UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5262
- --------------------------------------------------------------------------------
MFS SERIES TRUST VIII
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Stephen E. Cavan
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
- --------------------------------------------------------------------------------
(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
- --------------------------------------------------------------------------------
Date of fiscal year end: October 31, 2002
- --------------------------------------------------------------------------------
Date of reporting period: April 30, 2003
- --------------------------------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
SEMIANNUAL REPORT 4/30/03
MFS(R) GLOBAL GROWTH FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) GLOBAL GROWTH FUND
The fund seeks to provide capital appreciation by investing in securities of
companies worldwide growing at rates expected to be well above the growth rate
of the overall U.S. economy.
TABLE OF CONTENTS
- ------------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ------------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ------------------------------------------------------
MANAGEMENT REVIEW 5
- ------------------------------------------------------
PERFORMANCE SUMMARY 8
- ------------------------------------------------------
PORTFOLIO OF INVESTMENTS 12
- ------------------------------------------------------
FINANCIAL STATEMENTS 26
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 40
- ------------------------------------------------------
TRUSTEES AND OFFICERS 47
- ------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 49
- ------------------------------------------------------
CONTACT INFORMATION 50
- ------------------------------------------------------
ASSET ALLOCATION 51
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers - no matter how
talented they may be - can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
- --------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- --------------------------------------------------------------------------------
THE HUMAN SIDE OF MONEY MANAGEMENT
For more than 75 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with insight
and care.
Our success, we believe, has to do with the fact that we see investors as people
with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The period began on a positive note as global equity markets, which had declined
sharply over the summer of 2002, rallied in October and November. Investor
psychology seemed to turn around, in part because third-quarter 2002 earnings in
general were somewhat encouraging. By December, however, markets turned negative
again under pressure of several factors including economic weakness in most
developed nations and geopolitical uncertainty in Iraq and North Korea.
Over the next few months, equity markets gave up most or all of their gains from
the previous rally. In mid-March, however, another rally began as geopolitical
uncertainty decreased with the start of war in Iraq. Rapid military success,
followed by a first-quarter U.S. earnings season that was better than many had
expected, allowed the rally to continue though the end of the period on April
30. For the six-month period overall, the combination of two rallies and one
downturn led the markets up modestly. In addition, the decline of the U.S.
dollar, particularly against the euro, helped U.S. investors in overseas stocks.
- -------------------------------------------------
TOP 5 STOCK HOLDINGS
4/30/03
NOVARTIS AG 2.3%
Swiss pharmaceutical company
- -------------------------------------------------
ASTRAZENECA GROUP PLC 1.7%
U.K.-based pharmaceutical company
- -------------------------------------------------
THE ROYAL BANK OF SCOTLAND PLC 1.5%
Banking firm with operations in the United
Kingdom and the United States
- -------------------------------------------------
BP AMOCO PLC, ADR 1.5%
U.K.-based oil exploration and
production firm
- -------------------------------------------------
MICROSOFT CORP. 1.4%
U.S. computer software and systems
company
- -------------------------------------------------
The portfolio is actively managed, and current holdings may be different.
DETRACTORS FROM PERFORMANCE
While the fund outperformed its peer group, as measured by the average global
fund tracked by Lipper Inc., the fund underperformed the broad global market as
measured by its benchmark, the Morgan Stanley Capital International (MSCI) All
Country World Free Index (the MSCI Index).
Basic materials was the fund's weakest sector over the period, with several
holdings contributing to relative underperformance. Swiss agricultural chemical
firm Syngenta stumbled in February after helping portfolio performance in
earlier periods. Factors that hurt company earnings included higher pension
costs, competition that put pressure on prices, and transaction costs related to
currency fluctuations. Our holdings in several South African platinum producers
- - Gold Fields, Anglo American Platinum, and Impala Platinum - also held back
performance. The companies' results over the period were hurt by rising
government royalties and the falling U.S. dollar, because platinum is a
commodity priced in dollars.
In the technology area, detractors from performance included Samsung, a Korean
semiconductor maker that was hurt by falling memory chip prices, and Tandberg, a
Norwegian teleconferencing firm whose growth was not as strong as had been
expected. We sold our Tandberg position over the period.
