<PAGE>
Annual Report
[LOGO] M F S(SM) for Year Ended
INVESTMENT MANAGEMENT October 31, 1997
MFS(R) WORLD GROWTH FUND
[Graphic Omitted]
LEARNING FINANCIAL BASICS THE EASY WAY (see page 44)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
A Discussion with the Portfolio Managers .................................. 3
Portfolio Managers' Profiles .............................................. 7
Fund Facts ................................................................ 8
Performance Summary ....................................................... 8
Tax Form Summary .......................................................... 10
Portfolio Concentration ................................................... 11
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 27
Notes to Financial Statements ............................................. 34
Independent Auditors' Report .............................................. 41
MFS Investment Opportunities .............................................. 42
The MFS Family of Funds(R) ................................................ 43
The ABCs of Investing ..................................................... 44
Trustees and Officers ..................................................... 45
HIGHLIGHTS
o FOR THE 12 MONTHS ENDED OCTOBER 31, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 15.17%, CLASS B SHARES
14.30%, CLASS C SHARES 14.27%, AND CLASS I SHARES 15.40%. (SEE PERFORMANCE
SUMMARY FOR MORE INFORMATION.)
o THE FUND'S PERFORMANCE HAS BEEN HELPED BY ITS OVERWEIGHTINGS IN U.S.
TECHNOLOGY AND LATIN AMERICAN STOCKS, COMBINED WITH AN UNDERWEIGHTING IN
SOUTHEAST ASIAN COMPANIES.
o THE UNITED STATES HAS BEEN ONE OF THE FUND'S BEST-PERFORMING MARKETS, LED
BY SUCH AREAS AS COMPUTER SOFTWARE AND BUSINESS AND COMPUTER SERVICES.
o THE FUND HAS HAD VERY LITTLE EXPOSURE TO SOUTHEAST ASIA, WITH THE EXCEPTION
OF HONG KONG AND CHINA, IN LIGHT OF OUR CONCERNS ABOUT THE HIGH LEVELS OF
CORPORATE AND GOVERNMENT DEBT IN COUNTRIES SUCH AS SOUTH KOREA, MALAYSIA,
AND THE PHILIPPINES, AS WELL AS ABOUT OVERVALUED CURRENCIES.
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
A. Keith Brodkin
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still uncomfortably
high. The rapid pace of growth seen in the first quarter slowed to an annual
rate of 3.3% in the second quarter and 3.5% in the third. We believe economic
momentum will carry well into the first quarter of 1998, as the money supply is
increasing at a rapid rate, and it still appears that Christmas sales could be
quite good. Because economic growth continues to be impressive, markets are
likely to continue to focus on the Federal Reserve Board's willingness to raise
interest rates.
The extreme volatility of the U.S. equity market in October was, we believe, the
consequence of overvaluations that had been evident for some months. As a
result, the stock market has been vulnerable to some type of correction and has
been impacted in the near term by chaotic market conditions in the Pacific Rim.
In the face of all this, however, the equity market continues to exhibit
surprising strength, much of it the result of continued gains in corporate
earnings, a trend that could be an important indicator of the market's future
direction. Certainly the situation in Southeast Asia bears close scrutiny
because it appears to be clearly deflationary and raises the prospect of trade
wars developing throughout the area. We are not convinced that U.S. markets have
escaped totally from October's volatility. Thus, while the near-term outlook for
profits is generally favorable, we believe equity valuations have risen to a
point where a cautious investment approach seems warranted, with a need for
particular attention to be paid to the effect of Pacific Rim volatility on the
earnings of U.S. companies.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
November 14, 1997
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGERS
For the 12 months ended October 31, 1997, Class A shares of the Fund provided a
total return of 15.17%, Class B shares 14.30%, Class C shares 14.27%, and Class
I shares 15.40%. These returns assume the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 13.63% return for the
Morgan Stanley Capital International (MSCI) All Country World Index, an
unmanaged index of developed-country and emerging market equities.
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 has been helped by its
overweightings in U.S. technology and Latin American stocks, combined with an
underweighting in Southeast Asian companies.
Q. BRIEFLY, HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY IN TERMS OF
WHAT YOU LOOK FOR IN GLOBAL MARKETS AND STOCKS?
A. We look for companies worldwide that are growing much faster than the overall
U.S. economy. As a result, we've targeted emerging growth stocks in the
United States and growth stocks in developed foreign markets such as Europe
and Japan, as well as growth stocks in the emerging markets.
Q. LET'S LOOK AT THE THREE MAJOR MARKETS IN WHICH THE FUND HAS INVESTMENTS,
STARTING WITH THE UNITED STATES. WHAT INDUSTRIES AND STOCKS ARE YOU
EMPHASIZING THERE, AND WHY?
A. The United States remains one of our favorite major markets. Technology
continues to be an area of emphasis since technology companies are generating
some of the strongest earnings growth rates of any industry. Our holdings are
primarily in software, a sector in which we own leading database, design
automation, and mainframe software companies such as Oracle Systems, Cadence
Design, BMC Software, Compuware, and Microsoft, all of which are helping
companies around the world become more productive. Another area that we
believe offers great potential is the business and computer services market,
which consists of information technology and outsourcing firms that help
other companies focus on their core businesses. Leisure is also an important
area for us, with our main holdings in this sector in the radio and
television broadcasting markets. Both are undergoing a lot of consolidation,
which means opportunities for acquirers and the companies they're acquiring.
The Fund is overweighted in retailing, in which our main emphasis is on drug
stores and supermarkets, both of which are benefiting from cost cutting and
consolidation. We've also recently added a few companies in the oil services
and exploration industry, whose strong demand for products and services has
created pricing power that is otherwise rare in the economy.
Q. NOW, WHAT ABOUT THE DEVELOPED FOREIGN MARKETS? WHAT COUNTRIES AND WHAT KIND
OF INDUSTRIES DO YOU LIKE THERE?
A. In the developed markets, we believe Japan offers value. Blue-chip,
export-oriented multinational companies such as Sony and Canon look
inexpensive and, we feel, should benefit from a weaker yen. Another area we
like is the United Kingdom, where we've found many companies generating 10%
to 15% annual growth rates through cost cutting and restructuring. British
Aerospace, Anglo-Irish Bank, and the Bank of Scotland are typical of the
companies we've found that are really changing the way they do business.
Q. FINALLY, WHAT ABOUT THE EMERGING MARKETS?
A. Our biggest country allocations are in Latin America, especially in Brazil
and Mexico. We are enthusiastic about Brazil because we believe that there
are some important strategic changes taking place there with respect to
liberalization of the economy and privatization. We like Mexico primarily
because of the economic and corporate earnings recoveries stemming from
policy measures the government took in 1996. Telecommunications and banking
are also industries in which we have major investments. In many countries,
the best-managed and most-liquid stocks are in these industries, and their
growth generally determines the growth of these countries overall.
Q. COULD YOU TALK ABOUT THE FUND'S POSITION IN SOUTHEAST ASIA, WHERE
CURRENCIES AND STOCK MARKETS HAVE TUMBLED, AND WHAT YOU SEE FOR THAT REGION
GOING FORWARD?
A. We are happy to say that we have had very little exposure in Southeast Asia,
with the exception of Hong Kong and China. We have been concerned about the
high level of corporate and government debt in countries such as South Korea,
Malaysia, and the Philippines, as well as about overvalued currencies. We
need to see a number of things happen in the region before these markets
become attractive, including significant structural reforms in the banking
system, freely floating exchange rates, and economies that are more open to
foreign competition. It could easily be one to two years before things are
better, so we are unlikely to initiate new positions soon. Meanwhile, China
is in reasonable shape, with economic growth still quite good, so we will
continue to invest in that region.
Q. HAVE THERE BEEN ANY SIGNIFICANT CHANGES IN THE FUND'S HOLDINGS OR
ALLOCATIONS OVER THE PAST YEAR?
A. Asset allocations across our three target markets have changed only modestly
since last year, with the United States representing about 41% of the
portfolio, developed foreign markets such as Europe and Japan at 38%, and
emerging markets at 21%. The most significant change was a reduction in our
holdings in Japan. This was made primarily because of valuations --with the
exception of a number of blue-chip export-oriented multinationals, our
analysts were not able to find a lot of attractively valued companies. We
also sold a number of small Southeast Asian positions in the beginning of the
year. The other change of note was a reduction in our holdings in Russia, a
vastly overweighted position in the Fund's emerging markets portion. After a
terrific run, and with its market up almost 100%, the decision was made to
take some profits.
Q. COULD YOU TALK ABOUT SOME STOCKS OR COUNTRIES THAT PERFORMED BETTER THAN YOU
EXPECTED, AND WHY YOU THINK THEY DID WELL?
A. Software companies in the United States did better than expected because of
surprisingly robust earnings. Stocks that contributed to performance included
Compuware, Microsoft, Computer Associates, and BMC Software, all of whose
products were in strong demand by companies seeking increasing productivity.
Radio and television broadcasting stocks such as Clear Channel Communications
and Cox Radio also helped performance, as their stocks were buoyed by
positive advertising trends and continued consolidation within their markets.
