<PAGE>
[LOGO] MFS (SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) WORLD
EQUITY FUND
SEMIANNUAL REPORT o APRIL 30, 1998
[graphic omitted]
<PAGE>
IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT(SM)
[Photo of A. Keith Brodkin] On February 2, 1998, Keith Brodkin, a friend and
leader to everyone at MFS, died unexpectedly at
age 62. His thoughtful letters to shareholders on
the markets and economy have been an integral
part of MFS shareholder reports like this one for
many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $80 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
A Discussion with the Portfolio Manager ................................... 4
Portfolio Manager's Profile ............................................... 8
Fund Facts ................................................................ 9
Performance Summary ....................................................... 9
Portfolio Concentration ................................................... 11
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 18
Notes to Financial Statements ............................................. 26
Trustees and Officers ..................................................... 33
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HIGHLIGHTS
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o FOR THE SIX MONTHS ENDED APRIL 30, 1998, CLASS A SHARES OF THE FUND PROVIDED
A TOTAL RETURN AT NET ASSET VALUE OF 19.13%, CLASS B SHARES 18.85%, CLASS C
SHARES 18.71%, AND CLASS I SHARES 19.34%. (SEE PERFORMANCE SUMMARY FOR MORE
INFORMATION.)
o THE FUND HAS BENEFITED FROM STRONG PERFORMANCE IN SEVERAL OF THE MARKETS IN
WHICH IT INVESTS, PARTICULARLY IN EUROPE, AS WELL AS FROM GOOD PERFORMANCE
BY SEVERAL OF ITS LARGER HOLDINGS.
o THE FUND'S GEOGRAPHIC ALLOCATIONS HAVE CHANGED LITTLE, WITH THE UNITED
STATES MOVING FROM APPROXIMATELY 33% OF THE PORTFOLIO SIX MONTHS AGO TO 36%
AND EUROPE GOING FROM 40% TO 43%. OFFSETTING THESE INCREASES, THE ASIA/
PACIFIC WEIGHTING HAS GONE FROM 20% OF THE PORTFOLIO TO 15%.
o THE FUND'S LARGEST INDUSTRY SECTOR IS FINANCIAL SERVICES, IN WHICH COMPANIES
IN EUROPE AND THE UNITED STATES HAVE BENEFITED FROM A COMBINATION OF FALLING
INTEREST RATES AND CONSOLIDATION, WHICH HAS CREATED A VERY FAVORABLE
ENVIRONMENT.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly accepted
measures, equity valuations appear to have risen to a point at which the stock
market has become more vulnerable to changes in the investment environment such
as rising inflation and interest rates or a slowing economy. As a result, while
we continue to hold a favorable long-term outlook for the equity markets, we
also believe that a market correction is possible in the near term. In such a
correction, equity prices would remain relatively flat or decline, possibly for
an extended period.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive than
most fixed-income investments, while low inflation helps control companies'
costs, such as for raw materials, wages, and benefits. The near-term outlook for
a continuation of this environment appears relatively favorable. However, this
year has seen a marked slowdown in corporate earnings. This means that as equity
prices continue to rise, price-to-earnings (P/E) ratios, or the amount an
investor pays for a stock in relation to the company's earnings per share, also
go up. A year ago, the average P/E ratio for stocks in the unmanaged Standard &
Poor's 500 Composite Index stood at approximately 21; this spring, the average
P/E was 33% higher, at about 28. In some cases, such as with some of the newer
companies associated with the Internet, P/Es have soared to levels that are
unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 8% to 10% this year. However, just as no one can predict market
cycles, so too no one can predict economic cycles -- except to say that these
cycles do exist and that an economic slowdown at some point is inevitable.
Given this reality, we believe it is prudent to remind investors of the need to
take a long-term view and to diversify their investments across a range of asset
classes, including mutual funds that focus on bonds and international
investments as well as on the U.S. stock market. The likelihood of an eventual
market correction also makes it important for us to use original, bottom-up
research to find companies that we think can keep growing or gain market share
in the face of the occasional downturn. To help achieve this, and to provide the
broadest possible coverage of industry sectors and individual companies, MFS
continues to increase its number of full-time research analysts. These analysts
thoroughly investigate each company's earnings potential and position in its
industry as well as the overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation. Every
year, both fixed-income and equity managers meet with thousands of credit
issuers and companies. They also attend many presentations, closely follow
sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to both
the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders -- regardless of changes in the
overall market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
May 14, 1998
JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED MFS IN 1983. AFTER
FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO MANAGER, HE WAS NAMED CHIEF
EQUITY OFFICER IN 1987 AND PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS IN
1993. MR. SHAMES WAS APPOINTED CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY
1998.
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of David R. Mannheim]
David R. Mannheim
For the six months ended April 30, 1998, Class A shares of the Fund provided a
total return of 19.13%, Class B shares 18.85%, Class C shares 18.71%, and Class
I shares 19.34%. These returns assume the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 19.08% return for the
Morgan Stanley Capital International (MSCI) World Index, a broad, unmanaged
index of global equities.
Q. COULD YOU DISCUSS THE FUND'S RECENT PERFORMANCE?
A. First of all, the markets in which we invest have been very strong, while
several of the Fund's larger holdings have performed well. The early fallout
from the Asian turmoil at the end of October represented a low point for the
U.S. and European markets during the period. The Pacific region, including
Japan, had the same initial drop, but it hasn't done anything since then.
The MSCI World Index was up about 34% in local currency terms during the
period, the United States was up about 23%, as measured by the Standard &
Poor's 500 Composite Index, an unmanaged index of common stock total return
performance, and the MSCI Pacific Index was down about 1%. That's been going
on for a while, so the Pacific piece of the MSCI World Index is getting
smaller and smaller. If you look at major currencies over the past six
months, the yen weakened 10% against the dollar, the German mark weakened
4%, and the Swiss franc weakened 7%, while the British pound was about flat.
Also, the smaller-country Asian currencies were very weak. So currencies
have continued to be a drag on performance. In terms of specific stocks, a
number of the Fund's larger holdings, including United Healthcare, Viacom,
Henkel, and Anglo Irish Bank, were strong contributors.