In the health care sector, stocks that hurt performance included French
pharmaceutical firm Aventis and Swedish medical device company Jomed. Factors
that dragged down Aventis' stock included increased competition faced by its
allergy medication Allegra and slower sales of its anti-clotting drug Lovenox.
Jomed stock was affected by news of fraud related to misstatements of earnings.
By the end of the period, we had sold both stocks out of the portfolio.
CONTRIBUTORS TO PERFORMANCE
While some health care holdings held back results over the period, Fresenius
Medical Care, a German-headquartered kidney dialysis products and services
provider, was one of the fund's best performing holdings. Prior to the period,
our Fresenius position had been hurt by asbestos-related lawsuits related to
acquisitions the company had made in the United States. Those suits were settled
during the period, and the stock came back strongly.
Driven in part by oil prices that rose for much of the period, several energy
stocks in emerging market countries also helped performance. These included our
holdings in LUKOIL, Surgutneftegaz, and YUKOS in Russia and Petroleo Brasileiro
("Pertrobras") in Brazil.
In the consumer staples sector, it was largely what we didn't own that helped
performance. The fund benefited by avoiding Coca Cola Co., a stock in the MSCI
Index that performed poorly. We also benefited by having an underweighted
position in tobacco firm Philip Morris, which declined sharply, and by selling
our position before the end of the period and thus missing some of the stock's
decline.
The fund's outperformance in the retail area came largely from one holding,
Kingfisher, a U.K.-based chain of home improvement and electrical & furniture
stores. A new position in the fund over the period, the stock did well as the
company sharpened its focus on its core business, the do-it-yourself market.
/s/ David A. Antonelli
David A. Antonelli
Director of Global Equity Research*
/s/ John E. Lathrop
John E. Lathrop
Portfolio Manager
/s/ Nicholas D. Smithie
Nicholas D. Smithie
Portfolio Manager
*The team of MFS global research analysts is responsible for the day-to-day
management of a portion of the fund under the general supervision of
Mr. Antonelli. Mr. Lathrop manages the U.S. portion of the fund, and
Mr. Smithie manages the emerging markets portion of the fund.
The opinions expressed in this report are those of the Director of Global Equity
Research and are current only through the end of the period of the report as
stated on the cover. These views are subject to change at any time based on
market and other conditions, and no forecasts can be guaranteed.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 4/30/03
- --------------------------------------------------------------------------------
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. Performance results reflect the percentage change in
net asset value, including the reinvestment of any dividends and capital gains
distributions. (See Notes to Performance Summary.)
TOTAL RETURNS
Cumulative without sales charge
Class
Share inception
class date 6-mo 1-yr 3-yr 5-yr Life*
A 11/18/93 2.99% -15.15% -41.75% -8.51% 74.76%
- -----------------------------------------------------------------------------------------------------------
B 11/18/93 2.60% -15.82% -43.06% -11.88% 62.51%
- -----------------------------------------------------------------------------------------------------------
C 1/3/94 2.63% -15.77% -43.06% -11.89% 62.87%
- -----------------------------------------------------------------------------------------------------------
I 1/2/97 3.11% -14.95% -41.36% -7.39% 77.62%
- -----------------------------------------------------------------------------------------------------------
R 12/31/02 2.83% -15.28% -41.84% -8.65% 74.49%
Average annual without sales charge
A -- -15.15% -16.48% -1.76% 6.09%
- -----------------------------------------------------------------------------------------------------------
B -- -15.82% -17.11% -2.50% 5.27%
- -----------------------------------------------------------------------------------------------------------
C -- 15.77% -17.12% -2.50% 5.30%
- -----------------------------------------------------------------------------------------------------------
I -- -14.95% -16.30% -1.52% 6.27%
- -----------------------------------------------------------------------------------------------------------
R -- -15.28% -16.53% -1.79% 6.07%
- -----------------------------------------------------------------------------------------------------------
Average annual with sales charge
A -- -20.02% -18.12% -2.92% 5.42%
- -----------------------------------------------------------------------------------------------------------
B -- -19.19% -17.76% -2.76% 5.27%
- -----------------------------------------------------------------------------------------------------------
C -- -16.61% -17.12% -2.50% 5.30%
I and R class shares do not have a sales charge. Please see the Notes to
Performance Summary for more details.
