<PAGE>
[LOGO] MFS(SM)
INVESTMENT MANAGEMENT
Annual Report
for Year Ended
October 31, 1997
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MFS(R) WORLD TOTAL RETURN FUND
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[graphic omitted]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
A Discussion with the Portfolio Manager ................................... 3
Portfolio Manager's Profile ............................................... 6
Fund Facts ................................................................ 7
Performance Summary ....................................................... 7
Portfolio Concentration ................................................... 10
Tax Form Summary .......................................................... 10
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 19
Notes to Financial Statements ............................................. 27
Independent Auditors' Report .............................................. 36
Trustees and Officers ..................................................... 37
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HIGHLIGHTS
o FOR THE 12 MONTHS ENDED OCTOBER 31, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 15.71%, CLASS B SHARES
15.00%, CLASS C SHARES 14.97%, AND CLASS I SHARES 15.97%. (SEE PERFORMANCE
SUMMARY FOR MORE INFORMATION.)
o THE EQUITY PORTION OF THE FUND WAS ABLE TO OUTPERFORM ITS BENCHMARK INDEX,
PARTLY BY AVOIDING TROUBLE AREAS SUCH AS THE FAR EAST AND BY BEING
UNDERWEIGHTED IN JAPAN.
o THE FUND HAS BEEN HEAVILY WEIGHTED IN EUROPE, PARTICULARLY IN SOME OF THE
SMALLER COUNTRIES SUCH AS THE NETHERLANDS AND SWEDEN, COUNTRIES THAT TEND
TO SPAWN SUCCESSFUL INTERNATIONAL COMPANIES IN INDUSTRIES SUCH AS
TELECOMMUNICATIONS, RETAILING, AND ENERGY.
o THE FUND'S BOND PORTION HAS FOCUSED ON SOME SPECIFIC THEMES, INCLUDING THE
CONVERGENCE OF YIELDS LEADING UP TO EUROPEAN CURRENCY UNION. THE FUND HAS
CONCENTRATED HOLDINGS IN HIGHER-YIELDING MARKETS SUCH AS ITALY, SPAIN,
SWEDEN, AND DENMARK.
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
A. Keith Brodkin
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still uncomfortably
high. The rapid pace of growth seen in the first quarter slowed to an annual
rate of 3.3% in the second quarter and 3.5% in the third. We believe economic
momentum will carry well into the first quarter of 1998, as the money supply is
increasing at a rapid rate, and it still appears that Christmas sales could be
quite good. Because economic growth continues to be impressive, markets are
likely to continue to focus on the Federal Reserve Board's (the Fed's)
willingness to raise interest rates.
The extreme volatility of the U.S. equity market in October was, we believe, the
consequence of overvaluations that had been evident for some months. As a
result, the stock market has been vulnerable to some type of correction and has
been impacted in the near term by chaotic market conditions in the Pacific Rim.
In the face of all this, however, the equity market continues to exhibit
surprising strength, much of it the result of continued gains in corporate
earnings, a trend that could be an important indicator of the market's future
direction. Certainly the situation in Southeast Asia bears close scrutiny
because it appears to be clearly deflationary and raises the prospect of trade
wars developing throughout the area. We are not convinced that U.S. markets have
escaped totally from October's volatility. Thus, while the near-term outlook for
profits is generally favorable, we believe equity valuations have risen to a
point where a cautious investment approach seems warranted, with a need for
particular attention to be paid to the effect of Pacific Rim volatility on the
earnings of U.S. companies.
The U.S. government bond market has benefited from the deflationary events in
Southeast Asia, while the high-yield and emerging-debt markets have come under
severe pressure. Inflation remains under control, and the Fed will most likely
take a wait-and-see attitude toward raising interest rates. As a result, our
near-term outlook for high-grade markets is neutral to moderately positive. At
the same time, high-yield markets, having gone through a substantial correction,
could offer reasonable value but require careful selection. Overall,
fixed-income markets appear to be reasonably valued.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
November 14, 1997
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Frederick J. Simmons]
Frederick J. Simmons
For the 12 months ended October 31, 1997, Class A shares of the Fund provided a
total return of 15.71%, Class B shares 15.00%, Class C shares 14.97%, and Class
I shares 15.97%. These returns assume the reinvestment of distributions but
exclude the effects of any sales charges and compare to that of a benchmark made
up of 60% of the Morgan Stanley Capital International (MSCI) World Index and 40%
of the J.P. Morgan Global Government Bond Index (the Morgan Index), which
returned 11.81% for the same period. The MSCI World Index is a broad, unmanaged
index of global equities, while the Morgan Index is an aggregate of actively
traded government bonds issued by 13 countries, including the United States,
with remaining maturities of at least one year. The Fund's returns also compare
to a 15.75% return for the Lipper Global Flexible Fund Index as determined by
Lipper Analytical Services, Inc., an independent firm that reports mutual fund
performance.
Q. COULD YOU TALK ABOUT SOME OF THE REASONS FOR THE FUND'S PERFORMANCE THIS
YEAR?
A. While the equity portion of the Fund significantly outperformed the MSCI
World Index, it was not a good year for bonds relative to stocks. One reason
for the equity portion's outperformance was that we generally avoided trouble
areas such as the Far East and were underweighted in Japan. Currently, about
5% of the Fund's assets are in Japanese stocks, versus the benchmark's 16%
weighting. Another reason for equity outperformance was our significant
position in pharmaceutical companies, particularly those in the United
States, which were outstanding performers. Unfortunately, the bond portion of
the Fund, which accounts for about 34% of assets, significantly
underperformed comparative indices. Because of economic uncertainties in
several overseas economies, it just was not a good year for foreign bonds.
Q. WHERE HAS THE EQUITY PORTION OF THE FUND BEEN OVERWEIGHTED?
A. We're very heavily weighted in Europe, particularly in some of the smaller
countries, such as the Netherlands and Sweden. These countries tend to spawn
successful international companies, some of which have been very attractive
investments during the past 12 to 24 months. In Sweden, for example, Astra
has been a successful investment, while Ericsson, the telecommunications
company, Skandia, an insurance company, and Hennes & Maritz, a clothing
retailer, have also done well. We've actually sold the latter stock because
its price has surpassed our target level. In the Netherlands, IHC Caland, a
company that makes systems for oil dredging and shipping equipment, has also
performed well.
Q. WHAT KIND OF COMPANIES ARE YOU FINDING ATTRACTIVE IN THE
UNITED STATES?
A. The U.S. companies in the portfolio tend to have something slightly unique
about them, and certainly valuation is a very important factor. I'm not
inclined to buy something with a high price-to-earnings ratio, even if it's
growing very quickly, because its growth rate can change for the worse. One
of my favorite stocks is Martin Marietta Materials, a spin-off from the
aerospace company. It's a materials company that produces aggregates for the
construction (notably of highways and buildings) industry. It's done very
well, and I still think it has great prospects. Also, as I mentioned earlier,
the pharmaceutical companies have done very well, and while some of them have
been sold because their prices went up so much, they still make up a
significant weighting for the Fund. This sector includes companies like Eli
Lilly, Schering-Plough, and Bristol-Myers Squibb. I might add that this is an
industry in which the Fund is heavily weighted around the world, with
holdings in Japanese, Swedish, Swiss, and French drug companies, all of them
multinational.
Q. CAN YOU DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY IN TERMS OF WHAT YOU LOOK
FOR IN GLOBAL MARKETS AND STOCKS?
A. I tend to look for companies that have steady earnings. By that I mean
predictable growth rates and reasonable stock prices given their outlooks.
