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Semiannual Report
[MFS LOGO] April 30, 1997
INVESTMENT MANAGEMENT
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MFS(R) World Equity Fund
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[PICTURE]
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Learning financial basics the easy way (see page 31)
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TABLE OF CONTENTS
<TABLE>
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Letter from the Chairman.......................................................... 1
Portfolio Manager's Overview...................................................... 3
Portfolio Manager's Profile....................................................... 5
Fund Facts........................................................................ 6
Performance Summary............................................................... 6
Portfolio Concentration........................................................... 9
Portfolio of Investments.......................................................... 10
Financial Statements.............................................................. 15
Notes to Financial Statements..................................................... 23
The ABCs of Investing............................................................. 31
The MFS Family of Funds(R)........................................................ 32
Trustees and Officers............................................................. 33
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HIGHLIGHTS
- FOR THE SIX MONTHS ENDED APRIL 30, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 10.04%, CLASS B SHARES
9.60%, CLASS C SHARES 9.62%, AND CLASS I SHARES 9.84%.
- MOST OF THE WORLD'S EQUITY MARKETS CONTINUED THEIR STRONG PERFORMANCE
DURING THE PAST SIX MONTHS, WITH EUROPE GAINING 23% OVERALL IN LOCAL
CURRENCY TERMS, AND SEVERAL COUNTRIES, INCLUDING SPAIN, SWITZERLAND,
THE NETHERLANDS, AND FINLAND, RETURNING MORE THAN 30%.
- THE FUND'S HEAVIEST CONCENTRATION IS IN INDUSTRIES IN WHICH WE EXPECT
COMPANIES TO GENERATE SUSTAINED GROWTH REGARDLESS OF THE STATE OF THE
GLOBAL ECONOMY, INCLUDING TECHNOLOGY, TELECOMMUNICATIONS, LODGING,
BROADCASTING, SPECIALTY RETAILING, AND AEROSPACE/DEFENSE.
- CURRENCY CONTINUED TO HAVE AN ADVERSE IMPACT ON THE FUND'S PERFORMANCE
DURING THE PERIOD, AS THE DOLLAR APPRECIATED AGAINST ALL THE MAJOR
CURRENCIES, INCLUDING THE JAPANESE YEN, THE GERMAN MARK, AND THE
BRITISH POUND. THIS DAMPENED THE STRONG UNDERLYING PERFORMANCE OF THE
STOCKS IN THE FUND.
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<PAGE> 3
LETTER FROM THE CHAIRMAN
Dear Shareholders:
After more than six years of expansion, the U.S.
economy is experiencing another year of growth
in 1997, although a few signs point to the
[Photo: A. Keith Brodkin] possibility of a modest rise in inflation during
the year. On the positive side, the pattern of
moderate growth and inflation set over the past
few years now seems fairly well entrenched in
the economy and, short of a major international
or domestic crisis, appears to have enough
momentum to remain on track for some time. Also,
gains in such important sectors as housing, automobiles, industrial production,
and exports indicate a fair amount of underlying strength in the economy. Some
of that strength was seen in the first quarter, when the U.S. economy grew at an
annualized rate of 5.6% (based on preliminary estimates), a pace that would be
inflationary in the unlikely event that it were to continue. The ongoing
tightness in the labor market could also add some inflationary pressures to the
economy. At the same time, there is some reason for caution as a result of the
continuing high level of consumer debt and rising personal bankruptcies. Given
these somewhat conflicting indicators, we expect real (inflation-adjusted)
growth to revolve around 2% in 1997, with the strength of the first quarter
moderating as we move through the balance of the year.
We continue to urge U.S. equity investors to remain cautious for 1997. Just
as the slowdown in corporate earnings growth and increases in interest rates in
1996 raised some near-term concerns, further interest-rate increases and the
fear of an acceleration of inflation have created extreme volatility in the
stock market in 1997. However, while the U.S. equity market enjoyed several
years without a major correction, we would like to point out that such downturns
are a natural part of the investment environment and, when they end, they often
result in more attractive valuations for stocks.
Overseas, the overall economic environment has remained favorable for
investing in equities. Global economic growth has remained moderate, with
subdued inflation. While the United States has experienced rising interest rates
over the past six months, continental Europe has seen improving economic
conditions, falling inflation and interest rates, and weaker currencies. This
has helped give Europe the best-performing equity markets. In Japan, meanwhile,
interest rates have remained low, but a tepid economic recovery has left that
market stalled. At the same time, a number of the emerging
1
<PAGE> 4
LETTER FROM THE CHAIRMAN - continued
markets have become increasingly attractive, thanks in part to rapidly expanding
economies and growth in earnings.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A Keith Brodkin
A. Keith Brodkin
Chairman and President
May 14, 1997
2
<PAGE> 5
PORTFOLIO MANAGER'S OVERVIEW
[Photo of David Mannheim Dear Shareholders:
For the six months ended April 30, 1997, Class A
shares of the Fund provided a total return of
10.04%, Class B shares 9.60%, Class C shares
9.62%, and Class I shares 9.84%. These returns
assume the reinvestment of distributions but
exclude the effects of any sales charges and
compare to a 7.79% return for the Morgan Stanley
Capital International (MSCI) World Index, a
broad, unmanaged index of global equities.
Most of the world's equity markets continued their strong performance
during the past six months, with the MSCI World Index gaining 13% in local
currency terms, led by Europe, which gained 23% (as measured by the MSCI Europe
Index). Several countries, including Spain, Switzerland, the Netherlands, and
Finland, returned more than 30%, according to Morgan Stanley. The United States
was also a positive contributor, with the Standard & Poor's 500 Composite Index
(the S&P 500), a popular, unmanaged index of common stock total return
performance, up 14.71% for the period. Markets in the Far East, meanwhile,
continued to lag those in the rest of the world, with the MSCI Pacific Index
down 2.8%. Japan remained weak, declining 3.2%, followed by almost all of the
region's other markets. Only Australia generated a positive return, advancing
6.9%, according to Morgan Stanley. In the aggregate, emerging markets continued
to lag the developed world, with the IFC Emerging Markets Composite Index up
10.7%. (The IFC Emerging Markets Composite Index is an unmanaged,
market-capitalization-weighted index of the most active stocks of emerging
markets, as defined by the World Bank.) Latin America, which gained 21.5%,
significantly outperformed the Asian emerging markets, which were up just 1.2%.