Comparative benchmarks
6-mo 1-yr 3-yr 5-yr Life*
Average global fund+ 1.81% -16.75% -14.01% -3.65% 5.19%
- -----------------------------------------------------------------------------------------------------------
MSCI All Country World Index# 3.96% -14.17% -14.36% -3.97% 5.23%
Periods less than one year are actual, not annualized.
* For the period from the commencement of the fund's investment operations,
November 18, 1993, through April 30, 2003. Index information is from December
1, 1993.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) ALL COUNTRY WORLD FREE INDEX -
Measures the performance of developed and emerging market stock markets.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
A SIGNIFICANT PORTION OF THE RETURNS THAT ARE LESS THAN ONE YEAR IS ATTRIBUTABLE
TO THE RECEIPT OF A NON-RECURRING PAYMENT IN SETTLEMENT OF A CLASS ACTION
LAWSUIT.
Class A results, including sales charge, reflects the deduction of the maximum
5.75% sales charge. Class B results, including sales charge, reflects the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%. Class C results, including sales charge,
redeemed within one year from the end of the calendar month of purchase reflects
the deduction of the 1% CDSC. Class I shares have no sales charges and are
available only to certain investors. Class R shares have no sales charges and
are available only to certain retirement plans.
Performance for Class R and I shares includes the performance of the fund's
Class A shares. Performance for Class C shares includes the performance of the
fund's Class B shares for periods prior to their offering. Blended class
performance has been adjusted to take into account differences in sales loads,
if any, applicable to these share classes, but has not been adjusted to take
into account differences in class specific operating expenses (such as Rule
12b-1 fees). Compared to performance these share classes would have experienced
had they been offered for the entire period, the use of blended performance
generally results in higher performance for share classes with higher operating
expenses than the initial share class to which it is blended, and lower
performance for share classes with lower operating expenses than the initial
share class to which it is blended.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. 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, AND THE PERFORMANCE SHOWN DOES NOT REFLECT THE
DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS
OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
Investing in small and/or emerging growth companies is riskier than investing in
more-established companies.
The portfolio may invest a substantial amount of its assets in issuers located
in a limited number of countries and therefore is susceptible to adverse
economic, political or regulatory developments affecting those countries.
These risks may increase share price volatility. Please see the prospectus for
details. Further information on these and other risk considerations.
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.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited) 4/30/03
- --------------------------------------------------------------------------------
The Portfolio of Investments is a list of all securities owned by your fund. It
is categorized by broad-based asset classes.
Stocks - 96.2%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
Foreign Stocks - 61.8%
- ----------------------------------------------------------------------------------------------------
Australia - 1.0%
- ----------------------------------------------------------------------------------------------------
Australia & New Zealand Banking Group Ltd.
(Banks & Credit Cos.)* 171,530 $2,002,596
- ----------------------------------------------------------------------------------------------------
John Fairfax Holdings Ltd. (Printing & Publishing) 587,350 1,121,427
- ----------------------------------------------------------------------------------------------------
The News Corp., Ltd. (Media)* 166,862 1,188,705
- ----------------------------------------------------------------------------------------------------
$4,312,728
- ----------------------------------------------------------------------------------------------------
Austria - 0.1%
- ----------------------------------------------------------------------------------------------------
Erste Bank der Oesterreichischen Sparkassen AG (Banks &
Credit Cos.) 7,180 $569,081
- ----------------------------------------------------------------------------------------------------
Belgium - 0.5%
- ----------------------------------------------------------------------------------------------------
Fortis (Financial Services) 117,430 $1,958,624
- ----------------------------------------------------------------------------------------------------
Bermuda - 0.8%
- ----------------------------------------------------------------------------------------------------
Accenture Ltd., "A" (Business Services)* 41,700 $668,034
- ----------------------------------------------------------------------------------------------------
Ace Ltd. (Insurance) 27,150 898,122
- ----------------------------------------------------------------------------------------------------
XL Capital Ltd. (Insurance) 23,710 1,951,333
- ----------------------------------------------------------------------------------------------------
$3,517,489
- ----------------------------------------------------------------------------------------------------
Brazil - 1.3%