It's hard to find outright bargains in this day and age, but a good business
selling for a reasonable price can work out quite nicely over time. I also
tend to look for stocks that provide favorable total returns; that is, whose
growth rates, plus yields, appear attractive. But trying to find yield in
this equity market has gotten more and more difficult because stock prices
have risen so much relative to dividends. Nevertheless, that's part of my
decision-making process.
Q. YOU'VE TALKED ABOUT PHARMACEUTICAL STOCKS, BUT TWO OF THE FUND'S BIGGEST
INDUSTRY SECTORS ARE FINANCIAL SERVICES AND UTILITIES AND COMMUNICATIONS.
WHAT CAN YOU TELL US ABOUT THOSE SECTORS?
A. In many parts of the world, the biggest stocks are utilities and bank and
insurance companies. They also tend to provide income, which is important, so
they attract more investors than they might otherwise. Also, in faster-
growing economies, utilities, which include telephone companies, are growing
at rates that are much more favorable than those in the United States. There
are very few U.S. utilities in the portfolio.
Q. YOU MENTIONED THAT YOU WERE CUTTING BACK THE U.S. PORTION OF
THE FUND. COULD YOU DISCUSS ANY OTHER MAJOR CHANGES IN HOLDINGS THIS YEAR?
A. A significant change was in the United Kingdom, where the share has moved
from 12% of Fund assets to 16%. The transition to the Labor government has
been as smooth as one could hope for. It seems to have a good handle on the
economy, and there are some interesting companies. One is British Aerospace,
which is benefiting from the consolidation of the aerospace industry in
Europe, as well as from consolidation in the United States. Other companies
of note include Lloyd's Group, an innovative, consumer-driven bank, and
Tomkins, a well-run conglomerate that's not sufficiently appreciated by
investors.
Q. WHAT ABOUT THE BOND PORTION?
A. Here, we have focused on specific themes fairly consistently, including the
convergence of yields leading up to European currency union. We have
concentrated holdings in higher-yielding markets such as Italy, Spain,
Sweden, Denmark and, more recently, the United Kingdom, all of which have
outperformed core markets like Germany. Another theme has been the
disinflationary, slow-growth environment in Japan. While many investors have
shunned the low yields on Japanese bonds, these declining yields have
provided and continue to provide capital gains. In the dollar-bloc countries,
we continue to emphasize the higher-yielding markets of Australia, Canada,
and New Zealand, all of which have outperformed the U.S. market. Although we
were mistaken in shortening our portfolio duration, or sensitivity to changes
in interest rates, during the first half of the year, the duration has been
increased since the summer, helping the Fund benefit from the subsequent
decline in yields.
Q. AND HOW ABOUT THE CURRENCY POSITION?
A. The dominant theme here has been to favor the currencies of countries with
strong economies, specifically the U.S. dollar. The strength of the U.S.
economy has pushed the dollar up against both the Japanese yen and European
currencies. More recently, we have underweighted the yen because the Asian
currency crisis appears to be yet another negative shock to the Japanese
economy, which is more exposed to this phenomenon than the economies of the
United States or Europe.
Q. WHAT KIND OF ENVIRONMENT DO YOU SEE GOING FORWARD, AND HOW MIGHT THIS LEAD
YOU TO POSITION THE FUND?
A. I foresee an environment in which valuations are going to be given greater
weight. People are going to realize that stocks, no matter what their
outlooks, can get too expensive. For the Fund, this means pulling back from
areas that have already done extremely well, which among countries means the
United States. We have decreased our U.S. holdings and will probably continue
to do so if valuations continue to rise. On an industry level, we've been
cutting back on some of the pharmaceutical companies. In general, my
expectations are to look for companies that are fairly valued and have decent
growth. I don't expect to see that many undervalued companies but remain on
the lookout for potential bargains.
/s/ Frederick J. Simmons
Frederick J. Simmons
Portfolio Manager
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PORTFOLIO MANAGER'S PROFILE
FREDERICK J. SIMMONS JOINED MFS IN 1971 AS AN INVESTMENT OFFICER IN THE RESEARCH
DEPARTMENT AND WAS NAMED ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1974, VICE
PRESIDENT -- INVESTMENTS IN 1975, AND SENIOR VICE PRESIDENT IN 1983. MR. SIMMONS
GRADUATED WITH HONORS FROM TUFTS UNIVERSITY AND THE AMOS TUCK SCHOOL OF BUSINESS
ADMINISTRATION OF DARTMOUTH COLLEGE. HE IS A CHARTERED FINANCIAL ANALYST
(C.F.A.), A MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY, INC., AND PAST
PRESIDENT OF THE ELECTRONIC ANALYSTS OF BOSTON. MR. SIMMONS HAS MANAGED MFS(R)
WORLD TOTAL RETURN FUND SINCE 1991.
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FUND FACTS
OBJECTIVE: THE INVESTMENT OBJECTIVE OF THE FUND IS TO SEEK TOTAL RETURN BY
INVESTING IN SECURITIES THAT WILL PROVIDE ABOVE-AVERAGE CURRENT
INCOME (COMPARED TO A PORTFOLIO INVESTED ENTIRELY IN EQUITY
SECURITIES) AND OPPORTUNITIES FOR LONG-TERM GROWTH OF CAPITAL
AND INCOME.
COMMENCEMENT OF INVESTMENT OPERATIONS: SEPTEMBER 4, 1990
CLASS INCEPTION: CLASS A SEPTEMBER 4, 1990
CLASS B SEPTEMBER 7, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $273.4 MILLION NET ASSETS AS OF OCTOBER 31, 1997
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PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS World Total
Return Fund -- Class A shares in comparison to various market indicators. Class
A share performance results reflect the deduction of the 4.75% maximum sales
charge; benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown, based on differences in charges and fees paid by
shareholders investing in different classes. It is not possible to invest
directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from October 1, 1990, through October 31, 1997)
MFS WORLD S&P 500 CONSUMER PRICE 60% MSCI
TOTAL RETURN COMPOSITE INDEX 40% J.P. MORGAN
FUND - CLASS A INDEX -- U.S. GLOBAL
10/90 $ 9,521 $10,000 $10,000 $10,082
10/90 9,532 9.957 10,060 10,082
10/91 10,956 13,292 10,354 11,546
10/92 12,396 14,616 10,686 11,546
10/93 14,587 16,800 10,980 14,231
10/94 15,185 17,450 11,266 14,231
10/95 16,800 22,064 11,583 16,938
10/96 19,498 27,380 11,929 16,938
10/97 22,560 36,173 12,178 21,312
AVERAGE ANNUAL TOTAL RETURNS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Life of Fund*
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<S> <C> <C> <C> <C>
MFS World Total Return Fund (Class A)
including 4.75% sales charge (SEC results) +10.25% +12.26% +11.63% +12.11%
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MFS World Total Return Fund (Class A)
at net asset value +15.71% +14.11% +12.72% +12.88%
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MFS World Total Return Fund (Class B)
with CDSC (SEC results) +11.00% +12.53% +11.84% +12.44%
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MFS World Total Return Fund (Class B)
at net asset value +15.00% +13.32% +12.10% +12.44%
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MFS World Total Return Fund (Class C)
with CDSC (SEC results) +13.97% +13.38% +12.16% +12.48%
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MFS World Total Return Fund (Class C)
at net asset value +14.97% +13.38% +12.16% +12.48%
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MFS World Total Return Fund (Class I)
at net asset value +15.97% +14.19% +12.77% +12.91%
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Average global flexible fund** +14.42% +12.84% +11.96% +10.51%
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60% Morgan Stanley Capital International/
40% J.P. Morgan Global Government Bond** +11.81% +12.18% +12.59% +11.14%
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Standard & Poor's 500 Composite Index+# +32.12% +27.51% +19.87% +18.83%
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Consumer Price Index+## + 2.09% + 2.63% + 2.65% + 2.91%
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* For the period from the commencement of the Fund's investment operations, September 4, 1990, through
October 31, 1997.