Currency continued to have an adverse impact on the Fund's performance
during the period, as the dollar appreciated against all the major currencies.
For example, the dollar gained 11.5% against the Japanese yen, 14.0% against the
German mark, 16.1% against the Swiss franc, and 0.2% against the British pound.
This dampened the strong underlying performance of the stocks in the Fund. While
the performance of the Fund was influenced by these developments, we continue to
believe stock selection is the key driver to performance, and we have stuck to
our bottom-up approach to stock selection, concentrating on high-quality
companies that we believe have superior growth prospects and are trading at
attractive valuations.
3
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PORTFOLIO MANAGER'S OVERVIEW - continued
The Fund continues to be invested in a wide range of countries throughout
the world. The biggest shift in the Fund's geographic weightings over the past
six months has been an increase in our position in the United States, to 39% of
our equity holdings from 32% at the end of October 1996. This has come at the
expense of Asia/Pacific, now at 25% of the portfolio versus 30% six months ago,
and Europe (36% versus 38%). Most of the increase in the United States came in
the technology area, where market sell-offs, particularly in the first quarter
of 1997, produced buying opportunities. New holdings in this area include
Computer Sciences, IBM, and Synopsys. The Fund's position in an older holding,
Computer Associates, was also increased and is now the second-largest position
in the Fund.
The reduction in our Asia/Pacific exposure resulted from weak market
performance and the elimination and/or reduction of several holdings. For
example, Lion Nathan, a New Zealand brewer, which had been a significant holding
for several years, was sold in anticipation of deteriorating fundamentals
leading to worse-than-expected results.
While the European markets have provided the best performance over the past
six months, we continue to feel that they also offer the best opportunities.
Although interest rates appear unlikely to fall much further, we believe that
inflation will remain in check and, therefore, rates are unlikely to rise much,
if at all, over the next six to 12 months. We expect continued moderate economic
growth, combined with an emphasis on cost reduction, to produce strong corporate
earnings growth. With European equity-market valuations still at a discount to
global averages, these factors should generate continued above-average
performance.
Elsewhere, we are keeping a close eye on a number of Asian markets. If
sell-offs in these markets continue, they could present good buying
opportunities in high-quality companies that get caught up in general market
moves.
Currently, the Fund remains underweighted in the two largest markets in the
world, the United States and Japan, relative to the MSCI World Index. Our
investment philosophy of looking anywhere in the world for investment
opportunities results in a long-term bias to be underweighted in the United
States, while the Fund's exposure to Japan has remained fairly constant over the
past 18 to 24 months despite it having been one of the worst-performing markets.
The Fund's heaviest concentration is in industries in which we expect
companies to generate sustained growth regardless of the state of the global
economy. For example, the Fund has increased its exposure to technology (now
4
<PAGE> 7
PORTFOLIO MANAGER'S OVERVIEW - continued
10% of the Fund's equity assets), a sector in which we have added names not only
in the United States, but also in Japan with companies such as Sony, TDK, and
Rohm. The Fund also has a large exposure to the telecommunications, lodging,
broadcasting, specialty retailing, and aerospace/defense industries.
At the same time, the Fund is underweighted in financial services, with no
exposure to this sector in Japan. Although fundamentals for this industry seem
to be improving, valuations still appear expensive relative to comparable global
companies. We also continue to have limited exposure to heavy cyclical
industries such as paper, commodity chemicals, and metals, in which valuations
appear unattractive relative to average earnings levels for the economic cycle
and prospective long-term growth rates.
Finally, while many markets, particularly the United States, had rebounded
from first-quarter sell-offs and were back to near-record levels by the end of
April, our short-term outlook is for more modest equity-market returns than we
have experienced in the recent past. Although inflation remains under control,
we do not expect global interest rates to lower, which would provide fuel to the
equity markets. Instead, we believe that corporate earnings growth will be the
key driver to returns, and that our bottom-up stock-selection discipline is well
suited to this type of environment.
Respectfully,
/s/ David Mannheim
David Mannheim
Portfolio Manager
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PORTFOLIO MANAGER'S PROFILE
DAVID MANNHEIM BEGAN HIS CAREER AT MFS IN 1988 AS A RESEARCH SPECIALIST
AND WAS PROMOTED TO ASSISTANT VICE PRESIDENT - INVESTMENTS IN 1991, VICE
PRESIDENT - INVESTMENTS IN 1992, AND SENIOR VICE PRESIDENT IN 1997. MR.
MANNHEIM HAS BEEN THE PORTFOLIO MANAGER OF MFS(R) WORLD EQUITY FUND
SINCE 1992. HE IS A GRADUATE OF AMHERST COLLEGE AND OF MASSACHUSETTS
INSTITUTE OF TECHNOLOGY'S SLOAN SCHOOL OF MANAGEMENT.
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5
<PAGE> 8
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<TABLE>
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FUND FACTS
STRATEGY: THE INVESTMENT OBJECTIVE OF THE FUND IS TO PROVIDE
CAPITAL APPRECIATION PRIMARILY THROUGH INVESTMENTS
IN EQUITY SECURITIES OF U.S. AND NON-U.S. ISSUERS.
COMMENCEMENT OF
INVESTMENT
OPERATIONS: CLASS A: SEPTEMBER 7, 1993
CLASS B: DECEMBER 29, 1986
CLASS C: JANUARY 3, 1994
CLASS I: JANUARY 2, 1997
SIZE: $349.3 MILLION NET ASSETS AS OF APRIL 30, 1997
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</TABLE>
PERFORMANCE SUMMARY
Because mutual funds like MFS World Equity Fund are designed for investors with
long-term goals, we have provided cumulative results as well as the average
annual total returns for Class A, Class B, Class C, and Class I shares for the
applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
AS OF APRIL 30, 1997
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Cumulative Total Return +10.04% +12.29% +90.94% +144.45%
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Average Annual Total Return -- +12.29% +13.81% + 9.35%
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SEC Results -- + 5.85% +12.47% + 8.71%
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</TABLE>
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Cumulative Total Return +9.60% +11.42% +84.41% +136.30%
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Average Annual Total Return -- +11.42% +13.02% + 8.98%
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SEC Results -- + 7.42% +12.78% + 8.98%
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</TABLE>
6
<PAGE> 9
PERFORMANCE SUMMARY - continued
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Cumulative Total Return +9.62% +11.45% +84.90% +136.95%
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Average Annual Total Return -- +11.45% +13.08% + 9.01%
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SEC Results -- +10.45% +13.08% + 9.01%
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</TABLE>
CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Cumulative Total Return +9.84% +11.67% +84.81% +136.74%
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Average Annual Total Return -- +11.67% +13.07% + 9.00%
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SEC Results -- +11.67% +13.07% + 9.00%
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</TABLE>
Class A share SEC results include the maximum 5.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares,
which became available on January 2, 1997, have no sales charge or Rule 12b-1
fees and are only available to certain institutional investors.