- ----------------------------------------------------------------------------------------------------
Aracruz Celulose S.A. (Forest & Paper Products) 36,370 $763,770
- ----------------------------------------------------------------------------------------------------
Banco Bradesco S.A., Preferred (Banks & Credit Cos.) 174,700,000 720,850
- ----------------------------------------------------------------------------------------------------
Brasil Telecom Participacoes, ADR (Telecommunications) 12,700 449,585
- ----------------------------------------------------------------------------------------------------
Companhia Siderurgica National (Steel) 11,300 260,013
- ----------------------------------------------------------------------------------------------------
Companhia Vale Do Rio Doce (Metals & Minerals) 17,300 483,708
- ----------------------------------------------------------------------------------------------------
Petroleo Brasileiro S.A., ADR (Oils & Gas) 82,150 1,523,882
- ----------------------------------------------------------------------------------------------------
Tele Norte Leste Participacoes S.A., ADR
(Telecommunications) 47,500 515,375
- ----------------------------------------------------------------------------------------------------
Uniao de Banco Brasiliero S.A. (Banks & Credit Cos.) 26,800 486,420
- ----------------------------------------------------------------------------------------------------
$5,203,603
- ----------------------------------------------------------------------------------------------------
Canada - 0.9%
- ----------------------------------------------------------------------------------------------------
Bank Nova Scotia (Banks) 23,810 $926,655
- ----------------------------------------------------------------------------------------------------
Encana Corp. (Utilities - Gas) 55,340 1,814,812
- ----------------------------------------------------------------------------------------------------
Manitoba Telecom Services, Inc. (Telecommunications) 41,150 1,059,250
- ----------------------------------------------------------------------------------------------------
$3,800,717
- ----------------------------------------------------------------------------------------------------
China - 1.9%
- ----------------------------------------------------------------------------------------------------
Beijing Datang Power Generation Co., Ltd. (Energy) 664,000 $261,809
- ----------------------------------------------------------------------------------------------------
China Mobile (Hong Kong) Ltd. (Telecommunications) 866,500 1,738,822
- ----------------------------------------------------------------------------------------------------
China Mobile (Hong Kong) Ltd., ADR (Telecommunications) 30,800 308,308
- ----------------------------------------------------------------------------------------------------
China Oilfield Services, Ltd. (Oil Services) 5,615,400 1,188,056
- ----------------------------------------------------------------------------------------------------
China Petroleum and Chemical Corp. (Oils) 4,342,000 857,399
- ----------------------------------------------------------------------------------------------------
China Telecom Corp. (Telecommunications)* 3,668,000 705,493
- ----------------------------------------------------------------------------------------------------
Huaneng Power International, Inc. (Energy) 2,036,000 1,931,887
- ----------------------------------------------------------------------------------------------------
PetroChina Co., Ltd. (Oils) 2,962,000 676,048
- ----------------------------------------------------------------------------------------------------
$7,667,822
- ----------------------------------------------------------------------------------------------------
Croatia - 0.1%
- ----------------------------------------------------------------------------------------------------
Pliva d.d., GDR (Medical & Health Products) 24,000 $334,517
- ----------------------------------------------------------------------------------------------------
Denmark - 0.7%
- ----------------------------------------------------------------------------------------------------
Danske Bank (Banks & Credit Cos.) 157,810 $3,041,983
- ----------------------------------------------------------------------------------------------------
France - 4.3%
- ----------------------------------------------------------------------------------------------------
Carrefour S.A. (Supermarket) 39,570 $1,723,851
- ----------------------------------------------------------------------------------------------------
France Telecom S.A. (Telecommunications)* 99,490 2,302,252
- ----------------------------------------------------------------------------------------------------
France Telecom S.A., New (Telecommunications)* 22,340 514,712
- ----------------------------------------------------------------------------------------------------
Generale de Sante (Healthcare) 76,309 870,120
- ----------------------------------------------------------------------------------------------------
L'Air Liquide S.A. (Gas) 13,440 2,038,836
- ----------------------------------------------------------------------------------------------------
Sanofi-Synthelabo S.A. (Medical & Health Products) 59,090 3,530,733
- ----------------------------------------------------------------------------------------------------
Schneider Electric S.A. (Manufacturing) 28,871 1,369,101
- ----------------------------------------------------------------------------------------------------
Societe Television Francaise 1 (Media) 22,899 644,322