** Source: Lipper Analytical Services, Inc.
+ Source: CDA/Wiesenberger.
# The Standard & Poor's 500 Composite Index is a popular unmanaged index of common stock total return performance.
## The Consumer Price Index is published by the U.S. Bureau of Labor Statistics and measures the cost of living
(inflation).
</TABLE>
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
Class A share SEC results include the maximum 4.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares
have no sales charge or Rule 12b-1 fees and are only available to certain
institutional investors.
Class B and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods prior
to the inception of Class B and Class C shares. Because operating expenses
attributable to Class B and Class C shares are higher than those of Class A
shares, Class B and Class C share performance generally would have been lower
than Class A share performance. The Class A share performance included within
the Class B and Class C share SEC performance has been adjusted to reflect the
CDSC generally applicable to Class B and Class C shares rather than the initial
sales charge generally applicable to Class A shares.
Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the inception
of Class I shares. Because operating expenses attributable to Class A shares are
greater than those of Class I shares, Class I share performance generally would
have been higher than Class A share performance. The Class A share performance
included within the Class I share performance has been adjusted to reflect the
fact that Class I shares have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1997
TOP 10 EQUITY HOLDINGS
<TABLE>
<S> <C>
BRITISH PETROLEUM PLC PHILIP MORRIS COS., INC.
Oil exploration and production company Tobacco, food, and beverage conglomerate
BARNETT BANKS, INC. SONY CORP.
Southern U.S. bank holding company Japanese electronics and entertainment company
BRITISH AEROSPACE PLC SPRINT CORP.
Manufacturer of interior products for Long-distance telephone company
commercial aircraft
TYCO INTERNATIONAL LTD.
CANADIAN NATIONAL RAILWAY CO. Manufacturer of fire protection, packaging, and
Canadian railway/transportation company electronic equipment
NOVARTIS AG TOMPKINS PLC
Swiss pharmaceutical company British industrial conglomerate
</TABLE>
LARGEST SECTORS
Other Sectors 39.1%
Financial Services 16.5%
Energy 12.1%
Utilities and Communications 11.1%
Consumer Staples 10.9%
Health Care 10.3%
For a more complete breakdown, refer to the Portfolio of Investments.
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TAX FORM SUMMARY
IN JANUARY 1998, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 1997.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
THE FUND HAS DESIGNATED $6,351,763 AS A LONG-TERM CAPITAL GAIN.
FOREIGN TAX CREDIT
FOR THE YEAR ENDED OCTOBER 31, 1997, INTEREST AND DIVIDENDS FROM FOREIGN
COUNTRIES WERE $6,139,697 AND TAXES PAID TO FOREIGN COUNTRIES WERE $264,220.
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED OCTOBER 31, 1997, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS CAME TO
12.4%.
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<PAGE>
PORTFOLIO OF INVESTMENTS - October 31, 1997
Stocks - 53.3%
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ISSUER SHARES VALUE
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U.S. Stocks - 18%
Aerospace - 0.6%
General Dynamics Corp. 9,600 $ 779,400
Lockheed Martin Corp. 10,008 951,386
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$ 1,730,786
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Banks and Credit Companies - 1.7%
Barnett Banks, Inc. 41,400 $ 2,856,600
Norwest Corp. 55,200 1,769,850
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$ 4,626,450
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Business Machines - 0.6%
International Business Machines Corp. 17,600 $ 1,725,900
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Chemicals - 0.4%
Air Products & Chemicals, Inc. 10,000 $ 760,000
Praxair, Inc. 7,500 326,719
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$ 1,086,719
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Computer Hardware - Systems - 0.3%
Digital Equipment Corp.* 16,000 $ 801,000
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Construction Services - 0.3%
Martin Marietta Materials, Inc. 20,346 $ 709,567
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Consumer Goods and Services - 2.5%
Philip Morris Cos. Inc. 81,900 $ 3,245,287
Tyco International Ltd. 95,000 3,586,250
------------
$ 6,831,537
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Electrical Equipment - 1.0%
General Electric Co. 41,000 $ 2,647,063
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Financial Institutions - 1.4%
American Express Co. 31,100 $ 2,425,800
Freddie Mac 36,800 1,393,800
------------
$ 3,819,600
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Food and Beverage Products - 0.3%
McCormick & Co., Inc. 33,000 $ 825,000
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Insurance - 2.0%
Allstate Corp. 26,200 $ 2,172,962
CIGNA Corp. 14,700 2,282,175
Reliastar Financial Corp. 23,000 859,625
------------
$ 5,314,762
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Machinery - 0.4%
Deere & Co., Inc. 23,000 $ 1,210,375
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Medical and Health Products - 1.7%
Bristol-Myers Squibb Co. 25,500 $ 2,237,625
Eli Lilly & Co. 19,176 1,282,395
Warner-Lambert Co. 8,200 1,174,137
------------
$ 4,694,157
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Oils - 1.4%
Exxon Corp. 25,500 $ 1,566,656
USX-Marathon Group 66,000 2,359,500
------------
$ 3,926,156
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Pharmaceuticals - 0.6%
Schering Plough Corp. 28,600 $ 1,603,388
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Printing and Publishing - 0.4%
Gannett Co., Inc. 21,400 $ 1,124,838
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Utilities - Electric - 0.6%
Sierra Pacific Resources 52,000 $ 1,582,750
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Utilities - Gas - 0.8%
Coastal Corp. 37,000 $ 2,224,625
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Utilities - Telephone - 1.0%
Sprint Corp. 52,800 $ 2,745,600
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Total U.S. Stocks $ 49,230,273
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Foreign Stocks - 35.3%
Argentina
Mirgor Sacifia, ADR (Automotive)*## 47,930 $ 155,773
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Australia - 2.3%
Australia & New Zealand Banking Group
(Banks and Credit Companies)* 185,000 $ 1,285,925
Fosters Brewing Group (Beverages) 801,000 1,515,404
QBE Insurance Group Ltd. (Insurance)* 545,131 2,540,123
Seven Network Ltd. (Entertainment) 252,000 900,540
------------
$ 6,241,992
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Austria - 0.2%
Austria Tabak AG (Tobacco) 15,000 $ 624,433
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Brazil - 0.4%
Companhia Cervejaria Brahma,
ADR (Beverages) 28,600 $ 368,225
Unibanco Uniao De Barncos Bras
(Banks and Credit Companies)* 24,400 664,900
------------
$ 1,033,125
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Canada - 1.4%
Canadian National Railway Co. (Railroads) 49,500 $ 2,669,906
Westcoast Energy Inc. (Utilities - Gas) 59,800 1,225,900
------------
$ 3,895,806
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Chile - 0.2%
Enersis S.A., ADR (Utilities - Electric) 13,600 $ 448,800
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Finland - 0.3%
Huhtamaki Oy Group (Conglomerate) 19,000 $ 781,078
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France - 4.2%
Sanofi (Medical and Health Products) 17,000 $ 1,611,904
Chargeurs S.A. (Apparels and Textiles) 13,600 908,314
Pin Printemps Redo (Retail) 3,900 1,780,119
Societe Nationale Elf Aquitaine (Oils) 20,800 2,569,634
Total S.A., ADR (Oils) 31,500 1,748,250
TV Francaise (Broadcasting) 17,500 1,626,006
Union des Assurances Federales S.A.
