MFS WORLD TOTAL RETURN FUND
(A SERIES OF MFS SERIES TRUST VI)
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
December 22, 1995
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: MFS Series Trust VI (File No. 811-6102), on Behalf of
MFS World Total Return Fund
-----------------------------------------------------
Ladies and Gentlemen:
Pursuant to the requirements of Section 30(b) of the Investment Company Act
of 1940 and Rule 30b2-1 thereunder, we hereby file a copy of the Annual
Report to Shareholders dated October 31, 1995 of MFS World Total Return Fund.
Very truly yours,
LORRAINE K. GRIP
Lorraine K. Grip
Senior Production Editor
<PAGE>
MFS LOGO Annual Report for
Year Ended
October 31, 1995
MFS [Registration Mark] World Total Return Fund
Front Cover
A picture of airplanes.
<PAGE>
MFS [Registration Mark] World Total Return Fund
TRUSTEES
A. Keith Brodkin* - Chairman and President
Richard B. Bailey* - Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Marshall N. Cohan - Private Investor
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School
The Hon. Sir J. David Gibbons, KBE - Chief Executive Officer, Edmund Gibbons
Ltd.; Chairman, Bank of N.T. Butterfield & Son Ltd.
Abby M. O'Neill - Private Investor; Director, Rockefeller Financial Services,
Inc. (investment adviser)
Walter E. Robb, III - President and Treasurer, Benchmark Advisers, Inc.
(corporate financial consultants); President, Benchmark Consulting Group, Inc.
(office services); Trustee, Landmark Funds (mutual funds)
Arnold D. Scott* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames* - President and Director, Massachusetts Financial Services
Company
J. Dale Sherratt - President, Insight Resources, Inc. (acquisition planning
specialists)
Ward Smith - Former Chairman (until 1994), NACCO Industries; Director,
Sundstrand Corporation
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
Frederick J. Simmons*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Ernst & Young LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
INVESTOR SERVICE
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any business day from 8
a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
TOP-RATED SERVICE
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s
Broker/Dealer Survey, Main Office Operations Service Quality category. The firm
achieved a 3.49 overall score -- on a scale of 1 to 4 -- in the 1995 survey. A
total of 71 firms responded, offering input on the quality of service they
receive from 36 mutual fund companies nationwide. The survey contained questions
about service quality in 17 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
Declining interest rates and favorable inflation outlooks helped create
opportunities in both fixed-income and equity markets around the world during
the past 12 months, although the global economic situation presented a mixed
picture. For the year ended October 31, 1995, Class A shares of the Fund
provided a total return of +10.63%, Class B shares +9.75% and Class C shares
+9.84%. These returns include the reinvestment of distributions but exclude the
effects of any sales charges. A discussion of the Fund's performance as well as
our outlook for the coming fiscal year can be found in the Portfolio Performance
and Strategy section of this letter.
U.S. Outlook
Moderate, but sustainable, growth appears to be the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy growing
at an annual rate of 4.2% in the third quarter, this surprisingly strong growth
was mainly driven by a pickup in consumer spending and an increase in business
and government outlays. Although impressive, this growth rate is not expected to
continue in coming months. Recent retail sales have been disappointing, in part
because of rising levels of consumer debt. An extended period of lower mortgage
rates seems to have relieved much of the pent-up demand for housing. Growth is
not expected to get much help from the manufacturing sector, either, as order
flows from manufacturers have moderated. Export activity, meanwhile, is also
expected to remain modest as continued weakness abroad has limited demand for
many U.S. goods. However, the Federal Reserve Board's consistent and, so far,
successful efforts to fight inflation seem to be giving consumers and businesses
enough longer term confidence to help maintain modest growth in real (adjusted
for inflation) gross domestic product into 1996.
Global Outlook
As in the United States, a pattern of slow to moderate growth along with low and
controlled inflation remains a dominant theme in major industrialized countries.
While the recent recovery of the dollar against the yen and the mark has added
some strength to the economies of Europe and Japan, the outlook is for sluggish
economic growth, in the near term at least. And although central banks in Europe
and Japan have lowered interest rates in an attempt to stimulate domestic
demand, many industrial companies in these countries are still struggling to
compete in a global marketplace in which the prices of their products are less
competitively priced. On the positive side, this does mean little to no
inflationary pressure in these countries, and we believe that this, combined
with further reductions in interest rates, could help provide a foundation for
stronger economic growth in the long run.
1
<PAGE>
LETTER TO SHAREHOLDERS - continued
U.S. Bond Market
Given the unexpected strength of the economy in the third quarter, prospects for
further decreases in short-term interest rates by the Federal Reserve seem
uncertain in the near term. Long-term rates, meanwhile, have moved noticeably
downward in recent months in anticipation of more modest fourth-quarter growth
with continued low inflation. While there have been some increases in commodity
prices, companies have found it difficult to pass these on at the consumer level
as they continue to fight for market share. Additionally, unit labor costs
remain under control and seem to be growing at a pace that is near or below the
ongoing inflation rate. Thus, with long-term government bonds yielding over 6%
in an environment of 2% to 3% inflation, real rates of return in the
fixed-income markets remain relatively attractive.
Stock Markets
After some volatility late in the third quarter, the U.S. stock market appears
to have stabilized. Although many companies reported solid third-quarter
results, there was some weakness in the earnings of retail, financial services
and even some technology companies. However, a slowdown in earnings may be a
positive development if it is an indication that the economy is not overheating
and that inflation - an enemy of long-term equity valuations - is under control.
While we see a deceleration of corporate earnings as the inevitable consequence
of traditional business cycles, we remain encouraged by the high absolute level
of profitability among U.S. companies. Also, many companies' increasing emphasis
on cost containment and growing use of technology have helped keep them highly
competitive and reasonably profitable. Looking ahead, we believe that a
stabilizing interest rate environment, coupled with reasonable earnings reports,
could justify current market valuations.
Meanwhile, according to Datastream, an independent financial database
service, the performance of the European markets (in local currencies) varied
widely, with Switzerland gaining 22%, Sweden up 19%, and the United Kingdom
ahead 18%. At the same time, Germany was ahead just 2%, while France was down 2%
and the Italian stock market fell 7%. In general, the markets of the Pacific Rim
showed improved performance during the second half, but not enough to offset
weak first-half returns. Japan finished the yea r down 10%, while Singapore,
Malaysia, Thailand and Korea showed losses ranging from 8% to 14%.
When measured in U.S. dollars, currency movements had a noticeable impact
on international stock market returns during the past 12 months. The U.S. dollar
fell 7% versus the mark, 10% against the Swiss franc and 2% against the
Australian dollar, thereby aiding U.S. dollar-based returns. Conversely, the
U.S. dollar strengthened 5% against the yen, with a 22% gain against the yen in
the second half alone.
2
<PAGE>
LETTER TO SHAREHOLDERS - continued
Portfolio Performance and Strategy
Although the Fund's return underperformed that of a benchmark made up of 60% of
the Morgan Stanley Capital International World Index (the MSCI) and 40% of the
J.P. Morgan Global Government Bond Index, its performance during the 12 months
ended October 31, 1995 compared favorably with similar funds. The +10.63% total
return of the Fund's Class A shares compared to an average +9.27% return for the
Lipper global flexible fund category as determined by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance.
Factors having a positive effect on the equity holdings during the past
year included overweightings in the United States, which was important since it
accounts for 35% to 40% of the MSCI, and an underweighting in Japan, which is
also heavily weighted at about 25% of the MSCI. Among other countries which did
well and were overweighted were Sweden and the Netherlands. Countries hurting
performance were France, Italy and Australia. In the various industry sectors,
our holdings in financial services stocks, which in last year's annual report
were mentioned as likely additions, did very well, as did pharmaceutical stocks.