Class A and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class B shares for periods prior
to the commencement of offering of Class A and Class C shares. Because operating
expenses attributable to Class A shares are lower than those of Class B shares,
Class A share performance generally would have been higher than Class B share
performance. Operating expenses attributable to Class C shares are not
significantly different from those of Class B shares. The Class B share
performance included in the Class A share SEC performance has been adjusted to
reflect the maximum initial sales charge generally applicable to Class A shares
rather than the CDSC generally applicable to Class B shares. The Class C share
SEC performance has been adjusted to reflect the lower CDSC generally applicable
to Class C shares rather than the CDSC generally applicable to Class B shares.
7
<PAGE> 10
PERFORMANCE SUMMARY - continued
Class I share results include the performance and operating expenses (e.g., Rule
12b-1 fees) of Class B shares for periods prior to the commencement of offering
of Class I shares. Because operating expenses attributable to Class B shares are
greater than those of Class I shares, Class I share performance generally would
have been higher than Class B share performance. The Class B SEC share
performance included in the Class I share SEC performance has been adjusted to
reflect the fact that Class I shares have no CDSC. These results represent the
percentage change in net asset value.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time. All results are historical and assume
the reinvestment of dividends and capital gains. Investment return and principal
value will fluctuate, and shares, when redeemed, may be worth more or less than
their original cost. Past performance is no guarantee of future results.
8
<PAGE> 11
PORTFOLIO CONCENTRATION AS OF APRIL 30, 1997
TOP 10 EQUITY HOLDINGS
<TABLE>
<S> <C>
POWERGEN PLC HILTON HOTELS CORP.
British electric utility U.S. hotel company
COMPUTER ASSOCIATES INTERNATIONAL, INC. ASDA GROUP PLC
Computer software company British food retailer
CANADIAN NATIONAL RAILWAY CO. DDI CORP.
Canadian railway/transportation company Japanese telecommunications company
RITE-AID CORP. COMPUTER SCIENCES CORP.
U.S. drug store chain U.S. computer services and consulting company
FEDERAL HOME LOAN MORTGAGE CORP. BRITISH AEROSPACE PLC
U.S. mortgage banker and underwriter U.K. defense company and aircraft manufacturer
</TABLE>
LARGEST SECTORS
[PIE CHART]
<TABLE>
<S> <C>
Financial Services 13.5%
Utilities & Communications 13.3%
Technology 11.3%
Retailing 9.2%
Leisure 9.1%
Miscellaneous 43.6%
</TABLE>
For a more complete breakdown, refer to the Portfolio of Investments.
9
<PAGE> 12
PORTFOLIO OF INVESTMENTS (UNAUDITED) - April 30, 1997
Stocks - 91.5%
<TABLE>
<CAPTION>
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Issuer Shares Value
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<S> <C> <C>
U.S. Stocks - 31.9%
Aerospace - 2.0%
AlliedSignal, Inc. 35,500 $ 2,564,875
Lockheed-Martin Corp. 50,000 4,475,000
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$ 7,039,875
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Business Machines - 1.4%
International Business Machines Corp. 31,000 $ 4,983,250
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Business Services - 2.8%
H & R Block, Inc. 144,500 $ 4,660,125
Computer Sciences Corp.* 82,000 5,125,000
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$ 9,785,125
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Chemicals - 2.2%
Air Products & Chemicals, Inc. 49,500 $ 3,551,625
Praxair, Inc. 78,000 4,026,750
-----------
$ 7,578,375
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Computer Software - Systems - 2.7%
Computer Associates International, Inc. 130,000 $ 6,760,000
Synopsys, Inc.* 80,600 2,569,125
-----------
$ 9,329,125
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Consumer Goods and Services
Hertz, Corp.* 3,800 $ 110,200
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Entertainment - 0.7%
Viacom, Inc., "B"* 87,251 $ 2,333,964
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Financial Institutions - 1.7%
Federal Home Loan Mortgage Corp. 182,000 $ 5,801,250
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Food and Beverage Products - 0.7%
PepsiCo, Inc. 75,000 $ 2,615,625
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Forest and Paper Products - 1.8%
Kimberly-Clark Corp. 79,000 $ 4,048,750
Unisource Worldwide, Inc. 163,000 2,404,250
-----------
$ 6,453,000
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Insurance - 2.0%
CIGNA Corp. 22,500 $ 3,383,438
Reliastar Financial Corp. 57,500 3,478,750
-----------
$ 6,862,188
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Machinery - 0.7%
AGCO, Corp. 99,000 $ 2,561,625
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Medical and Health Products - 0.8%
Bristol-Myers Squibb Co. 40,000 $ 2,620,000
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Medical and Health Technology and Services - 2.3%
St. Jude Medical, Inc.* 134,000 $ 4,355,000
United Healthcare Corp. 76,000 3,695,500
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$ 8,050,500
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</TABLE>
10
<PAGE> 13
PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
Stocks - continued
<TABLE>
<CAPTION>
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Issuer Shares Value
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<S> <C> <C>
U.S. Stocks - continued
Oils - 1.0%
Mobil Corp. 26,500 $ 3,445,000
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Printing and Publishing - 0.7%
Gannett Co., Inc. 29,500 $ 2,573,875
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Railroads - 1.4%
Burlington Northern Santa Fe Railway Co. 60,500 $ 4,764,375
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Restaurants and Lodging - 2.3%
Hilton Hotels Corp. 208,000 $ 5,616,000
Host Marriott Corp.* 138,000 2,397,750
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$ 8,013,750
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Stores - 3.2%