In developed foreign markets, companies with strong product pipelines and
good earnings did well. These included SAP, the German software company, and
Novartis, the Swiss pharmaceutical company. In the emerging markets, Russia
did much better than expected, as investors discovered the attractive values
there. Among our Russian holdings, Lukoil Oil, the biggest oil and gas
company, and Unified Energy Systems, the national electric generation and
distribution company, did much better than expected. Through October, Brazil
also did better than expected, with valuations helped by economic and
political reforms.
Q. NOW, WHAT ABOUT SOME STOCKS OR COUNTRIES THAT DID NOT PERFORM AS WELL AS
YOU WOULD HAVE LIKED?
A. In the United States, a real disappointment for us has been the stocks of
health maintenance organizations. Higher-than-expected expenses more than
offset price increases, creating earnings disappointments. Now that these
companies have a more realistic view of the cost of doing business, they
should begin to price their product more realistically, and earnings should
begin to meet investors' expectations. In Asia, Hong Kong and China
disappointed, primarily because of the concern relating to the Southeast
Asian crisis and worries about their currencies versus the U.S. dollar. A
number of Japanese stocks also were disappointing, with Nippon Broadcasting
being among the hardest hit because of continued weakness in the economy.
Q. IN GENERAL, HOW WOULD YOU CHARACTERIZE THE INVESTMENT ENVIRONMENT OF THE PAST
YEAR, PARTICULARLY AS IT RELATES TO THE FUND?
A. In the United States, we've had a strong market during the past year, driven
by surprisingly strong earnings and low inflation. This has been a wonderful
environment for stocks. Going forward, our outlook is for a continuation of
moderate economic growth and low rates, especially given the dampening effect
we expect Asia and Latin America to have on U.S. companies. This means that
we'll continue to focus on companies offering something special --
proprietary products and services that will help them grow much faster than
their competition. We'll also look more closely at domestic U.S. companies
that have less exposure to potentially questionable foreign markets. In
emerging markets, the year has been volatile, with investors seeing the best
and worst of what it is like to invest in these markets. We feel investors
have gone from being too euphoric to too pessimistic, so select opportunities
have been created that we hope to take advantage of on a stock-by-stock
basis. In developed foreign markets such as Europe and Japan, the year has
been characterized by solid earnings growth. We see more of the same in the
next 12 months, albeit at a somewhat slower rate, with economies continuing
to improve and with good growth being generated by consolidation and
restructuring stories across the world.
/s/ John W. Ballen /s/ David R. Mannheim
John W. Ballen David R. Mannheim
Portfolio Manager Portfolio Manager
/s/ Toni Y. Shimura
Toni Y. Shimura
Portfolio Manager
<PAGE>
PORTFOLIO MANAGERS' PROFILES
JOHN W. BALLEN BEGAN HIS CAREER AT MFS AS AN INDUSTRY SPECIALIST IN 1984. A
GRADUATE OF HARVARD COLLEGE, THE UNIVERSITY OF NEW SOUTH WALES, AND THE
STANFORD UNIVERSITY GRADUATE SCHOOL OF BUSINESS ADMINISTRATION, HE WAS
PROMOTED TO INVESTMENT OFFICER IN 1986, VICE PRESIDENT --INVESTMENTS IN 1987,
DIRECTOR OF RESEARCH IN 1988, SENIOR VICE PRESIDENT IN 1990, DIRECTOR OF
EQUITY PORTFOLIO MANAGEMENT IN 1993, CHIEF EQUITY OFFICER IN 1995, AND
EXECUTIVE VICE PRESIDENT IN 1997. HE HAS MANAGED MFS(R) WORLD GROWTH FUND
SINCE ITS INCEPTION.
DAVID R. MANNHEIM JOINED MFS IN 1988 AS A RESEARCH SPECIALIST AND WAS NAMED
ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1991, VICE PRESIDENT --
INVESTMENTS IN 1992, AND SENIOR VICE PRESIDENT IN 1997. A GRADUATE OF AMHERST
COLLEGE AND OF THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF
MANAGEMENT, HE HAS MANAGED THE FUND SINCE ITS INCEPTION.
TONI Y. SHIMURA JOINED THE MFS RESEARCH DEPARTMENT IN 1987. A GRADUATE OF
WELLESLEY COLLEGE AND OF THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN
SCHOOL OF MANAGEMENT, SHE WAS PROMOTED TO INVESTMENT OFFICER IN 1990,
ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1991, AND VICE PRESIDENT --
INVESTMENTS IN 1992. SHE HAS MANAGED THE FUND SINCE 1995.
<PAGE>
FUND FACTS
OBJECTIVE: THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK CAPITAL
APPRECIATION BY INVESTING IN SECURITIES OF COMPANIES
WORLDWIDE THAT ARE GROWING AT RATES EXPECTED TO BE WELL
ABOVE THE GROWTH RATE OF THE OVERALL U.S. ECONOMY.
COMMENCEMENT OF INVESTMENT OPERATIONS: NOVEMBER 18, 1993
CLASS INCEPTION: CLASS A NOVEMBER 18, 1993
CLASS B NOVEMBER 18, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $544.8 MILLION NET ASSETS AS OF OCTOBER 31, 1997
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS World Growth
Fund -- Class A shares in comparison to various market indicators. Class A share
performance results reflect the deduction of the 5.75% maximum sales charge;
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, based on differences in charges and fees paid by shareholders investing
in different classes. 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, 1997)
<TABLE>
<CAPTION>
MFS World Growth S&P 500 Consumer Price Russell 2000 MSCI All Country
Fund - Class A Composite Index Index - U.S. Total Return Index MSCI World Index World Index
-------------- --------------- ------------ ------------------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
$ 9,422 $10,000 $10,000 $10,000 $10,000 $10,000
10,954 10,487 10,254 10,305 11,464 11,604
11,553 13,259 10,542 12,193 12,613 12,430
13,370 16,454 10,857 14,218 14,737 14,370
15,399 21,738 11,084 18,388 17,279 16,632
</TABLE>
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Years Life of Fund*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MFS World Growth Fund (Class A)
including 5.75% sales charge (SEC results) + 8.58% + 9.84% +11.56%
- -------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class A)
at net asset value +15.17% +12.02% +13.25%
- -------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class B)
with CDSC (SEC results) +10.30% +10.31% +11.81%
- -------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class B)
at net asset value +14.30% +11.13% +12.35%
- -------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class C)
with CDSC (SEC results) +13.27% +11.18% +12.42%
- -------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class C)
at net asset value +14.27% +11.18% +12.42%
- -------------------------------------------------------------------------------------------------------
MFS World Growth Fund (Class I)
at net asset value +15.40% +12.10% +13.30%
- -------------------------------------------------------------------------------------------------------
Average global portfolio fund** +16.50% +12.44% +11.93%
- -------------------------------------------------------------------------------------------------------
MSCI All Country World Index** +13.63% +10.50% +11.58%
- -------------------------------------------------------------------------------------------------------
MSCI World Index+ +17.25% +14.66% +13.16%
- -------------------------------------------------------------------------------------------------------
Russell 2000 Total Return Index+ +29.33% +21.29% +15.68%
- -------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +32.12% +27.51% +21.41%
- -------------------------------------------------------------------------------------------------------
Consumer Price Index+# + 2.09% + 2.63% + 2.66%
- -------------------------------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations, November 18, 1993,
through October 31, 1997.
** Source: Lipper Analytical Services, Inc.
+ Source: CDA/Wiesenberger.
# 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 is an unmanaged index comprised of 2,000 of the smallest U.S.-domiciled company common
stocks that are traded in the United States. The S&P 500 is an unmanaged measure of common stock
total return performance.
</TABLE>
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.
Class A share SEC results include the maximum 5.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares
have no sales charge or Rule 12b-1 fees and are only available to certain
institutional investors.
Class C share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the inception
of Class C shares. Operating expenses attributable to Class C shares are not
significantly different than those of Class B shares. The Class B share
performance included within the Class C share SEC performance has been adjusted
to reflect the CDSC generally applicable to Class C shares rather than the CDSC
generally applicable to Class B shares.
Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the inception
of Class I shares. Because operating expenses attributable to Class A shares are
greater than those of Class I shares, Class I share performance generally would
have been higher than Class A share performance. The Class A share performance
included within the Class I share performance has been adjusted to reflect the
fact that Class I shares have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
TAX FORM SUMMARY
IN JANUARY 1998, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1997.
FEDERAL INCOME TAX ON DISTRIBUTIONS
THE FUND HAS DESIGNATED $42,004,294 AS A LONG-TERM CAPITAL GAIN.
FOREIGN TAX CREDIT
FOR THE YEAR ENDED OCTOBER 31, 1997, DIVIDENDS FROM FOREIGN COUNTRIES WERE
$5,635,016 AND TAXES PAID TO FOREIGN COUNTRIES WERE $504,899.
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED OCTOBER 31, 1997, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 2.64%.
<PAGE>
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1997
TOP 10 HOLDINGS
BMC SOFTWARE, INC. HFS, INC.
Computer software company Franchiser of hotels and real estate
companies
CaDENCE DESIGN SYSTEMS, INC.
Computer software and systems ORACLE SYSTEMS CORP.
company Developer and manufacturer of database
software
CISCO SYSTEMS, INC.
Computer network developer SAP AG, PREFERRED
German computer software company
COMPUWARE CORP.
Computer software company TYCO INTERNATIONAL LTD.
Manufacturer of fire protection,
COMPUTER ASSOCIATES packaging, and electronic equipment
INTERNATIONAL, INC.
