,999,208
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 16,847,131
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $442,229,627) $471,793,882
Other Assets, Less Liabilities - 1.5% 7,339,058
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $479,132,940
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+Restricted security.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
OCTOBER 31, 1998
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $442,229,627) $471,793,882
Foreign currency, at value (identified cost, $1,260,462) 1,267,942
Cash 18,645
Receivable for investments sold 13,966,118
Receivable for Fund shares sold 1,357,292
Dividends receivable 581,370
Deferred organization expenses 703
Other assets 32,276
------------
Total assets $489,018,228
------------
Liabilities:
Payable for investments purchased $ 4,175,470
Payable for Fund shares reaquired 5,363,790
Payable to affiliates -
Management fee 23,128
Shareholder servicing agent fee 2,891
Distribution and service fee 120,475
Administrative fee 385
Accrued expenses and other liabilities 199,149
------------
Total liabilities $ 9,885,288
------------
Net assets $479,132,940
============
Net assets consist of:
Paid-in capital $412,686,928
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 29,586,340
Accumulated undistributed net realized gain on
investments and
foreign currency transactions 36,893,291
Accumulated net investment loss (33,619)
------------
Total $479,132,940
============
Shares of beneficial interest outstanding 26,408,432
==========
Class A shares:
Net asset value per share
(net assets of $195,193,955 / 10,685,341 shares of
beneficial interest outstanding) $18.27
======
Offering price per share (100 / 94.25) $19.38
======
Class B shares:
Net asset value and offering price per share
(net assets of $259,345,273 / 14,361,502 shares of
beneficial interest outstanding) $18.06
======
Class C shares:
Net asset value and offering price per share
(net assets of $19,148,575 / 1,064,384 shares of
beneficial interest outstanding) $17.99
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $5,445,137 / 297,205 shares of
beneficial interest outstanding) $18.32
======
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
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- -------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998
- -------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 6,834,364
Interest 1,284,346
Foreign taxes withheld (541,000)
------------
Total investment income $ 7,577,710
------------
Expenses -
Management fee $ 4,889,762
Trustees' compensation 41,965
Shareholder servicing agent fee 626,573
Distribution and service fee (Class A) 738,901
Distribution and service fee (Class B) 3,032,367
Distribution and service fee (Class C) 225,219
Administrative fee 76,885
Custodian fee 365,320
Printing 89,271
Postage 81,976
Auditing fees 81,410
Legal fees 5,557
Amortization of organization expenses 6,757
Miscellaneous 461,652
------------
Total expenses $ 10,723,615
Fees paid indirectly (170,023)
Reduction of expenses by distributor (210,700)
------------
Net expenses $ 10,342,892
------------
Net investment loss $ (2,765,182)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 40,395,360
Foreign currency transactions (484,700)
------------
Net realized gain on investments and foreign
currency transactions $ 39,910,660
------------
Change in unrealized appreciation (depreciation) -
Investments $(40,297,332)
Translation of assets and liabilities in foreign currencies 31,013
------------
Net unrealized loss on investments and foreign currency
translation $(40,266,319)
------------
Net realized and unrealized loss on investments and
foreign currency $ (355,659)
------------
Decrease in net assets from operations $ (3,120,841)
============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- --------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (2,765,182) $ (3,010,335)
Net realized gain on investments and foreign currency
transactions 39,910,660 54,087,549
Net unrealized gain (loss) on investments and foreign
currency translation (40,266,319) 21,042,586
------------ ------------
Increase (decrease) in net assets from operations $ (3,120,841) $ 72,119,800
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $(20,053,104) $ (9,634,864)
From net realized gain on investments and foreign
currency transactions (Class B) (28,720,424) (13,421,222)
From net realized gain on investments and foreign
currency transactions (Class C) (2,097,140) (1,004,314)
From net realized gain on investments and foreign
currency transactions (Class I) (638,217) --
------------ ------------
Total distributions declared to shareholders $(51,508,885) $(24,060,400)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions $(11,059,613) $ 21,994,786
------------ ------------
Total increase (decrease) in net assets $(65,689,339) $ 70,054,186
Net assets:
At beginning of period 544,822,279 474,768,093
------------ ------------
At end of period (including accumulated net investment loss
of $33,619 and $24,743, respectively) $479,132,940 $544,822,279
============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.79 $19.09 $18.16 $17.45 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.01) $(0.02) $(0.07) $ -- $(0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (0.41) 2.77 2.73 0.93 2.47
------ ------ ------ ------ ------
Total from investment operations $(0.42) $ 2.75 $ 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 (2.10) (1.05) (1.72) (0.22) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders
$(2.10) $(1.05) $(1.73) $(0.22) $ --
------ ------ ------ ------ ------
Net asset value - end of period $18.27 $20.79 $19.09 $18.16 $17.45
====== ====== ====== ====== ======
Total return(+) (1.99)% 15.17% 15.73% 5.47% 16.33%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.49% 1.52% 1.58% 1.63% 1.57%+
Net investment income (loss) (0.06)% (0.10)% (0.35)% 0.02% (0.14)%+
