<PAGE> 1
[MFS LOGO] Annual Report
for Year Ended
October 31, 1996
MFS[Registered Trademark] World Equity Fund
-----------------
[Graphic]
America learns how "We invented the mutual fund" (see page 30)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter from the Chairman................................................... 1
Fund Facts................................................................. 2
A Discussion with the Portfolio Manager.................................... 3
Portfolio Manager's Profile................................................ 6
Portfolio Concentration.................................................... 7
Performance Summary........................................................ 8
Portfolio of Investments................................................... 10
Financial Statements....................................................... 15
Notes to Financial Statements.............................................. 22
Independent Auditors' Report............................................... 29
MFS Family of Funds........................................................ 32
Trustees and Officers...................................................... 33
</TABLE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
- - FOR THE YEAR ENDED OCTOBER 31, 1996, CLASS A SHARES OF THE FUND PROVIDED A
TOTAL RETURN AT NET ASSET VALUE OF 16.72%, CLASS B SHARES 15.75%, AND CLASS C
SHARES 15.82%.
- - MOST OF THE WORLD'S EQUITY MARKETS GENERATED DOUBLE-DIGIT RETURNS FOR THE
PAST YEAR, WITH THE UNITED STATES UP 24.08% AND EUROPE ADVANCING 21%, WITH
RETURNS RANGING FROM 3.3% IN ITALY TO 39% IN SPAIN.
- - THE NUMBER OF COUNTRIES IN WHICH THE FUND HAS INVESTMENTS HAS INCREASED FROM
20 TO 25, WITH 38% OF THE FUND'S EQUITY HOLDINGS IN EUROPE, 32% IN THE
AMERICAS, AND 30% IN ASIA/PACIFIC.
- - WE FIND THAT COMPANIES WE CHARACTERIZE AS STEADY EARNERS OFFER THE MOST
ATTRACTIVE GROWTH PROSPECTS RELATIVE TO VALUATION. CONSEQUENTLY, THE FUND HAS
LARGE HOLDINGS IN THE LEISURE AND HEALTH CARE INDUSTRIES.
- --------------------------------------------------------------------------------
<PAGE> 3
LETTER FROM THE CHAIRMAN
[Picture of Dear Shareholders:
A. Keith Brodkin]
As we enter the final months of 1996, the U.S.
economy appears to have settled into a pattern of
moderate growth and inflation -- two factors that
we think can be important contributors to a
favorable long-term investment climate. During the
first quarter of 1996, real (inflation-adjusted)
economic growth was 2.3% on an annualized basis,
followed by a rate of 4.7% in the second quarter.
This unexpectedly high level was followed by a more moderate 2.2% pace during
the third quarter. Overall, real growth in gross domestic product has surpassed
our expectations this year and we now expect that growth for all of 1996 could
exceed 2.5%. Although individual consumers appear to be carrying an excessive
debt load, the consumer sector itself, which represents two-thirds of the
economy, continues to support the automobile and housing markets. Consumer
spending has also been positively impacted by widespread job growth and, more
recently, increasing wages. However, the latest statistics appear to show signs
of slower consumer spending. This is particularly true when considering overall
retail sales, which have been flat for several months. Furthermore, the
economies of Europe and Japan continue to be in the doldrums, weakening U.S.
export markets while subduing the capital spending plans of American
corporations. While economic growth should continue, we expect it may slacken
toward the end of the year.
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity market this
year. We believe the equity market represents fair value at current levels,
although the slowdown in corporate earnings growth and interest rate increases
earlier in the year raised some near-term concerns, as was seen in July's stock
market correction. Further interest rate increases, and an acceleration of
inflation coupled with an additional slowdown in corporate earnings growth, may
have a negative effect on the stock market in the near term. To the extent that
some earnings disappointments are taken as a sign that the economy is not
overheating, this may prove beneficial for the equity market's longer-term
health. We believe many of the technology-driven productivity gains that U.S.
companies have made in recent years will continue to enhance corporate
America's competitiveness and profitability. While we have some near-term
concerns, we remain quite constructive on the long-term viability of the equity
market.
1
<PAGE> 4
LETTER FROM THE CHAIRMAN - continued
Outside the United States, we see similar economic backdrops with slow to
moderate growth and low inflation in the developed countries of Europe and
Japan. We believe the long-term underperformance of many of these markets
relative to the United States has created some attractive valuations. European
markets such as the United Kingdom and Germany have recently eased monetary
policy, a trend which may continue as German and other central banks seek
economic stimulus. Corporate earnings growth is expected to improve in these
markets, which may lead to their favorable performance in the U.S. market.
Finally, as you may notice, this report to shareholders incorporates a
number of changes which we hope you will find informative and useful. Following
a discussion with the Portfolio Manager, we have added new information on the
Fund's holdings, including a chart illustrating the portfolio's concentration in
the types of investments that meet its criteria. Near the back of the report,
telephone numbers and addresses are listed if you would like to contact MFS.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
November 12, 1996
- -------------------------------------------------------------------
FUND FACTS
<TABLE>
<S> <C>
STRATEGY: THE FUND'S OBJECTIVE IS TO PROVIDE CAPITAL
APPRECIATION PRIMARILY THROUGH INVESTMENTS
IN STOCKS OF U.S. AND NON-U.S. ISSUERS.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
SIZE: $284.5 MILLION NET ASSETS AS OF OCTOBER
31, 1996
</TABLE>
- -------------------------------------------------------------------
2
<PAGE> 5
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Picture of Dear Shareholders:
David Mannheim]
For the 12 months ended October 31, 1996, Class A
shares of the Fund provided a total return of
16.72%, Class B shares 15.75%, and Class C shares
15.82%. These returns assume the reinvestment of
distributions but exclude the effects of any sales
charges, and compare to a 16.78% return for the
Morgan Stanley Capital International World Index
(the MSCI), a broad, unmanaged index of global
equities.
Q. WHAT DO YOU SEE AS SOME OF THE REASONS FOR THIS PERFORMANCE?
A. In the past year, most of the world's equity markets generated double-digit
returns. As measured by the MSCI, the United States was the best performing
major market in local currencies, with the Standard & Poor's 500 Composite
Index, an unmanaged index of common stock performance, up 23.89%. In Europe,
stocks advanced 21%, according to Morgan Stanley, with returns ranging from 3.3%
in Italy to 39% in Spain. The Far East advanced just 12.2%, with returns ranging
from 4.3% in Singapore to 28.1% in Hong Kong, with Japan at 10.5%. The emerging
markets lagged the developed world; the IFC Composite Index, measured in U.S.
currency, was up 7.2%, with Latin America up 9.3% and Asia ahead 3.4%. The IFC
Composite Index is an unmanaged, market-capitalization-weighted index of the
most active stocks of emerging markets, as defined by the World Bank.
During the past year, currency changes dragged on the Fund's performance,
with the U.S. dollar gaining 11.9% against the Japanese yen and 7.9% against the
German mark. The dollar did decline 2.9% against the British pound, 4.5% against
the Italian lira, and 3.9% against the Australian dollar.
While the Fund's performance was influenced by these market returns, we
continue to believe stock selection drives performance. We have stuck to our
bottom-up approach to stock selection, with a concentration on high-quality
companies which we believe have superior growth prospects and are trading at
attractive values.
Q. COULD YOU DESCRIBE THE BUSINESS AND ECONOMIC ENVIRONMENT YOU FACED OVER THE
PAST YEAR AS IT RELATES TO THE FUND?