Computer software company UNITED HEALTHCARE CORP.
Health maintenance organization
LARGEST SECTORS
[Graphic Omitted]
Other Sectors 31.5%
Miscellaneous 21.2%
(Conglomerates, special
products/services)
Technology 19.7%
Utilities and Communications 9.8%
Financial Services 9.1%
Leisure 8.7%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS - October 31, 1997
<TABLE>
<CAPTION>
Stocks - 96.0%
- ------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 41.0%
Aerospace - 0.1%
Thiokol Corp. 2,700 $ 247,219
- ------------------------------------------------------------------------------------------------
Apparel and Textiles
Tefron Ltd.* 1,100 $ 21,106
- ------------------------------------------------------------------------------------------------
Automotive - 0.1%
Avis Rent A Car, Inc.* 8,800 $ 241,450
- ------------------------------------------------------------------------------------------------
Broadcasting - 0.3%
Chancellor Media Corp.* 9,300 $ 510,338
SFX Broadcasting, Inc., "A"* 17,300 1,279,119
------------
$ 1,789,457
- ------------------------------------------------------------------------------------------------
Building - 0.2%
Newport News Shipbuilding, Inc. 52,500 $ 1,128,750
- ------------------------------------------------------------------------------------------------
Business Machines - 0.2%
Affiliated Computer Services, Inc., "A"* 19,600 $ 492,450
Sun Microsystems, Inc.* 22,900 784,325
------------
$ 1,276,775
- ------------------------------------------------------------------------------------------------
Business Services - 3.7%
AccuStaff, Inc.* 76,100 $ 2,173,606
American Communications Services, Inc.* 12,400 139,500
BISYS Group, Inc.* 19,700 613,162
Corestaff, Inc.* 29,000 717,750
CUC International, Inc.* 169,750 5,007,625
Diamond Offshore Drilling, Inc. 14,000 871,500
DST Systems, Inc.* 5,800 204,813
Fine Host Corp.* 6,000 168,000
First Data Corp. 53,802 1,563,621
Galieo International, Inc.* 4,600 115,575
Global Directmail Corp.* 5,000 91,875
Ikon Office Solutions, Inc. 8,700 246,319
Learning Tree International, Inc.* 151,700 5,271,575
Technology Solutions Co.* 87,700 2,762,550
Transaction System Architects, Inc., "A"* 3,200 125,200
------------
$ 20,072,671
- ------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.3%
Adobe Systems, Inc. 2,300 $ 109,825
Autodesk, Inc. 9,900 366,300
Microsoft Corp.* 48,400 6,292,000
Security Dynamics* 2,600 88,075
------------
$ 6,856,200
- ------------------------------------------------------------------------------------------------
Computer Software - Services
Cognicase, Inc.* 500 $ 6,313
- ------------------------------------------------------------------------------------------------
Computer Software - Systems - 8.9%
Aspen Technology, Inc.* 3,600 $ 135,450
Bay Networks, Inc.* 7,800 246,675
BMC Software, Inc.* 113,800 6,870,675
Cadence Design Systems, Inc.* 143,000 7,614,750
Compaq Computer Corp.* 12,800 816,000
Computer Associates International, Inc. 162,950 12,149,959
Compuware Corp.* 108,200 7,154,725
Lear Corp.* 7,600 365,275
Learning Co., Inc.* 34,200 645,525
Oracle Systems Corp.* 333,750 11,941,992
Scopus Technology* 18,300 271,069
Synopsys, Inc.* 8,500 330,438
Xionics Document Technologies, Inc.* 9,600 146,400
------------
$ 48,688,933
- ------------------------------------------------------------------------------------------------
Consumer Goods and Services - 2.9%
Carson, Inc., "A"* 92,200 $ 829,800
Industrial Distribution Group, Inc.* 400 7,750
Ivex Packaging Corp.* 1,800 38,025
Silgan Holdings, Inc.* 1,000 35,250
Tyco International Ltd. 386,600 14,594,150
------------
$ 15,504,975
- ------------------------------------------------------------------------------------------------
Defense Electronics - 0.1%
Loral Space & Communications Corp.* 32,500 $ 682,500
- ------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1%
Westinghouse Electric Corp. 23,800 $ 629,213
- ------------------------------------------------------------------------------------------------
Electronics - 1.0%
Altera Corp.* 38,000 $ 1,686,250
Analog Devices, Inc.* 24,400 745,725
P Common, Inc.* 3,300 66,413
Sci Systems, Inc.* 23,000 1,012,000
Teradyne, Inc.* 31,100 1,164,306
Xilinx, Inc.* 8,400 286,650
------------
$ 4,961,344
- ------------------------------------------------------------------------------------------------
Energy - 0.3%
BJ Services Co.* 10,100 $ 855,975
Halter Marine Group, Inc.* 6,400 334,800
Rowan Cos, Inc.* 3,800 147,725
Veritas DGC, Inc.* 2,900 118,719
------------
$ 1,457,219
- ------------------------------------------------------------------------------------------------
Entertainment - 1.9%
American Radio Systems Corp., "A"* 12,300 $ 599,625
Clear Channel Communications, Inc.* 27,600 1,821,600
Cox Radio, Inc., "A"* 57,200 1,948,375
Emmis Broadcasting Corp., "A"* 14,700 650,475
Gemstar Group Ltd.* 8,500 188,063
Harrah's Entertainment, Inc.* 33,900 667,406
Jacor Communications, Inc., "A"* 25,300 1,059,437
LIN Television Corp.* 43,600 2,291,725
Sinclair Broadcast Group, Inc., "A"* 400 14,600
Univision Communications, Inc., "A"* 18,500 1,147,000
------------
$ 10,388,306
- ------------------------------------------------------------------------------------------------
Financial Institutions - 1.3%
Associates First Capital Corp., "A" 13,200 $ 839,850
Charter One Financial Inc. 11,460 666,113
Donaldson Lufkin & Jenrette, Inc. 6,700 470,675
Franklin Resources, Inc. 37,000 3,325,375
Lehman Brothers Holdings, Inc. 6,100 287,081
Morgan Stanley, Dean Witter, Discover & Co. 14,300 700,700
Price (T Rowe) Associates 15,000 993,750
United States Trust Corp. 3,900 228,150
------------
$ 7,511,694
- ------------------------------------------------------------------------------------------------
Food and Beverage Products
Beringer Wine Estates Holdings, "B"* 1,000 $ 31,000
Tootsie Roll Industries, Inc. 2,400 136,200
------------
$ 167,200
- ------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.2%
Jefferson Smurfit* 322,600 $ 946,412
- ------------------------------------------------------------------------------------------------
Insurance - 0.2%
ACE Ltd. 2,300 $ 213,756
Conseco, Inc. 11,600 506,050
Hartford Life, Inc., "A" 1,900 70,181
Paula Financial* 400 10,100
------------
$ 800,087
- ------------------------------------------------------------------------------------------------
Machinery - 0.1%
SI Handling Systems, Inc. 24,900 $ 522,900
- ------------------------------------------------------------------------------------------------
Medical and Health Products - 0.8%
Arterial Vascular Engineering, Inc.* 18,700 $ 993,437
Boston Scientific Corp.* 15,500 705,250
Guidant Corp. 32,600 1,874,500
McKesson Corp. 2,600 279,013
Pathogensis Corp.* 5,800 208,800
Safeskin Corp.* 4,200 190,575
Zonagen, Inc.* 9,600 314,400
------------
$ 4,565,975
- ------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.0%
Ameripath, Inc.* 1,000 $ 16,500
Columbia/HCA Healthcare Corp. 17,100 483,075
Creative Biomolecules, Inc.* 9,300 85,734
Cyberonics, Inc.* 61,900 827,912
Foundation Health Systems, Inc.* 910 26,163
Health Management Associates, Inc., "A"* 5,700 138,938
HealthSouth Corp.* 53,000 1,354,812
Integrated Health Services, Inc. 25,200 800,100
Mariner Health Group, Inc.* 13,400 196,813
Medtronic, Inc. 5,500 239,250
National Research Corp.* 300 6,075
Orthodontic Centers America, Inc.* 47,400 820,613
Oxford Health Plans, Inc.* 20,900 539,481
Pacificare Health Systems, Inc., "B"* 20,600 1,333,850
Renal Treatment Centers, Inc.* 20,300 673,706
St. Jude Medical, Inc.* 2,000 60,625
United Healthcare Corp. 193,700 8,970,731
------------
$ 16,574,378
- ------------------------------------------------------------------------------------------------
Oil Services - 1.3%
Camco International, Inc. 10,300 $ 744,175
Cooper Cameron Corp.* 11,100 801,975
Dril-Quip, Inc.* 1,200 43,050
Global Industries, Inc.* 37,800 760,725
Gulf Indonesia Resources Ltd.* 49,000 1,029,000
Input/Output, Inc.* 5,000 134,062
National Oilwell, Inc.* 3,200 245,000
Noble Drilling Corp.* 46,000 1,635,875
Transocean Offshore, Inc. 12,700 685,800
Weatherford Enterra, Inc.* 21,200 1,082,525
------------
$ 7,162,187
- ------------------------------------------------------------------------------------------------
Oils - 0.1%
Evi, Inc.* 2,500 $ 160,469
Newfield Exploration Co.* 4,800 130,200
Santa Fe International Corp. 2,600 127,887
------------
$ 418,556
- ------------------------------------------------------------------------------------------------
Pollution Control - 1.1%
Allied Waste Industries, Inc.* 12,000 $ 244,500
Republic Industries, Inc.* 173,400 5,115,300
United States Filter Corp.* 15,100 605,887
------------
$ 5,965,687
- ------------------------------------------------------------------------------------------------
Printing and Publishing - 0.1%
Applied Graphics Technologies* 3,900 $ 208,650
Petersen Cos., Inc., "A"* 1,700 33,575
------------
$ 242,225
- ------------------------------------------------------------------------------------------------
Railroads - 0.2%
Kansas City Southern Industries, Inc. 41,800 $ 1,274,900
- ------------------------------------------------------------------------------------------------
Real Estate Investment Trusts
Starwood Lodging Trust 2,800 $ 167,475