Portfolio turnover 104% 133% 95% 149% 100%
Net assets at end of period (000 omitted) $195,194 $204,918 $172,106 $143,543 $131,503
* For the period from the commencement of the Fund's investment operations, November 18, 1993, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
(S) The distributor voluntarily waived its fee for the periods indicated. If the fee had been incurred by the Fund, the net
investment loss per share and the ratios would have been:
Net investment loss $(0.03) $(0.04) $(0.09) $ -- $(0.04)
Ratios (to average net assets):
Expenses## 1.59% 1.62% 1.68% 1.73% 1.67%+
Net investment loss (0.16)% (0.20)% (0.45)% (0.08)% (0.24)%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.56 $18.87 $17.97 $17.32 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.16) $(0.17) $(0.21) $(0.14) $(0.15)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (0.40) 2.76 2.70 0.92 2.47
------ ------ ------ ------ ------
Total from investment operations $(0.56) $ 2.59 $ 2.49 $ 0.78 $ 2.32
------ ------ ------ ------ ------
Less distributions declared to shareholders
from net realized gain on investments and
foreign currency transactions $(1.94) $(0.90) $(1.59) $(0.13) $ --
------ ------ ------ ------ ------
Net asset value - end of period $18.06 $20.56 $18.87 $17.97 $17.32
====== ====== ====== ====== ======
Total return (2.70)% 14.30% 14.77% 4.61% 15.47%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.24% 2.28% 2.39% 2.45% 2.39%+
Net investment loss (0.81)% (0.87)% (1.16)% (0.80)% (0.95)%+
Portfolio turnover 104% 133% 95% 149% 100%
Net assets at end of period (000 omitted) $259,345 $308,692 $282,668 $247,437 $236,971
* For the period from the commencement of the Fund's investment operations, November 18, 1993, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997 1996 1995 1994**
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.49 $18.85 $17.96 $17.34 $16.04
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.16) $(0.17) $(0.20) $(0.13) $(0.13)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.40) 2.75 2.70 0.92 1.43
------ ------ ------ ------ ------
Total from investment operations $(0.56) $ 2.58 $ 2.50 $ 0.79 $ 1.30
------ ------ ------ ------ ------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $(1.94) $(0.94) $(1.61) $(0.17) $ --
------ ------ ------ ------ ------
Net asset value - end of period $17.99 $20.49 $18.85 $17.96 $17.34
====== ====== ====== ====== ======
Total return (2.73)% 14.27% 14.88% 4.68% 8.10%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.24% 2.25% 2.32% 2.38% 2.31%+
Net investment loss (0.83)% (0.85)% (1.10)% (0.72)% (0.83)%+
Portfolio turnover 104% 133% 95% 149% 100%
Net assets at end of period (000 omitted) $19,149 $24,662 $19,994 $13,349 $11,872
** For the period from the inception of Class C, January 3, 1994, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997***
- ---------------------------------------------------------------------------------------------------------------
CLASS I
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.84 $18.34
------ ------
Income from investment operations# -
Net investment income $ 0.04 $ 0.04
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.40) 2.46
------ ------
Total from investment operations $(0.36) $ 2.50
------ ------
Less distributions declared to shareholders from net realized
gain on investments and foreign currency transactions $(2.16) $ --
------ ------
Net asset value - end of period $18.32 $20.84
====== ======
Total return (1.64)% 13.58%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.24% 1.21%+
Net investment income 0.19% 0.20%+
Portfolio turnover 104% 133%
Net assets at end of period (000 omitted) $5,445 $6,550
*** For the period from the inception of Class I, January 2, 1997, through October 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of
cash maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are
calculated without reduction for this expense offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Global Growth Fund (the Fund) (formerly, MFS World Growth 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 reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. 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 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 may enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Fund may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. The Fund may also use contracts in a manner intended to
protect foreign currency denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Fund's tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on Form
1099-DIV. Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
During the year ended October 31, 1998, $698,389 and $2,056,180, respectively
were reclassified from accumulated net realized gain on investments and
foreign currency transactions and paid-in capital to accumulated net
investment loss due to differences between book and tax accounting for
currency transactions and net investment losses. This change had no effect on
the net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(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 Foreign & Colonial Management Ltd. and Foreign &
Colonial Emerging Markets Ltd., each an England and Wales Company, to assist
in the performance of its services.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain 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 $8,983
for the year ended October 31, 1998.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$63,936 for the year ended October 31, 1998, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
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
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and 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. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $46,531
for the year ended October 31, 1998. The Class A distribution fee is currently
being waived on a voluntary basis and may be imposed at the discretion of MFD.