Q. IN GENERAL, HOW WOULD YOU CHARACTERIZE THE INVESTMENT ENVIRONMENT OF THE
PAST YEAR, PARTICULARLY AS IT RELATES TO THE FUND?
A. The period started off with the uncertainty surrounding Asia, with the end
of October representing the bottom for most markets. Since then, corporate
earnings in developed markets have not been overly impacted by Asia and
inflation has continued to come down, partly due to the crisis. So the
environment for equities has remained very favorable. Companies are
delivering strong earnings, and the stock markets have reacted favorably.
Q. LET'S TALK ABOUT SOME OF THE MAJOR MARKETS IN WHICH THE FUND IS INVESTED.
A. The equity allocation to the Americas hasn't changed very much. It was 40%
six months ago; it's now 42%. The United States represented approximately
33% of the portfolio six months ago; it's now 36%, while Europe has gone
from 40% to 43%. Offsetting these increases, the Asia/Pacific weighting has
gone from 20% of the portfolio to 15%. Most of that came out of Japan, which
went from 14% to 9%. Our position in Southeast Asia hasn't changed much and,
in fact, is higher in certain places, like Malaysia. The main reason for the
overweighting in Europe is because that's where we're finding better ideas.
Earnings growth is accelerating in Europe, particularly on the continent,
while we see earnings decelerating in the United States. Also, valuations
are slightly cheaper in Europe than they are in the United States and Japan.
Q. HOW MIGHT THE ASIAN CRISIS CHANGE THE INVESTMENT LANDSCAPE?
A. One effect would be slowing global growth, which we believe will happen.
Markets in Asia have declined dramatically, both in local currency and in
dollar terms. We are worried about companies that might be overexposed to
Asia but, on the other hand, a lot of good stocks have sold off because of
their Asian exposure. So we're looking for opportunities, trying to evaluate
the fundamentals for each company and determine what the fallout from Asia
might be.
Q. DO YOU SEE A MAJOR IMPROVEMENT IN ASIA ANYTIME SOON?
A. We can't predict whether those economies are going to bottom out in the next
year or two, but we think earnings estimates for many of the companies there
are still too high for the coming year. However, by focusing on individual
companies, we do see opportunities. We do see a light at the end of the
tunnel, but we don't know how far away the light is.
Q. WHAT'S IN LATIN AMERICA?
A. We've been relatively neutral on Latin America, given the effect of the
Asian crisis on emerging markets. Today, we have just under 4% of equities
in Latin America, whereas six months ago we were at 3%, so it's come up a
little. For the first time, we've added Brazil, but while it's now the
largest Latin American position in the Fund, it still only comprises 2% of
the portfolio.
Q. THE FUND'S LARGEST INDUSTRY SECTOR IS FINANCIAL SERVICES. WHY DO YOU LIKE
THIS INDUSTRY?
A. While financial services is the largest sector in the Fund, it still is
underweighted relative to the MSCI World Index. However, both in Europe and
the United States, these companies have benefited from a combination of
falling interest rates and consolidation, which has created a very favorable
environment. The United States is ahead of Europe in terms of consolidation,
but we're seeing a lot more of it in Europe, both within and among various
markets as well as between banks and insurance companies.
Q. COULD YOU TALK ABOUT SOME STOCKS OR COUNTRIES THAT PERFORMED BETTER THAN
YOU EXPECTED?
A. In the United States, there were a number of outperformers, two of which
were among our larger holdings. United Healthcare was up about 50% during
the period, and Viacom was up 90%. So they were significant contributors. We
had several other holdings that were also up significantly, including
Cadence Design Systems and Computer Sciences in the United States. In
Europe, Henkel, a German consumer goods company, was up 54%, Anglo Irish
Bank was up 66%, and Union des Assurances des Federales, a French insurance
company, was up 45%. Some of the Fund's Asian holdings also performed very
well, although they were smaller positions. For example, Li & Fung, a Hong
Kong wholesaler, was up 64%. Wing Hang Bank in Hong Kong was up 13% for the
six months, but for the last three months of that period it was up 100%.
Q. NOW, WHAT ABOUT SOME STOCKS THAT DIDN'T DO AS WELL AS YOU WOULD HAVE LIKED?
A. A few of our larger U.S. holdings underperformed, such as AmeriSource
Health, which was down 7%, while Kimberly Clark was flat and Hilton Hotels
was up just 7%. Rite Aid, the fourth largest holding in the Fund, was up
10%, while the market was up 20%. Japan, meanwhile, has been a two-tiered
market in which the globally competitive companies in sectors such as
electronics and autos have done very well over the past couple of years,
while domestically oriented companies have underperformed. However, in
January the reverse happened, with all the domestically oriented companies
making big gains. There was some hope that reform measures announced around
that time would help the domestic economy, but it hasn't happened, so these
stocks have come back down. We have no exposure to those companies, so the
Fund underperformed the MSCI World Index in January. While we own some
stocks in Southeast Asia, we're not banking on an upturn in the short term.
We're looking ahead two or three years, when we expect the fundamentals to
be much better, especially considering today's valuations, which are very
compelling.
Q. WHAT DO YOU SEE AS THE BIGGEST RISKS TO YOUR MARKETS AND THE FUND GOING
FORWARD?
A. The obvious concern is whether anything might lead to higher inflation and,
therefore, higher interest rates. We don't expect that because the companies
we talk to don't foresee having pricing power. That's the main concern,
because economic growth has remained strong in Europe and the United States.
However, if the Federal Reserve Board or central banks in Europe get
concerned that this growth could lead to inflation, that could lead to
higher interest rates.
Q. WHAT KIND OF INVESTMENT ENVIRONMENT DO YOU SEE FOR THE REST OF 1998?
A. We do not expect the above-average returns in the equity markets we've seen
in the past few years and so far in 1998 to continue. That being said, we
still see very little inflationary pressure, which means interest rates
should stay low, and that should support valuations. In certain markets,
such as continental Europe, earnings growth is accelerating. In others, such
as the United States, earnings growth might be decelerating, but it's still
high by historical standards, which should continue to drive stock prices.