(Insurance) 10,400 1,160,654
------------
$ 11,404,881
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Germany - 0.9%
Adidas AG (Apparel and Textiles) 13,500 $ 1,951,477
Prosieben Media AG (Entertainment)* 13,400 656,025
------------
$ 2,607,502
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Greece - 0.3%
Hellenic Telecommunication Organization S.A.
(Telecommunications) 35,796 $ 749,648
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Hong Kong - 0.6%
Hong Kong Electric Holdings Ltd. (Utilities -
Electric) 202,000 $ 684,657
Wharf (Holdings) Ltd. (Real Estate) 272,000 555,964
Wing Hang Bank Ltd. (Banks and Credit Companies) 142,800 367,622
------------
$ 1,608,243
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Italy - 1.3%
Telecom Italia S.p.A. (Telecommunications)* 276,150 $ 1,111,840
Eni S.P.A, ADR (Oils) 13,500 761,063
INA - Instituto Nazionale delle Assicurazioni
(Insurance) 522,000 839,996
Telecom Italia S.p.A., Saving Shares
(Telecommunications) 475,000 973,338
------------
$ 3,686,237
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Japan - 5.4%
Canon, Inc. (Office Equipment) 86,000 $ 2,090,924
DDI Corp. (Telecommunications) 80 267,777
Eisai Co. Ltd. (Pharmaceuticals) 30,000 472,107
Fuji Photo Film Co. (Photographic Products) 16,000 580,849
Kirin Beverage Corp. (Beverages) 105,000 1,748,543
Nippon Broadcasting (Broadcasting) 16,000 979,184
Osaka Sanso Kogyo Ltd. (Chemicals) 146,000 291,757
Rohm Co. (Electronics) 12,000 1,189,009
Sony Corp. (Electronics) 40,000 3,327,227
Takeda Chemical Industries (Pharmaceuticals) 68,000 1,857,119
Terumo Corp. (Medical Equipment) 41,000 675,937
Tokyo Broadcasting System, Inc. (Broadcasting) 37,000 634,638
Ushio, Inc. (Electronics) 51,000 556,286
------------
$ 14,671,357
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Mexico - 0.1%
TV Azteca, S.A. de C V (Broadcasting)* 20,900 $ 399,713
- -------------------------------------------------------------------------------
Netherlands - 3.3%
Akzo Nobel N.V. (Chemicals) 12,000 $ 2,110,643
Hunter Douglas N.V. ADR (Consumer Goods and
Services) 37,900 1,558,869
IHC Caland N.V. (Marine Equipment)* 25,396 1,559,014
Koninklijke Ahold NV, ADR (Food/Retail) 42,483 1,078,006
Royal Dutch Petroleum Co., ADR (Oils) 35,700 1,878,712
Wolters Kluwer NV (Publishing)* 5,759 705,885
------------
$ 8,891,129
- -------------------------------------------------------------------------------
Peru - 0.3%
Telefonica del Peru S.A., ADR
(Telecommunications) 37,300 $ 736,675
- -------------------------------------------------------------------------------
Poland - 0.1%
Bank Handlowy Warsza (Banks and
Credit Companies)*+ 13,500 $ 181,552
KGHM Polska Miedz S.A. (Metals
and Minerals)*## 3,500 34,300
------------
$ 215,852
- -------------------------------------------------------------------------------
Portugal - 0.4%
Telecel - Comunicacaoes Pessoais
S.A. (Telecommunication)* 11,100 $ 1,004,670
- -------------------------------------------------------------------------------
Singapore - 0.2%
Singapore Press Holdings Ltd.
(Publishing) 47,000 $ 647,967
- -------------------------------------------------------------------------------
South Korea - 0.1%
Korea Electric Power Corp.
(Utilities - Electric) 17,000 $ 242,604
- -------------------------------------------------------------------------------
Spain - 1.5%
Iberdrola S.A. (Utilities - Electric) 162,000 $ 1,934,262
Acerinox S.A. (Iron and Steel) 5,700 849,935
Repsol S.A. (Oils) 35,000 1,465,038
------------
$ 4,249,235
- -------------------------------------------------------------------------------
Sweden - 1.6%
Astra AB (Pharmaceuticals) 88,500 $ 1,369,366
Munters AB (Consumer Goods and
Services)* 4,400 44,605
Skandia Forsakrings AB (Insurance) 33,600 1,568,648
Telefonaktiebolaget LM Ericsson
(Telecommunications Equipment) 30,000 1,327,500
------------
$ 4,310,119
- -------------------------------------------------------------------------------
Switzerland - 1.5%
Ciba Specialty AG (Chemicals)* 12,000 $ 1,177,730
Novartis AG (Pharmaceuticals) 1,900 2,974,090
------------
$ 4,151,820
- -------------------------------------------------------------------------------
United Kingdom - 8.7%
ASDA Group PLC (Supermarkets) 920,000 $ 2,390,548
Avis Europe PLC (Auto Rental)## 376,300 939,936
Bank Of Scotland (Banks and
Credit Companies)* 110,000 907,268
Booker PLC (Food - Wholesale)* 112,400 584,125
British Aerospace PLC (Aerospace
and Defense)* 105,300 2,792,626
British Petroleum PLC, ADR (Oils) 33,959 2,979,902
Carlton Communicatons PLC
(Broadcasting) 80,000 660,502
Compass Group PLC
(Food - Catering)## 160,000 1,689,812
Grand Metropolitan PLC (Food
and Beverage Products) 157,000 1,415,989
Kwik-Fit Holdings PLC (Automotive
Repair Centers) 286,700 1,554,819
Lloyds TSB Group PLC (Banks
and Credit Companies)* 139,965 1,748,049
PowerGen PLC (Utilities - Electric)* 179,000 1,989,502
Tomkins PLC (Diversified Operations) 617,333 3,166,787
Williams Holdings (Diversifie
Operations) 156,000 936,237
------------
$ 23,756,102
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 96,514,761
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $101,382,471) $145,745,034
- -------------------------------------------------------------------------------
Preferred Stock - 1.1%
- -------------------------------------------------------------------------------
Foreign Stocks - 1.1%
Germany - 1.1%
Henkel KGaa (Chemicals) 30,000 $ 1,555,620
Wella AG (Cosmetics) 2,100 1,458,806
------------
$ 3,014,426
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 3,014,426
- -------------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $3,182,602) $ 3,014,426
- -------------------------------------------------------------------------------
Bonds - 34.6%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
U.S. Bonds - 8.8%
Telecommunications - 0.8%
WorldCom, Inc., 8.875s, 2006 $ 2,152 $ 2,347,208
- -------------------------------------------------------------------------------
U.S. Government Guaranteed - 4.8%
Federal National Mortgage Assn.,
2.125s, 2007 $ 420,000 $ 3,554,787
Federal National Mortgage Assn.,
7s, 2012 9,374 9,500,223
------------
$ 13,055,010
- -------------------------------------------------------------------------------
U.S. Treasury Obligations - 3.2%
U.S. Treasury Strip, 0s, 2015 $ 16,900 $ 5,775,575
U.S. Treasury Notes, 5.75s, 2003 3,000 2,990,160
------------
$ 8,765,735
- -------------------------------------------------------------------------------
Total U.S. Bonds $ 24,167,953
- -------------------------------------------------------------------------------
Foreign Bonds - 25.8%
Australia - 2.0%
Commonwealth of Australia, 9.5s, 2003 AUD 6,660 $ 5,518,329
- -------------------------------------------------------------------------------
Denmark - 0.6%
Kingdom of Denmark, 7s, 2007 DKK 4,839 $ 782,229
Nykredit, 8s, 2026 (Banks and
Credit Companies) 5,880 924,895
------------
$ 1,707,124
- -------------------------------------------------------------------------------
Germany - 3.3%
Germany Federal Republic, 6s, 2016 DEM 15,407 $ 8,935,346
- -------------------------------------------------------------------------------
Italy - 3.7%
Republic of Italy, 8.5s, 2004 ITL 7,515,000 $ 5,002,308
Republic of Italy, 9.5s, 1999 7,590,000 4,963,347
------------
$ 9,965,655
- -------------------------------------------------------------------------------
Japan - 3.7%
Japan Development Bank, 2.875s, 2006
(Banks and Credit Companies) JPY 580,000 $ 5,242,215
International Bank of Reconstruction and
Development,
4.5s, 2003 (Banks and Credit Companies) 509,000 4,924,713
------------
$ 10,166,928
- -------------------------------------------------------------------------------
New Zealand - 1.8%
Government of New Zealand, 8s, 2001 NZD 7,590 $ 4,982,435
- -------------------------------------------------------------------------------
Poland - 1.9%
Government of Poland, 6.688s, 2024 $ 5,500 $ 5,128,750
- -------------------------------------------------------------------------------
Spain - 1.2%
Government of Spain, 10.5s, 2003 ESP 155,110 $ 1,322,794
Kingdom of Spain, 5s, 2001 298,350 2,018,208
------------
$ 3,341,002
- -------------------------------------------------------------------------------
Sweden - 2.7%