Federated Department Stores, Inc.* 72,000 $ 2,448,000
Longs Drug Stores Corp. 106,000 2,676,500
Rite-Aid Corp. 135,000 6,210,000
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$ 11,334,500
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Supermarkets - 1.0%
Safeway, Inc.* 75,000 $ 3,346,875
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Telecommunications - 0.5%
Cabletron Systems, Inc.* 49,000 $ 1,690,500
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Total U.S. Stocks $111,292,977
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Foreign Stocks - 59.6%
Argentina - 0.1%
Mirgor Sacifia, ADR* (Auto Parts)## 97,600 $ 239,120
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Australia - 2.4%
Q.B.E. Insurance Group Ltd. (Insurance) 853,167 $ 4,876,019
Seven Network Ltd. (Entertainment) 909,000 3,421,831
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$ 8,297,850
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Canada - 1.8%
Canadian National Railway Co. (Railroads) 163,000 $ 6,275,500
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Chile - 0.7%
Chilectra S.A., ADR (Utilities - Electric) 41,850 $ 2,573,775
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Finland - 1.6%
Aamulehti Yhtymae Oy II (Publishing) 21,300 $ 741,860
Huhtamaki Oy Group (Conglomerate) 54,000 2,343,173
TT Tieto Oy (Computer Software - Systems) 33,300 2,531,077
------------
$ 5,616,110
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France - 2.0%
TV Francaise (Entertainment) 27,000 $ 2,606,705
Union des Assurances Federales S.A. (Insurance) 37,000 4,409,672
------------
$ 7,016,377
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Germany - 2.1%
Adidas AG (Apparel and Textiles) 32,000 $ 3,338,728
Henkel KGaA (Consumer Goods and Services) 44,500 2,417,919
Volkswagen AG (Automotive) 2,700 1,718,324
------------
$ 7,474,971
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</TABLE>
11
<PAGE> 14
PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
Stocks - continued
<TABLE>
<CAPTION>
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Issuer Shares Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
Greece - 0.9%
Hellenic Telecommunication Organization S.A.
(Telecommunications) 75,500 $ 1,716,721
Papastratos Cigarettes S.A. (Consumer Goods and
Services) 70,000 1,345,713
-----------
$ 3,062,434
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Hong Kong - 3.9%
Asia Satellite Telecommunications Corp.
(Telecommunications) 74,500 $ 1,918,375
Asia Satellite Telecommunications Holdings Ltd.
(Telecommunications)* 385,500 977,921
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) 479,000 1,694,349
Hong Kong Land Holdings Ltd. (Real Estate)* 502,825 1,045,876
Li & Fung Ltd. (Wholesale) 1,578,000 1,588,980
Liu Chong Hing Bank (Banks and Credit Cos.) 1,460,000 2,685,868
Peregrine Investment Holdings (Finance)* 769,000 1,181,382
Wing Hang Bank Ltd. (Banks and Credit Cos.) 705,600 2,577,875
-----------
$13,670,626
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India - 0.6%
Videsh Sanchar Nigam Ltd., GDR
(Telecommunications)*## 100,700 $ 1,988,322
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Indonesia - 0.4%
Semen Gresik (Building Materials) 549,000 $ 1,339,162
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Italy - 1.2%
Telecom Italia S.p.A. (Telecommunications) 351,000 $ 1,105,019
INA (Instituto Nazionale delle Assicurazioni)
(Insurance) 600,000 805,028
Telecom Italia S.p.A., Saving Shares
(Telecommunications) 1,281,000 2,370,280
-----------
$ 4,280,327
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Japan - 12.0%
Bridgestone Corp. (Tire and Rubber) 137,000 $ 2,913,746
Canon, Inc. (Office Equipment) 201,000 4,765,734
DDI Corp. (Telecommunications) 814 5,405,293
East Japan Railway Co. (Railroads) 409 1,768,736
Eisai Co., Ltd. (Pharmaceuticals) 99,000 1,715,636
Kinki Coca-Cola Bottling Co. (Beverages) 89,000 1,023,553
Kirin Beverage Corp. (Beverages) 155,000 2,112,249
Nitto Denko Corp. (Industrial Goods and
Services) 225,000 3,261,126
Osaka Sanso Kogyo Ltd. (Chemicals) 484,000 1,277,196
Rohm Co. (Electronics) 25,000 1,937,771
Sony Corp. (Electronics) 50,000 3,639,228
Takeda Chemical Industries (Pharmaceuticals) 212,000 4,892,950
TDK Corp. (Special Products and Services) 53,000 3,820,008
Ushio, Inc. (Electronics) 302,000 3,544,545
-----------
$42,077,771
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</TABLE>
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PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
Stocks - continued
<TABLE>
<CAPTION>
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Issuer Shares Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
Malaysia - 1.0%
New Straits Times Press Berhad (Printing and
Publishing) 195,000 $ 1,087,736
UMW Holdings Berhad (Automotive) 478,000 2,513,985
-----------
$ 3,601,721
- ------------------------------------------------------------------------------------------
Netherlands - 3.1%
Ahrend Groep N.V. (Furniture and Home
Appliances)* 46,300 $ 2,806,637
Akzo Nobel (Chemicals) 25,000 3,223,569
IHC Caland NV (Transportation) 35,000 1,729,683
Royal Dutch Petroleum Co. (Oils) 17,300 3,094,555
-----------
$10,854,444
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New Zealand - 0.4%
Sky City Ltd. (Entertainment) 336,900 $ 1,511,805
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Peru - 0.4%
Telefonica del Peru SA, ADR
(Utilities - Telephone) 55,000 $ 1,320,000
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Philippines - 0.3%
Alsons Cement Corp. (Building Materials)*## 5,331,500 $ 971,203
- ------------------------------------------------------------------------------------------
Portugal - 0.6%
Banco Totta E Acores (Banks and Credit Cos.)## 159,000 $ 2,214,051
- ------------------------------------------------------------------------------------------
Singapore - 1.2%
Hong Leong Finance Ltd. (Finance)+ 774,000 $ 2,396,020
Mandarin Oriental International, Ltd.
(Restaurants and Lodgings)* 1,461,000 1,694,760
-----------
$ 4,090,780
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South Korea - 1.0%
Korea Electric Power Corp.