/s/ David Mannheim
David R. Mannheim
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGER'S PROFILE
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DAVID R. MANNHEIM IS A SENIOR VICE PRESIDENT OF MFS(R) INVESTMENT
MANAGEMENT(SM) AND PORTFOLIO MANAGER OF MFS(R) WORLD EQUITY FUND, MFS(R)
INTERNATIONAL GROWTH FUND, MFS(R) WORLD ASSET ALLOCATION FUND, MFS(R)
MERIDIAN(SM) GLOBAL EQUITY FUND, MFS(R) WORLD GROWTH FUND, THE INTERNATIONAL
SERIES, THE WORLD GROWTH SERIES, AND THE WORLD ASSET ALLOCATION SERIES OFFERED
THROUGH MFS/SUN LIFE ANNUITY PRODUCTS.
MR. MANNHEIM JOINED MFS IN 1988 AND WAS NAMED AN INVESTMENT OFFICER IN 1990,
ASSISTANT VICE PRESIDENT IN 1991, VICE PRESIDENT AND PORTFOLIO MANAGER OF MFS
WORLD EQUITY FUND IN 1992, AND SENIOR VICE PRESIDENT IN 1997.
HE IS A GRADUATE OF AMHERST COLLEGE AND THE MASSACHUSETTS INSTITUTE OF
TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT.
<PAGE>
FUND FACTS
OBJECTIVE: SEEKS CAPITAL APPRECIATION BY INVESTING PRIMARILY IN
STOCKS OF U.S. AND NON-U.S. ISSUERS.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 7, 1993
CLASS B DECEMBER 29, 1986
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $588.8 MILLION NET ASSETS AS OF APRIL 30, 1998
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in net
asset value, including reinvestment of dividends.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH APRIL 30, 1998
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
<CAPTION>
Cumulative Total Return +19.13% +30.79% +85.04% +132.78% +226.18%
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Average Annual Total Return -- +30.79% +22.77% + 18.41% + 12.55%
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SEC Results -- +23.27% +20.37% + 17.02% + 11.89%
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CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +18.85% +29.84% +80.78% +123.21% +212.81%
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Average Annual Total Return -- +29.84% +21.82% + 17.42% + 12.08%
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SEC Results -- +25.84% +21.14% + 17.21% + 12.08%
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<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +18.71% +29.80% +80.87% +123.78% +213.65%
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Average Annual Total Return -- +29.80% +21.84% + 17.48% + 12.11%
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SEC Results -- +28.80% +21.84% + 17.48% + 12.11%
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<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +19.34% +31.20% +83.29% +126.36% +217.30%
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Average Annual Total Return -- +31.20% +22.38% + 17.75% + 12.24%
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</TABLE>
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months. Class I shares ("I") have no sales charge or Rule 12b-1 fees and are
only available to certain institutional investors.
A and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of B for periods prior to the inception of A and C. Because
operating expenses of A are lower than those of B, A performance generally would
have been higher than B performance. Operating expenses of C are not
significantly different from those of B. The B performance included in the A SEC
performance has been adjusted to reflect the maximum initial sales charge
generally applicable to A rather than the CDSC generally applicable to B. The C
SEC performance has been adjusted to reflect the lower CDSC generally applicable
to C rather than the CDSC generally applicable to B.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of I. Because operating expenses
of B are greater than those of I, I performance generally would have been higher
than B performance. The B performance included in the I performance has been
adjusted to reflect the fact that I have no CDSC.
Peformance results reflect any applicable expense subsidies and waivers, without
which the results would have been less favorable. Subsidies and waivers may be
rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably affected
by changes in interest rates and currency exchange rates, market conditions, and
the economic and political conditions of the countries where investments are
made. These risks may increase share price volatility.
PORTFOLIO CONCENTRATION AS OF APRIL 30, 1998
LARGEST STOCK SECTORS
Financial Services 20.9%
Other Sectors 19.2%
Technology 14.3%
Leisure 8.2%
Consumer Staples 8.1%
Retailing 8.0%
Health Care 7.9%
Basic Materials 6.8%
Utilities & Communications 6.6%
For a more complete breakdown, refer to the Portfolio of Investments.
TOP 10 STOCK HOLDINGS
COMPUTER ASSOCIATES HENKEL KGAA 1.8%
INTERNATIONAL, INC. 3.1% German consumer products company
U.S. computer software company
INTERNATIONAL BUSINESS MACHINES CORP. 1.8%
CANADIAN NATIONAL RAILWAY CO. 2.6% U.S. computer and business equipment
Railway and transportation company company
AKZO NOBEL N.V. 2.4% VIACOM, INC. 1.7%
Dutch chemical company U.S. entertainment, media, and publishing
company
RITE AID CORP. 2.3%
U.S. drug store chain BENCKISER N.V. 1.7%
Dutch cleaning products manufacturer
BRITISH AEROSPACE PLC 2.0%
British defense and aircraft SYNOPSYS, INC. 1.6%
company U.S. semiconductor design company
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- April 30, 1998
<TABLE>
<CAPTION>
Stocks - 90.9%
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ISSUER SHARES VALUE
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<S> <C> <C>
Foreign Stocks - 57.6%
Australia - 1.9%
QBE Insurance Group Ltd. (Insurance) 1,632,418 $ 7,481,438
Seven Network Ltd. (Entertainment) 1,112,000 3,988,756
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$ 11,470,194
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Brazil - 1.3%
Companhia Electric est Rio de Janeiro (Utilities -
Electric)* 3,692,800 $ 2,680,388
Companhia Paranaense de Energia, ADR (Utilities -
Electric) 208,800 2,975,400
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 18,000 2,193,750
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$ 7,849,538
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Canada - 2.7%