Kingdom of Sweden, 6s, 2005 SEK 13,700 $ 1,803,665
Kingdom of Sweden, 10.25s, 2000 12,300 1,816,723
Kingdom of Sweden, 13s, 2001 22,100 3,630,026
------------
$ 7,250,414
- -------------------------------------------------------------------------------
United Kingdom - 4.9%
United Kingdom Treasury, 7.25s, 2007 GBP 4,250 $ 7,494,298
United Kingdom Treasury, 8s, 2003 3,380 6,020,375
------------
$ 13,514,673
- -------------------------------------------------------------------------------
Total Foreign Bonds $ 70,510,656
- -------------------------------------------------------------------------------
Total Bonds (Identified Cost, $93,603,504) $ 94,678,609
- -------------------------------------------------------------------------------
Short-Term Obligations - 9.6%
- -------------------------------------------------------------------------------
Associates Corp. of North America,
due 11/03/97 $ 10,300 $ 10,296,767
Federal Home Loan Mortgage Corp.,
due 11/04/97 4,000 3,998,180
Federal Home Loan Mortgage
Discount Notes,
due 11/07/97 - 11/13/97 5,900 5,892,428
Federal National Mortgage Assn.,
due 11/24/97 6,100 6,078,721
- -------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 26,266,096
- -------------------------------------------------------------------------------
Call Options Purchased - 0.1%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- -------------------------------------------------------------------------------
Japanese Goverment Bond/January/116.618 JPY 218,000 $ 29,587
Deutsche Marks/British Pounds/March/2.775 DEM 19,211 150,675
- -------------------------------------------------------------------------------
Total Call Options Purchased (Identified Cost, $230,567) $ 180,262
- -------------------------------------------------------------------------------
Put Options Purchased - 0.2%
- -------------------------------------------------------------------------------
Deutsche Marks/November/1.8 DEM 10,127 $ 10
Japanese Yen/April/121 JPY 1,320,571 237,921
Japanese Yen/Deutsche Marks/December/68 JPY 788,444 185,284
- -------------------------------------------------------------------------------
Total Put Options Purchased (Identified Cost, $322,476) $ 423,215
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $224,987,716) $270,307,642
- -------------------------------------------------------------------------------
Call Options Written - (0.1)%
- -------------------------------------------------------------------------------
Deutsche Marks/British Pounds/March/2.6750 DEM 18,519 $ (54,835)
Japanese Yen/Deutsche Marks/November/62.1500 JPY 720,275 0
Japanese Yen/Deutsche Marks/December/63.1000 JPY 731,285 (731)
Japanese Yen/U.S. Dollars/April/114.0000 JPY 1,244,174 (237,921)
- --------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $470,663) $ (293,487)
- -------------------------------------------------------------------------------
Put Options Written - (0.1)%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED) VALUE
- -------------------------------------------------------------------------------
Deutsche Marks/British Pounds/March/2.9500 DEM 20,423 $ (143,491)
Japanese Bond/March/116.6180 JPY 218,000 (9,156)
Japanese Yen/Deutsche Marks/December/71.0000 JPY 822,841 (46,902)
- -------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $159,877) $ (199,549)
- -------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.3% 3,607,946
- -------------------------------------------------------------------------------
Net Assets - 100.0% $273,422,552
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars ITL = Italian Lira
CHF = Swiss Francs JPY = Japanese Yen
DEM = Deutsche Marks NLG = Netherland Guilder
DKK = Danish Krone NZD = New Zealand Dollars
ESP = Spanish Pesetas SEK = Swedish Krona
FRF = French Francs
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
OCTOBER 31, 1997
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $224,987,716) $270,307,642
Cash 338,404
Net receivable for forward foreign currency exchange
contracts to purchase 41,993
Net receivable for forward foreign currency exchange
contracts closed or subject to master netting
agreements 434,069
Premium receivable on options written 237,921
Receivable for Fund shares sold 458,784
Receivable for investments sold 2,335,400
Interest and dividends receivable 1,899,924
Receivable for interest rate swaps 79,135
Other assets 2,000
------------
Total assets $276,135,272
------------
Liabilities:
Payable for Fund shares reacquired $ 117,217
Payable for investments purchased 1,671,934
Written options outstanding, at value (premiums received,
$630,540) 493,036
Net payable for forward foreign currency exchange
contracts to sell 138,508
Payable to affiliates -
Management fee 5,905
Shareholder servicing agent fee 973
Distribution and service fee 82,303
Administrative fee 112
Accrued expenses and other liabilities 202,732
------------
Total liabilities $ 2,712,720
------------
Net assets $273,422,552
============
Net assets consist of:
Paid-in capital $211,376,539
Unrealized appreciation on investments and translation of
assets and liabilities
in foreign currencies 45,906,633
Accumulated undistributed net realized gain on
investments and foreign
currency transactions 17,450,329
Accumulated distributions in excess of net investment
income (1,310,949)
------------
Total $273,422,552
============
Shares of beneficial interest outstanding 19,767,000
============
Class A shares:
Net asset value per share
(net assets of $152,918,767 / 11,046,653 shares of
beneficial interest outstanding) $13.84
======
Offering price per share (100 / 95.25 of net asset value
per share) $14.53
======
Class B shares:
Net asset value and offering price per share
(net assets of $96,930,806 / 7,014,778 shares of
beneficial interest outstanding) $13.82
======
Class C shares:
Net asset value and offering price per share
(net assets of $21,724,828 / 1,572,190 shares of
beneficial interest outstanding) $13.82
======
Class I shares:
Net asset value per share
(net assets of $1,848,151 / 133,379 shares of
beneficial interest outstanding) $13.86
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997
- ------------------------------------------------------------------------------
Net investment income:
Interest $ 6,681,626
Dividends 3,330,009
Foreign taxes withheld (267,697)
-----------
Total investment income $ 9,743,938
-----------
Expenses -
Management fee $ 2,096,169
Trustees' compensation 41,571
Shareholder servicing agent fee 273,347
Shareholder servicing agent fee (Class A) 33,618
Shareholder servicing agent fee (Class B) 27,467
Shareholder servicing agent fee (Class C) 3,778
Distribution and service fee (Class A) 498,606
Distribution and service fee (Class B) 852,056
Distribution and service fee (Class C) 183,530
Administrative fee 26,017
Custodian fee 192,274
Printing 83,420
Postage 45,052
Audit fees 34,795
Legal fees 5,458
Miscellaneous 210,288
-----------
Total expenses $ 4,607,446
Fees paid indirectly (23,943)
-----------
Net expenses $ 4,583,503
-----------
Net investment income $ 5,160,435
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $16,160,751
Interest rate swap agreements 123,193
Written option transactions (449,470)
Foreign currency transactions (2,755,053)
-----------
Net realized gain on investments and foreign
currency transactions $13,079,421
-----------
Change in unrealized appreciation -
Investments and interest rate swap agreements $15,188,107
Interest rate swap agreements (20,495)
Written options 37,319
Translation of assets and liabilities in
foreign currencies 1,446,727
-----------
Net unrealized gain on investments $16,651,658
-----------
Net realized and unrealized gain on
investments and foreign currency $29,731,079
-----------
Increase in net assets from operations $34,891,514
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 5,160,435 $ 4,979,811
Net realized gain on investments and foreign currency
transactions 13,079,421 10,409,811
Net unrealized gain on investments and foreign currency
translation 16,651,658 13,407,417
------------ ------------
Increase in net assets from operations $ 34,891,514 $ 28,797,039
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (2,231,027) $ (6,143,145)
From net investment income (Class B) (816,452) (2,682,617)