(Utilities - Electric) 54,730 $ 1,635,750
Korea Mobile Telecommunications
(Utilities - Telephone) 2,482 1,907,515
-----------
$ 3,543,265
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Spain - 2.1%
Acerinox S.A. (Iron and Steel) 24,000 $ 3,513,158
Catalana Occidente (Insurance)*+ 6,818 358,842
Cubiertas y Mzov S.A. (Engineering) 2,519 255,318
Repsol S.A. (Oils) 78,500 3,297,732
-----------
$ 7,425,050
- ------------------------------------------------------------------------------------------
Sweden - 2.5%
Astra AB, Free Shares, "B" ADR (Pharmaceuticals) 107,000 $ 4,248,630
Nobel Biocare AB (Medical and Health Products)* 69,500 1,018,802
Sparbanken Sverige AB, "A" (Banks and Credit
Cos.) 186,000 3,319,311
-----------
$ 8,586,743
- ------------------------------------------------------------------------------------------
Switzerland - 1.7%
Ciba Specialty AG (Chemicals)* 26,996 $ 2,326,768
Novartis AG (Pharmaceuticals) 2,776 3,658,630
-----------
$ 5,985,398
- ------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 16
PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
Stocks - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
United Kingdom - 15.1%
ASDA Group PLC (Retail) 2,737,000 $ 5,108,473
Avis Europe PLC (Auto Rental)*## 805,000 1,763,795
British Aerospace PLC (Aerospace and Defense)* 241,000 5,127,884
British Petroleum PLC (Oils)* 306,120 3,517,576
Capital Radio PLC (Broadcasting) 117,200 1,030,968
Carlton Communications PLC (Broadcasting) 322,000 2,644,386
Grand Metropolitan PLC (Food and Beverage
Products)* 344,000 2,875,307
Jarvis Hotels PLC (Restaurants and Lodgings)+ 624,000 1,569,765
Kwik-Fit Holdings PLC (Retail) 674,900 2,639,824
Lloyds TSB Group PLC (Banks and Credit Cos.)* 367,386 3,356,986
PowerGen PLC (Utilities - Electric)* 1,540,854 16,155,206
Storehouse PLC (Retail) 975,192 3,497,848
Tomkins PLC (Diversified Operations)* 769,000 3,319,911
------------
$ 52,607,929
- ------------------------------------------------------------------------------------------
Venezuela - 0.5%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications)* 58,000 $ 1,740,000
- ------------------------------------------------------------------------------------------
Total Foreign Stocks $208,364,734
- ------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $269,921,405) $319,657,711
- ------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
Warrants
- ------------------------------------------------------------------------------------------
Issuer
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Hong Kong
Peregrine Investment Holdings (Identified Cost
$9,538) 76,900 $ 11,516
Short-Term Obligations - 7.5%
- ------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 05/22/97 $ 5,450 $ 5,432,912
Federal Home Loan Mortgage Corp., due 05/02/97 3,940 3,939,414
Federal Home Loan Mortgage Corp., due 05/05/97 9,510 9,504,326
Federal National Mortgage Assn., due 05/01/97 640 640,000
Federal National Mortgage Assn., due 05/06/97 6,660 6,655,042
- ------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 26,171,694
- ------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $296,102,637) $345,840,921
Other Assets, Less Liabilities - 1.0% 3,444,962
- ------------------------------------------------------------------------------------------
Net Assets - 100.0% $349,285,883
- ------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
</TABLE>
See notes to financial statements
14
<PAGE> 17
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
April 30, 1997
- ------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $296,102,637) $345,840,921
Cash 120,630
Receivable for Fund shares sold 1,065,459
Receivable for investments sold 4,837,934
Dividends receivable 915,907
Net receivable for forward foreign currency exchange contracts
sold 521,145
Net receivable on closed forward currency exchange contracts 280,838
Other assets 2,676
------------
Total assets $353,585,510
------------
Liabilities:
Payable for investments purchased $ 2,950,806
Payable for Fund shares reacquired 958,672
Payable to affiliates -
Management fee 9,402
Administrative fee 141
Shareholder servicing agent fee 2,008
Distribution fee 87,723
Accrued expenses and other liabilities 290,875
------------
Total liabilities $ 4,299,627
------------
Net assets $349,285,883
------------
Net assets consist of:
Paid-in capital $285,802,815
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 50,525,123
Accumulated undistributed net realized gain on investments and
foreign currency transactions 13,300,068
Accumulated net investment loss (342,123)
------------
Total $349,285,883
------------
Shares of beneficial interest outstanding 19,106,019
------------
Class A shares:
Net asset value per share
(net assets of $128,342,904 / 7,012,393 shares of beneficial
interest outstanding) $18.30
------
Offering price per share (100/94.25) $19.42
------
Class B shares:
Net asset value and offering price per share
(net assets of $209,940,775 / 11,485,635 shares of beneficial
interest outstanding) $18.28
------
Class C shares:
Net asset value and offering price per share
(net assets of $10,843,164 / 599,311 shares of beneficial
interest outstanding) $18.09
------
Class I shares:
Net asset value, offering price and redemption price per share
(net assets of $159,040 / 8,680 shares of beneficial
interest outstanding) $18.32
------
</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 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Six Months Ended April 30, 1997
- ------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 2,920,674
Interest 500,856
Foreign taxes withheld (283,215)
-----------
Total investment income $ 3,138,315
-----------
Expenses -
Management fee $ 1,587,187
Administrative fee 8,494
Trustees' compensation 22,909
Shareholder servicing agent fee 140,586
Shareholder servicing agent fee (Class A) 24,975
Shareholder servicing agent fee (Class B) 71,652
Shareholder servicing agent fee (Class C) 2,035
Distribution and service fee (Class A) 135,124
Distribution and service fee (Class B) 1,000,938