Canadian National Railway Co. (Railroads) 217,000 $ 14,118,563
Legacy Hotel Real Estate Investment Trust (Real
Estate)*## 304,100 1,891,502
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$ 16,010,065
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Chile - 1.0%
Chilectra S.A., ADR (Utilities - Electric) 207,000 $ 5,692,500
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Czechoslovakia - 0.3%
Tabak AS (Tobacco) 6,407 $ 1,686,514
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Finland - 2.2%
Huhtamaki Oy Group (Conglomerate) 51,400 $ 2,972,898
Pohjola Insurance Group (Insurance) 93,090 5,161,981
TT Tieto Oy (Computer Software - Systems) 25,000 4,590,357
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$ 12,725,236
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France - 3.8%
Renault S.A. (Automobiles) 49,256 $ 2,284,123
TOTAL S.A., "B" (Oils) 52,000 6,179,672
Television Francaise (Broadcasting) 44,000 6,179,672
Union des Assurances Federales S.A. (Insurance) 49,500 7,741,960
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$ 22,385,427
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Germany - 0.7%
Adidas-Salomon AG (Apparel and Textiles) 24,400 $ 4,045,138
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Greece - 0.6%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 113,800 $ 3,261,368
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Hong Kong - 1.0%
Li & Fung Ltd. (Wholesale) 1,204,000 $ 2,020,265
Liu Chong Hing Bank (Banks and Credit Cos.) 645,000 903,291
Peregrine Investment Holdings (Finance)* 902,000 0
Wing Hang Bank Ltd. (Banks and Credit Cos.) 1,114,600 3,136,274
------------
$ 6,059,830
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Ireland - 1.4%
Anglo Irish Bank Corp. PLC (Banks and Credit Cos.)* 3,180,748 $ 8,506,081
- -----------------------------------------------------------------------------------------------
Italy - 1.4%
Banca Carige S.p.A. (Banks and Credit Cos.) 321,000 $ 3,043,770
ERG S.p.A. (Oils)* 532,600 2,299,642
Telecom Italia S.p.A., Saving Shares
(Telecommunications) 724,000 2,627,526
------------
$ 7,970,938
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Japan - 8.7%
Canon, Inc. (Office Equipment) 238,000 $ 5,617,102
Eisai Co. Ltd. (Pharmaceuticals) 186,000 2,664,756
Kinki Coca-Cola Bottling Co. (Beverages) 119,000 1,399,789
Kirin Beverage Corp. (Beverages) 239,000 4,667,546
Nitto Denko Corp. (Industrial Goods and Services) 166,000 2,528,427
NTT Data Corp. (Computer Software - Services) 97 4,183,683
Osaka Sanso Kogyo Ltd. (Chemicals) 484,000 1,003,619
Rohm Co. (Electronics) 32,000 3,604,886
Sankyo Co. Ltd. (Pharmaceuticals) 96,000 2,374,303
Sony Corp. (Electronics) 97,500 8,094,367
Takeda Chemical Industries (Pharmaceuticals) 157,000 4,474,891
TDK Corp. (Special Products and Services) 39,000 3,076,007
Tokyo Broadcasting System, Inc. (Broadcasting) 219,000 2,774,242
Ushio, Inc. (Electronics) 511,000 4,658,415
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$ 51,122,033
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Malaysia - 1.2%
New Straits Times Press Berhad (Printing and
Publishing) 1,118,000 $ 1,262,258
Tanjong PLC (Entertainment) 2,426,000 5,543,279
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$ 6,805,537
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Mexico - 0.1%
TV Azteca, S.A. de C.V., ADR (Broadcasting)* 28,500 $ 530,813
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Netherlands - 7.0%
Akzo Nobel N.V. (Chemicals) 64,000 13,016,627
Benckiser N.V. (Consumer Goods and Services)* 161,000 9,393,260
IHC Caland N.V. (Marine Equipment)* 44,555 2,592,869
ING Groep N.V. (Financial Services)* 116,000 7,537,015
Koninklijke Ahrend Groep N.V.
(Consumer Goods and Services)* 120,024 4,157,601
Royal Dutch Petroleum Co. (Oils) 77,200 4,259,600
------------
$ 40,956,972
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Peru - 0.5%
Telefonica del Peru S.A., ADR (Telecommunications) 136,000 $ 3,009,000
- -----------------------------------------------------------------------------------------------
Poland - 0.1%
Bank Handlowy w Warszawie (Banks and Credit Cos.)*+ 27,500 $ 510,460
- -----------------------------------------------------------------------------------------------
Portugal - 2.5%
Banco Espirito Santo e Comercial de Lisboa S.A.
(Banks and Credit Cos.) 57,500 $ 2,751,196
Banco Totta E Acores (Banks and Credit Cos.) 196,000 7,458,699
Portugal Telecom S.A. (Utilities - Telephone) 86,000 4,622,173
------------
$ 14,832,068
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Singapore - 1.1%
Hong Leong Finance Ltd. (Finance)+ 1,340,000 $ 2,031,586
Overseas Union Bank (Banks and Credit Cos.) 1,185,000 4,491,472
------------
$ 6,523,058
- -----------------------------------------------------------------------------------------------
Spain - 1.6%
Acerinox S.A. (Iron and Steel) 26,000 $ 4,214,187
Repsol S.A. (Oils) 93,000 5,095,807
------------
$ 9,309,994
- -----------------------------------------------------------------------------------------------
Sweden - 3.3%
Astra AB (Pharmaceuticals) 285,333 $ 5,677,168
Skandia Forsakrings AB (Insurance) 49,000 3,412,274
Sparbanken Sverige AB, "A" (Banks and Credit Cos.) 205,000 6,409,561
Volvo AB (Automobiles) 142,200 4,152,093
------------
$ 19,651,096
- -----------------------------------------------------------------------------------------------
Switzerland - 2.2%
Ciba Specialty AG (Chemicals) 50,235 $ 6,078,435
Clariant AG (Chemicals) 2,700 2,907,000
Novartis AG (Pharmaceuticals) 2,361 3,903,520
------------
$ 12,888,955
- -----------------------------------------------------------------------------------------------
United Kingdom - 10.6%
Aegis Group PLC (Advertising) 104,300 $ 160,381
ASDA Group PLC (Supermarkets) 1,759,800 5,890,011
Avis Europe PLC (Auto Rental)## 973,000 3,756,688
British Aerospace PLC (Aerospace and Defense)* 331,000 11,053,600
British Petroleum PLC (Oils)* 484,201 7,647,822
Capital Radio PLC (Broadcasting) 117,200 1,243,889
Carlton Communicatons PLC (Broadcasting) 292,400 2,617,081
Diageo PLC (Food & Beverage Products) 235,544 2,803,059
Jarvis Hotels PLC (Restaurants and Lodging)+ 709,000 1,884,185
Kwik-Fit Holdings PLC (Automotive Repair Centers) 374,700 3,256,622