The absence of much in the way of technology stocks, except IBM, hurt
performance. The Fund's emphasis on value and income is apt to lead to the
omission of stocks of that sort. Furthermore, the technology craze was almost
exclusively a U.S. phenomenon and so tended to be underrepresented in global
portfolios. We believe there are exciting opportunities that fit our emphasis on
value and income. On the bond side, our overweighting in core European markets
and Japan contributed to the performance against the benchmark, while our
underweighting in the U.S. market in the first part of the year had a negative
effect on bond performance.
As we enter 1996, the equity position of the portfolio is fully invested
with 60% of assets invested in U.S. and foreign stocks and convertible
securities. Foreign holdings in 18 countries account for approximately 62% of
the total equity position, higher than earlier in the year, and likely to go
higher still, since the United States is unlikely to repeat 1995's
outperformance. Far Eastern holdings, including Japanese stocks, are likely to
be increased. For some time now, our stock investments have been concentrated in
companies that are not dependent upon the business cycle for them to outperform.
Approximately 58% of the holdings is in financial services stocks, utilities,
consumer staples, special situation retailers, and health care stocks, all of
which we believe will perform well in a slower growth economy.
As we anticipated, the dollar did recover somewhat during the last six
months. However, we believe the dollar cannot begin a long-term rally until the
United States becomes less reliant on foreign capital to finance its
investments.
3
<PAGE>
LETTER TO SHAREHOLDERS - continued
For next year, we expect that the dollar's overall trend will remain downward,
although slow U.S. growth, if it continues, could lead to a cyclical reduction
in our borrowing of foreign capital, taking some of the pressure off the dollar.
The majority of our foreign-based bond holdings remains in Europe. The core
markets, such as Germany and the Netherlands, provided solid returns against a
backdrop of slow growth, low inflation and declining official interest rates,
and remain an important anchor to our foreign holdings. Other European markets,
such as Denmark, offer a combination of higher yields with moderate growth and
low inflation. The highest yielding markets have recovered over the last six
months, and the Fund has increased both its bond and currency weightings in
these markets. We believe the first part of next year should be supportive of
fixed-income investments. Moderate to slow growth, with commensurate declines in
overall inflation rates, could lead to further reductions in official interest
rates.
In addition to these economic developments, European governments are
engaged in multi-year programs to reduce their budget deficits and debt levels.
These programs are positive for bonds because lower government spending tends to
reduce inflationary pressures and lower issuance of government debt reduces the
supply pressures on the bond market.
In the Japanese market, powerful deflationary forces have supported a drop
in yields to historically low levels. We now feel this process may be drawing to
an end, given a reversal of priorities at the central bank from fighting
inflation, which is now non-existent, to offsetting the downward spiral of
deflation. Thus, the weighting in Japan will most likely be reduced in the
coming year.
The high returns of the U.S. market have been echoed in other U.S. dollar-
bloc markets. Australia, New Zealand and Canada have all contributed to
performance over the last 12 months. The Australian market currently offers
significantly higher yields than the U.S. market, and we believe it represents
good value. As long as the outlook for U.S. bonds remains positive, these
related markets could perform well.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
[A photo of A. Keith Brodkin [A photo of Frederick J. Simmons
Chairman and President] Portfolio Manager]
[Signature] [Signature]
A. Keith Brodkin Frederick J. Simmons
Chairman and President Portfolio Manager
November 10, 1995
4
<PAGE>
PORTFOLIO MANAGER PROFILE
A graduate of Tufts University and the Amos Tuck School of Business
Administration of Dartmouth College, Frederick Simmons began his career at MFS
in 1971 as a research specialist and was named Senior Vice President in 1983. In
1991, he became the Portfolio Manager for MFS World Total Return Fund.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995. For
the year ended October 31, 1995, the amount of distributions from income e
ligible for the 70% dividends-received deduction for corporations came to 40%.
The Fund is estimated to have derived approximately 42% of its ordinary income
from dividends paid by foreign companies, and to have paid foreign taxes
equivalent to approximately 3% of its ordinary income.
PERFORMANCE
The information on the following page illustrates the historical performance
of MFS World Total Return Fund Class A shares in comparison to various market
indicators. Fund results in the graph reflect the deduction of the 4.75% maximum
sales charge. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. You cannot invest in an index. All results reflect the reinvestment of
all dividends and capital gains.
Class B shares were offered effective September 7, 1993. Information on Class B
share performance appears on the next page.
Please note that effective January 3, 1994, Class C shares were offered.
Information on Class C share performance appears on the next page.
In the table on the next page, we have included the average annual total returns
of all global flexible portfolio funds (including the Fund) tracked by Lipper
Analytical Services, Inc. for the applicable time periods. Because these returns
do not reflect any applicable sales charges, we have also included the Fund's
results at net asset value (no sales charge) for comparison.
All results are historical, and, therefore, are not an indication of future
results. The investment return and principal value of an investment in a mutual
fund will vary with changes in market conditions, and shares, when redeemed, may
be worth more or less than their original cost.
5
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000* INVESTMENT
(For the Period from September 4, 1990 to October 31, 1995)
Line graph representing the growth of a $10,000 investment for the five-year
period ended October 31, 1995. The graph is scaled from $5,000 to $30,000 in
$5,000 segments. The years are marked in 12-month segments from 1990 to 1995.
There are four lines drawn to scale. One is a solid line representing MFS World
Total Return Fund (Class A), a second line of short dashes represents the S&P
500, a third line of very short dashes reprsents the MSCI World Index - 60%/J.P.
Morgan Global Government Bond Index - 40%, and a fourth line of medium-short
dashes represents the Consumer Price Index.
MFS World Total Return Fund (Class A) $16,936
S&P 500 $16,894
MSCI World Index $20,965
Consumer Price Index $11,679
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
Life Of Class
Through
1 Year 3 Years 5 Years 10/31/95
===================================================================================================================================
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
MFS World Total Return Fund (Class A) including
4.75% Sales Charge + 5.36% + 8.88% +10.91% +10.70%*
- -----------------------------------------------------------------------------------------------------------------------------------
MFS World Total Return Fund (Class A) at net
asset value +10.63 +10.66% +12.00% +11.74%*
- -----------------------------------------------------------------------------------------------------------------------------------
MFS World Total Return Fund (Class B) With CDSC** + 5.75% -- -- + 6.62%+++
- -----------------------------------------------------------------------------------------------------------------------------------
MFS World Total Return Fund (Class B) Without CDSC + 9.75% -- -- + 7.91%+++
- -----------------------------------------------------------------------------------------------------------------------------------
MFS World Total Return Fund (Class C) + 9.84% -- -- + 5.19%#
- -----------------------------------------------------------------------------------------------------------------------------------
Average global flexible portfolio fund + 9.27% +10.16% +10.06% + 9.33%#
- -----------------------------------------------------------------------------------------------------------------------------------
60% Morgan Stanley Capital International (MSCI)
World Index+ 40% J.P. Morgan Global Government
Bond Index +12.20% +12.87% +10.93% +10.74%#
- -----------------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index +26.41% +14.69% +17.22% +15.40%#
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Price Index + 2.81% + 2.72% + 2.86% + 3.05%#
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* For the period from the commencement of offering of Class A shares, September 4, 1990 to October 31, 1995. Benchmark
comparisons begin on September 1, 1990.
** These returns reflect the current Class B contingent deferred sales charge (CDSC) of 4% for the 1-year period and 3% for the
period commencing September 7, 1993.
+++ For the period from the commencement of offering of Class B shares, September 7, 1993 to October 31, 1995.