- ------------------------------------------------------------------------------------------------
Restaurants and Lodging - 3.0%
Applebee's International, Inc. 34,300 $ 761,031
HFS, Inc.* 173,000 12,196,500
Hilton Hotels Corp. 31,800 979,838
Promus Hotel Corp.* 66,350 2,604,237
------------
$ 16,541,606
- ------------------------------------------------------------------------------------------------
Retail
Audio Book Club, Inc.* 500 $ 3,813
- ------------------------------------------------------------------------------------------------
Stores - 3.6%
Consolidated Stores Corp.* 27,625 $ 1,101,547
Corporate Express, Inc.* 95,650 1,404,859
CVS Corp. 40,000 2,452,500
General Nutrition Cos., Inc.* 33,700 1,061,550
Hollywood Entertainment Corp.* 1,400 17,150
Home Depot, Inc. 16,950 942,844
Micro Warehouse, Inc.* 54,300 814,500
Office Depot, Inc.* 188,800 3,894,000
Rite Aid Corp. 79,600 4,726,250
Staples, Inc.* 28,200 740,250
U.S. Office Products Co.* 81,800 2,556,250
------------
$ 19,711,700
- ------------------------------------------------------------------------------------------------
Supermarkets - 0.5%
Meyer, Fred, Inc.* 99,350 $ 2,837,684
- ------------------------------------------------------------------------------------------------
Telecommunications - 3.7%
AFC Cable Systems, Inc.* 3,125 $ 88,672
Aspect Telecommunications Corp.* 7,300 175,200
Cisco Systems, Inc.* 127,700 10,475,391
Eci Telecom Ltd. 7,859 217,105
Inter-Tel, Inc.* 10,500 261,516
Intermedia Communications, Inc.* 45,000 2,041,875
International Business Communications
Systems, Inc.*+ 40,300 282,100
ITT Corp.* 1,600 119,500
Lucent Technologies, Inc. 22,300 1,838,356
Metromedia Fiber Network Inc., "A"* 1,900 45,600
Nextlink Communications, Inc., "A"* 9,700 219,462
Premisys Communications, Inc.* 4,500 122,625
Qwest Communications International, Inc.* 1,200 74,100
Tel-Save Holdings, Inc.* 7,200 154,800
WorldCom, Inc.* 114,700 3,856,787
------------
$ 19,973,089
- ------------------------------------------------------------------------------------------------
Universities
Edutrek International, Inc., "A"* 700 $ 17,150
- ------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.7%
Brooks Fiber Properties, Inc.* 3,900 $ 217,912
MCI Communications Corp. 104,300 3,702,650
------------
$ 3,920,562
- ------------------------------------------------------------------------------------------------
Total U.S. Stocks $223,277,711
- ------------------------------------------------------------------------------------------------
Foreign Stocks - 55.0%
Argentina - 0.9%
Banco de Galicia y Buenos Aires S.A. de C.V., ADR
(Banks and Credit Cos.) 16,821 $ 407,646
Banco Rio De La Plata S.A., "B" ADR (Bank)* 68,300 717,150
Perez Companc S.A. (Oils) 119,076 745,863
Siderar SAIC, ADR (Steel)## 11,280 417,360
Telecom Argentina, "B" ADR (Telecommunications) 18,600 470,813
Telefonica de Argentina, ADR (Utilities - Telephone) 13,400 376,875
Transportadora de Gas del Sur S.A., ADR (Pipelines) 38,900 367,119
YPF Sociedad Anonima, ADR (Oils) 42,000 1,344,000
------------
$ 4,846,826
- ------------------------------------------------------------------------------------------------
Australia - 0.6%
QBE Insurance Group Ltd. (Insurance) 717,456 $ 3,343,098
- ------------------------------------------------------------------------------------------------
Austria - 0.1%
Austria Tabak AG (Consumer Goods and Services) 19,100 $ 795,308
- ------------------------------------------------------------------------------------------------
Brazil - 3.9%
Banco Bradesco S.A., Preferred (Banks and Credit
Cos.) 111,171,934 $ 826,932
Cia Vale do Rio Doce, Preferred (Mining) 29,553 571,008
CEMIG (Utilities - Electric) 17,500,000 698,476
Centrais Eletricas Brasile, ADR (Utilities -
Electric) 63,200 1,295,600
Centrais Eletricas Brasileiras S.A. - Eletrobras,
Preferred, "B" (Utilities - Electric)* 1,800,000 778,846
Cia Cervejaria Brahma, Preferred (Beverages) 1,872,433 1,171,969
Cia Cervejaria Brahma, ADR (Beverages) 127,300 1,638,988
Cimsa (Construction Services) 1,079,800 244,205
Companhia Paranaense de Energia - COPEL, Preferred
"B" (Electrical) 50,800 613,342
Hunter Douglas NV, ADR (Consumer Goods and
Services)* 52,554 2,161,604
Itausa Investimentos Itau S.A. (Conglomerates) 750,000 510,250
Orbotech Ltd. (Electronics)* 10,000 427,500
Petroleo Brasileiro S.A., Preferred (Oils) 16,710,000 3,107,357
Telecommunicacoes Brasileiras S.A., ADR
(Telecommunications) 53,990 5,479,985
Telecommunicacoes Sao Paulo (Telecommunications) 5,608,944 1,465,326
Telecommunicacoes Sao Paulo, Preferred
(Telecommunications)* 187,549 4,934
------------
$ 20,996,322
- ------------------------------------------------------------------------------------------------
Canada - 1.0%
Canadian National Railway Co. (Railroads) 74,520 $ 4,019,423
Legacy Hotel Real Estate Investment Trust (Real
Estate) 175,200 1,219,515
Microcell Telecommunications, "B"
(Telecommunications)* 3,500 31,281
Super Sol Ltd. (Supermarkets) 127,600 366,830
------------
$ 5,637,049
- ------------------------------------------------------------------------------------------------
Chile - 1.2%
Banco Santander Chile, ADR, "A" (Banks and Credit Cos.) 45,030 $ 585,390
Chilectra S.A., ADR (Utilities - Electric) 72,925 1,916,980
Chilgener S.A. (Utilities - Electric) 18,638 507,885
Compania de Telecom de Chile, ADR
(Utilities - Telephone) 50,480 1,400,820
Distribucion Y Servicio D & S, ADR (Supermarkets)* 21,010 368,988
Enersis S.A., ADR (Utilities - Electric) 29,247 965,151
Laboratorio Chile S.A., ADR (Medical and Health
Technology Services) 16,000 402,000
Moneda Chile Fund Ltd. (Finance)+* 63,000 378,000
Santa Isabel S.A., ADR (Stores)## 4,619 85,452
------------
$ 6,610,666
- ------------------------------------------------------------------------------------------------
China - 0.3%
China Light & Power (Utilities - Electric) 400 $ 2,106
Guangdong Kelon El (Consumer Goods) 222,000 281,449
Huaneng Power International, Inc., ADR
(Utilities - Electric)* 48,180 1,059,960
Qingling Motors Co. (Automotive) 584,000 381,527
------------
$ 1,725,042
- ------------------------------------------------------------------------------------------------
Colombia - 0.7%
Banco Ganadero S.A., ADR, "B" (Banks and Credit Cos.) 24,400 $ 931,775
Banco Industrial Colombiano, ADR
(Banks and Credit Cos.) 91,800 1,468,800
Cementos Diamante S.A., ADR, "B" (Construction)## 101,738 1,220,856
------------
$ 3,621,431
- ------------------------------------------------------------------------------------------------
Egypt - 0.8%
A - Ahram Beverage Co. S.A.E. ( Beverages)*## 6,491 $ 175,257
Commercial International Bank, GDR
(Banks and Credit Cos.)## 31,667 672,924
Madinet Nasar City (Housing Development) 5,350 369,709
Misr Elgadida for Housing & Recreation (Housing) 675 92,322
North Cairo Mills (Food Products) 10,160 442,194
South Cairo Flour Mills (Food Products) 14,355 257,930
Suez Cement Co., S.A.E., GDR (Building Materials)## 91,035 1,843,459
Torra for Cement (Construction) 20,510 560,926
------------
$ 4,414,721
- ------------------------------------------------------------------------------------------------
Finland - 0.5%
Huhtamaki Oy Group (Conglomerate) 27,500 $ 1,130,508
TT Tieto Oy (Computer Software - Systems) 12,830 1,436,203
------------
$ 2,566,711
- ------------------------------------------------------------------------------------------------
France - 2.6%
Elf Aquitaine S.A. (Oils) 12,700 $ 1,568,959
Alcatel Alsthom Compagnie (Telecommunications) 15,900 1,914,768
Chargeurs S.A. (Apparels and Textiles) 5,100 340,618
Compagnie Generale de Geophysique S.A., ADR
(Computer Software)* 47,800 1,338,400
Dassault Systemes S.A. (Computer Software) 67,000 2,005,537
Dassault Systemes S.A., ADR (Computer Software) 2,400 72,000
Rhone-Poulenc S.A. (Pharmaceuticals)* 74,468 3,240,540
TV Francaise (Broadcasting) 24,900 2,313,574
Union des Assurances Federales S.A. (Insurance) 12,100 1,350,376
------------
$ 14,144,772
- ------------------------------------------------------------------------------------------------
Germany - 3.6%
adidas AG (Apparel and Textiles) 9,306 $ 1,345,218
Henkel KGaa (Chemicals) 95,200 4,936,501
Pfleiderer AG (Construction)* 49,050 940,646
Phoenix AG (Auto Parts) 98,300 1,822,480
SAP AG, Preferred (Computer Software - Systems) 23,679 7,044,708
Wella AG, Preferred (Cosmetics) 4,700 3,264,948
------------
$ 19,354,501
- ------------------------------------------------------------------------------------------------
Greece - 1.2%
Athens Medic Center GDR, (Medical and Health
Technology and Services) 96,000 $ 1,042,326
Attica Enterprises S.A., GDR (Transportation) 34,400 364,004
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 110,430 2,312,649
Intracom S.A., GDR (Telecommunications) 12,000 527,346
National Bank Of Greece (Banks and Credit Cos.) 3,500 15,497
National Bank Of Greece, GDR (Banks and Credit Cos.)* 3,500 367,133
Papastratos Cigarettes S.A., GDR (Consumer Goods and
Services) 63,040 1,069,615
Titan Cement Co., GDR (Building Materials) 13,100 641,741
------------
$ 6,340,311
- ------------------------------------------------------------------------------------------------
Hong Kong - 2.7%
Hong Kong Telecommunications (Telecommunications) 144,000 $ 275,705
Asia Satellite Telecommunications Holdings Ltd.