A. In general, the world's economies had slower growth than anticipated at the
beginning of the year. The United States has experienced moderate
3
<PAGE> 6
A DISCUSSION WITH THE PORTFOLIO MANAGER - continued
economic growth with subdued inflation, as opposed to earlier concerns about
overly strong growth and increasing inflationary pressures. Europe's economy,
particularly on the Continent, showed little to no growth, while inflation has
fallen. In Japan, the economic recovery has been choppy and modest, with
deflation more of an issue.
As a result, interest rates have fallen around the world, particularly
during the year's second half. This has created a favorable environment for
equities, and stock market valuations have risen as a result.
Q. HOW HAVE THE FUND'S GEOGRAPHIC ALLOCATIONS CHANGED THIS YEAR, AND WHY?
A. While the number of countries in which the Fund has investments has increased
from 20 to 25, there have been only incremental changes to the broad geographic
weightings. The Fund's assets are evenly spread around the world, with 38% of
equity holdings in Europe, 32% in the Americas, and 30% in Asia/Pacific.
As always, stock selection drives the Fund's country weightings. For
example, the Fund's Asia/Pacific holdings have been reduced from 32% of assets
on October 31, 1995, to 30% today. This reflects a 4% reduction in our holdings
in Australia and a 2% reduction in South Korea. There have also been small cuts
in Malaysia and Singapore, although these were partially offset by a 2% increase
in holdings in both Japan and Hong Kong and by new positions in Indonesia and
the Philippines. The reduction in Australia resulted from three of our holdings
reaching what we felt were fair valuations: ANZ Bank, Sydney Harbour Casino, and
Woolworths. The increases in Japan and Hong Kong reflect additions to the
portfolio that include Takeda Chemical, Nitto Denko, Ushio, Hong Kong Land, Wing
Hank Bank, Liu Chong Hing Bank, and Hong Kong Electric.
Q. ARE THERE ANY PARTS OF THE WORLD THAT YOU ARE AVOIDING OR UNDERWEIGHTING?
A. Relative to the MSCI, the Fund is most noticably underweighted in the two
largest markets in the world, the United States and Japan, with weightings of
29% and 13%, respectively. We believe that the United States is disadvantaged by
what we feel is a disproportionate 42.2% weighting in the index relative to the
actual number of investment opportunities available elsewhere in the world.
Therefore, there is a built-in bias to be underweighted in the United States. In
Japan, which comprises 20.8% of the index, we continue to find most companies'
valuations unattractive relative to similar companies elsewhere in the world.
4
<PAGE> 7
A DISCUSSION WITH THE PORTFOLIO MANAGER - continued
Q. ARE THERE ANY PARTICULAR INDUSTRIES OR SECTORS THAT YOU LIKE RIGHT NOW?
A. We continue to find that the companies we characterize as steady earners
offer the most attractive growth prospects relative to valuation. Not
surprisingly, the Fund has large holdings in the leisure and health care
industries. Representative holdings would include Astra in Sweden, St. Jude
Medical and Viacom in the United States, Takeda Chemical in Japan, and Sky City
Casino in New Zealand.
The Fund is also overweighted in the utilities and communications sector
(14% versus 9% of the MSCI). This reflects large concentrations in mobile
telephone operators such as DDI, Telecom Italia Mobile, and Korea Mobile
Telecom, and holdings in electric and telephone utilities operating in what we
see as high-growth economies, such as Korea Electric Power, Chilectra, OTE, and
Hong Kong Electric.
Q. WHAT ABOUT SECTORS THE FUND IS AVOIDING?
A. We have underweighted most of the cyclical sectors because their valuations,
based on average cycle prices, appear to us to be too rich relative to their
growth prospects. For example, the Fund has 4% invested in basic materials such
as chemicals and papers, versus 9% by the MSCI, and most of our weighting is in
industrial gas companies like Praxair and Air Products, both of which we expect
to show above-average growth regardless of the state of the global economy. We
are also underweighted in energy, at 4% of the portfolio versus 6% by the MSCI.
Q. WHICH STOCKS CONTRIBUTED THE MOST TO THE FUND'S PERFORMANCE?
A. A list of major contributors includes companies in most markets around the
world and covers such U.S. companies as Lockheed Martin, which advanced 34.4%
for the year; Cigna, which was up 35.4%; and Federal Home Loan Mortgage Corp.,
up 48.1%. Overseas, Sparbanken in Sweden was up 66.7%, Royal Dutch Petroleum
gained 48.5%, QBE Insurance in Australia advanced 51.3%, and Acerinox of Spain
gained 23.4%.
Q. NOW, HOW ABOUT SOME STOCKS THAT PERFORMED BELOW EXPECTATIONS?
A. That list would include United Healthcare and Office Depot in the United
States, which fell 28.9% and 31.4%, respectively, for the year; Omron in Japan,
which declined 14.6%; and Korea Electric Power, down 21.6%.
5
<PAGE> 8
A DISCUSSION WITH THE PORTFOLIO MANAGER - continued
Q. WHAT CHANGES DO YOU SEE IN THE OVERALL MARKET OR ECONOMIC ENVIRONMENT AS THEY
RELATE TO THE FUND, AND HOW IS THE FUND POSITIONED TO TAKE ADVANTAGE OF THESE
CHANGES?
A. While our inflation outlook is subdued, we believe that in most markets
around the world, interest rates are unlikely to repeat their recent decline.
With this threat removed, corporate earnings growth should be the key to future
performance. In this environment, stock selection becomes even more critical,
and by identifying those companies that, on a global basis, can sustain
above-average earnings growth and trade at attractive relative valuations, we
believe the Fund can generate superior investment returns.
Respectfully,
/s/ David Mannheim
David Mannheim
Portfolio Manager
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
DAVID MANNHEIM IS A VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT AND PORTFOLIO
MANAGER OF MFS WORLD EQUITY FUND, MFS WORLD ASSET ALLOCATION FUND, AND MERIDIAN
WORLD EQUITY FUND. MR. MANNHEIM JOINED MFS IN 1988 AND WAS NAMED AN INVESTMENT
OFFICER IN 1990, ASSISTANT VICE PRESIDENT IN 1991, AND VICE PRESIDENT AND
PORTFOLIO MANAGER OF MFS WORLD EQUITY FUND IN 1992. HE IS A GRADUATE OF AMHERST
COLLEGE AND MASSACHUSETTS INSTITUTE OF TECHNOLOGY'S SLOAN SCHOOL OF MANAGEMENT.
- --------------------------------------------------------------------------------
6
<PAGE> 9
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1996
TOP TEN HOLDINGS
<TABLE>
<S> <C>
POWERGEN PLC FEDERAL HOME LOAN MORTGAGE CORP.
British electric utility U.S. mortgage banker and underwriter
DDI CORP. ASTRA AB
Japanese telecommunications company Swedish pharmaceutical manufacturer
FEDERATED DEPARTMENT STORES CABLETRON SYSTEMS
U.S. retailer Computer network company
ABB AB ST. JUDE MEDICAL
Swiss engineering conglomerate U.S. medical instrument manufacturer
KIMBERLY-CLARK LION NATHAN
U.S. paper products company New Zealand brewer
</TABLE>
LARGEST SECTORS
[Pie Chart]
<TABLE>
<S> <C>
Utilities and Communications 14.2%
Financial Services 11.6%
Industrial Goods and Services 10.3%
Retailing 9.5%
Health Care 9.1%
Other Sectors* 45.3%
<FN>
* For a more complete breakdown refer to Portfolio of Investments.