# For the period from the commencement of offering of Class C shares, January 3, 1994 to October 31, 1995. Class C shares have
no initial sales charge or CDSC but, along with Class B shares, have higher annual fees and expenses than Class A shares.
+ The MSCI World Index is a broad, unmanaged index of global equities.
++ The J.P. Morgan Global Government Bond Index is an aggregate of actively traded government bonds issued from 13 countries,
including the U.S., with remaining maturities of at least one year.
ss The Standard & Poor's 500 Composite Index is a popular, unmanaged index of common stock performance.
ss ss The Consumer Price Index is a popular measure of change in prices.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - October 31, 1995
Common Stocks - 59.4%
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Common Stocks - 22.1%
Aerospace - 0.7%
Lockheed Martin Corp. 19,200 $ 1,308,000
- --------------------------------------------------------------------------------
Apparel And Textiles - 0.6%
Gucci Group* 35,100 $ 1,053,000
- --------------------------------------------------------------------------------
Banks and Credit Companies - 1.5%
Barnett Banks, Inc. 29,800 $ 1,646,450
Norwest Corp. 34,500 1,017,750
------------
$ 2,664,200
- --------------------------------------------------------------------------------
Biotechnology - 0.3%
Guidant Corp. 16,423 $ 525,536
- --------------------------------------------------------------------------------
Business Machines - 1.6%
International Business Machines Corp. 12,500 $ 1,215,625
Xerox Corp. 12,000 1,557,000
------------
$ 2,772,625
- --------------------------------------------------------------------------------
Consumer Goods and Services - 2.3%
Philip Morris Cos., Inc. 34,200 $ 2,889,900
Tyco International Ltd. 19,000 1,154,250
------------
$ 4,044,150
- --------------------------------------------------------------------------------
Electrical Equipment - 0.9%
General Electric Co. 25,600 $ 1,619,200
- --------------------------------------------------------------------------------
Electronics - 0.7%
Sony Corp. 29,000 $ 1,326,750
- --------------------------------------------------------------------------------
Financial Institutions - 1.0%
Federal Home Loan Mortgage Corp. 16,700 $ 1,156,475
ROC Communities, Inc. 16,000 360,000
Walden Residential Properties, Inc. 16,400 301,350
------------
$ 1,817,825
- --------------------------------------------------------------------------------
Food and Beverage Products - 1.4%
General Mills, Inc. 25,000 $ 1,434,375
Universal Foods Corp. 31,000 1,061,750
------------
$ 2,496,125
- --------------------------------------------------------------------------------
Insurance - 2.8%
CIGNA Corp. 11,700 $ 1,159,763
MBIA, Inc. 15,400 1,072,225
St. Paul Cos., Inc. 26,400 1,339,800
Transamerica Corp. 22,000 1,490,500
------------
$ 5,062,288
- --------------------------------------------------------------------------------
Machinery - 1.0%
Deere & Co., Inc. 10,000 $ 893,750
Ingersoll Rand Co. 27,500 972,813
------------
$ 1,866,563
- --------------------------------------------------------------------------------
Medical and Health Products - 2.2%
Lilly (Eli) & Co. 9,294 $ 898,033
Schering Plough Corp. 32,000 1,716,000
Warner-Lambert Co. 15,000 1,276,875
------------
$ 3,890,908
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Common Stocks - continued
Oils - 1.9%
Amoco Corp. 18,000 $ 1,149,750
Exxon Corp. 10,600 809,575
Mobil Corp. 13,700 1,380,275
------------
$ 3,339,600
- --------------------------------------------------------------------------------
Photographic Products - 1.0%
Eastman Kodak Co. 28,800 $ 1,803,600
- --------------------------------------------------------------------------------
Pollution Control - 0.6%
WMX Technologies, Inc. 39,000 $ 1,096,875
- --------------------------------------------------------------------------------
Printing and Publishing - 0.3%
Deluxe Corp. 17,500 $ 470,312
- --------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Darden Restaurants, Inc. 15,000 $ 170,625
- --------------------------------------------------------------------------------
Utilities - Gas - 1.2%
Coastal Corp. 34,000 $ 1,100,750
Westcoast Energy, Inc. 68,000 1,003,000
------------
$ 2,103,750
- --------------------------------------------------------------------------------
Total U.S. Common Stocks $ 39,431,932
- --------------------------------------------------------------------------------
Foreign Stocks - 37.3%
Argentina - 0.2%
Central Costenera, ADR (Utilities - Electric)## 13,167 $ 358,801
Mirgor Sacifia, ADR (Auto Parts)*## 47,930 95,860
------------
$ 454,661
- --------------------------------------------------------------------------------
Australia - 4.1%
Australia & New Zealand Bank Group Ltd.
(Banks and Credit Cos.) 285,000 $ 1,192,868
Broken Hill Proprietary Co. (Metals) 145,011 1,962,084
Q.B.E. Insurance Group Ltd. (Insurance) 280,000 1,235,864
Seven Network Ltd. (Entertainment) 412,000 1,069,144
Woolworth Ltd. ADR (Retail - Food)## 78,500 1,825,125
------------
$ 7,285,085
- --------------------------------------------------------------------------------
Canada - 0.7%
Hudsons Bay Co. (Stores) 70,000 $ 1,308,594
- --------------------------------------------------------------------------------
Denmark - 1.1%
Tele Denmark A/S, ADR (Telecommunications) 78,000 $ 2,037,750
- --------------------------------------------------------------------------------
France - 3.7%
Elf Aquitaine, ADS (Oils) 35,400 $ 1,194,750
LVMH Moet-Hennessy (Luggage and Beverage) 3,000 597,849
Pinault-Printemps S.A. (Retail) 9,900 2,149,309
Television Francaise (Entertainment) 14,500 1,499,744
Total S.A., ADR (Oils) 35,000 1,080,625
------------
$ 6,522,277
- --------------------------------------------------------------------------------
Germany - 1.0%
Deutsche Bank AG (Banks and Credit Companies) 22,000 $ 994,914
Hornbach Baumarkt AG (Retail) 8,400 423,610
Praktiker Bau-Und Heimwerker (Retail)* 10,700 338,199
------------
$ 1,756,723
- --------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
Hong Kong - 0.7%
Consolidated Electric Power Asia Ltd., ADR
(Utilities -Electric)## 13,600 $ 275,400
Giordano International Ltd. (Retail) 624,000 516,583
Wharf Holdings Ltd. (Real Estate) 150,000 506,416
------------
$ 1,298,399
- --------------------------------------------------------------------------------
Italy - 1.3%
Instituto Nazionale delle Assicurazioni
(Insurance) 392,000 $ 516,503
Luxottica Group (Medical Supplies -Eyeware) 13,100 638,625
Telecom Italia RNC (Utilities - Telephone) 475,000 561,635
Telecom Italia Mobile DRNC (Telecommunications)* 475,000 528,774
------------
$ 2,245,537
- --------------------------------------------------------------------------------
Japan - 6.2%
DDI Corp. (Telecommunications) 139 $ 1,127,615
Dai Nippon Printing Co., Ltd. (Printing) 64,000 1,020,844
Daiwa House Industry Co.
(Manufacturer - Housing) 37,000 553,968
East Japan Railway Co. (Railroads) 135 638,076
Hitachi Ltd. (Electrical Equipment)* 135,000 1,387,122
ITO Yokado Co. (Retail) 30,000 1,641,061
Kirin Beverage (Beverages) 26,000 394,363
MOS Food Services (Food Services) 11,000 275,565
Matsushita Electric Industrial Co.
(Electrical Equipment) 119,000 1,688,521
Murata Manufacturing Co., Ltd.