(Telecommunications) 234,500 564,256
Beijing Enterprise (Consumer Goods and Services)* 116,000 387,917
Cheung Kong Holdings Ltd. (Real Estate) 191,000 1,328,105
China Resources Enterprises (Real Estate Investment
Trusts) 346,000 948,926
Citic Pacific Ltd. (Conglomerates) 219,000 1,048,254
Dah Sing Financial Group (Banks and Credit Cos.) 85,800 215,332
Hong Kong & China Gas Ltd. (Gas) 334,000 630,841
Hong Kong Telecommunications, ADR
(Telecommunications)* 16,800 322,350
HSBC Holdings PLC (Finance)* 28,800 652,005
Hutchison Whampoa (Real Estate) 118,000 816,688
Hysan Development Co. (Real Estate) 246,000 513,959
Li & Fung Ltd. (Wholesale) 1,375,000 1,378,558
Liu Chong Hing Bank (Banks and Credit Cos.) 118,000 155,705
New World Development Co. (Real Estate) 291,000 1,023,959
Swire Pacific Air Ltd., "A" (Transportation) 211,000 1,127,335
Wharf Holdings Ltd. (Real Estate) 874,000 1,786,442
Wing Hang Bank Ltd. (Banks and Credit Cos.) 451,400 1,162,078
Zhenhai Refining and Chemical Co., Ltd. (Oils) 846,000 393,997
------------
$ 14,732,412
- ------------------------------------------------------------------------------------------------
Hungary - 0.3%
BorsodChem RT. (Chemicals) 6,900 $ 245,771
Gedeon Richter RT. (Pharmaceuticals) 5,500 505,286
Graboplast RT. (Apparel and Textiles) 5,000 269,452
Magyar Olaj Es Gazipari KT. (Gas) 13,500 290,661
Pannonplast Muanuagipari (Chemicals)* 4,400 241,612
------------
$ 1,552,782
- ------------------------------------------------------------------------------------------------
India - 1.3%
Bajaj Auto Ltd. (Automotive) 67,500 $ 1,075,299
EIH Ltd. (Restaurants and Lodging) 76,050 818,485
Hindustan Lever Ltd. (Consumer Goods and Services) 25,000 884,944
Hindustan Petroleum Corp. Ltd. (Oil and Gas) 50,000 657,170
ICL Israel Chemical (Chemicals) 364,000 455,863
India Gateway Fund Ltd. (Finance)+* 2,144 9,455
Industrial Development Bank of India Ltd.
(Banks and Credit Cos.) 280,000 753,372
Mahanagar Telephone Nigam Ltd. (Telecommunications) 100,000 697,082
State Bank Of India (Banks and Credit Cos.) 122,000 883,182
Tata Engineering and Locomotive Co. Ltd.
(Automotive) 11,570 101,432
Videsh Sanchar Nigam Ltd., GDR
(Telecommunications)## 47,430 640,305
------------
$ 6,976,589
- ------------------------------------------------------------------------------------------------
Indonesia - 0.1%
PT Indosat (Telecommunications) 44,500 $ 100,714
PT Indosat, ADR (Telecommunications) 27,930 661,592
------------
$ 762,306
- ------------------------------------------------------------------------------------------------
Ireland - 0.9%
Allied Irish Banks (Banks and Credit Cos.)* 309,363 $ 2,603,454
Anglo Irish Bank Corp. PLC (Banks and Credit Cos.)* 1,510,500 2,532,204
------------
$ 5,135,658
- ------------------------------------------------------------------------------------------------
Israel - 0.1%
Makhteshim Chemical Works Ltd. (Chemicals) 63,500 $ 393,297
Tadiran Telecommunications Ltd. (Telecommunications) 12,000 271,500
Teva Pharmaceutical Industries Ltd., ADR
(Pharmaceuticals) 3,280 153,340
------------
$ 818,137
- ------------------------------------------------------------------------------------------------
Italy - 1.8%
ERG S.p.A. (Oils)* 301,900 $ 1,244,397
Gucci Group NV (Apparel and Textiles) 29,770 1,082,884
INA - Instituto Nazionale delle Assicurazioni
(Insurance) 958,400 1,542,246
Industrie Natuzzi S.p.A., ADR (Consumer Goods and
Services) 76,700 1,716,162
Telecom Italia S.p.A. (Telecommunications)* 317,900 1,991,803
Telecom Italia S.p.A., Saving Shares
(Telecommunications) 1,167,700 2,385,876
------------
$ 9,963,368
- ------------------------------------------------------------------------------------------------
Japan - 8.3%
Aeon Credit Service Co. Ltd. (Financial Services) 27,000 $ 1,539,967
Bank of Tokyo Mitsubishi (Banks and Credit Cos.) 105,000 1,372,606
Bridgestone Corp. (Tire and Rubber) 78,000 1,688,593
Canon, Inc. (Office Equipment) 129,000 3,136,386
DDI Corp. (Telecommunications) 216 722,998
Fuji Photo Film Co. (Photographic Products) 51,000 1,851,457
Fujimi Inc. (Electronics) 34,300 1,890,641
Keyence Corp. (Electronics) 18,930 2,837,136
Kinki Coca-Cola Bottling Co. (Beverages) 90,000 1,079,101
Kirin Beverage Corp. (Beverages) 138,000 2,298,085
Nippon Broadcasting (Broadcasting) 21,000 1,285,179
Nippon Telephone & Telegraph Co. (Utilities -
Telephone) 181 1,537,219
NTT Data Communications Systems Co.