- ----------------------------------------------------------------------------------------------------
Total Fina Elf S.A., "B" (Oils) 37,390 4,911,300
- ----------------------------------------------------------------------------------------------------
$17,905,227
- ----------------------------------------------------------------------------------------------------
Germany - 2.6%
- ----------------------------------------------------------------------------------------------------
Bayerische Motoren Werke AG (Automotive) 84,330 $2,815,921
- ----------------------------------------------------------------------------------------------------
Celanese AG (Chemicals) 44,630 987,860
- ----------------------------------------------------------------------------------------------------
Fresenius Medical Care AG (Medical & Health Products) 33,555 1,196,606
- ----------------------------------------------------------------------------------------------------
Linde AG (Conglomerates) 42,090 1,588,490
- ----------------------------------------------------------------------------------------------------
Porsche AG (Automotive) 5,638 2,079,898
- ----------------------------------------------------------------------------------------------------
SAP AG, ADR (Computer Software - Systems) 8,200 841,511
- ----------------------------------------------------------------------------------------------------
Schering AG (Pharmaceuticals) 13,180 588,620
- ----------------------------------------------------------------------------------------------------
Stada Arzneimittel AG (Pharmaceuticals) 10,600 555,753
- ----------------------------------------------------------------------------------------------------
$10,654,659
- ----------------------------------------------------------------------------------------------------
Greece - 0.5%
- ----------------------------------------------------------------------------------------------------
Cosmote S.A. (Telecommunications) 90,000 $933,670
- ----------------------------------------------------------------------------------------------------
Hellenic Bottling (Beverages) 88,340 1,293,695
- ----------------------------------------------------------------------------------------------------
$2,227,365
- ----------------------------------------------------------------------------------------------------
Hong Kong - 0.5%
- ----------------------------------------------------------------------------------------------------
Citic Pacific Ltd. (Conglomerate) 311,000 $528,382
- ----------------------------------------------------------------------------------------------------
CNOOC Ltd. (Oils) 534,500 702,496
- ----------------------------------------------------------------------------------------------------
Hong Kong Electric Holdings Ltd. (Utilities-Electric) 170,500 688,664
- ----------------------------------------------------------------------------------------------------
$1,919,542
- ----------------------------------------------------------------------------------------------------
Hungary - 0.3%
- ----------------------------------------------------------------------------------------------------
Gedeon Richter Ltd., GDR (Pharmaceuticals) 5,400 $392,219
- ----------------------------------------------------------------------------------------------------
OTP Bank (Banks & Credit Cos.) 39,590 854,352
- ----------------------------------------------------------------------------------------------------
$1,246,571
- ----------------------------------------------------------------------------------------------------
India - 0.7%
- ----------------------------------------------------------------------------------------------------
Hindustan Petroleum Corp., Ltd. (Oils) 51,700 $304,873
- ----------------------------------------------------------------------------------------------------
Housing Development Finance Corp., Ltd. (Financial
Services) 103,458 746,552
- ----------------------------------------------------------------------------------------------------
ICICI Bank Ltd. (Banks & Credit Cos.)* 94,392 497,446
- ----------------------------------------------------------------------------------------------------
Infosys Technologies Ltd., ADR (Computer Software -
Services) 13,300 546,630
- ----------------------------------------------------------------------------------------------------
Reliance Industries Ltd. (Conglomerate) 106,560 619,703
- ----------------------------------------------------------------------------------------------------
Sun Pharmaceutical Industries Ltd. (Pharmaceuticals)* 32,080 187,309
- ----------------------------------------------------------------------------------------------------
$2,902,513
- ----------------------------------------------------------------------------------------------------
Indonesia - 0.4%
- ----------------------------------------------------------------------------------------------------
PT Astra International Tbk (Automotive) 616,500 $215,075
- ----------------------------------------------------------------------------------------------------
PT Bank Central Asia Tbk (Financial Services) 580,500 162,347
- ----------------------------------------------------------------------------------------------------
PT Hanjaya Mandala Sampoerna Tbk (Tobacco) 502,500 207,178
- ----------------------------------------------------------------------------------------------------
PT Indocement Tunggal Prakarsa Tbk (Building Materials) 1,623,000 191,855
- ----------------------------------------------------------------------------------------------------