(Electrical Equipment) 24,000 843,135
Nippondenso Co., Ltd. (Auto Parts) 57,000 1,043,057
Nissen Corp. (Retail) 13,200 381,055
------------
$ 10,994,382
- --------------------------------------------------------------------------------
Korea - 0.6%
Korea Electric Power Corp.
(Utilities - Electric) 17,000 $ 769,899
Korea Electric Power Corp., ADR
(Utilities - Electric) 15,000 371,250
------------
$ 1,141,149
- --------------------------------------------------------------------------------
Malaysia - 0.1%
Petronas Gas Berhad (Oil/Gas Domestic)*## 47,800 $ 161,843
- --------------------------------------------------------------------------------
Mexico - 0.1%
Grupo Casa Autrey ADR (Wholesale Distributors) 14,000 $ 178,500
- --------------------------------------------------------------------------------
Netherlands - 3.0%
IHC Caland (Transportation - Marine)* 25,000 $ 711,434
Royal Dutch Petroleum Co. (Oils) 11,500 1,413,063
Royal PTT Nederland N.V. (Commercial Services) 32,400 1,139,688
Wolters Kluwer (Publishing) 22,357 2,034,773
------------
$ 5,298,958
- --------------------------------------------------------------------------------
New Zealand - 1.7%
Lion Nathan Ltd. (Food and Beverage) 1,002,000 $ 2,275,629
Telecom of New Zealand, ADR (Telecommunications) 10,300 683,663
------------
$ 2,959,292
- --------------------------------------------------------------------------------
Norway - 0.1%
Fokus Bank A/S (Financial - Banks)*## 30,200 $ 160,084
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
Singapore - 0.6%
Hong Leong Finance (Financial Services) 199,000 $ 603,200
Singapore Press Holdings (Publishing - Newspaper) 33,000 516,501
------------
$ 1,119,701
- --------------------------------------------------------------------------------
Spain - 1.6%
Iberdrola S.A. (Utilities - Electric) 242,000 $ 1,825,666
Repsol S.A. (Oil/Gas Exploration) 32,000 956,458
------------
$ 2,782,124
- --------------------------------------------------------------------------------
Sweden - 3.6%
Asea AB, "B" (Electrical Equipment) 20,500 $ 2,024,928
Astra AB, "B" (Pharmaceuticals) 69,500 2,515,419
Hennes & Mauritz AB, "B" (Retail) 14,900 975,193
Nordbanken AB (Financial - Banks)* 31,200 465,805
Sparbanken Sverige AB
(Financial - Savings and Loan) 46,400 489,813
------------
$ 6,471,158
- --------------------------------------------------------------------------------
Switzerland - 1.2%
Nestle A.G. (Food and Beverage) 1,200 $ 1,258,150
Sandoz Ltd. AG-R (Pharmaceuticals) 1,100 908,106
------------
$ 2,166,256
- --------------------------------------------------------------------------------
United Kingdom - 5.7%
British Petroleum PLC, ADR (Oils) 16,400 $ 1,447,300
London Electricity PLC (Utilities - Electric) 60,000 855,637
Mai PLC (Finance) 120,000 623,230
PowerGen PLC, ADR (Utilities - Electric) 60,000 2,227,500
Reuters Holdings PLC, ADR (Financial Services) 32,000 1,776,000
Storehouse PLC (Retail) 240,000 1,138,320
Tomkins PLC (Conglomerate) 255,000 1,005,872
Unilever N.V. (Consumer Goods) 61,000 1,185,260
------------
$ 10,259,119
- --------------------------------------------------------------------------------
Total Foreign Stocks $ 66,601,592
- --------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $91,994,480) $106,033,524
- --------------------------------------------------------------------------------
Convertible Preferred Stocks - 0.5%
================================================================================
Allstate Corp., 6.76s (Insurance) 12,500 $ 543,750
Compania Inversiones Telephones, 7s
(Utilities - Telephone)## 6,000 261,000
- --------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(Identified Cost, $857,000) $ 804,750
- --------------------------------------------------------------------------------
Non-Convertible Bonds - 30.5%
================================================================================
Principal Amount
(000 Omitted)
- --------------------------------------------------------------------------------
U.S. Government Guaranteed - 11.9%
Government National Mortgage Assn. - 2.4%
GNMA, 8s, 2025 $ 4,151 $ 4,271,233
- --------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Non-Convertible Bonds - continued
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Guaranteed - continued
U.S. Treasury Obligations - 9.5%
U.S. Treasury Notes, 6.25s, 2003 $ 5,700 $ 5,800,662
U.S. Treasury Notes, 7.25s, 2004 3,240 3,505,777
U.S. Treasury Notes, 6.5s, 2005 7,400 7,663,588
------------
$ 16,970,027
- --------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 21,241,260
- --------------------------------------------------------------------------------
Foreign Non-Convertible Bonds - 18.6%
Australia - 1.9%
Commonwealth of Australia, 8.75s, 2001 AUD 500 $ 386,017
Commonwealth of Australia, 9.75s, 2002 1,250 1,005,947
Commonwealth of Australia, 9.5s, 2003 2,400 1,906,762
------------
$ 3,298,726
- --------------------------------------------------------------------------------
Canada - 2.3%
Government of Canada, 9.75s, 2001 CAD 2,800 $ 2,336,458
Government of Canada, 8.5s, 2002 2,300 1,814,844
------------
$ 4,151,302
- --------------------------------------------------------------------------------
Denmark - 2.0%
Kingdom of Denmark, 9s, 1998 DKK 10,470 $ 2,049,720
Kingdom of Denmark, 9s, 2000 7,440 1,475,196
------------
$ 3,524,916
- --------------------------------------------------------------------------------
France - 1.0%
Government of France, 7.75s, 2000 FRF 8,400 $ 1,798,710
- --------------------------------------------------------------------------------
Germany - 6.6%
Deutschland Republic, 8.5s, 2000 DEM 2,790 $ 2,221,457
Deutschland Republic, 6.5s, 2003 3,020 2,170,779
Deutschland Republic, 6.875s, 2005 2,900 2,118,510
German Unity Fund, 8.5s, 2001 2,980 2,378,031
Nordrhein Westfalen, 6.25s, 2002 4,140 2,922,907
------------
$ 11,811,684
- --------------------------------------------------------------------------------
Italy - 0.9%
Republic of Italy, 8.5s, 1999 ITL 2,120,000 $ 1,246,400
Republic of Italy, 9.5s, 1999 585,000 347,762
------------
$ 1,594,162
- --------------------------------------------------------------------------------
Netherlands - 1.7%
Dutch State Loan, 6.25s, 1998 NLG 690 $ 453,061
Netherlands Government, 8.25s, 2007 3,690 2,627,529
------------
$ 3,080,590
- --------------------------------------------------------------------------------
New Zealand - 1.2%
Government of New Zealand, 10s, 2002 NZD 3,000 $ 2,252,932
- --------------------------------------------------------------------------------
Spain - 1.0%
Government of Spain, 10.9s, 2003 ESP 206,000 $ 1,699,014
- --------------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds $ 33,212,036
- --------------------------------------------------------------------------------
Total Non-convertible Bonds
(Identified Cost, $52,833,216) $ 54,453,296
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Convertible Bonds - 1.9%
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Foreign Convertible Bond
Essilor International, 6.5s, 1999 FRF $ 7 $ 739,531
- --------------------------------------------------------------------------------
U.S. Convertible Bonds
MBL International Finance Bermuda, 3s, 2002 $ 728 $ 752,570
PIV Investment Finance Cayman Ltd.,
4.5s, 2000## 455 369,688
Roche Holdings, Inc., 0s, 2010## 3,200 1,330,000
Sandoz Capital BVI Ltd., 2s, 2002## 334 293,085
------------
$ 2,745,343
- --------------------------------------------------------------------------------
Total Convertible Bonds
(Identified Cost, $3,375,813) $ 3,484,874
- --------------------------------------------------------------------------------
Call Options Purchased - 0.1%
================================================================================
Principal Amount
of Contracts
Issuer/Expiration Date/Strike Price (000 Omitted)
- --------------------------------------------------------------------------------
Canadian Dollars
November/1.38 CAD 5,342 $ 29,666
Italian Lire/Deutsche Marks
November/1050.0 ITL 6,958,924 0
Japanese Government Bonds
December/111.563 JPY 420,000 34,949
December/112.062 111,000 10,989
December/115.156 465,000 94,395
- --------------------------------------------------------------------------------