(Telecommunications) 44 2,106,578
Osaka Sanso Kogyo Ltd. (Chemicals) 397,000 793,339
Rohm Co. (Electronics) 22,000 2,179,850
Sankyo Co. Ltd. (Pharmaceuticals) 45,000 1,487,510
Secom Co. (Consumer Goods and Services) 49,000 3,174,188
Sony Corp. (Electronics) 34,800 2,894,688
Sony Corp., ADR (Electronics) 10,200 860,625
Takeda Chemical Industries (Pharmaceuticals) 124,000 3,386,511
TDK Corp. (Special Products and Services) 36,000 2,991,507
Terumo Corp. (Pharmaceuticals) 105,000 1,731,057
Ushio, Inc. (Electronics) 214,000 2,334,222
------------
$ 45,179,443
- ------------------------------------------------------------------------------------------------
Malaysia - 0.1%
Tanjong PLC (Entertainment) 468,000 $ 823,011
- ------------------------------------------------------------------------------------------------
Mexico - 2.6%
Apasco S.A. (Building Materials) 70,000 $ 427,545
Cemex S.A. (Construction)* 291,506 1,159,042
Cifra S.A. de C.V., "A" (Retail) 291,600 537,103
Cifra S.A. de C.V., "B" (Retail) 48,130 96,145
Corporacion GEO S.A. de C.V. (Housing)*## 25,000 587,500
Desc S.A. de C.V., "B" (Conglomerate) 88,000 758,802
Fomento Economico Mexicano S.A., "B" (Beverages) 68,200 481,892
Gruma S.A. (Food Products) 128,480 504,688
Grupo Carso, "A" (Conglomerate)* 230,300 1,464,542
Grupo Financiero Banamex, "B" (Finance)* 253,200 503,368
Grupo Modelo S.A. de C.V. (Brewery) 68,000 504,910
Grupo Television S.A. de C.V., GDR (Entertainment)* 31,000 961,000
Hylsamex S.A. de C.V., "B" (Steel) 122,000 788,982
Industries Bachoco S. A. de C.V., ADR (Food
Products)* 43,000 731,000
Organiz Soriana, "B" (Real Estate) 197,000 658,239
Sanluis Corporacion S.A. de C.V. 78,700 610,750
Telefonos de Mexico S.A. (Utilities - Telephone) 1,107,000 2,420,817
TV Azteca, S.A. de C.V., ADR (Broadcasting)* 49,800 952,425
------------
$ 14,148,750
- ------------------------------------------------------------------------------------------------
Morocco - 0.4%
Banque Marocaine Commerce (Banks and Credit Cos.) 11,550 $ 701,630
Brasserica Du Maroc (Consumer Goods and Services) 2,150 468,727
Credit Eqdom (Financial Institutions) 2,050 244,073
Ona Omnium Nord AF (Conglomerate) 5,500 500,000
Societe Nationale Dinvestiss (Conglomerate) 5,850 516,960
------------
$ 2,431,390
- ------------------------------------------------------------------------------------------------
Netherlands - 1.4%
Akzo Nobel N.V. (Chemicals) 17,300 $ 3,042,843
Brunel International N.V. (Human Resources)* 27,300 575,476
Fugro N.V. (Enginering)* 6,100 214,833
Koninklijke Ten Cate (Textiles)* 19,096 635,224
Philips Electronics N.V. (Manufacturing) 15,200 1,187,866
Royal Dutch Petroleum Co. (Oils) 39,900 2,106,802
------------
$ 7,763,044
- ------------------------------------------------------------------------------------------------
Pakistan - 0.3%
Hub Power Co. Ltd. (Utilities - Electric) 1,040,000 $ 1,389,629
Pakistan Telecom, "A" (Telecommunications) 200 168
Sui Northern Gas (Oils)* 1,200 859
------------
$ 1,390,656
- ------------------------------------------------------------------------------------------------
Peru - 1.1%
Alicorp S.A. (Food Products)* 540,000 $ 559,926
Compania de Minas Buenaventura S.A. (Mining) 104,430 789,969
CPT Telefonica del Peru S.A., "B" (Utilities -
Telephone) 953,954 1,904,388
Credicorp Ltd. (Conglomerate) 56,138 1,006,975
Telefonica del Peru S.A., ADR (Telecommunications) 75,400 1,489,150
------------
$ 5,750,408
- ------------------------------------------------------------------------------------------------
Philippines
Alsons Cement Corp. (Building Materials)## 4,302,350 $ 197,242
- ------------------------------------------------------------------------------------------------
Poland - 0.8%
Agros Holdings S.A. (Consumer Goods and Services) 20,000 $ 419,540
Bank Handlowy w Warszawie S.A., GDR
(Banks and Credit Cos.)*## 36,030 482,802
Bank Handlowy w Warszawie (Banks and Credit Cos.)*+ 30,679 412,579
Bank Slaski S.A. w Katowicach (Banks and Credit
Cos.) 6,245 364,292
Bydgoska Fabryka Kabli S.A. (Electrical Equipment) 105,000 859,914
Elektrim Spolka Akcyjna S.A. (Electrical Equipment) 105,333 992,794
Exbud S.A. (Construction)* 37,600 340,345
KGHM Polska Miedz S.A. (Metals and Minerals)*## 30,771 301,556
Zaklady Piwowarske w Zywcu (Beverages) 1,550 115,804
------------
$ 4,289,626
- ------------------------------------------------------------------------------------------------
Portugal - 2.2%
Banco Espirito Santo e Comercial de Lisboa S.A.
(Banks and Credit Cos.) 108,279 $ 3,146,359
Banco Totta E Acores (Banks and Credit Cos.) 120,600 2,368,195
Cimentos de Portugal S.A. (Building Materials) 34,946 886,740
Inparsa-Industria e Participacoes, SGPS, S.A.
(Conglomerates)* 17,090 344,807
Mota and Companhia (Construction) 16,100 266,719
Portugal Telecom S.A. (Utilities - Telephone) 48,450 1,980,346
Sonae Investimentos-Sociedade Gestora de
Participacoes Sociais, S.A. (Finance) 34,180 1,264,776
Telecel - Comunicacaoes Pessoais S.A. (Cellular
Telephones)* 20,800 1,882,624
------------
$ 12,140,566
- ------------------------------------------------------------------------------------------------
Russia - 0.9%
Lukoil Oil Co., ADR (Oils) 19,180 $ 1,606,325
Rostelecom (Telecommunications)##* 18 604,800
Unified Energy Systems, GDR (Utilities - Electric)* 74,453 2,479,285
------------
$ 4,690,410
- ------------------------------------------------------------------------------------------------
Singapore - 0.4%
Hong Leong Finance Ltd. (Finance)+ 136,000 $ 185,769
Mandarin Oriental International Ltd. (Restaurants
and Lodgings)* 1,826,901 1,443,252
Singapore Land Ltd. (Conglomerates) 279,000 794,104
------------
$ 2,423,125
- ------------------------------------------------------------------------------------------------
South Africa - 1.0%
Anglo American Corp. of South Africa Ltd. (Mining) 6,500 $ 280,847
DeBeers Centenary AG (Diamonds - Precious Stones) 23,450 559,215
Dimension Data Holdings (Financial Institutions) 120,780 501,786
Liberty Life Association of Africa Ltd. (Insurance) 30,000 747,819
Nedcor Ltd. (Banks and Credit Cos.)* 50,550 1,060,563
Sasol Ltd. (Oils) 53,200 640,964
South African Breweries Ltd. (Brewery) 53,300 1,417,200
------------
$ 5,208,394
- ------------------------------------------------------------------------------------------------
Spain - 0.7%
Abengoa S.A. (Construction) 24,959 $ 1,284,516
Acerinox S.A. (Iron and Steel) 16,694 2,489,265
------------
$ 3,773,781
- ------------------------------------------------------------------------------------------------
Sweden - 1.4%
Astra AB (Pharmaceuticals) 104,533 $ 1,687,163
Munters AB (Consumer Goods and Services)* 6,650 67,415
Skandia Forsakrings AB (Insurance) 65,300 3,048,594
Sparbanken Sverige AB, "A" (Banks and Credit Cos.) 122,100 2,768,744
------------
$ 7,571,916
- ------------------------------------------------------------------------------------------------
Switzerland - 1.5%
Julius Baer Holdings (Bank) 615 $ 917,452
Kuoni Reisen Holdings AG (Transportation) 800 3,026,410
Novartis AG (Pharmaceuticals) 2,787 4,362,520
------------
$ 8,306,382
- ------------------------------------------------------------------------------------------------
Turkey - 0.2%
Yapi ve Kredi Bankasi (Bank) 12,770,900 $ 389,739
Ardem Pisirici ve Isitici Cihazlar Sanayii A.S.
(Conglomerate) 832,700 96,430
Haci Omer Sabanci Holdings S.A., ADR (Conglomerate)* 37,800 472,500
------------
$ 958,669
- ------------------------------------------------------------------------------------------------
United Kingdom - 6.1%
ASDA Group PLC (Supermarkets) 808,800 $ 2,101,603
Bank Of Scotland (Banks and Credit Cos.)* 215,600 1,778,246
British Aerospace PLC (Aerospace and Defense)* 127,910 3,392,258
British Petroleum PLC (Oils)* 207,762 3,051,042
Carlton Communicatons PLC (Broadcasting) 253,000 2,088,838
Corporate Services Group PLC (Business Services) 473,200 1,776,931
Danka Business Systems, ADR (Business Services) 59,500 2,201,500
Jarvis Hotels PLC (Restaurants and Lodging)##+ 1,245,100 3,005,693
JBA Holdings (Computer Systems - Software) 80,200 1,270,528
Kwik-Fit Holdings PLC (Automotive Repair Centers) 744,500 4,037,540
Lloyds TSB Group PLC (Banks and Credit Cos.)* 196,809 2,457,984
PowerGen PLC (Utilities - Electric)* 183,930 2,044,297
Tomkins PLC (Conglomerate) 536,400 2,751,618
Williams Holdings (Conglomerate) 195,700 1,174,497
------------
$ 33,132,575
- ------------------------------------------------------------------------------------------------
Venezuela - 1.0%
Compania Anonima Nacional Telefonos de Venezuela,
ADR (Telecommunications) 122,000 $ 5,337,500
- ------------------------------------------------------------------------------------------------
Total Foreign Stocks $299,854,898
- ------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $453,044,046) $523,132,609
- ------------------------------------------------------------------------------------------------
Bond
- ------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------
Cia Vale do Rio Doce (Mining)(S)(S)
(Identified Cost, $0) $ 29 $ 0
- ------------------------------------------------------------------------------------------------
Warrants - 0.1%
- ------------------------------------------------------------------------------------------------
SHARES
- ------------------------------------------------------------------------------------------------
Intel Corp.* (Identified Cost, $889,489) 11,700 $ 662,513
- ------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.2%
- ------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 11/03/97 $12,485 $ 12,481,112
Federal Home Loan Mortgage Corp., due 11/07/97 4,000 3,996,340
General Electric Capital Corp., due 11/03/97 740 739,763
- ------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 17,217,215
- ------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $471,150,750) $541,012,337
Other Assets, Less Liabilities - 0.7% 3,809,942
- ------------------------------------------------------------------------------------------------
Net Assets - 100.0% $544,822,279
- ------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
(S)(S) When-issued security. At October 31, 1997, the Fund had sufficient cash and/or securities
at least equal to the value of the when-issued security.