</TABLE>
7
<PAGE> 10
PERFORMANCE SUMMARY
The information below and on the following page illustrates the historical
performance of MFS World Equity Fund Class B shares in comparison to various
market indicators. Fund results in the graph do not reflect the deduction of any
contingent deferred sales charge (CDSC) since the CDSC is not applicable after a
six-year period. 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from January 1, 1987 to October 31, 1996)
<TABLE>
[Graphic]
<CAPTION>
1/1/87 10/88 10/90 10/92 10/94 10/96
<S> <C> <C> <C> <C> <C> <C>
MFS World Equity Class B 10,000 13,393 16,230 16,878 22,926 28,945
Consumer Price Index 10,000 10,872 12,075 12,826 13,522 14,321
S&P 500 Composite Index 10,000 12,236 14,291 20,963 25,008 39,152
MSCI World Index 10,000 13,856 14,094 15,645 21,607 27,776
</TABLE>
<TABLE>
<CAPTION>
Life of
AVERAGE ANNUAL TOTAL RETURNS 1 Year 3 Years 5 Years Fund++
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS World Equity Fund (Class A) at net
asset value +16.72% +11.23% +12.40% +11.65%
- --------------------------------------------------------------------------------
MFS World Equity Fund (Class A) including
5.75% sales charge + 9.99% + 9.06% +11.08% +10.98%
- --------------------------------------------------------------------------------
MFS World Equity Fund (Class B) without
CDSC +15.75% +10.17% +11.72% +11.30%
- --------------------------------------------------------------------------------
MFS World Equity Fund (Class B) with CDSC +11.75% + 9.34% +11.46% +11.30%
- --------------------------------------------------------------------------------
MFS World Equity Fund (Class C) without
CDSC +15.82% +10.26% +11.77% +11.33%
- --------------------------------------------------------------------------------
MFS World Equity Fund (Class C) with CDSC +14.82% +10.26% +11.77% +11.33%
- --------------------------------------------------------------------------------
Average global fund* +15.52% + 9.50% +11.00% +11.25%
- --------------------------------------------------------------------------------
Morgan Stanley Capital International (MSCI)
World Index +16.78% +11.62% +11.10% +11.44%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +23.89% +17.57% +15.47% +14.60%
- --------------------------------------------------------------------------------
Consumer Price Index** + 3.01% + 2.81% + 2.88% + 3.68%
- --------------------------------------------------------------------------------
</TABLE>
* Source: Lipper Analytical Services.
** The Consumer Price Index is a popular measure of change in prices.
+ Source: CDA/Wiesenberger.
++ Commencement of investment operations December 29, 1986.
8
<PAGE> 11
PERFORMANCE SUMMARY - continued
Class A (SEC) results include the maximum 5.75% sales charge. Class B SEC
results reflect the applicable contingent deferred sales charge (CDSC), which
declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C shares
have no initial sales charge but, along with Class B shares, have higher annual
fees and expenses than Class A shares. Class C share purchases made on or after
April 1, 1996 will be subject to a 1% CDSC if redeemed within 12 months of
purchase.
Class A and Class C share performance includes the performance of the Fund's
Class B shares for periods prior to the commencement of offering of Class A
shares on September 7, 1993 and of Class C shares on January 3, 1994. Sales
charges and operating expenses for Class A, Class B, and Class C shares differ.
The Class B share performance, which is included within the Class A share SEC
performance, has been adjusted to reflect the initial sales charge generally
applicable to Class A shares rather than the CDSC generally applicable to Class
B shares. The Class B share performance included within the Class C share SEC
performance has been adjusted to reflect the lower CDSC generally applicable to
Class C shares, rather than the higher CDSC generally applicable to Class B
shares. Class A and Class C share performance has not been adjusted, however, to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are higher for Class B shares, and not significantly different for
Class C shares.
Fund results reflect any applicable expense subsidies and waivers, without which
the performance results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
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.
- --------------------------------------------------------------------------------
TAX FORM SUMMARY
The Fund is estimated to have derived approximately 68.9% of its
ordinary income from dividends paid by foreign companies, and to have
paid foreign taxes equivalent to approximately 8.8% of its ordinary
income.
For the year ended October 31, 1996, the amount of distributions from
income eligible for the 70% dividends-received deduction for
corporations came to 10.43%.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
For the year ended October 31, 1996 distributions from long-term capital
gains are $6,681,382.
- --------------------------------------------------------------------------------
9
<PAGE> 12
PORTFOLIO OF INVESTMENTS - October 31, 1996
COMMON STOCKS - 93.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 28.8%
Aerospace - 2.2%
Allied Signal, Inc. 35,500 $2,325,250
Lockheed-Martin Corp. 44,000 3,943,500
----------
$6,268,750
- ------------------------------------------------------------------------------------
Apparel and Textiles - 0.8%
Owens Corning Fiberglass Corp. 55,000 $2,131,250
- ------------------------------------------------------------------------------------
Automotive - 1.0%
Goodrich (B.F.) Co. 66,200 $2,805,225
- ------------------------------------------------------------------------------------
Business Services - 1.4%
Alco Standard Corp. 45,500 $2,110,062
Block H & R Incorporated 72,000 1,782,000
----------
$3,892,062
- ------------------------------------------------------------------------------------
Chemicals - 2.1%
Air Products & Chemicals, Inc. 48,000 $2,880,000
Praxair, Inc. 68,000 3,009,000
----------
$5,889,000
- ------------------------------------------------------------------------------------
Computer Software - Systems - 1.0%
Computer Associates International, Inc. 49,000 $2,897,125
- ------------------------------------------------------------------------------------
Consumer Goods and Services - 0.6%
Philip Morris Cos., Inc. 18,500 $1,713,563
- ------------------------------------------------------------------------------------
Entertainment - 1.0%
Viacom, Inc. "B"* 87,251 $2,846,564
- ------------------------------------------------------------------------------------
Financial Institutions - 1.6%
Federal Home Loan Mortgage Corp. 45,500 $4,595,500
- ------------------------------------------------------------------------------------
Food and Beverage Products - 1.0%
PepsiCo. Inc. 96,000 $2,844,000
- ------------------------------------------------------------------------------------
Forest and Paper Products - 1.7%
Kimberly-Clark Corp. 52,500 $4,895,625
- ------------------------------------------------------------------------------------
Insurance - 1.0%
Cigna Corp. 22,500 $2,936,250
- ------------------------------------------------------------------------------------
Medical and Health Products - 1.6%
Pharmacia & Upjohn, Inc. 51,000 $1,836,000
Rhone-Poulenc Rorer, Inc. 42,300 2,839,387
----------
$4,675,387
- ------------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.3%
St. Jude Medical, Inc.* 101,000 $3,989,500
United Healthcare Corp. 68,000 2,575,500
----------
$6,565,000
- ------------------------------------------------------------------------------------
Oils - 1.0%
Mobil Corp. 23,000 $2,685,250
- ------------------------------------------------------------------------------------
Printing and Publishing - 1.0%
Gannett Co., Inc. 39,000 $2,959,125
- ------------------------------------------------------------------------------------
Railroads - 1.3%
Burlington Northern Santa Fe Railway Co. 43,500 $3,583,313
- ------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
PORTFOLIO OF INVESTMENTS - continued
COMMON STOCKS - CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Restaurants and Lodging - 1.3%
Host Marriott Corp. 148,700 $ 2,286,263
Mandarin Oriental 1,052,000 1,420,200
-----------
$ 3,706,463
- -------------------------------------------------------------------------------------
Stores - 3.7%
Federated Department Stores, Inc.* 168,000 $ 5,544,000
Office Depot, Inc.* 107,000 2,099,875
Rite Aid Corporation 58,000 1,972,000
Thrifty Payless Holdings, Inc., "B"* 38,000 812,250
-----------
$10,428,125
- -------------------------------------------------------------------------------------
Telecommunications - 1.3%
Cabletron Systems, Inc.* 60,500 $ 3,773,687
- -------------------------------------------------------------------------------------
Total U.S. Stocks $82,091,264
- -------------------------------------------------------------------------------------
Foreign Stocks - 64.7%
Argentina - 0.1%
Mirgor Sacifia, ADR (Auto Parts)## 97,600 $ 156,160
- -------------------------------------------------------------------------------------
Australia - 2.6%
QBE Insurance Group Ltd. (Insurance) 723,121 $ 3,822,606
Southern Star Group Limited
(Entertainment)## 574,000 809,202
Seven Network Ltd. (Entertainment) 909,000 2,807,720
-----------
$ 7,439,528
- -------------------------------------------------------------------------------------
Brazil - 0.5%
Multicanal Participacoes S.A.