Lloyds TSB Group PLC (Banks and Credit Cos.)* 321,511 4,812,178
LucasVarity PLC (Automotive) 1,763,000 7,874,995
PowerGen PLC (Utilities - Electric)* 302,491 4,085,113
Tomkins PLC (Conglomerates) 943,000 5,547,977
------------
$ 62,633,601
- -----------------------------------------------------------------------------------------------
Venezuela - 0.4%
Compania Anonima Nacional Telefonos de Venezuela, ADR
(Telecommunications) 73,000 $ 2,445,500
- -----------------------------------------------------------------------------------------------
Total Foreign Stocks $338,881,916
- -----------------------------------------------------------------------------------------------
U.S. Stocks - 33.3%
Aerospace - 1.6%
Allied Signal, Inc. 53,900 $ 2,361,494
Lockheed-Martin Corp. 37,000 4,120,875
Raytheon Co., "A" 52,000 2,869,750
------------
$ 9,352,119
- -----------------------------------------------------------------------------------------------
Business Machines - 2.7%
International Business Machines Corp. 85,000 $ 9,849,375
Sun Microsystems, Inc.* 142,000 5,848,625
------------
$ 15,698,000
- -----------------------------------------------------------------------------------------------
Business Services - 1.8%
Computer Sciences Corp.* 99,800 $ 5,264,450
H & R Block, Inc. 124,000 5,580,000
------------
$ 10,844,450
- -----------------------------------------------------------------------------------------------
Chemicals - 1.7%
Air Products & Chemicals, Inc. 61,000 $ 5,303,188
Praxair, Inc. 98,500 4,955,781
------------
$ 10,258,969
- -----------------------------------------------------------------------------------------------
Computer Software - Systems - 5.0%
Cadence Design Systems, Inc.* 91,000 $ 3,304,438
Computer Associates International, Inc. 291,000 17,041,687
Synopsys, Inc.* 207,800 8,935,400
------------
$ 29,281,525
- -----------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.1%
Kimberly-Clark Corp. 122,000 $ 6,191,500
- -----------------------------------------------------------------------------------------------
Entertainment - 1.8%
Hearst-Argyle Television, Inc.* 27,800 $ 990,375
Viacom, Inc., "B"* 165,251 9,584,558
------------
$ 10,574,933
- -----------------------------------------------------------------------------------------------
Financial Institutions - 1.5%
Federal Home Loan Mortgage Corp. 182,000 $ 8,428,875
Heller Financial, Inc. 8,300 223,062
Waddell & Reed Financial, Inc. 3,500 86,625
------------
$ 8,738,562
- -----------------------------------------------------------------------------------------------
Insurance - 5.2%
CIGNA Corp. 41,600 $ 8,608,600
Hartford Financial Services Group, Inc. 46,000 5,094,500
Nationwide Financial Services, Inc., "A" 131,400 5,699,475
Reliastar Financial Corp. 161,000 7,345,625
Transamerica Corp. 36,000 4,158,000
------------
$ 30,906,200
- -----------------------------------------------------------------------------------------------
Medical and Health Products - 2.7%
American Home Products Corp. 62,000 $ 5,773,750
AmeriSource Health Corp., "A"* 107,000 5,831,500
Bristol-Myers Squibb Co. 42,000 4,446,750
------------
16,052,000
- -----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.4%
United Healthcare Corp. 120,000 $ 8,430,000
- -----------------------------------------------------------------------------------------------
Printing and Publishing
Pulitzer Publishing Co. 1,900 $ 162,213
- -----------------------------------------------------------------------------------------------
Railroads - 0.9%
Burlington Northern Santa Fe Railway Co. 52,960 $ 5,243,040
- -----------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.1%
Hilton Hotels Corp. 207,700 $ 6,633,419
- -----------------------------------------------------------------------------------------------
Stores - 3.4%
AutoZone, Inc.* 128,000 $ 3,864,000
Federated Department Stores, Inc.* 65,000 3,197,187
Rite Aid Corp. 397,000 12,753,625
------------
$ 19,814,812
- -----------------------------------------------------------------------------------------------
Supermarkets - 0.9%
Safeway, Inc.* 138,000 $ 5,278,500
- -----------------------------------------------------------------------------------------------
Utilities - Gas - 0.5%
KN Energy, Inc. 50,000 $ 2,934,375
- -----------------------------------------------------------------------------------------------
Total U.S. Stocks $196,394,617
- -----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $389,224,803) $535,276,533
- -----------------------------------------------------------------------------------------------
Rights
- -----------------------------------------------------------------------------------------------
Sweden
Mandamus AB (Real Estate)* 205,000 $ 222,481
- -----------------------------------------------------------------------------------------------
Warrants
Hong Kong
Peregrine Investment Holdings (Finance)*
(Identified Cost, $9,538) 76,900 $ --
- -----------------------------------------------------------------------------------------------
Preferred Stocks - 2.6%
- -----------------------------------------------------------------------------------------------
Germany - 2.6%
Henkel KGaA (Chemicals)* 130,000 $ 10,142,200
Wella AG (Cosmetics) 5,700 5,193,368
- -----------------------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $11,317,668) $ 15,335,568
- -----------------------------------------------------------------------------------------------
Short-Term Obligations - 6.8%
- -----------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -----------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 5/08/98 $10,000 $ 9,989,578
Federal Home Loan Mortgage Corp., due 5/07/98 - 5/15/98 12,310 12,292,549
Federal National Mortgage Assn., due 5/13/98 2,000 1,996,400
General Electric Capital Corp., due 5/01/98 15,700 15,700,000
- -----------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 39,978,527
- -----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $440,530,536) $590,813,109
Other Assets, Less Liabilities - (0.3)% (1,986,127)
- -----------------------------------------------------------------------------------------------
Net Assets - 100.0% $588,826,982