Distribution and service fee (Class C) 45,563
Custodian fee 145,023
Printing 58,897
Postage 40,807
Auditing fees 19,683
Legal fees 2,516
Miscellaneous 148,866
-----------
Total expenses $ 3,455,255
Fees paid indirectly (16,247)
-----------
Net expenses $ 3,439,008
-----------
Net investment loss $ (300,693)
-----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $12,976,543
Foreign currency transactions 437,477
-----------
Net realized gain on investments and foreign currency
transactions $13,414,020
-----------
Change in unrealized appreciation -
Investments $14,753,490
Translation of assets and liabilities in foreign currencies 777,912
-----------
Net unrealized gain on investments and foreign currency
translation $15,531,402
-----------
Net realized and unrealized gain on investments and foreign
currency $28,945,422
-----------
Increase in net assets from operations $28,644,729
-----------
</TABLE>
See notes to financial statements
16
<PAGE> 19
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Six Months Ended
April 30, 1997 Year Ended
(Unaudited) October 31, 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (300,693) $ (493,793)
Net realized gain on investments and foreign
currency transactions 13,414,020 29,747,702
Net unrealized gain on investments and foreign
currency translation 15,531,402 7,027,936
------------- -------------
Increase in net assets from operations $ 28,644,729 $ 36,281,845
------------- -------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (10,136,119) $ (3,152,132)
From net realized gain on investments and foreign
currency transactions (Class B) (18,280,747) (6,611,169)
From net realized gain on investments and foreign
currency transactions (Class C) (828,520) (153,959)
------------- -------------
Total distributions declared to shareholders $ (29,245,386) $ (9,917,260)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 245,995,603 $ 277,646,024
Net asset value of shares issued to shareholders
in reinvestment of distributions 27,086,301 9,129,534
Cost of shares reacquired (207,746,054) (239,947,155)
------------- -------------
Increase in net assets from Fund share
transactions $ 65,335,850 $ 46,828,403
------------- -------------
Total increase in net assets $ 64,735,193 $ 73,192,988
Net assets:
At beginning of period 284,550,690 211,357,702
------------- -------------
At end of period (including accumulated net
investment loss of $342,123 and $41,430,
respectively) $ 349,285,883 $ 284,550,690
------------- -------------
</TABLE>
See notes to financial statements
17
<PAGE> 20
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
- --------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Ended
April 30, Year Ended October 31,
1997 --------------------------------------
(Unaudited) 1996 1995 1994 1993**
- --------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $ 18.45 $ 16.68 $ 16.95 $ 16.56 $15.71
-------- -------- ------- ------- ------
Income from investment
operations# -
Net investment income $ 0.03 $ 0.07 $ 0.09 $ 0.03 $ 0.01
Net realized and unrealized gain
on investments and foreign
currency transactions 1.74 2.60 1.37 1.13 0.84
-------- -------- ------- ------- ------
Total from investment
operations $ 1.77 $ 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 (1.92) (0.90) (1.73) (0.70) --
-------- -------- ------- ------- ------
Total distributions declared
to shareholders $ (1.92) $ (0.90) $ (1.73) $ (0.77) $ --
-------- -------- ------- ------- ------
Net asset value - end of period $ 18.30 $ 18.45 $ 16.68 $ 16.95 $16.56
-------- -------- ------- ------- ------
Total return++ 10.04%++ 16.72% 10.16% 7.03% 5.41%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.67%+ 1.65% 1.61% 1.54% 1.68%+
Net investment income 0.34%+ 0.38% 0.58% 0.15% 0.94%+
Portfolio turnover 37% 83% 73% 99% 70%
Average commission rate### $ 0.0194 $ 0.0200 $ -- $ -- $ --
Net assets at end of period (000
omitted) $128,343 $ 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.
# Per share data for the periods subsequent to October 31, 1993, are based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for Funds with fiscal years beginning on or
after September 1, 1995.
++ Total returns for Class A shares do not include the applicable sales charge. If
the charge had been included, the results would have been lower.
</TABLE>
See notes to financial statements
18
<PAGE> 21
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------
<CAPTION>
Six Months Eleven
Ended Months
April 30, Year Ended October 31, Ended
1997 ---------------------------- October 31,
(Unaudited) 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $ 18.36 $ 16.55 $ 16.78 $ 16.53 $ 13.50
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment loss $ (0.04) $ (0.08) $ (0.05) $ (0.17) $ (0.10)
Net realized and unrealized
gain on investments and
foreign currency
transactions 1.74 2.60 1.37 1.13 3.28
-------- -------- -------- -------- --------
Total from investment
operations $ 1.70 $ 2.52 $ 1.32 $ 0.96 $ 3.18
-------- -------- -------- -------- --------
Less distributions declared to
shareholders -
From net investment income $ -- $ -- $ -- $ (0.01) $ --
From net realized gain on
investments and foreign
currency transactions (1.78) (0.71) (1.55) (0.70) (0.15)
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (1.78) $ (0.71) $ (1.55) $ (0.71) $ (0.15)
-------- -------- -------- -------- --------
Net asset value - end of period $ 18.28 $ 18.36 $ 16.55 $ 16.78 $ 16.53
-------- -------- -------- -------- --------
Total return 9.60%++ 15.75% 9.07% 5.91% 23.80%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.43%+ 2.45% 2.55% 2.58% 2.66%+
Net investment loss (0.42)%+ (0.44)% (0.35)% (1.01)% (0.71)%+
Portfolio turnover 37% 83% 73% 99% 70%
Average commission rate### $ 0.0194 $ 0.0200 $ -- $ -- $ --
Net assets at end of period
(000 omitted) $209,941 $182,139 $156,286 $175,438 $145,575
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to October 31, 1993, are based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or
after September 1, 1995.