(Telecommunications) 105,800 $ 1,481,200
- -------------------------------------------------------------------------------------
Canada - 1.6%
Canadian National Railway Co. (Railroads) 163,000 $ 4,482,500
- -------------------------------------------------------------------------------------
Chile - 0.7%
Chilectra S.A., ADR (Utilities - Electric) 38,500 $ 2,088,625
- -------------------------------------------------------------------------------------
Finland - 2.0%
Aamulehti Ii (Publishing) 59,900 $ 1,754,084
Huhtamaki Oy (Conglomerates) 41,000 1,778,370
Tt Tieto Oy (Computer Software) 33,300 2,226,697
-----------
$ 5,759,151
- -------------------------------------------------------------------------------------
France - 2.0%
Michelin, "B" (Tire and Rubber) 44,000 $ 2,116,292
Union des Assurances Federales S.A.
(Broadcasting) 31,000 3,478,049
-----------
$ 5,594,341
- -------------------------------------------------------------------------------------
Germany - 3.0%
Adidas AG (Stores) 45,200 $ 3,864,928
Henkel Kgaa (Chemicals) 48,000 2,148,617
Tarkett AG (Building Materials)## 31,600 682,793
Volkswagen AG (Automotive) 4,800 1,885,375
-----------
$ 8,581,713
- -------------------------------------------------------------------------------------
Greece - 0.5%
Ote Greek Telecom (Telecommunications) 86,000 $ 1,515,823
- -------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
PORTFOLIO OF INVESTMENTS - continued
COMMON STOCKS - CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
Hong Kong - 4.2%
Asia Satellite Telecommunications
(Telecommunications) 46,000 $ 1,230,500
Giordano International Ltd. (Retail) 2,117,000 2,135,701
Hong Kong Electric Holdings Ltd. (Real
Estate) 450,000 1,440,498
Hong Kong Land Holdings (Real Estate) 621,000 1,384,830
Liu Chong Hing Bank (Financial Institutions) 1,293,000 1,881,378
Peregrine Investment Holdings (Finance) 769,000 1,238,285
Wing Hang Bank Limited
(Banks and Credit Companies) 655,000 2,634,673
-----------
$11,945,865
- -------------------------------------------------------------------------------------
Indonesia - 0.7%
Bank Negara Indonesia (Banks)+ 2,072,600 $ 756,651
Semen Gresik (Building Materials) 463,000 1,332,345
-----------
$ 2,088,996
- -------------------------------------------------------------------------------------
Italy - 1.4%
Telecom Italia RNC (Utilities - Telephone) 454,000 $ 937,609
Telecom Italia DRNC (Utilities - Telephone) 2,630,000 2,997,299
-----------
$ 3,934,908
- -------------------------------------------------------------------------------------
Japan - 12.0%
Bridgestone Corp. (Tire and Rubber) 137,000 $ 2,305,548
Canon, Inc. (Office Equipment) 185,000 3,534,928
Daiwa House Industrial Co. (Housing) 88,000 1,218,687
DDI Corp. (Telecommunications) 810 6,070,208
East Japan Railway Co. (Railroads) 409 1,874,897
Kinki Coca-Cola (Beverages) 89,000 1,162,328
Kirin Beverage (Beverages) 143,000 1,905,163
Matsushita Electric (Electrical Equipment) 109,000 1,738,803
Murata Manufacturing Co., Ltd. (Electrical
Equipment) 59,000 1,892,716
Nitto Denko Corporation (Industrial Goods
and Services) 183,000 2,710,755
Omron Corp. (Electronics) 150,000 2,668,946
Osaka Sanso Kogyo (Chemicals) 456,000 1,506,810
Takeda Chemical Inds (Pharmaceuticals) 212,000 3,623,455
Ushio Incorporated (Electronics) 194,000 2,023,490
-----------
$34,236,734
- -------------------------------------------------------------------------------------
Malaysia - 0.7%
New Straits Times Press Berhad
(Printing and Publishing) 397,000 $ 2,090,301
- -------------------------------------------------------------------------------------
Netherlands - 1.7%
Ihc Caland NV (Transportation - Marine) 37,300 $ 2,076,242
Royal Dutch Petroleum Co. (Oils) 17,300 2,849,268
-----------
$ 4,925,510
- -------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
PORTFOLIO OF INVESTMENTS - continued
COMMON STOCKS - CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
New Zealand - 3.1%
Sky City Ltd. (Entertainment) 673,175 $ 3,855,072
Lion Nathan Ltd. (Food and Beverage
Products) 1,882,000 4,852,501
-----------
$ 8,707,573
- -------------------------------------------------------------------------------------
Peru - 0.4%
Telefonica del Peru S.A.
(Telecommunications) 59,000 $ 1,216,875
- -------------------------------------------------------------------------------------
Philippines - 0.9%
Alison's Cement Corp. (Building Materials)## 2,885,000 $ 1,099,466
Philipino Telephone (Telecommunications) 1,437,700 1,273,877
-----------
$ 2,373,343
- -------------------------------------------------------------------------------------
Singapore - 0.8%
Hong Leong Finance Ltd. (Financial Services) 722,000 $ 2,204,972
- -------------------------------------------------------------------------------------
South Korea - 1.6%
Korea Electric Power Corp.
(Utilities - Electric) 69,230 $ 2,041,613
Korea Mobile Telecommunications
(Utilities - Telephone) 2,595 2,602,873
-----------
$ 4,644,486
- -------------------------------------------------------------------------------------
Spain - 3.5%
Fab Autom Renault (Automotive) 32,000 $ 637,998
Cubiertas Y Mzov
(Engineering - Construction) 39,000 2,780,923
Repsol S.A. (Oils) 81,500 2,654,007
Acerinox S.A. (Iron and Steel) 32,450 3,881,822
-----------
$ 9,954,750
- -------------------------------------------------------------------------------------
Sweden - 6.5%
Abb AB (Electrical Equipment) 48,000 $ 5,349,958
Astra AB, Free, "B" (Pharmaceuticals) 107,000 4,881,016
Enator Ab (Computer Services) 97,000 2,153,425
Nobel Biocare AB (Medical and Health
Products) 93,500 1,578,119
Sparbanken Sverige AB, "A"
(Banks and Credit Companies) 195,000 3,083,707
Volvo AB (Automotive) 67,000 1,390,634
-----------
$18,436,859
- -------------------------------------------------------------------------------------
Switzerland - 1.0%
Ciba-Geigy AG (Medical and Health Products) 2,300 $ 2,820,874
- -------------------------------------------------------------------------------------
Thailand - 0.9%
Siam City Cement Co., Ltd. (Building
Materials) 140,800 $ 883,035
Total Access Communications Public Co., Ltd.