From net investment income (Class C) (183,191) (505,747)
From net investment income (Class I) (21,797) --
From net realized gain on investments and foreign currency
transactions (Class A) (6,137,212) (54,351)
From net realized gain on investments and foreign currency
transactions (Class B) (3,460,672) (28,792)
From net realized gain on investments and foreign currency
transactions (Class C) (701,486) (5,382)
------------ ------------
Total distributions declared to shareholders $(13,551,837) $ (9,420,034)
------------ ------------
Net increase in net assets from Fund share transactions $ 36,203,831 $ 18,100,744
------------ ------------
Total increase in net assets $ 57,543,508 $ 37,477,749
Net assets:
At beginning of period 215,879,044 178,401,295
------------ ------------
At end of period (including accumulated undistributed net
investment income (accumulated distributions in excess
of net investment income) of $(1,310,949) and $1,027,892,
respectively) $273,422,552 $215,879,044
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 1996
- -----------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.73 $11.57
------ ------
Income from investment operations# -
Net investment income $ 0.31 $ 0.34
Net realized and unrealized gain on investments and foreign
currency transactions 1.61 1.46
------ ------
Total from investment operations $ 1.92 $ 1.80
------ ------
Less distributions declared to shareholders -
From net investment income $(0.21) $(0.63)
From net realized gain on investments and foreign currency
transactions (0.60) (0.01)
------ ------
Total distributions declared to shareholders $(0.81) $(0.64)
------ ------
Net asset value - end of period $13.84 $12.73
====== ======
Total return(+) 15.71% 16.06%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.59% 1.63%
Net investment income 2.35% 2.79%
Portfolio turnover 143% 167%
Average commission rate### $ 0.0277 $ 0.0187
Net assets at end of period (000 omitted) $152,919 $129,843
# 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 fiscal years beginning on or after September 1, 1995.
(+) Total return results for Class A shares do not include the sales charge. If the charge had been included,
the results would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1995 1994 1993 1992 1991 1990*
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.58 $11.19 $10.21 $ 9.42 $ 8.55 $ 8.50
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.33 $ 0.30 $ 0.28 $ 0.36 $ 0.37 $ 0.08
Net realized and unrealized
gain (loss) on investments and
foreign currency transactions 0.79 0.15 1.42 0.86 0.88 (0.03)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.12 $ 0.45 $ 1.70 $ 1.22 $ 1.25 $ 0.05
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income
$(0.08) $(0.25) $(0.45) $(0.26) $(0.38) $ --
From net realized gain on
investments and foreign
currency transactions (0.05) (0.33) (0.27) (0.17) -- --
In excess of net realized gain
on investment and foreign
currency transactions -- (0.38) -- -- -- --
From paid-in capital -- (0.10) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(0.13) $(1.06) $(0.72) $(0.43) $(0.38) $ --
------ ------ ------ ------ ------ ------
Net asset value - end of period $11.57 $10.58 $11.19 $10.21 $ 9.42 $ 8.55
====== ====== ====== ====== ====== ======
Total return(+) 10.63% 4.10% 17.78% 13.14% 14.94% 3.76%+
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.77% 1.76% 1.92% 1.84% 2.18% 1.57%+
Net investment income 3.06% 2.81% 2.96% 3.65% 4.05% 3.14%+
Portfolio turnover 160% 118% 112% 72% 134% 2%
Net assets at end of period
(000 omitted) $110,294 $99,870 $71,262 $44,707 $30,847 $12,510
* For the period from the commencement of the Fund's investment operations, September 4, 1990, through October 31, 1990.
+ 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 results for Class A shares do not include the sales charge. If the charge had been included, the results would
have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 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 $12.71 $11.52 $10.54 $11.19 $10.84
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.22 $ 0.25 $ 0.25 $ 0.25 $ 0.06
Net realized and unrealized gain on
investments and foreign currency
transactions 1.62 1.46 0.77 0.13 0.35
------ ------ ------ ------ ------
Total from investment operations $ 1.84 $ 1.71 $ 1.02 $ 0.38 $ 0.41
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.13) $(0.47) $(0.03) $(0.24) $(0.06)
In excess of net investment income -- (0.04) -- -- --
From net realized gain on investments and
foreign currency transactions (0.60) (0.01) (0.01) (0.32) --
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.38) --
From paid-in capital -- -- -- (0.09) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.73) $(0.52) $(0.04) $(1.03) $(0.06)
------ ------ ------ ------ ------
Net asset value - end of period $13.82 $12.71 $11.52 $10.54 $11.19
====== ====== ====== ====== ======
Total return 15.00% 15.29% 9.75% 3.38% 3.79%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.25% 2.34% 2.49% 2.49% 2.77%+
Net investment income 1.70% 2.07% 2.34% 2.33% 2.15%+
Portfolio turnover 143% 167% 160% 118% 112%
Average commission rate###
$0.0277 $0.0187 $ -- $ -- $ --
Net assets at end of period (000 omitted) $96,931 $71,788 $57,214 $47,677 $4,381
** For the period from the inception of Class B shares, 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.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997 1996 1995 1994***
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.72 $11.52 $10.53 $11.06
------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.23 $ 0.26 $ 0.27 $ 0.27
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.61 1.46 0.76 (0.29)
------ ------ ------ ------
Total from investment operations $ 1.84 $ 1.72 $ 1.03 $(0.02)
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.14) $(0.51) $(0.03) $(0.12)
From net realized gain on investments and foreign
currency transactions (0.60) (0.01) (0.01) (0.16)
In excess of net realized gains on investments and
foreign currency transactions -- -- -- (0.18)
From paid-in capital -- -- -- (0.05)
------ ------ ------ ------
Total distributions declared to shareholders $(0.74) $(0.52) $(0.04) $(0.51)
------ ------ ------ ------
Net asset value - end of period $13.82 $12.72 $11.52 $10.53
====== ====== ====== ======
Total return 14.97% 15.41% 9.84% (0.15)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.24% 2.27% 2.42% 2.39%+
Net investment income 1.71% 2.14% 2.41% 2.51%+
Portfolio turnover 143% 167% 160% 118%
Average commission rate###
$0.0277 $0.0187 $ -- $ --
Net assets at end of period (000 omitted) $21,725 $14,248 $10,894 $10,903
*** For the period from the inception of Class C shares, January 3, 1994, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- ------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1997****
- ------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.51
------
Income from investment operations# -
Net investment income $ 0.30
Net realized and unrealized gain on investments and
foreign currency transactions 1.21
------
Total from investment operations $ 1.51
------
Less distributions declared to shareholders -
From net investment income $(0.16)
------
Total distributions declared to shareholders $(0.16)
------
Net asset value - end of period $13.86
======
Total return 12.08%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.24%+
Net investment income 2.72%+
Portfolio turnover 143%
Average commission rate $0.0277
Net assets at end of period (000 omitted) $ 1,848
**** For the period from the inception of Class I shares, January 2, 1997,
through October 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid
indirectly.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS World Total Return Fund (the Fund) is a non-diversified series of MFS Series
Trust VI (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, forward contracts, and interest rate
swaps, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon exchange or over-the-counter prices. Short-term obligations, which
mature in 60 days or less, are valued at amortized cost, which approximates
market value. Non-U.S. dollar denominated short-term obligations are valued at
amortized cost as calculated in the foreign currency and translated into U.S.