Fees incurred under the distribution plan during the year ended October 31,
1998, were 0.25% of average daily net assets attributable to Class A shares on
an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be 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 $24,141 and $159 for
Class B and Class C shares, respectively, for the year ended October 31, 1998.
Fees incurred under the distribution plan during the year ended October 31,
1998, were 1.00% of average daily net assets attributable to both Class B and
Class C shares on an annualized basis.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months
following purchase. A contingent deferred sales charge is imposed on
shareholder redemptions of Class B shares in the event of a shareholder
redemption within six years of purchase. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
October 31, 1998, were $3,546, $462,790, and $3,665 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 Fund's average daily net assets at an effective annual
rate of 0.1125%. Prior to January 1, 1998, the fee was calculated as a
percentage of the average daily net assets at an effective annual rate of
0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$538,552,998 and $607,444,886, 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 $ 446,337,659
-------------
Gross unrealized appreciation $ 68,491,260
Gross unrealized depreciation (43,035,037)
-------------
Net unrealized appreciation $ 25,456,223
=============
(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>
Class A Shares
<CAPTION>
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
-------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 59,000,914 $1,171,149,285 28,172,048 $ 562,208,269
Shares issued to shareholders
in reinvestment of
distributions 967,119 17,570,051 449,325 8,218,149
Shares transferred to Class I -- -- (373,008) (6,841,795)
Shares reacquired (59,138,361) (1,181,723,918) (27,406,795) (549,595,449)
----------- -------------- ----------- -------------
Net increase 829,672 $ 6,995,418 841,570 $ 13,989,174
=========== ============== =========== =============
</TABLE>
<TABLE>
Class B Shares
<CAPTION>
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
-------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,457,348 $ 47,943,310 3,233,868 $ 64,511,271
Shares issued to shareholders
in reinvestment of
distributions 1,230,304 22,182,930 561,080 10,209,856
Shares reacquired (4,343,624) (84,629,146) (3,754,830) (75,204,244)
----------- -------------- ----------- -------------
Net increase (decrease) (655,972) $ (14,502,906) 40,118 $ (483,117)
=========== ============== =========== =============
</TABLE>
<TABLE>
Class C Shares
<CAPTION>
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
-------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,032,301 $ 39,976,080 480,867 $ 9,630,276
Shares issued to shareholders
in reinvestment of
distributions 78,016 1,401,164 36,836 667,838
Shares reacquired (2,249,822) (44,495,696) (374,659) (7,546,094)
----------- -------------- ----------- -------------
Net increase (decrease) (139,505) $ (3,118,452) 143,044 $ 2,752,020
=========== ============== =========== =============
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
YEAR ENDED OCTOBER 31, 1998 PERIOD ENDED OCTOBER 31, 1997*
-------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 54,528 $ 1,091,358 38,825 $ 786,858
Shares issued to shareholders
in reinvestment of
distributions 35,224 638,251 -- --
Shares transferred from Class A -- -- 373,008 6,841,795
Shares reacquired (106,903) (2,163,282) (97,477) (1,891,944)
----------- -------------- ----------- -------------
Net increase (decrease) (17,151) $ (433,673) 314,356 $ 5,736,709
=========== ============== =========== =============
</TABLE>
*For the period from the inception of Class I, January 2, 1997, through
October 31, 1997.