(Telecommunications) 224,000 1,546,980
-----------
$ 2,430,015
- -------------------------------------------------------------------------------------
United Kingdom - 12.3%
ASDA Group PLC (Retail) 2,186,000 $ 4,159,969
British Aerospace (Aerospace) 172,300 3,270,471
British Petroleum (Oils) 283,000 3,039,127
Capital Radio PLC (Broadcasting) 117,200 1,105,630
Jarvis Hotels PLC (Lodging)+ 575,000 1,487,028
</TABLE>
13
<PAGE> 16
PORTFOLIO OF INVESTMENTS - continued
COMMON STOCKS - CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
United Kingdom - continued
Kwik-Fit Holdings PLC (Retail) 674,900 $ 2,441,230
Lloyds Tsb Group PLC (Banks) 367,386 2,327,471
New London Capital PLC (Financial
Services)## 670,000 1,215,077
PowerGen PLC (Utilities - Electric) 1,665,854 13,818,511
Storehouse PLC (Retail) 454,749 2,059,923
------------
$ 34,924,437
- --------------------------------------------------------------------------------------
Total Foreign Stocks $184,035,539
- --------------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $231,146,893) $266,126,803
- --------------------------------------------------------------------------------------
WARRANTS
- --------------------------------------------------------------------------------------
Hong Kong
Peregrine Investment Holdings
(Identified Cost, $9,538) 76,900 $ 14,422
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS - 5.8%
- --------------------------------------------------------------------------------------
Federal Farm Credit Bank, due 11/05/96 $ 340 $ 339,804
Federal Home Loan Mortgage Assn., due
11/13/96 2,900 2,894,993
Federal National Mortgage Assn., due
11/19/96 7,225 7,206,251
General Electric Capital Corp., due 11/01/96 5,945 5,945,000
- --------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 16,386,048
- --------------------------------------------------------------------------------------
Total Investments (Identified Cost, $247,542,479) $282,527,273
OTHER ASSETS, LESS LIABILITIES - 0.7% 2,023,417
- --------------------------------------------------------------------------------------
Net Assets - 100.0% $284,550,690
- --------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
##SEC Rule 144A restriction.
+Restricted security.
See notes to financial statements
14
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $247,542,479) $282,527,273
Cash 99,859
Foreign currency, at value (identified cost, $768,967) 774,218
Receivable for Fund shares sold 5,429,597
Receivable for investments sold 1,428,862
Dividends receivable 293,002
Net receivable for forward foreign currency exchange contracts
purchased 81,860
Other assets 99,602
------------
Total assets $290,734,273
------------
Liabilities:
Payable for investments purchased $ 4,955,735
Payable for Fund shares reacquired 830,602
Net payable for forward foreign currency exchange contracts sold 82,112
Payable to affiliates -
Management fee 7,702
Shareholder servicing agent fee 1,505
Distribution fee 73,924
Accrued expenses and other liabilities 232,003
------------
Total liabilities $ 6,183,583
------------
Net assets $284,550,690
------------
Net assets consist of:
Paid-in capital $220,466,965
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 34,993,721
Accumulated undistributed net realized gain
on investments and foreign currency transactions 29,131,434
Accumulated net investment loss (41,430)
------------
Total $284,550,690
------------
Shares of beneficial interest outstanding 15,478,006
------------
Class A shares:
Net asset value and redemption price per share
(net assets of $94,909,355 / 5,145,398 shares of beneficial
interest outstanding) $18.45
------
Offering price per share (100 / 94.25) $19.58
------
Class B shares:
Net asset value and offering price per share
(net assets of $182,138,282 / 9,921,316 shares of beneficial
interest outstanding) $18.36
------
Class C shares:
Net asset value and offering price per share
(net assets of $7,503,053 / 411,292 shares of beneficial
interest outstanding) $18.24
------
</TABLE>
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
15
<PAGE> 18
FINANCIAL STATEMENTS - continued
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 4,883,198
Interest 700,562
Foreign taxes withheld (508,479)
-----------
Total investment income $ 5,075,281
-----------
Expenses -
Management fee $ 2,493,195
Trustees' compensation 41,618
Shareholder servicing agent fee (Class A) 109,927
Shareholder servicing agent fee (Class B) 376,160
Shareholder servicing agent fee (Class C) 7,580
Distribution and service fee (Class A) 183,212
Distribution and service fee (Class B) 1,709,816
Distribution and service fee (Class C) 50,531
Custodian fee 211,477
Postage 61,227
Printing 59,150
Auditing fees 44,745
Legal fees 2,723
Miscellaneous 243,989
-----------
Total expenses $ 5,595,350
Fees paid indirectly (26,276)
-----------
Net expenses $ 5,569,074
-----------
Net investment loss $ (493,793)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $31,942,068
Foreign currency transactions (2,194,366)
-----------
Net realized gain on investments and foreign currency
transactions $29,747,702
-----------
Change in unrealized appreciation -
Investments $ 5,199,094
Translation of assets and liabilities in foreign currencies 1,828,842
-----------
Net unrealized gain on investments $ 7,027,936
-----------
Net realized and unrealized gain on investments and foreign
currency $36,775,638
-----------
Increase in net assets from operations $36,281,845
-----------
</TABLE>
See notes to financial statements
16
<PAGE> 19
FINANCIAL STATEMENTS - continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (493,793) $ (391,803)
Net realized gain on investments and
foreign currency transactions 29,747,702 9,883,882
Net unrealized gain on investments and
foreign currency translation 7,027,936 9,058,497
------------- ------------
Increase in net assets from operations $ 36,281,845 $ 18,550,576
------------- ------------
Distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions (Class A) $ (3,152,132) $ (2,000,929)
From net realized gain on investments and
foreign currency transactions (Class B) (6,611,169) (15,860,996)
From net realized gain on investments and
foreign currency transactions (Class C) (153,959) (151,274)
------------- ------------
Total distributions declared to shareholders $ (9,917,260) $(18,013,199)
------------- ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 277,646,024 $150,342,597
Net asset value of shares issued to shareholders
in reinvestment of distributions 9,129,534 16,618,722
Cost of shares reacquired (239,947,155) (149,986,942)
------------- ------------
Increase in net assets from
Fund share transactions $ 46,828,403 $ 16,974,377
------------- ------------
Total increase in net assets $ 73,192,988 $ 17,511,754
Net assets:
At beginning of period 211,357,702 193,845,948
------------- ------------
At end of period (including accumulated net
investment loss of $41,430 and $71,455,
respectively) $ 284,550,690 $211,357,702
------------- ------------
</TABLE>
See notes to financial statements
17
<PAGE> 20
FINANCIAL STATEMENTS - continued
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------
1996 1995 1994 1993*
- -----------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each
period):
Net asset value - beginning of period $ 16.68 $ 16.95 $ 16.56 $15.71
------- ------- ------- ------
Income from investment operations# -
Net investment income $ 0.07 $ 0.09 $ 0.03 $ 0.01
Net realized and unrealized gain on
investments and foreign currency
transactions 2.60 1.37 1.13 0.84
------- ------- ------- ------
Total from investment operations $ 2.67 $ 1.46 $ 1.16 $ 0.85
------- ------- ------- ------
Less distributions declared to shareholders -
In excess of net investment income $ -- $ -- $ (0.07) $ --
From net realized gain on investments and
foreign currency transactions (0.90) (1.73) (0.70) --
------- ------- ------- ------
Total distributions declared to
shareholders $ (0.90) $ (1.73) $ (0.77) $ --
------- ------- ------- ------
Net asset value - end of period $ 18.45 $ 16.68 $ 16.95 $16.56
------- ------- ------- ------
Total return++ 16.72% 10.16% 7.03% 5.41%++
Ratios (to average net assets)/Supplemental
data[Section]:
Expenses## 1.65% 1.61% 1.54% 1.68%+
Net investment income 0.38% 0.58% 0.15% 0.94%+
Portfolio turnover 83% 73% 99% 70%
Average commission rate### $0.0200 $ -- $ -- $ --
Net assets at end of period (000 omitted) $94,909 $52,164 $16,968 $2,076
* For the period from the commencement of offering of Class A shares,
September 7, 1993 to October 31, 1993.