Total Call Options Purchased
(Premiums Paid, $136,209) $ 169,999
- --------------------------------------------------------------------------------
Put Options Purchased - 0.1%
================================================================================
Deutsche Marks
December/1.420 DEM 0,004,436 $ 25,101
December/1.510 6,843 2,108
Deutsche Marks/British Pounds
January/2.23 5,575 49,991
- --------------------------------------------------------------------------------
Swedish Kronor/Deutsche Marks
November/5.0 SEK 25,366 0
Total Put Options Purchased
(Premiums Paid, $140,511) $ 77,200
- --------------------------------------------------------------------------------
Short-Term Obligations - 7.7%
================================================================================
Principal Amount
Issuer (000 Omitted)
- --------------------------------------------------------------------------------
Federal Farm Credit, due 9/05/95 - 11/03/95 $ 2,000 $ 1,999,375
Federal National Mortgage Assn.,
due 10/12/95 - 11/10/95 4,075 4,069,275
General Electric Co., due 10/31/95 - 11/01/95 4,490 4,490,000
Wal Mart Stores, due 10/30/95 - 11/09/95 3,150 3,146,010
- --------------------------------------------------------------------------------
Total Short-term Obligations, at Amortized Cost $ 13,704,660
- --------------------------------------------------------------------------------
Total Investments (Identified Cost $163,041,889) $178,728,303
- --------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Call Options Written - (0.1)%
================================================================================
Principal Amount
of Contracts
Issuer/Expiration Date/Strike Price (000 Omitted) Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Australian Dollars
January/0.77 AUD (1,953) $ (18,532)
Deutsche Marks
November/1.380 DEM (5,388) (12,063)
Deutsche Marks/British Pounds
January/2.1238 (5,310) (12,504)
Italian Lire/Deutsche Marks
August/1125.0 ITL (9,941,320) (139,178)
Japanese Yen
July/75.0 JPY (328,362) (1,970)
- --------------------------------------------------------------------------------
Total Call Options Written
(Premiums Received, $294,142) $ (184,247)
- --------------------------------------------------------------------------------
Put Options Written - (0.3)%
================================================================================
Australian Dollars
January/0.745 AUD (1,904) $ (15,211)
Deutsche Marks
December/1.46 DEM (4,561) (9,287)
December/1.560 (7,070) (177)
Italian Lire/Deutsche Marks
August/1125.0 ITL (9,941,320) (457,301)
Japanese Government Bonds
December/112.062 JPY (111,000) (10,101)
Japanese Yen
November/109.0 (323,201) (646)
- --------------------------------------------------------------------------------
Total Put Options Written
(Premiums Received, $456,014) $ (492,723)
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.2% $ 349,962
================================================================================
Net Assets - 100.0% $178,401,295
- --------------------------------------------------------------------------------
<FN>
* Non-income producing security.
## SEC Rule 144A restriction.
</FN>
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars FRF = French Francs
CAD = Canadian Dollars GBP = British Pounds
CHF = Swiss Francs IEP = Irish Punts
DEM = Deutsche Marks ITL = Italian Lire
DKK = Danish Kroner JPY = Japanese Yen
ESP = Spanish Pesetas NLG = Dutch Guilders
FIM = Finnish Markkaa NZD = New Zealand Dollars
SEK = Swedish Kronor
See notes to financial statements
13
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
================================================================================
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $163,041,889) $ 178,728,303
Cash 1,151
Foreign currency, at value (identified cost, $2,970) 3,537
Net receivable for forward foreign currency
exchange contracts purchased 1,030,286
Premium receivable on options written 12,184
Receivable for Fund shares sold 77,723
Receivable for investments sold 29,075
Interest and dividends receivable 1,554,085
Other assets 2,111
--------------
Total assets $ 181,438,455
--------------
Liabilities:
Payable for Fund shares reacquired $ 240,855
Payable for investments purchased 920,735
Net payable for forward foreign currency
exchange contracts sold 916,341
Net payable for forward foreign currency
exchange contracts 44,215
Written options outstanding, at value
(premiums received, $750,156) 676,970
Payable to affiliates -
Management fee 11,531
Shareholder servicing agent fee 2,496
Distribution fee 43,080
Accrued expenses and other liabilities 180,937
--------------
Total liabilities $ 3,037,160
--------------
Net assets $ 178,401,295
--------------
Net assets consist of:
Paid-in capital $ 157,735,131
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 15,847,558
Accumulated distributions in excess of net realized gain
on investments and foreign currency transactions (402,060)
Accumulated undistributed net investment income 5,220,666
--------------
Total $ 178,401,295
--------------
Shares of beneficial interest outstanding 15,446,640
--------------
Class A shares:
Net asset value and redemption price per share
net assets of $110,293,556 / 9,536,061 shares
of beneficial interest outstanding) $11.57
------
Offering price per share (100/95.25 of
net asset value per share) $12.15
------
Class B shares:
Net asset value and offering price per share
(net assets of $57,213,608 / 4,965,263 shares
of beneficial interest outstanding) $11.52
------
Class C shares:
Net asset value, offering price and redemption price
per share (net assets of $10,894,131 / 945,316
shares of beneficial interest outstanding) $11.52
------
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements
14
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Operations
================================================================================
Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
Net Investment Income:
Income -
Interest $ 5,176,435
Dividends 2,987,225
Foreign taxes withheld (145,641)
------------
Total investment income $ 8,018,019
------------
Expenses -
Management fee $ 1,479,587
Trustees' compensation 35,843
Shareholder servicing agent fee (Class A) 155,157
Shareholder servicing agent fee (Class B) 114,929
Shareholder servicing agent fee (Class C) 15,694
Distribution and service fee (Class A) 362,335
Distribution and service fee (Class B) 522,400
Distribution and service fee (Class C) 104,630
Custodian fee 194,333
Printing 78,882
Postage 55,584
Auditing fees 35,600
Amortization of organizations expenses 14,076
Legal fees 11,597
Miscellaneous 201,767
------------
Total expenses $ 3,382,414
------------
Fees paid indirectly (1,326)
------------
Net expenses $ 3,381,088
------------
Net investment income $ 4,636,931
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 7,079,959
Written option transactions 168,284
Foreign currency transactions (3,498,974)
------------
Net realized gain on investments and
foreign currency transactions $ 3,749,269
------------
Change in unrealized appreciation (depreciation) -
Investments $ 7,918,550
Written options 610,278
Translation of assets and liabilities in foreign currencies (341,371)
------------
Net unrealized gain on investments $ 8,187,457
------------
Net realized and unrealized gain on
investments and foreign currency $ 11,936,726
------------
Increase in net assets from operations $ 16,573,657
------------
</TABLE>
See notes to financial statements
15
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
================================================================================
Year Ended October 31, 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,636,931 $ 3,273,968
------------ ------------
Net realized gain on investments and
foreign currency transactions 3,749,269 636,673
Net unrealized gain on investments and
foreign currency translation 8,187,457 173,343
------------ ------------
Increase in net assets from operations $ 16,573,657 $ 4,083,984
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (734,229) $ (1,963,576)
From net investment income (Class B) (140,223) (497,186)
From net investment income (Class C) (27,610) (102,055)