See notes to financial statements
</TABLE>
<PAGE>
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
OCTOBER 31, 1997
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $471,150,750) $541,012,337
Cash 286,811
Foreign currency, at value (identified cost, $1,635,638) 1,630,057
Receivable for investments sold 8,169,968
Receivable for Fund shares sold 10,161,650
Dividends receivable 501,679
Deferred organization expenses 7,460
Other assets 4,288
------------
Total assets $561,774,250
------------
Liabilities:
Payable for investments purchased $ 15,809,278
Payable for Fund shares reacquired 707,396
Payable to affiliates -
Management fee 13,192
Shareholder servicing agent fee 1,905
Distribution and service fee 158,660
Administrative fee 220
Accrued expenses and other liabilities 261,320
------------
Total liabilities $ 16,951,971
------------
Net assets $544,822,279
============
Net assets consist of:
Paid-in capital $425,800,148
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 69,852,659
Accumulated undistributed net realized gain on
investments and foreign currency transactions 49,194,215
Accumulated net investment loss (24,743)
============
Total $544,822,279
============
Shares of beneficial interest outstanding 26,391,388
==========
Class A shares:
Net asset value per share
(net assets of $204,918,234 / 9,855,669 shares of
beneficial interest outstanding) $20.79
======
Offering price per share (100/94.25) $22.06
======
Class B shares:
Net asset value and offering price per share
(net assets $308,691,574 / 15,017,474 shares of
beneficial interest outstanding) $20.56
======
Class C shares:
Net asset value and offering price per share
(net assets of $24,662,012 / 1,203,889 shares of
beneficial interest outstanding) $20.49
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $6,550,459 / 314,356 shares of
beneficial interest outstanding) $20.84
======
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, 1997
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 6,365,528
Interest 1,405,964
Foreign taxes withheld (465,140)
-----------
Total investment income $ 7,306,352
-----------
Expenses -
Management fee $ 4,717,882
Trustees' compensation 41,991
Shareholder servicing agent fee 575,983
Shareholder servicing agent fee (Class A) 44,744
Shareholder servicing agent fee (Class B) 105,357
Shareholder servicing agent fee (Class C) 5,139
Distribution and service fee (Class A) 669,541
Distribution and service fee (Class B) 3,045,052
Distribution and service fee (Class C) 228,918
Administrative fee 54,453
Custodian fee 386,509
Postage 93,660
Audit fees 85,315
Printing 80,064
Legal fees 18,562
Amortization of organization expenses 7,424
Miscellaneous 452,588
-----------
Total expenses $10,613,181
Reduction of expenses by distributor (191,298)
Fees paid indirectly (105,196)
-----------
Net expenses $10,316,687
-----------
Net investment loss $(3,010,335)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $54,554,091
Foreign currency transactions (466,542)
-----------
Net realized gain on investments and foreign
currency transactions $54,087,549
-----------
Change in unrealized appreciation (depreciation) -
Investments $21,043,685
Translation of assets and liabilities in foreign
currencies (1,099)
-----------
Net unrealized gain on investments and foreign
currency translation $21,042,586
-----------
Net realized and unrealized gain on investments and
foreign currency $75,130,135
-----------
Increase in net assets from operations $72,119,800
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (3,010,335) $ (3,934,625)
Net realized gain on investments and foreign currency
transactions 54,087,549 26,926,412
Net unrealized gain on investments and foreign currency
translation 21,042,586 38,287,928
------------ ------------
Increase in net assets from operations $ 72,119,800 $ 61,279,715
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (102,984)
From net realized gain on investments and foreign currency
transactions (Class A) (9,634,864) (13,664,586)
From net realized gain on investments and foreign currency
transactions (Class B) (13,421,222) (21,606,221)
From net realized gain on investments and foreign currency
transactions (Class C) (1,004,314) (1,215,266)
------------ ------------
Total distributions declared to shareholders $(24,060,400) $(36,589,057)
------------ ------------
Net increase in net assets from Fund share transactions $ 21,994,786 $ 45,748,708
------------ ------------
Total increase in net assets $ 70,054,186 $ 70,439,366
Net assets:
At beginning of period 474,768,093 404,328,727
------------ ------------
At end of period (including accumulated net investment loss
of $24,743 and $375,752, respectively) $544,822,279 $474,768,093
============ ============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $19.09 $18.16 $17.45 $15.00
------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.02) $(0.07) $ -- $(0.02)
Net realized and unrealized gain on investments
and foreign currency transactions 2.77 2.73 0.93 2.47
------ ------ ------ ------
Total from investment operations $ 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 (1.05) (1.72) (0.22) --
------ ------ ------ ------
Total distributions declared to shareholders $(1.05) $(1.73) $(0.22) $ --
------ ------ ------ ------
Net asset value - end of period $20.79 $19.09 $18.16 $17.45
====== ====== ====== ======
Total return(+) 15.17% 15.73% 5.47% 16.33%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.52% 1.58% 1.63% 1.57%+
Net investment income (loss) (0.10)% (0.35)% 0.02% (0.14)%+
Portfolio turnover 133% 95% 149% 100%
Average commission rate### $ 0.0149 $ 0.0130 $ -- $ --
Net assets at end of period (000 omitted) $204,918 $172,106 $143,543 $131,503
* For the period from the inception of Class A shares, November 18, 1993, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
(S) The distributor waived a portion of its distribution fee for the periods indicated. If the fee had been incurred by
the Fund, the net investment income per share and the ratios would have been:
Net investment income $(0.04) $(0.09) $ -- $(0.04)
Ratios (to average net assets)
Expenses## 1.62% 1.68% 1.73% 1.67%+
Net investment loss (0.20)% (0.45)% (0.08)% (0.24)%+
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 1996 1995 1994**
- ------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.87 $17.97 $17.32 $15.00
------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.17) $(0.21) $(0.14) $(0.15)
Net realized and unrealized gain on investments
and foreign currency transactions 2.76 2.70 0.92 2.47
------ ------ ------ ------
Total from investment operations $ 2.59 $ 2.49 $ 0.78 $ 2.32
------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions $(0.90) $(1.59) $(0.13) $ --
------ ------ ------ ------
Net asset value - end of period $20.56 $18.87 $17.97 $17.32
====== ====== ====== ======
Total return 14.30% 14.77% 4.61% 15.47%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.28% 2.39% 2.45% 2.39%+
Net investment loss (0.87)% (1.16)% (0.80)% (0.95)%+
Portfolio turnover 133% 95% 149% 100%
Average commission rate### $ $
$ 0.0149 $ 0.0130 -- --
Net assets at end of period (000 omitted) $308,692 $282,668 $247,437 $236,971
** For the period from the inception of Class B shares, November 18, 1993, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 1996 1995 1994***
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.85 $17.96 $17.34 $16.04
------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.17) $(0.20) $(0.13) $(0.13)
Net realized and unrealized gain on investments
and foreign currency transactions 2.75 2.70 0.92 1.43
------ ------ ------ ------
Total from investment operations $ 2.58 $ 2.50 $ 0.79 $ 1.30
------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions $(0.94) $(1.61) $(0.17) $ --
------ ------ ------ ------
Net asset value - end of period $20.49 $18.85 $17.96 $17.34
====== ====== ====== ======
Total return 14.27% 14.88% 4.68% 8.10%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.25% 2.32% 2.38% 2.31%+
Net investment loss (0.85)% (1.10)% (0.72)% (0.83)%+
Portfolio turnover 133% 95% 149% 100%
Average commission rate### $0.0149 $0.0130 $ -- $ --
Net assets at end of period (000 omitted) $24,662 $19,994 $13,349 $11,872
*** For the period from the inception of Class C shares, January 3, 1994, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
PERIOD ENDED OCTOBER 31, 1997****
- -------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.34
------
Income from investment operations# -
Net investment income $ 0.04
Net realized and unrealized gain on investments and
foreign currency transactions 2.46
------
Total from investment operations $ 2.50
------
Net asset value - end of period $20.84
======
Total return 13.58%++ Ratios (to average net assets)/Supplemental data:
Expenses## 1.21%+
Net investment income 0.20%+
Portfolio turnover 133%
Average commission rate $0.0149
Net assets at end of period (000 omitted) $ 6,550
**** For the period from the inception of Class I shares, January 2, 1997,
through October 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid
indirectly.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS World Growth Fund (the Fund) is a non-diversified series of MFS Series Trust
VIII (the Trust).The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are 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. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues and forward contracts, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon exchange
or over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Non-U.S.
dollar denominated short-term obligations are valued at amortized cost as
calculated in the foreign currency and translated into U.S. dollars at the
closing daily exchange rate. Securities for which there are no such quotations
or valuations are valued at fair value as determined in good faith by or at the
direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Fund
operations.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. 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 average daily net assets. The fee is reduced according to an
arrangement which 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. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended October 31, 1997, $3,361,344 was reclassified from
accumulated net investment loss and $3,400,382 and $39,038 were reclassified
from accumulated net realized gain on investments and foreign currency
transactions and to paid-in capital, respectively, due to differences between
book and tax accounting for currency transactions, passive foreign investment
companies, and accumulated net investment loss. This change had no effect on the
net assets or net asset value per share. At October 31, 1997, accumulated
undistributed net investment income and realized gain on investments and foreign
currency transactions under book accounting were different from tax accounting
due to temporary differences in accounting for wash sale transactions.