</TABLE>
See notes to financial statements
19
<PAGE> 22
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------
<CAPTION>
Year Ended November 30, 1992 1991 1990 1989 1988 1987*
- -------------------------------------------------------------------------------------------
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 $ 12.40 $ 12.94 $ 12.96 $ 11.21 $ 10.12 $ 8.47
-------- ------- ------- ------- ------- --------
Income from investment
operations -
Net investment income
(loss) $ (0.04) $ 0.17 $ 0.13 $ 0.09 $ 0.14 $ (0.02)
Net realized and unrealized
gain (loss) on
investments and foreign
currency transactions 1.17 (0.37) 0.14 2.03 0.95 1.67
-------- ------- ------- ------- ------- --------
Total from investment
operations $ 1.13 $ (0.20) $ 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 (0.03) (0.15) (0.29) (0.12) -- --
From paid-in capital -- (0.19) -- (0.04) -- --
-------- ------- ------- ------- ------- --------
Total distributions
declared to
shareholders $ (0.03) $ (0.34) $ (0.29) $ (0.37) $ -- $ --
-------- ------- ------- ------- ------- --------
Net asset value - end of
period $ 13.50 $ 12.40 $ 12.94 $ 12.96 $ 11.21 $ 10.12
-------- ------- ------- ------- ------- --------
Total return 9.13% (1.57)% 2.02% 19.58% 10.77% 19.48%++
Ratios (to average net assets)/Supplemental data:
Expenses 2.91% 2.88% 2.93% 3.05% 2.48% 2.50%+
Net investment income
(loss) (0.31)% 1.35% 1.07% 0.77% 1.29% (0.29)%+
Portfolio turnover 110% 160% 173% 190% 276% 272%
Net assets at end of period
(000 omitted) $101,550 $82,890 $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
<TABLE>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Ended
April 30, Year Ended October 31,
1997 --------------------------------
(Unaudited) 1996 1995 1994***
- --------------------------------------------------------------------------------------------
Class C
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 18.24 $ 16.53 $ 16.80 $ 16.75
-------- -------- -------- --------
Income from investment operations# -
Net investment loss $ (0.04) $ (0.06) $ (0.05) $ (0.09)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.73 2.57 1.37 0.14
-------- -------- -------- --------
Total from investment operations $ 1.69 $ 2.51 $ 1.32 $ 0.05
-------- -------- -------- --------
Less distributions declared to
shareholders from net realized gain on
investments and foreign currency
transactions $ (1.84) $ (0.80) $ (1.59) $ --
-------- -------- -------- --------
Net asset value - end of period $ 18.09 $ 18.24 $ 16.53 $ 16.80
-------- -------- -------- --------
Total return 9.62%++ 15.82% 9.20% 0.30%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.41%+ 2.39% 2.49% 2.55%+
Net investment loss (0.40)%+ (0.34)% (0.31)% (0.72)%+
Portfolio turnover 37% 83% 73% 99%
Average commission rate### $ 0.0194 $ 0.0200 $ -- $ --
Net assets at end of period (000
omitted) $ 10,843 $ 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.
# 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
21
<PAGE> 24
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights -- continued
- ------------------------------------------------------------------------------------
<CAPTION>
Period Ended
April 30,
1997****
(Unaudited)
-----------------------------------------------------------------------------------
Class I
-----------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 17.57
-------
Income from investment operations# -
Net investment income $ 0.08
Net realized and unrealized gain on investments and foreign currency
transactions 0.67
-------
Total from investment operations $ 0.75
-------
Less distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions $ --
-------
Net asset value - end of period $ 18.32
-------
Total return 4.27%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.58%+
Net investment income 1.20%+
Portfolio turnover 37%
Average commission rate### $0.0194
Net assets at end of period (000 omitted) $ 159
**** For the period from the commencement of offering of Class I shares, January 2,
1997, to April 30, 1997.
+ 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
22
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(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 of 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
23
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
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 gain 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 counterparts 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 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.
24
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
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. 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.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B, Class C, and Class I shares. The four classes of shares differ in their
respective 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
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
class has preferential dividend rights; differences in per share dividend rates
are generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective 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 $5,085 for the six months
ended April 30, 1997.
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal,
compliance, shareholder communications and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee up to 0.015% per annum of the Fund's average daily net
assets, provided that the administrative fee is not assessed on Fund assets that
exceed $3 billion.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$312,854 for the six months ended April 30, 1997, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A
26
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
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 $19,924 for the six
months ended April 30, 1997. Payment of the 0.10% per annum Class A distribution
fee will commence on such date as the Trustees of the Fund may determine. Fees
incurred under the distribution plan during the six months ended April 30, 1997,
were 0.25% of average daily net assets attributable to Class A shares on an
annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be additional consideration for
services rendered by the dealer with respect to Class B and Class C shares. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $23,914 and $2,352 for Class B and Class C shares,
respectively, for the six months ended April 30, 1997. Fees incurred under the
distribution plan during the six months ended April 30, 1997, were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis.
Purchases over $1 million of Class A shares and certain purchases 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 six months
ended April 30, 1997, were $1,359, $112,899, and $2,314 for Class A, Class B,
and Class C shares, respectively.
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
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 Fund at an effective annual
rate of up to 0.13% attributable to Class A shares. Prior to January 1, 1997,
the fee was calculated as a percentage of the average daily net assets of each
class of shares at an effective annual rate of up to 0.15%, up to 0.22%, and up
to 0.15% attributable to Class A, Class B, and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$134,051,432 and $109,780,620, 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 $296,102,637
------------
Gross unrealized appreciation $ 59,720,556
Gross unrealized depreciation (9,982,272)
------------
Net unrealized appreciation $ 49,738,284
------------
</TABLE>
(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>
Six Months Ended April 30, 1997 Year Ended October 31, 1996
---------------------------- ----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,419,189 $ 154,107,317 8,201,319 $ 145,253,452
Shares issued to shareholders in
reinvestment of distributions 527,189 9,273,242 172,379 2,799,430
Shares transferred to Class I (1,626) (28,569)
Shares reacquired (7,077,757) (129,903,814) (6,355,583) (113,016,532)
---------- ------------- ---------- -------------
Net increase 1,866,995 $ 33,448,176 2,018,115 $ 35,036,350
---------- ------------- ---------- -------------
</TABLE>
28
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
Class B Shares
<TABLE>
<CAPTION>
Six Months Ended April 30, 1997 Year Ended October 31, 1996
------------------------------- ----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,624,673 $ 85,008,266 7,209,459 $ 125,696,939
Shares issued to shareholders in
reinvestment of distributions 972,327 17,122,677 381,169 6,206,034
Shares reacquired (4,032,681) (73,788,705) (7,113,969) (124,208,958)
---------- ------------ ---------- -------------
Net increase 1,564,319 $ 28,342,238 476,659 $ 7,694,015
---------- ------------ ---------- -------------
</TABLE>
Class C Shares
<TABLE>
<CAPTION>
Six Months Ended April 30, 1997 Year Ended October 31, 1996
------------------------------- ----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 368,993 $ 6,726,384 381,981 $ 6,695,633
Shares issued to shareholders in
reinvestment of distributions 39,609 690,382 7,678 124,070
Shares reacquired (220,583) (4,024,966) (154,314) (2,721,665)
-------- ----------- -------- -----------
Net increase 188,019 $ 3,391,800 235,345 $ 4,098,038
-------- ----------- -------- -----------
</TABLE>
Class I Shares
<TABLE>
<CAPTION>
Period Ended April 30, 1997*
----------------------------
Shares Amount
- --------------------------------------------------------------
<S> <C> <C>
Shares transferred from Class A 1,626 $ 28,569
Shares sold 7,054 125,067
Shares reacquired -- --
-------- ----------
Net increase 8,680 $ 153,636
-------- ----------
</TABLE>
*For the period from the commencement of offering of Class I shares, January 2,
1997, to April 30, 1997.