dollars at the closing daily exchange rate. Futures contracts, options, and
options on futures contracts listed on commodities exchanges are reported at
market value using closing settlement prices. Over-the-counter options on
securities are valued by brokers. Over-the-counter currency options are valued
through the use of a pricing model which takes into account foreign currency
exchange spot and forward rates, implied volatility, and short-term repurchase
rates. Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction of the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Fund may also write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, the Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income-producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering 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.
Swap Agreements - The Fund may enter into swap agreements. A swap is an exchange
of cash payments between the Fund and another party which is based on a specific
financial index. Cash payments are exchanged at specified intervals and the
expected income or expense is recorded on the accrual basis. The value of the
swap is adjusted daily and the change in value is recorded as unrealized
appreciation or depreciation. Risks may arise upon entering into these
agreements from the potential inability of counterparties to meet the terms of
their contract and from unanticipated changes in the value of the financial
index on which the swap agreement is based. The Fund uses swaps for both hedging
and non-hedging purposes. For hedging purposes, the Fund may use swaps to reduce
its exposure to interest and foreign exchange rate fluctuations. For non-hedging
purposes, the Fund may use swaps to take a position on anticipated changes in
the underlying financial index.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Dividend 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.
Some government securities may be purchased on a "when issued" or "forward
delivery" basis, which means that the securities will be delivered to the Fund
at a future date, usually beyond customary settlement time.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. The fee is reduced according to an
arrangement which measures the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return and, consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended October 31, 1997, $4,246,809 from accumulated
distributions in excess of net investment income and $151,573 from paid in
capital were reclassified to accumulate undistributed net realized gain on
investments and foreign currency transactions due to differences between book
and tax accounting for currency transactions. This change had no effect on the
net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of the Fund pro rata
based on average daily net assets of each class, without distinction between
share classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate of
0.65% of average daily net assets and 5.00% of investment income.
Administrator - Effective March 1, 1997, 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, provided that the administrative fee is not assessed
on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $7,946 for the year ended
October 31, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$56,871 for the year ended October 31, 1997, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to 0.10%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers, and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD retains the service fee for accounts not attributable
to a securities dealer which amounted to $53,165 for the year ended October 31,
1997. Fees incurred under the distribution plan during the year ended October
31, 1997 were 0.35% 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 or Class C shares. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $26,709 and $17,124 for Class B and Class C shares,
respectively, for the year ended October 31, 1997. Fees incurred under the
distribution plan during the year ended October 31, 1997, were 1.00% of average
daily net assets attributable to Class B and Class C shares on an annualized
basis respectively.
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 twelve months of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended October 31, 1997, were
$895, $111,555, and $3,270 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of the
average daily net assets of each class of shares at an effective annual rate of
up to 0.15%, up to 0.22%, and up to 0.15% attributable to Class A, Class B, and
Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option
transactions and short-term obligations, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
U.S. government securities $ 59,326,698 $ 52,757,326
------------ ------------
Investments (non-U.S. government securities) $268,918,502 $259,764,923
------------ ------------
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 $225,002,957
------------
Gross unrealized appreciation $ 50,254,869
Gross unrealized depreciation (4,950,184)
------------
Net unrealized appreciation $ 45,304,685
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,549,188 $ 33,536,171 2,084,100 $ 25,150,733
Shares issued to shareholders in
reinvestment of distributions 596,268 7,592,322 468,643 5,535,276
Shares reacquired (2,296,772) (30,263,298) (1,890,835) (22,849,389)
---------- ------------- ---------- ------------
Net increase 848,684 $ 10,865,195 661,908 $ 7,836,620
========== ============= ========== ============
<CAPTION>
Class B Shares
YEAR ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,145,163 $ 28,207,084 1,371,364 $ 16,563,323
Shares issued to shareholders in
reinvestment of distributions 297,676 3,786,788 199,482 2,357,194
Shares reacquired (1,074,408) (14,221,906) (889,762) (10,770,246)
---------- ------------- ---------- ------------
Net increase 1,368,431 $ 17,771,966 681,084 $ 8,150,271
========== ============= ========== ============
<CAPTION>
Class C Shares
PERIOD ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 681,359 $ 8,952,016 442,641 $ 5,360,832
Shares issued to shareholders in
reinvestment of distributions 55,143 702,127 32,507 384,467
Shares reacquired (284,443) (3,746,301) (300,333) (3,631,446)
---------- ------------- ---------- ------------
Net increase 452,059 $ 5,907,842 174,815 $ 2,113,853
========== ============= ========== ============
</TABLE>
Class I Shares
PERIOD ENDED OCTOBER 31, 1997*
------------
SHARES AMOUNT
- -----------------------------------------------------------------------
Shares sold 155,509 $ 1,954,464
Shares issued to shareholders in
reinvestment of distributions 1,606 21,797
Shares reacquired (23,736) (317,433)
----------- ------------
Net increase 133,379 $ 1,658,828
=========== ============
*For the period from the inception of Class I shares, January 2, 1997, through
October 31, 1997.
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended October 31, 1997, was $156.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange
contracts, and interest rate swap 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.