Capital gains taxes have been provided on unrealized and realized gains from
securities transactions in countries where such a capital gains tax is
applicable. Realized and unrealized gain is reported net of any capital gains
tax in the Statement of Operations.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of the Fund pro rata
based on the average daily net assets of each class, without distinction between
share classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory services and general office facilities. The management fee is computed
daily and paid monthly at 0.90%:
The advisory agreement permits the adviser to engage one or more sub-advisers
and the adviser has engaged Foreign & Colonial Management Ltd. and its
subsidiary Foreign & Colonial Emerging Markets Ltd., each an England and Wales
Company, to assist in the performance of its services.
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal, and other
administrative services. As a partial reimbursement for the cost of providing
these services, the Fund pays MFS an administrative fee at the following annual
percentages of the Fund's average daily net assets, provided that the
administrative fee is not assessed on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $ 8,366 for the year ended
October 31, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$519,298 for the year ended October 31, 1997, 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 to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to 0.10%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD retains the service fee for accounts not attributable
to a securities dealer which amounted to $93,551 for the year ended October 31,
1997. 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, 1997, 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 additional consideration for
services rendered by the dealer with respect to Class B and Class C shares. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $139,734 and $54,684 for Class B and Class C shares,
respectively, for the year ended October 31, 1997. Fees incurred under the
distribution plans during the year ended October 31, 1997, were 1.00% of average
daily net assets attributable to Class B and Class C shares on an annualized
basis.
Purchases over $1 million of Class A shares and certain purchases by retirement
plans are subject to a contingent deferred sales charge in the event of a
shareholder redemption within 12 months following such purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class B shares in
the event of a shareholder redemption within six years of purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class C shares in
the event of a shareholder redemption within twelve months of purchase. MFD
receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the year ended October 31, 1997, were $4,000, $574,458,
and $4,902 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
0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of the
average daily net assets of each class of shares at an effective annual rate of
up to 0.15%, up to 0.22%, and up to 0.15% attributable to Class A, Class B, and
Class C shares, respectively. (4) Portfolio Securities Purchases and sales of
investments, other than U.S. government securities, purchased option
transactions, and short-term obligations, aggregated $695,593,581 and
$652,359,487, 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 $473,412,588
------------
Gross unrealized appreciation $ 96,713,465
Gross unrealized depreciation (29,113,716)
------------
Net unrealized appreciation $ 67,599,749
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Class A Shares
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 28,172,048 $ 562,208,269 13,198,505 $ 248,410,300
Shares issued to shareholders
in reinvestment of
distributions 449,325 8,218,149 703,305 12,156,888
Shares transferred to Class I (373,008) (6,841,795) -- --
Shares reacquired (27,406,795) (549,595,449) (12,790,324) (241,363,733)
----------- ------------- ----------- -------------
Net increase 841,570 $ 13,989,174 1,111,486 $ 19,203,455
=========== ============= =========== =============
<CAPTION>
Class B Shares
YEAR ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,233,868 $ 64,511,271 3,986,473 $ 73,258,330
Shares issued to shareholders
in reinvestment of
distributions 561,080 10,209,856 923,243 15,760,023
Shares reacquired (3,754,830) (75,204,244) (3,703,963) (68,245,006)
---------- ------------ ---------- -------------
Net increase (decrease) 40,118 $ (483,117) 1,205,753 $ 20,773,347
========== ============ ========== =============
<CAPTION>
Class C Shares
YEAR ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 480,867 $ 9,630,276 574,128 $ 10,561,542
Shares issued to shareholders
in reinvestment of
distributions 36,836 667,838 43,379 739,185
Shares reacquired (374,659) (7,546,094) (300,073) (5,528,821)
-------- ------------ -------- ------------
Net increase 143,044 $ 2,752,020 317,434 $ 5,771,906
======== ============ ======== ============
<CAPTION>
Class I Shares
PERIOD ENDED OCTOBER 31, 1997*
----------------------------------
SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Shares sold 38,825 $ 786,858
Shares transferred from Class
A 373,008 6,841,795
Shares reacquired (97,477) (1,891,944)
------- ------------
Net increase 314,356 $ 5,736,709
======= ============
* For the period from the inception of Class I shares, January 2, 1997, through October 31, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended October 31, 1997, was $4,239.
(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, 1997, the
Fund owned the following restricted securities (constituting 0.8% of net assets)
which may not be publicly sold without registration under the Securities Act of
1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations supplied
by a pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF SHARE/PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Handlowy w Warszawie 6/18/97 - 9/04/97 30,679 $ 359,736 $ 412,579
Hong Leong Finance Ltd. 11/01/96 - 3/25/97 136,000 423,822 185,769
India Gateway Fund Ltd. 2/02/97 2,144 21,761 9,455
International Business Communications
Systems, Inc. 8/28/95 40,300 399,776 282,100
Jarvis Hotels PLC 11/01/96 - 3/25/97 1,245,100 3,302,353 3,005,693
Moneda Chile Fund Ltd. 8/22/95 63,000 630,000 378,000
----------
$4,273,596
==========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust VIII and Shareholders of MFS World Growth
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS World Growth Fund (a series of MFS Series
Trust VIII) as of October 31, 1997, the related statement of operations for the
year then ended, the statement of changes in net assets for the years ended
October 31, 1997 and 1996, and the financial highlights for each of the years in
the four-year period ended October 31, 1997. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS World Growth
Fund at October 31, 1997, 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 5, 1997
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) WORLD GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
Trustees Secretary
A. Keith Brodkin* - Chairman and President Stephen E. Cavan*
Richard B. Bailey* - Private Investor; Assistant Secretary
Former Chairman and Director (until 1991), James R. Bordewick, Jr.*
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, Custodian
Cambridge Trust Company State Street Bank and Trust Company
Marshall N. Cohan - Private Investor Auditors
Deloitte & Touche LLP
Lawrence H. Cohn, M.D. - Chief of Cardiac
Surgery, Brigham and Women's Hospital; Investor Information
Professor of Surgery, Harvard Medical School For MFS stock and bond market outlooks, call
toll free: 1-800-637-4458 anytime from a
The Hon. Sir J. David Gibbons, KBE - Chief touch-tone telephone.
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Bank of N.T. Butterfield & Son Ltd. For information on MFS mutual funds, call
your financial adviser or, for an information
Abby M. O'Neill - Private Investor; kit, call toll free: 1-800-637-2929 any
Director, Rockefeller Financial Services, business day from 9 a.m. to 5 p.m. Eastern
Inc. (investment advisers) time (or leave a message anytime).
Walter E. Robb, III - President and Investor Service
Treasurer, Benchmark Advisors, Inc. MFS Service Center, Inc.
(corporate financial consultants); President, P.O. Box 2281
Benchmark Consulting Group, Inc. (office Boston, MA 02107-9906
services); Trustee, Landmark Funds (mutual
funds) For general information, call toll free:
1-800-225-2606 any business day from
Arnold D. Scott* - Senior Executive Vice 8 a.m. to 8 p.m. Eastern time.
President, Director and Secretary,
Massachusetts Financial Services Company For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
Jeffrey L. Shames* - President and Director, day from 9 a.m. to 5 p.m. Eastern time. (To
Massachusetts Financial Services Company use this service, your phone must be equipped
with a Telecommunications Device for the
J. Dale Sherratt - President, Insight Deaf.)
Resources, Inc. (acquisition planning
specialists) Ward Smith - Former Chairman For share prices, account balances, and
(until 1994), NACCO Industries; Director, exchanges, call toll free: 1-800-MFS-TALK
Sundstrand Corporation (1-800-637-8255) anytime from a touch-tone
telephone.
Investment Adviser
Massachusetts Financial Services Company World Wide Web
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
Distributor [Dalbar Logo] For the fourth year in a
MFS Fund Distributors, Inc. row, MFS earned a #1
500 Boylston Street ranking in the DALBAR, Inc. Broker/Dealer
Boston, MA 02116-3741 Survey, Main Office Operations Service
Quality Category. The firm achieved a 3.42
Portfolio Managers overall score on a scale of 1 to 4 in the
John W. Ballen* 1997 survey. A total of 111 firms responded,
David R. Mannheim* offering input on the quality of service they
Toni Y. Shimura* received from 29 mutual fund companies
nationwide. The survey contained questions
Treasurer about service quality in 11 categories,
W. Thomas London* including "knowledge of operations contact,"
"keeping you informed," and "ease of doing
Assistant Treasurers business" with the firm.
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-------------
MFS(R) WORLD BULK RATE
GROWTH FUND U.S. POSTAGE
PAID
MFS
-------------
500 Boylston Street
Boston, MA 02116-3741
[LOGO] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[DALBAR
LOGO]
TOP-RATED SERVICE
(c)1997 MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116-3741
MWF-2 12/97 95.5M 9/209/309/809