From net realized gain on investments and
foreign currency transactions (Class A) (453,126) (2,611,400)
From net realized gain on investments and
foreign currency transactions (Class B) (72,338) (661,218)
From net realized gain on investments and
foreign currency transactions (Class C) (13,755) (135,725)
In excess of net realized gain on investments and
foreign currency transactions (Class A) -- (3,060,839)
In excess of net realized gain on investments and
foreign currency transactions (Class B) -- (775,018)
In excess of net realized gain on investments and
foreign currency transactions (Class C) -- (159,084)
From paid-in capital (Class A) -- (774,051)
From paid-in capital (Class B) -- (195,993)
From paid-in capital (Class C) -- (40,231)
------------ ------------
Total distributions declared to shareholders $ (1,441,281) $(10,976,376)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 44,197,817 $109,302,626
Net asset value of shares issued
to shareholders in reinvestment
of distributions 1,279,372 9,514,906
------------ ------------
Cost of shares reacquired (40,657,870) (29,119,416)
------------ ------------
Increase in net assets from Fund
share transactions $ 4,819,319 $ 89,698,116
------------ ------------
Total increase in net assets $ 19,951,695 $ 82,805,724
Net assets:
At beginning of year 158,449,600 75,643,876
------------ ------------
At end of year (including accumulated
undistributed net investment income
[accumulated distributions in excess of
net investment income] of $5,220,666 and
$(335,220), respectively) $178,401,295 $158,449,600
------------ ------------
</TABLE>
See notes to financial statements
16
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Financial Highlights
================================================================================================================================
Year Ended October 31, 1995 1994 1993 1992 1991 1990*
- --------------------------------------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.58 $ 11.19 $ 10.21 $ 9.42 $ 8.55 $ 8.50
-------- ------- ------- ------- ------- -------
Income from investment operations# -
Net investment income $ .33 $ 0.30 $ 0.28 $ 0.36 $ 0.37 $ 0.08
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 0.79 0.15 1.42 0.86 0.88 (0.03)
-------- ------- ------- ------- ------- -------
Total from investment
operations $ 1.12 $ 0.45 $ 1.70 $ 1.22 $ 1.25 $ 0.05
-------- ------- ------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ (0.08) $ (0.25) $ (0.45) $ (0.26) $ (0.38) $ --
From net realized gain on
investments and foreign
currency transactions (0.05) (0.33) (0.27) (0.17) -- --
In excess of net realized gain on
investments and foreign currency
transactions -- (0.38) -- -- -- --
From paid-in capital -- (0.10) -- -- -- --
-------- ------- ------- ------- ------- -------
Total distributions declared to
shareholders $ (0.13) $ (1.06) $ (0.72) $ (0.43) $ (0.38) $ --
-------- ------- ------- ------- ------- -------
Net asset value - end of period $ 11.57 $ 10.58 $ 11.19 $ 10.21 $ 9.42 $ 8.55
-------- ------- ------- ------- ------- -------
Total return+++ 10.63% 4.10% 17.78% 13.14% 14.94% 3.76%+
Ratios (to average daily net assets)/Supplemental data:
Expenses## 1.77% 1.76% 1.92% 1.84% 2.18% 1.57%+
Net investment income 3.06% 2.81% 2.96% 3.65% 4.05% 3.14%+
Portfolio turnover 160% 118% 112% 72% 134% 2%
Net assets at end of period (000 omitted) $110,294 $99,870 $71,262 $44,707 $30,847 $12,510
-------- ------- ------- ------- ------- -------
<FN>
* For the period from September 4, 1990 (commencement of investment operations) to October 31, 1990.
+ Annualized.
# Per share data for the periods subsequent to October 31, 1993 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
+++ Total returns do not include the applicable sales charge. If the sales charge had been included the results would have been
lower.
</FN>
</TABLE>
See notes to financial statements
Financial statements - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
==================================================================================================================================
Year Ended October 31, 1995 1994 1993** 1995 1994***
- ----------------------------------------------------------------------------------------------------------------------------------
Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.54 $ 11.19 $ 10.84 $ 10.53 $ 11.06
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income $ 0.25 $ 0.25 $ 0.06 $ 0.27 $ 0.27
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 0.77 0.13 0.35 0.76 (0.29)
------- ------- ------- ------- -------
Total from investment operations $ 1.02 $ 0.38 $ 0.41 $ 1.03 $ (0.02)
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.03) $ (0.24) $ (0.06) $ (0.03) $ (0.12)
From net realized gain on investments
and foreign currency transactions (0.01) (0.32) -- (0.01) (0.16)
In excess of net realized gain on investments
and foreign currency transactions -- (0.38) -- -- (0.18)
From paid-in capital -- (0.09) -- -- (0.05)
------- ------- ------- ------- -------
Total distributions declared to
shareholders $ (0.04) $ (1.03) $ (0.06) $ (0.04) $ (0.51)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.52 $ 10.54 $ 11.19 $ 11.52 $ 10.53
------- ------- ------- ------- -------
Total return+++ 9.75% 3.38% 3.79% 9.84% (0.15)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.49% 2.49% 2.77% 2.42% 2.39%+
Net investment income 2.34% 2.33% 2.15% 2.41% 2.51%+
Portfolio turnover 160% 118% 112% 160% 118%
Net assets at end of period (000 omitted) $57,214 $47,677 $ 4,381 $10,894 $10,903
<FN>
** For the period from commencement of offering of Class B shares, September 7, 1993 to October 31, 1993.
*** For the period from commencement of offering of Class C shares, January 3, 1994 to October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to October 31, 1993 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for
fees paid indirectly.
+++ Total return does not include the applicable sales charge. If the sales charge had been included the results would have
been lower.
</FN>
</TABLE>
See notes to financial statements
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS World Total Return Fund (the Fund) is a non-diversified series of MFS Series
Trust VI (the Trust). The Trust is organized as a Massachusetts business trust
and registered under the Investment Company Act of 1940, as amended, as an
open-ended management investment company.
(2) Significant Accounting Policies
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed issues
and forward contracts, are valued on the basis of valua- tions furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency and
translated into U.S. dollars at the closing daily exchange rate. Futures
contracts, options and options on futures contracts listed on commodities
exchanges are valued at closing settlement prices. Over-the-counter options are
valued by brokers through the use of a pricing model which takes into account
closing bond valuations, implied volatility and short-term repurchase rates.
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 and income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
the realized gain or loss. If a put option is exercised, the premium reduces the
cost basis of the security purchased by the Fund. The Fund, as writer of an
option, may have no control over whether the underlying securities may be sold
(call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written option.
In general, written call options may serve as a partial hedge against decreases
in value in the underlying securities to the extent of the premium received.
Written options may also be used as a part of an income producing strategy
reflecting the view of the Fund's management on the direction of interest rates.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Fund may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Fund may enter into
contracts with the intent of changing the relative exposure of the Fund's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend and interest payments received in additional securities are
recorded on the ex-dividend or ex-interest date in an amount equal to the value
of the security on such date.
The Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds, whereby interest income on PIK bonds is recorded
ratably by the Fund at a constant yield to maturity. Legal fees and other
related expenses incurred to preserve and protect the value of a security owned
are added to the cost of the security; other legal fees are expensed. Capital
infusions, which are generally non-recurring, incurred to protect or enhance the
value of high-yield debt securities, are reported as an addition to the cost
basis of the security. Costs that are incurred to negotiate the terms or
conditions of capital infusions or that are expected to result in a plan of
reorganization are considered workout expenses and are reported as rea lized
losses. Ongoing costs incurred to protect or enhance an investment, or costs
incurred to pursue other claims or legal actions, are reported as operating
expenses.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return, and consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV. Foreign taxes have been provided for on interest
and dividend income earned on foreign investments in accordance with the
applicable country's tax rates and to the extent unrecoverable are recorded as a
reduction of investment income. Distributions to shareholders are recorded on
the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits be reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended October 31, 1995, $1,821,017 was reclassified from
accumulated net realized gain on investments to accumulated undistributed net
investment income due to differences between book and tax accounting for
mortgage-backed securities and currency transactions. This change had no effect
on the net assets or net asset value per share. At October 31, 1995, accumulated
undistributed net investment income (realized gain on investments and foreign
currency transactions) under book accounting were different from tax accounting
due primarily to temporary differences in accounting for currency transactions.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee, computed daily and paid monthly at an annual rate of 0.65% of
average daily net assets and 5.0% of investment income.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $4,468 for the year ended
October 31, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$48,590 for the year ended October 31, 1995, as its portion of the sales charge
on sales of Class A shares of the Fund. The Trustees have adopted separate
distribution plans for Class A, Class B and Class C shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may 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 $36,067 for the year
ended October 31, 1995. Fees incurred under the distribution plan during the
year ended October 31, 1995 were 0.35% of average daily net assets attributable
to Class A shares on an annualized basis.
The Class B and Class C distribution plans provide that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per annum,
of the Fund's average daily net assets attributable to Class B and Class C
shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD all or a portion of the service fee attributable to Class B and Class C
shares, and will pay to such securities dealers all of the distribution fee
attributable to Class C shares. The service fee is intended to be additional
consideration for services rendered by the dealer with respect to Class B and
Class C shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $5,559 and $6,814 for Class B and Class C
shares, respectively, for the year ended October 31, 1995. Fees incurred under
the distribution
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
plans during the year ended October 31, 1995 were 1.00% of average daily net
assets attributable to Class B and Class C shares on an annualized basis.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the year ended October 31, 1995 were $376 and $91,996 for
Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22% and up to 0.15% attributable
to Class A, Class B and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
U.S. government securities $ 53,477,082 $ 58,834,510
------------ ------------
Investments (non-U.S. government securities) $166,820,503 $161,085,256
------------ ------------
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 $ 163,041,889
-------------
Gross unrealized appreciation $ 18,235,002
Gross unrealized depreciation (2,548,588)
-------------
Net unrealized appreciation $ 15,686,414
=============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares 1995 1994
-------------------------- --------------------------
Year Ended October 31, Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,123,469 $ 22,961,533 4,057,858 $ 44,108,242
Shares issued to shareholders in
reinvestment of distributions 98,593 1,061,212 650,058 7,016,535
Shares reacquired (2,125,319) (22,992,718) (1,634,278) (17,703,592)
---------- ----------- ---------- -----------
Net increase 96,743 $ 1,030,027 3,073,638 $ 33,421,185
========== =========== ========== ===========
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Class B Shares 1995 1994
--------------------------- -------------------------
Year Ended October 31, Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sares sold 1,673,616 $ 18,044,111 4,787,651 $ 52,159,264
Shares issued to shareholders in
reinvestment of distributions 17,272 186,186 201,731 2,142,482
Shares reacquired (1,250,017) (13,498,802) (856,456) (9,240,107)
---------- ------------ --------- ------------
Net increase 440,871 $ 4,731,495 4,132,926 $ 45,061,639
========== ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares 1995 1994*
------------------------ -------------------------
Year Ended October 31, Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 296,274 $ 3,192,173 1,206,568 $ 13,035,120
Shares issued to shareholders in
reinvestment of distributions 2,966 31,974 33,846 355,889
Shares reacquired (389,108) (4,166,350) (205,230) (2,175,717)
-------- ------------ --------- ------------
Net increase (decrease) (89,868) $ (942,203) 1,035,184 $ 11,215,292
======== ============ ========= ============
<FN>
*For the period from the commencement of offering of Class C shares, January 3, 1994 to October 31, 1994.
</FN>
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the year ended October 31,
1995 was $2,338.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options and forward foreign currency exchange
contracts. The notional or contractual amounts of these instruments represent
the investment the Fund has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at October 31, 1995, is as
follows:
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Written Option Transactions
1995 Calls 1995 Puts
----------------------------- ----------------------------
Principal Principal
Amounts Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
==============================================================================================================
<S> <C> <C> <C> <C>
Outstanding, beginning of period -
Deutsche Marks 14,075 $ 178,737 7,555 $ 21,587
Japanese Yen 731,609 93,043 321,000 34,499
Options written -
Australian Dollars 5,523 55,012 10,098 123,900
British Pounds 2,562 44,204 2,390 44,204
Canadian Dollars 2,042 4,282 9,854 41,541
Deutsche Marks 73,374 276,420 69,276 426,840
Deutsche Marks/British Pounds 7,238 46,604 8,335 28,494
Italian Lire/Deutsche Marks 24,618,706 245,454 16,512,683 441,878
Japanese Yen 3,443,674 809,348 10,264,446 1,081,268
Spanish Pesetas/Deutsche Marks -- -- 230,690 15,118
Swiss Francs/Deutsche Marks 2,841 11,963 -- --
Swedish Kronor/Deutsche Marks40,961 27,341 -- --
U.S. Dollars -- -- 4,100 54,133
Options terminated in closing transactions -
Australian Dollars (3,570) (31,281) (8,194) (99,490)
British Pounds (2,562) (44,204) -- --
Canadian Dollars (2,042) (4,282) (9,854) (41,541)
Deutsche Marks (9,005) (44,696) (45,391) (333,640)
Deutsche Marks/British Pounds (1,928) (12,526) (8,335) (28,494)
Italian Lire/Deutsche Marks -- -- (1,815,331) (13,582)
Japanese Yen (3,137,289) (774,102) (10,151,245) (1,088,229)
Swedish Kronor/Deutsche Marks (40,961) (27,341) --
Spanish Pesetas/Deutsche Marks -- -- (230,690) (15,118)
U.S. Dollars -- -- (4,100) (54,133)
Options exercised -
Deutsche Marks (19,434) (195,866) -- --
Italian Lire/Deutsche Marks -- -- (4,320,269) (58,746)
Swiss France/Deutsche Marks (2,841) (11,963) -- --
Options expired -
British Pounds -- -- (2,390) (44,204)
Deutsche Marks (53,622) (200,150) (19,809) (76,771)
Italian Lire/Deutsche Marks (14,677,386) (80,701) (435,763) (3,500)
Japanese Yen (709,632) (71,154) -- --
---------- ------------ ---------- ------------
Outstanding, end of period 10,282,333 $ 294,142 10,389,056 $ 456,014
========== ============ ========== ============
Outstanding, end of period -
Australian Dollars 1,953 $ 23,731 1,904$ 24,410
Deutsche Marks 5,388 14,445 11,631 38,016
Deutsche Marks/British Pounds 5,310 34,078 -- --
Italian Lire/Deutsche Marks 9,941,320 164,753 9,941,320 366,050
Japanese Yen 328,362 57,135 434,201 27,538
---------- ------------ ---------- ------------
10,282,333 $ 294,142 10,389,056 $ 456,014
========== ============ ========== ============