<TABLE>
<CAPTION>
Written Option Transactions
1997 CALLS 1997 PUTS
------------------------------------- -------------------------------------
PRINCIPAL AMOUNTS PRINCIPAL AMOUNTS
OF CONTRACTS OF CONTRACTS
(000 OMITTED) PREMIUMS (000 OMITTED) PREMIUMS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OUTSTANDING, BEGINNING OF PERIOD -
Deutsche Marks 13,293 $ 66,179
Japanese Government Bonds 1,164,000 $ 97,182
Deutsche Marks/British Pounds 19,522 75,295
Options written -
Australian Dollars 7,552 37,715
British Pounds 5,840 44,068
Deutsche Marks 16,211 27,177
Deutsche Marks/British Pounds 18,519 92,800 41,317 253,399
Japanese Government Bonds 2,448,000 59,301 5,681,000 371,335
Japanese Yen 5,315,224 635,595 1,230,865 84,162
Japanese Yen/Deutsche
Marks 1,451,560 139,942 1,599,690 104,849
Swiss Francs/Deutsche Marks 7,645 23,201 16,940 209,145
Options terminated in closing transactions -
Australian Dollars (7,552) (37,715)
British Pounds (5,840) (44,068)
Deutche Marks (13,293) (66,179) (16,211) (27,177)
Deutsche Marks/British Pounds (20,894) (169,544)
Japanese Government Bonds (2,448,000) (59,301) (6,627,000) (454,296)
Japanese Yen (4,071,050) (397,674) (1,230,865) (84,162)
Japanese Yen/Deutsche Marks (776,849) (43,048)
Swiss Francs/Deutsche Marks (16,940) (209,145)
Options expired -
Deutsche Marks/British Pounds (19,522) (75,295)
Swiss Francs/Deutsche Marks (7,645) (23,201)
--------- ---------- --------- ----------
OUTSTANDING, END OF PERIOD 2,714,253 $ 470,663 1,061,264 $ 159,877
========= ========== ========= ==========
Options outstanding at end of period consist of:
Deutsche Marks/British Pounds 18,519 92,800 20,423 83,855
Japanese Government Bonds 218,000 14,221
Japanese Yen 1,244,174 237,921
Japanese Yen/Deutsche Marks 1,451,560 139,942 822,841 61,801
--------- ---------- --------- ----------
OUTSTANDING, END OF PERIOD 2,714,253 $ 470,663 1,061,264 $ 159,877
========= ========== ========= ==========
</TABLE>
At October 31, 1997, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales
1/07/98 CAD 6,414,552 $ 4,707,342 $ 4,567,558 $ 139,784
1/07/98 CHF 7,740,223 5,483,297 5,562,317 (79,020)
1/07/98 ESP 126,887,421 875,750 871,590 4,160
1/07/98 FRF 62,728,795 10,691,932 10,895,364 (203,432)
----------- ----------- ---------
$21,758,321 $21,896,829 $(138,508)
=========== =========== =========
Purchases
1/07/98 CAD 15,998,972 $11,671,693 $11,392,260 $(279,433)
1/07/98 DEM 34,422,040 19,874,437 20,015,831 141,394
1/07/98 ESP 1,111,008,075 7,599,169 7,631,514 32,345
1/07/98 GBP 1,502,743 2,489,595 2,512,460 22,865
1/07/98 JPY 939,526,144 7,876,314 7,895,778 19,464
1/07/98 NLG 20,919,791 10,691,932 10,797,290 105,358
----------- ----------- ---------
$60,203,140 $60,245,133 $ 41,993
=========== =========== =========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $466,069 with Bankers' Trust,
$381,960 with C.S. First Boston, $204,068 with Merrill Lynch, and a net payable
of $652,039 with Swiss Bank and $180,521with Deutsche Bank at October 31, 1997.
Closed forward foreign currency exchange contracts excluded above amount to a
net receivable of $214,532 with Goldman Sachs at October 31, 1997.
At October 31, 1997, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
<TABLE>
<CAPTION>
Cross Currency Swaps
CASH FLOWS UNREALIZED
NOTIONAL PRINCIPAL CASH FLOWS PAID RECEIVED BY APPRECIATION
EXPIRATION AMOUNT OF CONTRACT BY THE FUND THE FUND (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ITL 19,632,000,000/
9/18/00 DEM (20,125,064) DEM-Fixed-4.565% ITL-Fixed-5.68% $79,135
</TABLE>
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At October 31,
1997, the Fund owned the following restricted securities (constituting 0.07%
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 by 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.
DATE OF
DESCRIPTION ACQUISITION SHARES COST VALUE
- ------------------------------------------------------------------------------
BK Handlowy 6/18/97 13,500 $145,935 $181,552
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust VI and Shareholders of MFS World Total
Return Fund:
We have audited the accompanying statement of assets and liabilities of MFS
World Total Return Fund, including the schedule of portfolio investments as of
October 31, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the periods prior to the year ended October
31, 1994 indicated herein, were audited by other auditors whose report dated
December 16, 1993 expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1997, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
World Total Return Fund at October 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the four years
in the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 12, 1997
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) World Total Return Fund
<TABLE>
<CAPTION>
<S> <C>
Trustees Secretary
A. Keith Brodkin* - Chairman and President Stephen E. Cavan*
Richard B. Bailey* - Private Investor; Assistant Secretary
Former Chairman and Director (until 1991), James R. Bordewick, Jr.*
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, Custodian
Cambridge Trust Company State Street Bank and Trust Company
Marshall N. Cohan - Private Investor Auditors
Deloitte & Touche LLP
Lawrence H. Cohn, M.D. - Chief of Cardiac
Surgery, Brigham and Women's Hospital; Investor Information
Professor of Surgery, Harvard Medical School For MFS stock and bond market outlooks, call
toll free: 1-800-637-4458 anytime from a
The Hon. Sir J. David Gibbons, KBE - Chief touch-tone telephone.
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Bank of N.T. Butterfield & Son Ltd. For information on MFS mutual funds, call
your financial adviser or, for an information
Abby M. O'Neill - Private Investor; kit, call toll free: 1-800-637-2929 any
Director, Rockefeller Financial Services, business day from 9 a.m. to 5 p.m. Eastern
Inc. (investment advisers) time (or leave a message anytime).
Walter E. Robb, III - President and Investor Service
Treasurer, Benchmark Advisors, Inc. MFS Service Center, Inc.
(corporate financial consultants); President, P.O. Box 2281
Benchmark Consulting Group, Inc. (office Boston, MA 02107-9906
services); Trustee, Landmark Funds (mutual
funds) For general information, call toll free:
1-800-225-2606 any business day from
Arnold D. Scott* - Senior Executive Vice 8 a.m. to 8 p.m. Eastern time.
President, Director and Secretary,
Massachusetts Financial Services Company For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
Jeffrey L. Shames* - President and Director, day from 9 a.m. to 5 p.m. Eastern time. (To
Massachusetts Financial Services Company use this service, your phone must be equipped
with a Telecommunications Device for the
J. Dale Sherratt - President, Insight Deaf.)
Resources, Inc. (acquisition planning
specialists)
Ward Smith - Former Chairman For share prices, account balances, and
(until 1994), NACCO Industries; Director, exchanges, call toll free: 1-800-MFS-TALK
Sundstrand Corporation (1-800-637-8255) anytime from a touch-tone
telephone.
Investment Adviser
Massachusetts Financial Services Company World Wide Web
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
Distributor [Dalbar Logo] For the fourth year in a
MFS Fund Distributors, Inc. row, MFS earned a #1
500 Boylston Street ranking in the DALBAR, Inc. Broker/Dealer
Boston, MA 02116-3741 Survey, Main Office Operations Service
Quality Category. The firm achieved a 3.42
Portfolio Manager overall score on a scale of 1 to 4 in the
Fredereick J. Simmons* 1997 survey. A total of 111 firms responded,
offering input on the quality of service they
Treasurer received from 29 mutual fund companies
W. Thomas London* nationwide. The survey contained questions
about service quality in 11 categories,
Assistant Treasurers including "knowledge of operations contact,"
Mark E. Bradley* "keeping you informed," and "ease of doing
Ellen Moynihan* business" with the firm.
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) WORLD TOTAL
RETURN FUND -------------
BULK RATE
U.S. POSTAGE
PAID
MFS
-------------
500 Boylston Street
Boston, MA 02116-3741
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