+ Annualized.
++ Not annualized.
++ 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.
# 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.
### Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
</TABLE>
See notes to financial statements
18
<PAGE> 21
FINANCIAL STATEMENTS - continued
FINANCIAL HIGHLIGHTS - CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31, YEAR ENDED NOVEMBER 30,
------------------------------- ------------ -----------------------
1996 1995 1994 1993* 1992 1991
- -----------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each
period):
Net asset
value - beginning
of period $ 16.55 $ 16.78 $ 16.53 $ 13.50 $ 12.40 $ 12.94
-------- -------- -------- -------- -------- -------
Income from investment
operations# -
Net investment
income (loss) $ (0.08) $ (0.05) $ (0.17) $ (0.10) $ (0.04) $ 0.17
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions 2.60 1.37 1.13 3.28 1.17 (0.37)
-------- -------- -------- -------- -------- -------
Total from
investment
operations $ 2.52 $ 1.32 $ 0.96 $ 3.18 $ 1.13 $ (0.20)
-------- -------- -------- -------- -------- -------
Less distributions declared
to shareholders -
In excess of net
investment income $ -- $ -- $ (0.01) $ -- $ -- $ --
-------- -------- -------- -------- -------- -------
From net realized
gain on
investments and
foreign currency
transactions (0.71) (1.55) (0.70) (0.15) (0.03) (0.15)
-------- -------- -------- -------- -------- -------
From paid-in capital -- -- -- -- -- (0.19)
Total
distributions
declared to
shareholders $ (0.71) $ (1.55) $ (0.71) $ (0.15) $ (0.03) $ (0.34)
-------- -------- -------- -------- -------- -------
Net asset value - end
of period $ 18.36 $ 16.55 $ 16.78 $ 16.53 $ 13.50 $ 12.40
-------- -------- -------- -------- -------- -------
Total return 15.75% 9.07% 5.91% 23.80%++ 9.13% (1.57)%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.45% 2.55% 2.58% 2.66%+ 2.91% 2.88%
Net investment
income (loss) (0.44)% (0.35)% (1.01)% (0.71)%+ (0.31)% 1.35%
Portfolio turnover 83% 73% 99% 70% 110% 160%
Average commission
rate### $ 0.0200 $ -- $ -- $ -- $ -- $ --
Net assets at end of
period (000 omitted) $182,139 $156,286 $175,438 $145,575 $101,550 $82,890
* For the 11 months ended October 31, 1993.
+ 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.
### Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
</TABLE>
See notes to financial statements
19
<PAGE> 22
FINANCIAL STATEMENTS - continued
FINANCIAL HIGHLIGHTS - CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------
1990 1989 1988 1987*
- -----------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.96 $ 11.21 $ 10.12 $ 8.47
------- ------- ------- -------
Income from investment operations -
Net investment income (loss) $ 0.13 $ 0.09 $ 0.14 $ (0.02)
Net realized and unrealized gain on
investments and foreign currency
transactions 0.14 2.03 0.95 1.67
------- ------- ------- -------
Total from investment operations $ 0.27 $ 2.12 $ 1.09 $ 1.65
------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ -- $ (0.21) $ -- $ --
------- ------- ------- -------
From net realized gain on investments and
foreign currency transactions (0.29) (0.12) -- --
From paid-in capital -- (0.04) -- --
Total distributions declared to
shareholders $ (0.29) $ (0.37) $ -- $ --
------- ------- ------- -------
Net asset value - end of period $ 12.94 $ 12.96 $ 11.21 $ 10.12
------- ------- ------- -------
Total return 2.02% 19.58% 10.77% 19.48%++
Ratios (to average net assets)/Supplemental
data:
Expenses 2.93% 3.05% 2.48% 2.50%+
Net investment income (loss) 1.07% 0.77% 1.29% (0.29)%+
Portfolio turnover 173% 190% 276% 272%
Net assets at end of period (000 omitted) $81,505 $50,827 $42,806 $37,248
* For the period from the commencement of investment operations, December 29,
1986 to November 30, 1987.
+ Annualized.
++ Not annualized.
</TABLE>
See notes to financial statements
20
<PAGE> 23
FINANCIAL STATEMENTS - continued
FINANCIAL HIGHLIGHTS - CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
------------------------------
1996 1995 1994*
- -----------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 16.53 $ 16.80 $ 16.75
------- ------- -------
Income from investment operations -
Net investment loss $ (0.06) $ (0.05) $ (0.09)
Net realized and unrealized gain on investments
and foreign currency transactions 2.57 1.37 .014
------- ------- -------
Total from investment operations $ 2.51 $ 1.32 $ 0.05
------- ------- -------
Less distributions declared to shareholders
from net realized gain on investments
and foreign currency transactions $ (0.80) $ (1.59) $ --
------- ------- -------
Net asset value - end of period $ 18.24 $ 16.53 $ 16.80
------- ------- -------
Total return 15.82% 9.20% 0.30%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.39% 2.49% 2.55%+
Net investment loss (0.34)% (0.31)% (0.72)%+
Portfolio turnover 83% 73% 99%
Average commission rate### $0.0200 $ -- $ --
Net assets at end of period (000 omitted) $ 7,503 $ 2,908 $ 1,440
* For the period from the commencement of offering of Class C shares, January
3, 1994 to October 31, 1994.
+ Annualized.
++ Not annualized.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
</TABLE>
See notes to financial statements
21
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
MFS World Equity Fund (the Fund) is a diversified series of MFS Series Trust VI
(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 the
changes in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed issues
and forward contracts, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency and
translated into U.S. dollars at the closing daily exchange rate. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized
22
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS - continued
gains and losses on investments that results from fluctuations in foreign
currency exchange rates is not separately disclosed.
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. It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Fund may enter into
contracts with the intent of changing the relative exposure of the Fund's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend 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 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
23
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS - continued
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. The Fund expects to pass through to shareholders foreign
income taxes paid. The election increases the taxable distributions of the Fund
by the amount of the foreign taxes paid. An individual shareholder who itemizes
deductions, or a corporate shareholder, will be able to claim an offsetting
deduction or a tax credit (but not both) on their federal income tax returns.