- -----------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
APRIL 30, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $440,530,536) $590,813,109
Cash 4,737
Receivable for Fund shares sold 8,200,789
Receivable for investments sold 3,188,145
Dividends receivable 1,449,839
Other assets 3,031
------------
Total assets $603,659,650
------------
Liabilities:
Payable for investments purchased $ 10,657,654
Payable for Fund shares reacquired 2,790,811
Net payable for foreign currency exchange contracts
subject to master netting agreements 1,026,381
Payable to affiliates -
Management fee 15,199
Administrative fee 329
Shareholder servicing agent fee 1,706
Distribution fee 129,499
Accrued expenses and other liabilities 211,089
------------
Total liabilities $ 14,832,668
------------
Net assets $588,826,982
============
Net assets consist of:
Paid-in capital $428,048,883
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 149,255,054
Accumulated undistributed net realized gain on
investments and foreign transactions 12,571,570
Accumulated net investment loss (1,048,525)
------------
Total $588,826,982
============
Shares of beneficial interest outstanding 26,156,865
==========
Class A shares:
Net asset value per share
(net assets of $263,040,360 / 11,660,194 shares of
beneficial interest outstanding) $22.56
======
Offering price per share (100 / 94.25) $23.94
======
Class B shares:
Net asset value and offering price per share
(net assets of $301,506,369 / 13,404,891 shares of
beneficial interest outstanding) $22.49
======
Class C shares:
Net asset value and offering price per share
(net assets of $23,693,240 / 1,065,810 shares of
beneficial interest outstanding) $22.23
======
Class I shares:
Net asset value, offering price, and redemption
price per share (net assets of $587,013 / 25,970
shares of beneficial interest outstanding) $22.60
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 1998
- ------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 3,463,295
Interest 768,170
Foreign taxes withheld (348,122)
-----------
Total investment income $ 3,883,343
-----------
Expenses -
Management fee $ 2,421,914
Trustees' compensation 21,302
Shareholder servicing agent fee 285,247
Distribution and service fee (Class A) 253,774
Distribution and service fee (Class B) 1,346,378
Distribution and service fee (Class C) 97,133
Administrative fee 32,415
Custodian fee 178,707
Printing 42,776
Postage 63,592
Auditing fees 21,407
Legal fees 803
Miscellaneous 222,308
-----------
Total expenses $ 4,987,756
Fees paid indirectly (25,955)
-----------
Net expenses $ 4,961,801
-----------
Net investment loss $(1,078,458)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $12,716,880
Foreign currency transactions (36,560)
-----------
Net realized gain on investments and foreign
currency transactions $12,680,320
-----------
Change in unrealized appreciation (depreciation) -
Investments $77,603,880
Translation of assets and liabilities in
foreign currencies (1,040,770)
-----------
Net unrealized gain on investments and
foreign currency translation $76,563,110
-----------
Net realized and unrealized gain on
investments and foreign currency $89,243,430
-----------
Increase in net assets from operations $88,164,972
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,078,458) $ (282,409)
Net realized gain on investments and foreign
currency transactions 12,680,320 24,215,038
Net unrealized gain on investments and foreign
currency translation 76,563,110 37,698,223
------------ ------------
Increase in net assets from operations $ 88,164,972 $ 61,630,852
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (989,161) $ --
From net investment income (Class C) (12,160) --
From net investment income (Class I) (3,499) --
From net realized gain on investments and foreign
currency transactions (Class A) (8,921,954) (10,136,119)
From net realized gain on investments and foreign
currency transactions (Class B) (13,016,806) (18,280,750)
From net realized gain on investments and foreign
currency transactions (Class C) (889,258) (828,520)
From net realized gain on investments and foreign
currency transactions (Class I) (23,223) --
------------ ------------
Total distributions declared to shareholders $(23,856,061) $(29,245,389)
------------ ------------
Net increase in net assets from Fund share transactions $ 86,643,917 $120,938,001
------------ ------------
Total increase in net assets $150,952,828 $153,323,464
Net assets:
At beginning of period 437,874,154 284,550,690
------------ ------------
At end of period (including accumulated net investment
loss of $1,048,525 and accumulated net investment
income of $1,034,753) $588,826,982 $437,874,154
============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED -------------------------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994 1993*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $20.09 $18.45 $16.68 $16.95 $16.56 $15.71
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.01 $ 0.08 $ 0.07 $ 0.09 $ 0.03 $ 0.01
Net realized and unrealized gain on
investments and foreign currency transactions 3.61 3.49 2.60 1.37 1.13 0.84
------ ------ ------ ------ ------ ------
Total from investment operations $ 3.62 $ 3.57 $ 2.67 $ 1.46 $ 1.16 $ 0.85
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.11) $ -- $ -- $ -- $ -- $ --
From net realized gain on investments and
foreign currency transactions (1.04) (1.93) (0.90) (1.73) (0.70) --
In excess of net investment income -- -- -- -- (0.07) --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.15) $(1.93) $(0.90) $(1.73) $(0.77) $ --
------ ------ ------ ------ ------ ------
Net asset value - end of period $22.56 $20.09 $18.45 $16.68 $16.95 $16.56
====== ====== ====== ====== ====== ======
Total return(+) 19.13%++ 20.81% 16.72% 10.16% 7.03% 5.41%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.63%+ 1.63% 1.65% 1.61% 1.54% 1.68%+
Net investment income 0.02%+ 0.42% 0.38% 0.58% 0.15% 0.94%+
Portfolio turnover 23% 65% 83% 73% 99% 70%
Net assets at end of period (000 omitted) $263,040 $167,390 $94,909 $52,164 $16,968 $2,076
*For the period from the inception of Class A, September 7, 1993, through 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.