(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 $400 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 six months ended
April 30, 1997, was $1,394.
(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
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
instruments include forward foreign currency exchange contracts. The notional or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. A summary of obligations under these
financial instruments at April 30, 1997, as follows:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Contracts to Contracts Net
Deliver/Receive In Exchange for At Value Appreciation
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales
6/30/97 SEK 35,558,276 $5,065,137 $4,543,992 $521,145
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net receivable of $280,838.
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:
SEK = Swedish Kronor
(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 April 30, 1997, the
Fund owned the following restricted securities (consisting of 1.2% of its net
assets). 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 of 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>
Catalana Occidente 4/22/97 6,818 $ 348,505 $ 358,842
Hong Leong Finance Ltd. 5/16/95-9/27/95 774,000 2,699,819 2,396,020
Jarvis Hotels PLC 6/21/96-7/02/96 624,000 1,676,830 1,569,765
----------
$4,324,627
</TABLE>
---------------------------------------------------------------------
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.
30
<PAGE> 33
INTRODUCING A QUICK AND EASY WAY TO LEARN SOME FINANCIAL BASICS:
THE ABCs OF INVESTING
part of MFS(R) Heritage Planning(SM)
[PICTURE]
This series of brief messages provides an overview of investment topics,
including:
- - Dollar-cost Averaging: a simple method of investing that could work for
anyone
- - Interest Rate Changes: what every fixed-income investor should know
- - Lump-sum Rollovers: how to handle a windfall
- - Professional Financial Advisers: why even smart investors may need one
- - Straw into Gold: tips for weaving small lifestyle changes into dollars to
invest
- - Weathering Market Downturns: how to maintain perspective
- - Basic Steps Smart Investors Take Automatically
The series will include messages on other topics as they become available.
You can read through each topic quickly -- in five minutes at most. Of course,
these materials are not designed to turn you into an expert. Your financial
adviser can provide more information on any of the ABC subjects. A conversation
with your adviser might also provide an opportune occasion to review your
portfolio and to assess your present and future financial needs.
To request your free copy of The ABCs OF INVESTING series, call MFS at
1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time.
As part of MFS Heritage Planning, your adviser has access to a wide range of MFS
materials he or she would be happy to share with you on topics related to the
intergenerational concerns of people today. These include financing college
tuition and a secure retirement, eldercare, tax-smart gifting strategies, estate
and health care planning, and other issues.
31
<PAGE> 34
THE MFS FAMILY OF FUNDS(R)
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 1-800-225-2606
any business day from 8 a.m. to 8 p.m. Eastern time. This material should be
read carefully before investing or sending money.
<TABLE>
<S> <C>
STOCK WORLD
- -------------------------------------------- --------------------------------------------
Massachusetts Investors Trust MFS(R)/Foreign & Colonial Emerging Markets
Equity Fund
Massachusetts Investors Growth Stock Fund
MFS(R)/Foreign & Colonial International
MFS(R) Capital Growth Fund Growth Fund
MFS(R) Emerging Growth Fund MFS(R)/Foreign & Colonial International
Growth and Income Fund
MFS(R) Gold & Natural Resources Fund
MFS(R) World Asset Allocation Fund(SM)
MFS(R) Growth Opportunities Fund
MFS(R) World Equity Fund
MFS(R) Managed Sectors Fund
MFS(R) World Governments Fund
MFS(R) OTC Fund
MFS(R) World Growth Fund
MFS(R) Research Fund
MFS(R) World Total Return Fund
MFS(R) Research Growth and Income Fund
NATIONAL TAX-FREE BOND
MFS(R) Strategic Growth Fund --------------------------------------------
MFS(R) Municipal Bond Fund
MFS(R) Value Fund
MFS(R) Municipal High Income Fund
STOCK AND BOND
- -------------------------------------------- MFS(R) Municipal Income Fund
MFS(R) Total Return Fund
STATE TAX-FREE BOND
MFS(R) Utilities Fund --------------------------------------------
Alabama, Arkansas, California, Florida,
BOND
- -------------------------------------------- Georgia, Maryland, Massachusetts,
MFS(R) Bond Fund
Mississippi, New York, North Carolina,
MFS(R) Government Mortgage Fund
Pennsylvania, South Carolina, Tennessee,
MFS(R) Government Securities Fund
Virginia, West Virginia
MFS(R) High Income Fund
MONEY MARKET
MFS(R) Intermediate Income Fund --------------------------------------------
MFS(R) Cash Reserve Fund
MFS(R) Strategic Income Fund
MFS(R) Government Money Market Fund
LIMITED MATURITY BOND
- -------------------------------------------- MFS(R) Money Market Fund
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
</TABLE>
32
<PAGE> 35
MFS(R) World Equity 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 advisers)
Walter E. Robb, III - President and Treasurer, Benchmark Advisors, 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
David Mannheim*
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
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.
WORLD WIDE WEB
www.mfs.com
[LOGO] For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category.
The firm achieved a 3.48 overall score on a scale of 1 to 4 in the 1996
survey. A total of 110 firms responded, offering input on the quality of service
they received from 29 mutual fund companies nationwide. The survey contained
questions about service quality in 15 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
33
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C>
------------
MFS(R) WORLD [DALBAR #1 LOGO] BULK RATE
EQUITY FUND U.S. POSTAGE
500 Boylston Street PAID
Boston, MA 02116-3741 MFS
------------
[MFS LOGO](SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741 MWE-3 6/97 53M 04/204/304/804
</TABLE>