Individuals who do not itemize deductions may claim a foreign tax credit but not
a deduction. The foreign source income is considered passive income for the
purpose of computing the foreign tax credit limitations. 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, 1996, $525,969 was reclassified from
accumulated undistributed net realized gain on investments and foreign currency
transactions to accumulated net investment loss and paid-in capital due to
differences between book and tax accounting for operating losses and currency
transactions. This change had no effect on the net assets or net asset value per
share. At October 31, 1996, accumulated undistributed net investment loss and
realized gain on investments and foreign currency transactions under book
accounting were different from tax accounting due to temporary differences in
accounting for distributions.
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 average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
(3) TRANSACTIONS WITH AFFILIATES
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is
24
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS - continued
computed daily and paid monthly at an annual rate of 1.00% of average daily net
assets.
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 $11,143 for the year ended
October 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$35,038 for the year ended October 31, 1996, as its portion of the sales charge
on sales of Class A shares of the Fund. The Trustees have adopted separate
distribution plans for Class A, Class B, and Class C shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer 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 $22,921 for the year
ended October 31, 1996. Payment of the 0.10% per annum Class A distribution fee
will commence on such date as the Trustees of the Trust may determine. Fees
incurred under the distribution plan during the year ended October 31, 1996 were
0.25% of average daily net assets attributable to Class A shares on an
annualized basis.
The Class B and Class C distribution plans provide that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per annum,
of the Fund's average daily net assets attributable to Class B and Class C
shares. MFD will pay to securities dealers 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 $45,712 and $1,340 for Class B and Class C
shares, respectively, for the year ended October 31,
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS - continued
1996. Fees incurred under the distribution plans during the year ended October
31, 1996 were 1.00% of average daily net assets attributable to Class B and
Class C shares on an annualized basis.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class C shares in the event of a shareholder redemption within 12 months of
purchases made on or after April 1, 1996. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
October 31, 1996 were $11,608, $187,701, and $361 for Class A, Class B, and
Class C shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22%, and up to 0.15% attributable
to Class A, Class B, and Class C shares, respectively.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$216,890,600 and $197,137,147, 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:
<TABLE>
<S> <C>
Aggregate cost $247,604,977
------------
Gross unrealized appreciation $ 43,456,599
Gross unrealized depreciation (8,534,303)
------------
Net unrealized appreciation $ 34,922,296
============
</TABLE>
26
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS - continued
(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 YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,201,319 $ 145,253,452 4,007,859 $ 63,217,135
Shares issued to shareholders
in reinvestment of
distributions 172,379 2,799,430 129,779 1,883,186
Shares reacquired (6,355,583) (113,016,532) (2,011,280) (32,143,857)
---------- ------------- ---------- ------------
Net increase 2,018,115 $ 35,036,350 2,126,358 $ 32,956,464
---------- ------------- ---------- ------------
</TABLE>
Class B Shares
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,209,459 $ 125,696,939 5,493,342 $ 85,113,083
Shares issued to shareholders
in reinvestment of
distributions 381,169 6,206,034 1,006,721 14,610,342
Shares reacquired (7,113,969) (124,208,958) (7,507,506) (117,113,709)
---------- ------------- ---------- ------------
Net increase (decrease) 476,659 $ 7,694,015 (1,007,443) $(17,390,284)
---------- ------------- ---------- ------------
</TABLE>
Class C Shares
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 381,981 $ 6,695,633 128,767 $2,012,379
Shares issued to shareholders
in reinvestment of
distributions 7,678 124,070 8,646 125,194
Shares reacquired (154,314) (2,721,665) (47,177) (729,376)
-------- ----------- ------- ----------
Net increase 235,345 $ 4,098,038 90,236 $1,408,197
-------- ----------- ------- ----------
</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,
1996 was $2,777.
(7) FINANCIAL INSTRUMENTS
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange contracts. The notional or
contractual
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS - continued
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, 1996 as follows:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
NET UNREALIZED
CONTRACTS TO IN CONTRACTS APPRECIATION
DELIVER/RECEIVE EXCHANGE FOR AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales
11/01/96 CAD 2,394,003 $ 1,749,734 $ 1,787,370 $(37,636)
11/15/96 ESP 509,819,928 3,999,623 3,984,243 15,380
2/03/97 SEK 120,261,478 18,262,943 18,322,799 (59,856)
----------- ----------- --------
$24,012,300 $24,094,412 $(82,112)
----------- ----------- --------
Purchases
11/01/96 CAD 2,394,003 $ 1,753,720 $ 1,787,370 $ 33,650
2/03/97 SEK 84,703,202 12,857,000 12,905,210 48,210
----------- ----------- --------
$14,610,720 $14,692,580 $ 81,860
=========== =========== ========
</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.
CAD = Canadian Dollars
ESP = Spanish Pesetas
SEK = Swedish Kronor
At October 31, 1996, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) RESTRICTED SECURITIES
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At October 31, 1996, the
Fund owned the following restricted securities (constituting 1.56% of net
assets) which may not be publicly sold without registration under Securities Act
of 1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations supplied
by a pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF
DESCRIPTION ACQUISITION SHARES COST VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Negara Indonesia 10/25/96 2,072,600 $ 764,972 $ 756,651
Hong Leong Finance Ltd. 5/16/95 - 9/27/95 722,000 2,524,941 2,204,972
Jarvis Hotels PLC 6/21/96 - 7/02/96 575,000 1,540,897 1,487,028
----------
$4,448,651
----------
</TABLE>
28
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust VI and Shareholders of MFS World Equity
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS World Equity Fund (a Series of MFS Series
Trust VI) as of October 31, 1996, the related statement of operations for the
year then ended, the statement of changes in net assets for the years ended
October 31, 1996 and 1995, and the financial highlights for each of the years in
the four-year period ended October 31, 1996 and the six-year period ended
November 30, 1992. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
October 31, 1996, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS World Equity
Fund at October 31, 1996, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 29, 1996
29
<PAGE> 32
ADS ILLUSTRATE MFS' UNPARALLELED EXPERIENCE
[GRAPHIC]
MFS' new advertisements look back at some of the most important events of the
twentieth century to demonstrate a simple point -- no other fund company can
match MFS' experience. MFS has been managing money for investors since 1924
when we "invented" the nation's first fund, Massachusetts Investors Trust.
Print and broadcast ads will offer dramatic portraits of what that 72 years'
worth of experience means. By the time the Apollo rockets began taking off for
the moon, for example, MFS had already been exploring the universe of stocks for
more than four decades. The company was also on the scene, as other ads will
illustrate, when Louis Armstrong was redefining jazz and when the great
racehorse Whirlaway was galloping to a Triple Crown victory.
An MFS Chairman Keith Brodkin emphasizes, in today's increasingly competitive
mutual fund industry, it's important to have a recognizable brand name. The
goal of the MFS ad campaign is to increase public awareness of the company and
its unique role in the industry as the inventor of the mutual fund.
The across-the-board strength of the MFS Family of Funds[Registered Trademark]
will be highlighted in the print ads, which cite the performance results and
Morningstar ratings of various MFS funds.
The broadcast ads appear on a number of cable and network television news and
sports programs. The print ads appear in newspapers such as The Wall Street
Journal and USA Today; in financial magazines such as Kiplinger's Personal
Finance and Money, and in leisure magazines such as Golf Digest and Tennis.