(+)Total return for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED --------------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $19.97 $18.36 $16.55 $16.78 $16.53
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.07) $(0.07) $(0.08) $(0.05) $(0.17)
Net realized and unrealized gain on investments
and foreign currency transactions 3.63 3.46 2.60 1.37 1.13
------ ------ ------ ------ ------
Total from investment operations $ 3.56 $ 3.39 $ 2.52 $ 1.32 $ 0.96
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $(0.01)
From net realized gain on investments and
foreign currency transactions (1.04) (1.78) (0.71) (1.55) (0.70)
------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.04) $(1.78) $(0.71) $(1.55) $(0.71)
------ ------ ------ ------ ------
Net asset value - end of period $22.49 $19.97 $18.36 $16.55 $16.78
====== ====== ====== ====== ======
Total return 18.85%++ 19.74% 15.75% 9.07% 5.91%
Ratios (to average net assets)/
Supplemental data:
Expenses## 2.37%+ 2.39% 2.45% 2.55% 2.58%
Net investment loss (0.72)%+ (0.36)% (0.44)% (0.35)% (1.01)%
Portfolio turnover 23% 65% 83% 73% 99%
Net assets at end of period (000 omitted) $301,506 $253,354 $182,139 $156,286 $175,438
+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.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
PERIOD ENDED ----------------------------------------------------------
OCTOBER 31, 1993** 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------------
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 $13.50 $12.40 $12.94 $12.96 $11.21 $10.12
------ ------ ------ ------ ------ ------
Income from investment operations -
Net investment income (loss) $(0.10) $(0.04) $ 0.17 $ 0.13 $ 0.09 $ 0.14
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 3.28 1.17 (0.37) 0.14 2.03 0.95
------ ------ ------ ------ ------ ------
Total from investment operations $ 3.18 $ 1.13 $(0.20) $ 0.27 $ 2.12 $ 1.09
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $ -- $ -- $ -- $ -- $(0.21) $ --
From net realized gain on
investments and foreign currency
transactions (0.15) (0.03) (0.15) (0.29) (0.12) --
From paid in capital -- -- (0.19) -- (0.04) --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.15) $(0.03) $(0.34) $(0.29) $(0.37) $ --
------ ------ ------ ------ ------ ------
Net asset value - end of period $16.53 $13.50 $12.40 $12.94 $12.96 $11.21
====== ====== ====== ====== ====== ======
Total return 23.80%++ 9.13% (1.57)% 2.02% 19.58% 10.77%
Ratios (to average net assets)/
Supplemental data:
Expenses 2.66%+ 2.91% 2.88% 2.93% 3.05% 2.48%
Net investment income (loss) (0.71)%+ (0.31)% 1.35% 1.07% 0.77% 1.29%
Portfolio turnover 70% 110% 160% 173% 190% 276%
Net assets at end of period
(000 omitted) $145,575 $101,550 $82,890 $81,505 $50,827 $42,806
**For the eleven months ended October 31, 1993.
+Annualized.
++Not annualized.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED -------------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994***
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $19.78 $18.24 $16.53 $16.80 $16.75
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.07) $(0.06) $(0.06) $(0.05) $(0.09)
Net realized and unrealized gain on investments
and foreign currency transactions 3.57 3.44 2.57 1.37 0.14
------ ------ ------ ------ ------
Total from investment operations $ 3.50 $ 3.38 $ 2.51 $ 1.32 $ 0.05
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.01) $ -- $ -- $ -- $ --
From net realized gain on investments and
foreign currency transactions (1.04) (1.84) (0.80) (1.59) --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.05) $(1.84) $(0.80) $(1.59) $ --
------ ------ ------ ------ ------
Net asset value - end of period $22.23 $19.78 $18.24 $16.53 $16.80
====== ====== ====== ====== ======
Total return 18.71%++ 19.86% 15.82% 9.20% 0.30%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 2.40%+ 2.36% 2.39% 2.49% 2.55%+
Net investment loss (0.75)%+ (0.33)% (0.34)% (0.31)% (0.72)%+
Portfolio turnover 23% 65% 83% 73% 99%
Net assets at end of period (000 omitted) $23,693 $16,658 $ 7,503 $ 2,908 $ 1,440
***For the period from the inception of Class C, January 3, 1994, through October 31, 1994.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, 1997****
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.14 $17.57
------ ------
Income from investment operations# -
Net investment income $ 0.03 $ 0.13
Net realized and unrealized gain on investments and foreign
currency transactions 3.63 2.44
------ ------
Total from investment operations $ 3.66 $ 2.57
------ ------
Less distributions declared to shareholders -
From net investment income $(0.16) $ --
From net realized gain on investments and foreign
currency transactions (1.04) --
------ ------
Total distributions declared to shareholders $(1.20) $ --
------ ------
Net asset value - end of period $22.60 $20.14
====== ======
Total return 19.34%++ 14.63%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.36%+ 1.38%+
Net investment income 0.05%+ 0.77%+
Portfolio turnover 23% 65%
Net assets at end of period (000 omitted) $ 587 $ 472
****For the period from the inception of Class I, January 2, 1997, through October 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
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 changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the foreign
currency and translated into U.S. dollars at the closing daily exchange rate.