PT Telekomunikasi Indonesia (Telecommunications) 1,713,500 810,212
- ----------------------------------------------------------------------------------------------------
$1,586,667
- ----------------------------------------------------------------------------------------------------
Ireland - 1.2%
- ----------------------------------------------------------------------------------------------------
Anglo Irish Bank Corp., PLC (Banks & Credit Cos.)* 71,100 $531,311
- ----------------------------------------------------------------------------------------------------
Bank of Ireland (Banks & Credit Cos.) 284,090 3,509,307
- ----------------------------------------------------------------------------------------------------
Irish Life & Permanent PLC (Financial Institutions) 83,950 976,016
- ----------------------------------------------------------------------------------------------------
$5,016,634
- ----------------------------------------------------------------------------------------------------
Israel - 0.3%
- ----------------------------------------------------------------------------------------------------
Bank Hapoalim (Banks & Credit Cos.)* 212,000 $367,013
- ----------------------------------------------------------------------------------------------------
Bank Leumi le-Isreal B.M. (Banking)* 339,300 415,728
- ----------------------------------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd. (Pharmaceuticals)* 13,900 636,064
- ----------------------------------------------------------------------------------------------------
$1,418,805
- ----------------------------------------------------------------------------------------------------
Japan - 8.7%
- ----------------------------------------------------------------------------------------------------
Aeon Credit Service Co., Ltd. (Financial Services) 30,100 $719,315
- ----------------------------------------------------------------------------------------------------
Brother Industries Ltd. (Electronics) 560,000 3,767,829
- ----------------------------------------------------------------------------------------------------
Canon, Inc. (Business Machines) 68,000 2,753,129
- ----------------------------------------------------------------------------------------------------
Credit Saison Co., Ltd. (Financial Services) 91,200 1,719,815
- ----------------------------------------------------------------------------------------------------
DDI Corp. (Telecommunications) 445 1,353,129
- ----------------------------------------------------------------------------------------------------
Fast Retailing Co. (Retail) 57,200 1,667,232
- ----------------------------------------------------------------------------------------------------
Fujikura Ltd. (Electronics) 522,000 1,179,488
- ----------------------------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automotive) 97,100 3,221,714
- ----------------------------------------------------------------------------------------------------
Namco Ltd. (Leisure) 72,400 1,016,215
- ----------------------------------------------------------------------------------------------------
Nippon Electric Glass Co., Ltd. (Manufacturing) 163,000 1,788,140
- ----------------------------------------------------------------------------------------------------
Nippon Oil Corp. (Energy) 237,000 945,611
- ----------------------------------------------------------------------------------------------------
Nissan Motor Co. (Automotive) 252,600 1,941,445
- ----------------------------------------------------------------------------------------------------
Shiseido Co., Ltd. (Consumer Products) 255,000 2,332,591
- ----------------------------------------------------------------------------------------------------
Sompo Japan Insurance, Inc. (Insurance - Property &
Casualty) 276,000 1,263,503
- ----------------------------------------------------------------------------------------------------
Stanley Electric Co., Ltd. (Electronics) 213,000 2,683,746
- ----------------------------------------------------------------------------------------------------
Tokyo Gas Co., Ltd. (Gas) 1,494,000 4,869,147
- ----------------------------------------------------------------------------------------------------
Uni-Charm Corp. (Forest & Paper Products) 69,700 2,780,974
- ----------------------------------------------------------------------------------------------------
$36,003,023
- ----------------------------------------------------------------------------------------------------
Luxembourg - 0.1%
- ----------------------------------------------------------------------------------------------------
Tenaris S.A., ADR (Metals & Mining)* 14,200 $333,700
- ----------------------------------------------------------------------------------------------------
Malaysia - 0.3%
- ----------------------------------------------------------------------------------------------------
Resorts World Berhad (Entertainment) 118,000 $259,324
- ----------------------------------------------------------------------------------------------------
Sime Darby Berhad (Financial Institutions) 709,000 933,017
- ----------------------------------------------------------------------------------------------------
$1,192,341
- ----------------------------------------------------------------------------------------------------
Mexico - 2.0%
- ----------------------------------------------------------------------------------------------------
Alfa, S.A., "A" (Chemicals) 120,900 $205,800