(The cost of the campaign is being underwritten by MFS. It is neither a fund
shareholder nor an annuity contractholder expense.)
30
<PAGE> 33
IT'S EASY TO CONTACT US
[PHONE] MFS AUTOMATED INFORMATION
ACCOUNT INFORMATION:
Call 1-800-MFS-TALK (1-800-637-8255)
anytime.
INVESTMENT OUTLOOK:
Call 1-800-637-4458 anytime for the MFS outlook
on the bond and stock markets.
[QUESTION MFS PERSONAL SERVICE
MARK]
ACCOUNT SERVICE/LITERATURE:
Call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
PRODUCT INFORMATION:
Call 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time.
IRA SERVICE:
Call 1-800-637-1255 any business day
from 9 a.m. to 5 p.m. Eastern time.
SERVICE FOR THE HEARING-IMPAIRED:
Call 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time (TDD required).
[ENVELOPE] MFS ADDRESSES
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
WORLD WIDE WEB:
www.mfs.com
31
<PAGE> 34
THE MFS FAMILY OF FUNDS[Registered Trademark]
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 advisor or call MFS at
1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time (or leave a
message anytime). This material should be read carefully before investing or
sending money.
<TABLE>
<CAPTION>
STOCK WORLD
- ---------------------------------------------------------- -------------------------------------------------------------------------
<S> <C>
Massachusetts Investors Trust MFS[Registered Trademark] Foreign & Colonial Emerging Markets Equity Fund
Massachusetts Investors Growth Stock Fund MFS[Registered Trademark] Foreign & Colonial International Growth Fund
MFS[Registered Trademark] Capital Growth Fund MFS[Registered Trademark] Foreign & Colonial International Growth and
MFS[Registered Trademark] Emerging Growth Fund Income Fund
MFS[Registered Trademark] Gold & Natural Resources Fund MFS[Registered Trademark] World Asset Allocation Fund
MFS[Registered Trademark] Growth Opportunities Fund MFS[Registered Trademark] World Equity Fund
MFS[Registered Trademark] Managed Sectors Fund MFS[Registered Trademark] World Governments Fund
MFS[Registered Trademark] OTC Fund MFS[Registered Trademark] World Growth Fund
MFS[Registered Trademark] Research Fund MFS[Registered Trademark] World Total Return Fund
MFS[Registered Trademark] Value Fund
NATIONAL TAX-FREE BOND
-------------------------------------------------------------------------
STOCK AND BOND MFS[Registered Trademark] Municipal Bond Fund
- ---------------------------------------------------------- MFS[Registered Trademark] Municipal High Income Fund
MFS[Registered Trademark] Total Return Fund MFS[Registered Trademark] Municipal Income Fund
MFS[Registered Trademark] Utilities Fund
STATE TAX-FREE BOND
BOND -------------------------------------------------------------------------
- ---------------------------------------------------------- Alabama, Arkansas, California, Florida,
MFS[Registered Trademark] Bond Fund Georgia, Maryland, Massachusetts,
MFS[Registered Trademark] Government Mortgage Fund Mississippi, New York, North Carolina,
MFS[Registered Trademark] Government Securities Fund Pennsylvania, South Carolina, Tennessee,
MFS[Registered Trademark] High Income Fund Virginia, West Virginia
MFS[Registered Trademark] Intermediate Income Fund
MFS[Registered Trademark] Strategic Income Fund MONEY MARKET
-------------------------------------------------------------------------
LIMITED MATURITY BOND MFS[Registered Trademark] Cash Reserve Fund
- ---------------------------------------------------------- MFS[Registered Trademark] Government Money Market Fund
MFS[Registered Trademark] Government Limited Maturity Fund MFS[Registered Trademark] Money Market Fund
MFS[Registered Trademark] Limited Maturity Fund
MFS[Registered Trademark] Municipal Limited Maturity Fund
</TABLE>
32
<PAGE> 35
MFS[Registered Trademark] WORLD EQUITY FUND[Service Mark]
<TABLE>
<S> <C>
TRUSTEES ASSISTANT SECRETARY
A. Keith Brodkin* - Chairman and President James R. Bordewick, Jr.*
Richard B. Bailey* - Private Investor; CUSTODIAN
Former Chairman and Director (until 1991), State Street Bank and Trust Company
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, AUDITORS
Cambridge Trust Company Deloitte & Touche LLP
Marshall N. Cohan - Private Investor INVESTOR INFORMATION
For MFS stock and bond market outlooks, call
Lawrence H. Cohn - Chief of Cardiac toll free: 1-800-637-4458 anytime from a
Surgery, Brigham and Women's Hospital; touch-tone telephone.
Professor of Surgery, Harvard Medical School
For information on MFS mutual funds,
The Hon. Sir J. David Gibbons, KBE - Chief call your financial adviser or, for an
Executive Officer, Edmund Gibbons Ltd.; information kit, call toll free:
Chairman, Bank of N.T. Butterfield & Son Ltd. 1-800-637-2929 any business day from
9 a.m. to 5 p.m. Eastern time (or leave
Abby M. O'Neill - Private Investor; a message anytime).
Director, Rockefeller Financial Services, Inc.
(investment advisers) INVESTOR SERVICE
MFS Service Center, Inc.
Walter E. Robb, III - President and Treasurer, P.O. Box 2281
Benchmark Advisors, Inc. (corporate financial Boston, MA 02107-9906
consultants); President, Benchmark Consulting
Group, Inc. (office services); Trustee, Landmark For general information, call toll free:
Funds (mutual funds) 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Arnold D. Scott* - Senior Executive Vice
President, Director and Secretary, For service to speech- or hearing-impaired, call
Massachusetts Financial Service Company toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. To use
Jeffrey L. Shames* - President and Director, this service, your phone must be equipped with
Massachusetts Financial Services Company a Telecommunications Device for the Deaf.
J. Dale Sherratt - President, Insight Resources, For share prices, account balances, and
Inc. (acquisition planning specialists) exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
Ward Smith - Former Chairman (until 1994), telephone.
NACCO Industries; Director, Sundstrand
Corporation WORLD WIDE WEB
www.mfs.com
INVESTMENT ADVISER
Massachusetts Financial Services Company [DALBAR LOGO] For the third year in a row, MFS
500 Boylston Street earned a #1 ranking in the DALBAR, Inc. Broker/Dealer
Boston, MA 02116-3741 Survey, Main Office Operations Service Quality Category.
The firm achieved a 3.48 overall score on a scale of 1
DISTRIBUTOR to 4 in the 1996 survey. A total of 110 firms responded,
MFS Fund Distributors, Inc. offering input on the quality of service they received from
500 Boylston Street 29 mutual fund companies nationwide. The survey contained
Boston, MA 02116-3741 questions about service quality in 15 categories, including
"knowledge of phone service contacts," "accuracy of
PORTFOLIO MANAGER transaction processing," and "overall ease of doing business
David Mannheim* with the firm."
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
* Affiliated with the Investment Adviser
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C>
MFS[Registered Trademark] WORLD [LOGO]
EQUITY FUND ----------------------
500 Boylston Street BULK RATE
Boston, MA 02116 U.S. POSTAGE
[LOGO] PAID
PERMIT #55638
BOSTON, MA
----------------------
(C)1996 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116 MWE-2-12/96 47M 04/204/304
</TABLE>