Securities for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that 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. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement and tax reporting
purposes as required by federal income tax regulations. Dividends received in
cash are recorded on the ex-dividend date. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or ex-interest
date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 1.00% of
average daily net assets.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $5,502 for the six months
ended April 30, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$69,766 for the six months ended April 30, 1998, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares. Payment of the 0.10% per annum Class A distribution fee will be
implemented on such date as the Trustees of the Fund may determine. MFD retains
the service fee for accounts not attributable to a securities dealer, which
amounted to $30,850 for the six months ended April 30, 1998. Fees incurred under
the distribution plan during the six months ended April 30, 1998, were 0.25% of
average daily net assets attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be consideration for services
rendered by the dealer with respect to Class B and Class C shares. MFD retains
the service fee for accounts not attributable to a securities dealer, which
amounted to $27,064 and $2,022 for Class B and Class C shares, respectively, for
the six months ended April 30, 1998. Fees incurred under the distribution plan
during the six months ended April 30, 1998, were 1.00% of average daily net
assets attributable to both Class B and Class C shares on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended April 30,
1998, were $2,381, $89,712, and $9,165 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of the
average daily net assets at an effective annual rate of up to 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$159,136,602 and $105,780,672, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $ 440,530,536
-------------
Gross unrealized appreciation $ 160,364,808
Gross unrealized depreciation (10,082,235)
-------------
Net unrealized appreciation $ 150,282,573
=============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 YEAR ENDED OCTOBER 31, 1997
------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 20,230,239 $427,589,821 18,465,899 $358,596,432
Shares issued to shareholders
in reinvestment of distributions 475,821 9,011,759 527,190 9,273,215
Shares transferred to Class I -- -- (1,626) (28,569)
Shares reacquired (17,378,407) (368,785,570) (15,804,320) (307,926,288)
------------ ------------ ------------ ------------
Net increase 3,327,653 $ 67,816,010 3,187,143 $ 59,914,790
============ ============ ============ ============
</TABLE>
<TABLE>
Class B Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 YEAR ENDED OCTOBER 31, 1997
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,537,646 $ 73,056,805 9,100,603 $175,632,414
Shares issued to shareholders
in reinvestment of distributions 642,250 12,158,577 972,341 17,122,902
Shares reacquired (3,461,110) (71,015,966) (7,308,155) (140,432,806)
---------- ------------ ---------- ------------
Net increase 718,786 $ 14,199,416 2,764,789 $ 52,322,510
========== ============ ========== ============
</TABLE>
<TABLE>
Class C Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 YEAR ENDED OCTOBER 31, 1997
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 676,492 $ 14,144,135 887,059 $ 17,183,627
Shares issued to shareholders
in reinvestment of distributions 39,122 731,968 39,609 690,382
Shares reacquired (491,878) (10,298,972) (495,886) (9,612,687)
------- ------------ ------- ------------
Net increase 223,736 $ 4,577,131 430,782 $ 8,261,322
======= ============ ======= ============
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 PERIOD ENDED OCTOBER 31, 1997*
------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,550 $53,843 22,958 $435,115
Shares issued to shareholders
in reinvestment of distributions 1,410 26,719 -- --
Shares transferred from Class A -- -- 1,626 28,569
Shares reacquired (1,421) (29,202) (1,153) (24,305)
----- ------- ------ --------
Net increase 2,539 $51,360 23,431 $439,379
===== ======= ====== ========
</TABLE>
*For the period from the inception of Class I, January 2, 1997, through October
31, 1997.
(6) Line of Credit
The Fund and other affiliated funds participate in an $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the six months ended April 30, 1998, was $217.
(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 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.
Forward Foreign Currency Exchange Contracts - Forward foreign currency purchases
and sales under master netting agreements amounted to net payables of $796,875
with Deutschebank and $229,506 with Merrill Lynch at April 30, 1998.
At April 30, 1998, 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 April 30, 1998, the
Fund owned the following restricted securities (constituting 0.8% of net assets)
which may not be publicly sold without registration under the Securities Act of
1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations furnished
by dealers or by a pricing service, or if not available, are valued at fair
value as determined in good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
DESCRIPTION DATE OF ACQUISITION SHARE AMOUNT COST VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Handlowy w
Warszawie Ltd. 6/18/97 27,500 $ 297,275 $ 510,460
Hong Leong Finance 5/16/95 - 8/13/97 1,340,000 4,261,840 2,031,586
Jarvis Hotels PLC 6/21/96 - 5/2/97 709,000 1,888,975 1,884,185
----------
$4,426,231
==========
</TABLE>
<PAGE>
<TABLE>
MFS(R) World Equity Fund
<S> <C>
Trustees Secretary
Stephen E. Cavan*
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991), Assistant Secretary
MFS Investment Management James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor Custodian
State Street Bank and Trust Company
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery,
Brigham and Women's Hospital; Professor of Surgery, Investor Information
Harvard Medical School For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
The Hon. Sir J. David Gibbons, KBE - Chief a touch-tone telephone.
Executive Officer, Edmund Gibbons Ltd.
For information on MFS mutual funds, call your
Abby M. O'Neill - Private Investor financial adviser or, for an information kit, call
toll free: 1-800-637-2929 any business day from 9
Walter E. Robb, III - President and Treasurer, a.m. to 5 p.m. Eastern time (or leave a message
Benchmark Advisors, Inc. (corporate financial anytime).
consultants); President, Benchmark Consulting
Group, Inc. (office services) Investor Service
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive Vice President, P.O. Box 2281
Director, and Secretary, MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman, Chief Executive For general information, call toll free:
Officer, and Director, MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt - President, Insight Resources,
Inc. (acquisition planning specialists) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9
Ward Smith - Former Chairman (until 1994), NACCO a.m. to 5 p.m. Eastern time. (To use this service,
Industries (holding company) your phone must be equipped with a
Telecommunications Device for the Deaf.) For share
Investment Adviser prices, account balances, and exchanges, call toll
Massachusetts Financial Services Company free: 1-800-MFS-TALK (1-800-637-8255) anytime from
500 Boylston Street a touch-tone telephone.
Boston, MA 02116-3741
World Wide Web
Distributor MFS Fund Distributors, Inc. www.mfs.com
500 Boylston Street
Boston, MA 02116-3741 For the fourth year in a row,
MFS earned a #1 ranking in the
Portfolio Manager [Dalbar Logo] DALBAR, Inc. Broker/Dealer
David R. Mannheim* Survey, Main Office Operations
Service Quality Category. The
Treasurer firm achieved a 3.42 overall score on a scale of 1
W. Thomas London* to 4 in the 1997 survey. A total of 111 firms
responded, offering input on the quality of service
Assistant Treasurers they received from 29 mutual fund companies
Mark E. Bradley* nationwide. The survey contained questions about
Ellen Moynihan* service quality in 11 categories, including
James O. Yost* "knowledge of operations contact," "keeping you
informed," and "ease of doing business" with the
firm.
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-----------------
MFS(R) World Equity Fund Bulk Rate
U.S. Postage
Paid
[Logo] MFS
INVESTMENT MANAGEMENT -----------------
We invented the mutual fund(SM)
500 Boylston Street
Boston, MA 02116-3741
[DALBAR LOGO]
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MWE-3 6/98 80M 04/204/304/804