(6) Line of Credit
The Fund and other affiliated funds participate in an $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended October 31, 1998, was $3,760.
(7) 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,
1998, the Fund owned the following restricted securities (constituting 0.5% 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 furnished by dealers or by a pricing service, or if not available,
are valued at fair value as determined in good faith by or at the direction of
the Trustees.
DATE OF
DESCRIPTION ACQUISITION SHARE AMOUNT COST VALUE
- --------------------------------------------------------------------------------
Bank Handlowy w
Warszawie 6/18/97 - 9/04/97 16,879 $ 211,454 $ 187,435
International Business
Communications
Systems, Inc. 8/29/95 40,300 399,776 --
Jarvis Hotels PLC 11/01/96 - 7/21/98 1,157,160 3,065,685 1,974,646
----------
$2,162,081
==========
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of the MFS Series Trust VIII and the Shareholders of MFS
Global Growth Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Global Growth Fund (formerly
known as MFS World Growth Fund) (a series of MFS Series Trust VIII) as of
October 31, 1998, the related statement of operations for the year then ended,
the statement of changes in net assets for the years ended October 31, 1998
and 1997, and the financial highlights for each of the years in the five-year
period ended October 31, 1998. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at October 31, 1998 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 Global Growth
Fund at October 31, 1998, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 11, 1998
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 1999, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR
1998.
THE FUND HAS DESIGNATED $42,002,293 AS A CAPITAL GAIN DIVIDEND.
FOR THE YEAR ENDED OCTOBER 31, 1998, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 2.64%.
FOR THE YEAR ENDED OCTOBER 31, 1998, INCOME FROM FOREIGN SOURCES WAS
$5,228,534, AND FOREIGN TAXES WITHHELD WERE $541,000.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) GLOBAL GROWTH FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991), MFS
Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
CUSTODIAN
Lawrence H. Cohn, M.D. - Chief of Cardiac State Street Bank and Trust Company
Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School AUDITORS
Deloitte & Touche LLP
The Hon. Sir J. David Gibbons, KBE - Chief
Executive Officer, Edmund Gibbons Ltd.; INVESTOR INFORMATION
Chairman, Colonial Insurance Company, Ltd. For MFS stock and bond market outlooks, call
toll free: 1-800-637-4458 anytime from a
Abby M. O'Neill - Private Investor touch-tone telephone.
Walter E. Robb, III - President and Treasurer, For information on MFS mutual funds, call your
Benchmark Advisors, Inc. (corporate financial financial adviser or, for an information kit,
consultants); President, Benchmark Consulting call toll free: 1-800-637-2929 any business day
Group, Inc. (office services) from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Arnold D. Scott* - Senior Executive
Vice President, Director, and Secretary, INVESTOR SERVICE
MFS Investment Management MFS Service Center, Inc.
P.O. Box 2281
Jeffrey L. Shames* - Chairman, Chief Boston, MA 02107-9906
Executive Officer, and Director,
MFS Investment Management For general information, call toll free:
1-800-225-2606 any business day from 8 a.m. to
J. Dale Sherratt - President, Insight 8 p.m. Eastern time.
Resources, Inc. (acquisition planning
specialists) For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business day
Ward Smith - Former Chairman (until 1994), from 9 a.m. to 5 p.m. Eastern time. (To use
NACCO Industries (holding company) this service, your phone must be equipped with
a Telecommunications Device for the Deaf.)
INVESTMENT ADVISER
Massachusetts Financial Services Company For share prices, account balances, and
500 Boylston Street exchanges, call toll free: 1-800-MFS-TALK
Boston, MA 02116-3741 (1-800-637-8255) anytime from a touch-tone
telephone.
DISTRIBUTOR
MFS Fund Distributors, Inc. WORLD WIDE WEB
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
PORTFOLIO MANAGERS
John W. Ballen*
David R. Mannheim*
Kevin R. Parke*
Toni Y. Shimura*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
----------------
MFS(R) GLOBAL GROWTH FUND Bulk Rate
U.S. Postage
[Logo] M F S(R) Paid
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ----------------
500 Boylston Street
Boston, MA 02116-3741
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MWF-2 12/98 69M 09/209/309/809