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
At October 31, 1995, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
Net Unrealized
Contracts To Contracts at Appreciation
Settlement Date Delivery/Receive In Exchange For Value (Depreciation)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 12/07/95 - 12/20/95 AUD 5,040,381 $ 3,790,784 $ 3,828,448 $ (37,664)
11/09/95 - 11/30/95 CAD 14,816,238 10,980,807 11,023,164 (42,357)
12/15/95 - 12/18/95 CHF 5,914,253 5,140,777 5,235,979 (95,202)
11/02/95 - 12/21/95 DEM 156,189,757 109,231,662 111,133,063 (1,901,401)
11/09/95 - 4/12/96 DKK 26,855,768 4,907,590 4,919,856 (12,266)
12/07/95 ESP 407,821,691 3,299,288 3,332,719 (33,431)
12/15/95 FIM 5,603,682 1,273,854 1,321,572 (47,718)
11/17/95 - 4/12/96 FRF 49,899,893 10,080,306 10,210,083 (129,777)
11/14/95 GBP 2,889,635 4,508,032 4,567,213 (59,181)
11/06/95 IEP 1,560,676 2,547,380 2,528,099 19,281
12/07/95 - 12/11/95 ITL 19,032,897,185 11,729,975 11,914,594 (184,619)
12/07/95 - 12/14/95 JPY 4,674,765,628 48,228,354 46,006,901 2,221,453)
11/24/95 NLG 4,726,181 2,986,509 2,998,899 (12,390)
11/15/95 NZD 2,418,044 1,551,054 1,595,116 (44,062)
11/20/95 - 12/21/95 SEK 61,910,856 8,760,568 9,317,575 (557,007)
------------- -------------- -------------
$ 229,016,940 $ 229,933,281 $ (916,341)
============= ============== =============
Purchases 11/27/95 - 12/20/95 AUD 5,296,998 $ 3,897,519 $ 4,026,296 $ 128,777
11/30/95 CAD 6,741,663 4,988,838 5,015,400 26,562
12/14/95 - 12/18/95 CHF 10,740,930 9,272,743 9,507,698 234,955
11/07/95 - 2/29/96 DEM 157,335,992 110,764,220 112,026,126 1,261,906
11/09/95 - 4/12/96 DKK 30,016,854 5,420,847 5,498,615 77,768
12/07/95 ESP 251,421,371 1,979,500 2,054,616 75,116
12/14/95 FIM 5,472,479 1,275,059 1,290,607 15,548
12/27/95 - 4/12/96 FRF 27,374,840 5,590,341 5,597,794 7,453
11/14/95 GBP 2,310,291 3,624,338 3,651,531 27,193
11/06/95 IEP 1,560,676 2,509,706 2,528,099 18,393
12/07/95 - 1/31/96 ITL 15,178,641,805 9,394,375 9,497,696 103,321
11/27/95 - 2/23/96 JPY 5,567,707,184 57,000,631 54,876,893 (2,123,738)
12/04/95 - 12/20/95 NZD 4,351,333 2,870,518 2,866,244 (4,274)
11/20/95 - 12/15/95 SEK 106,556,832 14,850,936 16,032,242 1,181,306
------------- -------------- --------------
$ 233,439,571 $ 234,469,857 $ 1,030,286
============= ============== ==============
Forward currency purchases and sales under master netting arrangements and
closed forward foreign currency exchange contracts excluded from above amounted
to a net payable of $44,215 at October 31, 1995.
At October 31, 1995, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At October 31, 1995, the
Fund owned the following restricted securities (constituting 2.88% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933 (the 1933 Act). The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers. All of these securities may
be offered and sold to "qualified institutional buyers" under Rule 144A of the
1933 Act.
Date of Share/Par
Description Acquisition Amount Cost Value
==============================================================================================
Central Costanera, ADR 12/17/93 13,167 $ 316,008 $ 358,801
Compania Inversiones Telephones, 7s 2/24/94 6,000 432,000 261,000
Consolidated Electric Power Asia
Ltd., ADR 11/29/93 13,600 220,364 275,400
Fokus Bank A.S 10/09/95 30,200 140,195 160,084
Mirgor Sacifia, ADR 10/20/94 47,930 431,370 95,860
Petronas Gas Berhad 7/31/95 47,800 155,636 161,843
PIV Investment Finance
Cayman Ltd., 4.5s, 2000 1/26/94 - 9/29/94 455,000 413,600 369,688
Roche Holdings, Inc., 0s, 2010 4/12/95 - 7/26/95 3,200,000 1,225,385 1,330,000
Sandoz Capital BVI Ltd., 2s, 2002 9/28/95 334,000 271,107 293,085
Woolworth Ltd., ADR 7/12/93 78,500 1,670,457 1,825,125
----------
$5,130,886
==========
</TABLE>
27
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of Mfs World Total Return Fund:
We have audited the accompanying statement of assets and liabilities of MFS
World Total Return Fund, including the schedule of portfolio investments, as of
October 31, 1995 and the related statement of operations for the year then ended
and the statement of changes in net assets and financial highlights for each of
the two years in the period then ended. 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. The financial highlights for each of the three years in the
period ended October 31, 1993 and for the period September 4, 1990 (commencement
of investment operations) to October 31, 1990 for Class A shares, and for the
period September 7, 1993 (commencement of investment operations) to October 31,
1993 for Class B shares, were audited by other auditors whose report dated
December 16, 1993 expressed an unqualified opinion on those statements and
financial highlights.
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, 1995, by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies from brokers were not received. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
World Total Return Fund at October 31, 1995, the results of its operations for
the year then ended and the changes in its net assets and financial highlights
for each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
[Signature of Ernst & Young LLP]
Boston, Massachusetts
December 8, 1995
---------------------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
29
<PAGE>
THE MFS FAMILY OF FUNDS [Registration Mark]
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or, leave a message any
time). This material should be read carefully before investing or sending money.
STOCK
================================================================================
Massachusetts Investors Trust
- --------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Capital Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Emerging Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Gold & Natural Resources Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Growth Opportunities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Managed Sectors Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] OTC Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Research Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Value Fund
- --------------------------------------------------------------------------------
STOCK AND BOND
================================================================================
MFS [Registration Mark] Total Return Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Utilities Fund
- --------------------------------------------------------------------------------
BOND
================================================================================
MFS [Registration Mark] Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Mortgage Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Securities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] High Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Intermediate Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Strategic Income Fund
(formerly MFS [Registration Mark] Income & Opportunity Fund)
- --------------------------------------------------------------------------------
LIMITED MATURITY BOND
================================================================================
MFS [Registration Mark] Government Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Limited Maturity Fund
- --------------------------------------------------------------------------------
WORLD
================================================================================
MFS [Registration Mark] World Asset Allocation Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Equity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Governments Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Total Return Fund
- --------------------------------------------------------------------------------
NATIONAL TAX-FREE BOND
================================================================================
MFS [Registration Mark] Municipal Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal High Income Fund
(closed to new investors)
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Income Fund
- --------------------------------------------------------------------------------
STATE TAX-FREE BOND
================================================================================
Alabama, Arkansas, California, Florida, Georgia, Louisiana, Maryland,
Massachusetts, Mississippi, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Texas, Virginia, Washington, West Virginia
- --------------------------------------------------------------------------------
MONEY MARKET
================================================================================
MFS [Registration Mark] Cash Reserve Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Money Market Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Money Market Fund
- --------------------------------------------------------------------------------
<PAGE>
MFS [Registration Mark] WORLD [Dalbar Logo] Bulk Rate
TOTAL RETURN FUND TOP RATED SERVICE U.S. Postage
P A I D
500 Boylston Street Permit #55638
Boston, MA 02116 Boston, MA
[MFS Logo]
THE FIRST NAME IN MUTUAL FUNDS
MWT-2 12/95/25M 24/224/324
<PAGE>