- ----------------------------------------------------------------------------------------------------
America Movil S.A. de C.V., ADR (Telecommunications) 114,960 1,927,879
- ----------------------------------------------------------------------------------------------------
Apasco S.A. (Building Materials) 59,000 401,727
- ----------------------------------------------------------------------------------------------------
Coca-Cola Femsa S.A., ADR (Beverages) 39,950 848,938
- ----------------------------------------------------------------------------------------------------
Corporacion GEO, S.A. de C.V., "B" (Real Estate)* 170,900 470,762
- ----------------------------------------------------------------------------------------------------
Fomento Economico Mexicano S.A. (Food & Beverage
Products) 21,080 800,197
- ----------------------------------------------------------------------------------------------------
Grupo Continential S.A. (Food & Beverage Products) 258,600 396,553
- ----------------------------------------------------------------------------------------------------
Grupo Elektra, S.A. de C.V. (Retail) 66,700 179,527
- ----------------------------------------------------------------------------------------------------
Grupo Financiero Banorte S.A. de C.V. (Finance) 244,430 678,762
- ----------------------------------------------------------------------------------------------------
Grupo Financiero BBVA Bancomer, S.A. de C.V. (Financial
Services)* 506,500 439,687
- ----------------------------------------------------------------------------------------------------
Kimberly-Clark de Mexico S.A. de C.V. (Forest & Paper
Products) 226,360 555,032
- ----------------------------------------------------------------------------------------------------
TV Azteca, S.A. de C.V., ADR (Broadcasting) 69,500 403,100
- ----------------------------------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V. "Series V" (Retail) 294,865 815,097
- ----------------------------------------------------------------------------------------------------
$8,123,061
- ----------------------------------------------------------------------------------------------------
Netherlands - 3.1%
- ----------------------------------------------------------------------------------------------------
Fugro N.V. (Engineering - Construction)* 27,298 $1,109,273
- ----------------------------------------------------------------------------------------------------
Koninklijke KPN N.V. (Telecommunications) 308,280 2,053,973
- ----------------------------------------------------------------------------------------------------
Koninklijke Philips Electronics N.V. (Electronics) 114,650 2,136,549
- ----------------------------------------------------------------------------------------------------
STMicroelectronics N.V. (Electronics) 58,300 1,200,397
- ----------------------------------------------------------------------------------------------------
Unilever N.V. (Consumer Products) 63,730 4,021,712
- ----------------------------------------------------------------------------------------------------
Unilever N.V., NY Shares (Consumer Products) 4,900 308,553
- ----------------------------------------------------------------------------------------------------
VNU N.V. (Printing & Publishing)* 74,391 2,162,205
- ----------------------------------------------------------------------------------------------------
$12,992,662
- ----------------------------------------------------------------------------------------------------
Norway - 0.1%
- ----------------------------------------------------------------------------------------------------
Gjensidige NOR ASA (Financial Services) 11,840 $410,805
- ----------------------------------------------------------------------------------------------------
Philippines - 0.1%
- ----------------------------------------------------------------------------------------------------
Philippine Long Distance Telephone Co., ADR (Utilities -
Telephone)* 37,000 $268,321
- ----------------------------------------------------------------------------------------------------
Poland - 0.1%
- ----------------------------------------------------------------------------------------------------
Bank Pekao S.A. (Banks & Credit Cos.) 28,100 $605,274
- ----------------------------------------------------------------------------------------------------
Russia - 1.2%
- ----------------------------------------------------------------------------------------------------
JSC Mining and Smelting Company Norilsk Nickel, ADR
(Mining) 33,690 $788,346
- ----------------------------------------------------------------------------------------------------
LUKOIL, Holdings ADR (Oils) 8,600 592,024
- ----------------------------------------------------------------------------------------------------
LUKOIL, Sponsored ADR (Oils) 27,540 1,895,854
- ----------------------------------------------------------------------------------------------------
Sibneft ADR (Oils) 3,500 83,020
- ----------------------------------------------------------------------------------------------------
YUKOS Corp., ADR (Oils) 8,850 1,553,175
- ----------------------------------------------------------------------------------------------------
$4,912,419
- ----------------------------------------------------------------------------------------------------
Singapore - 1.4%
- ----------------------------------------------------------------------------------------------------
DBS Group Holdings Ltd. (Financial Services) 210,000 $1,029,992
- ----------------------------------------------------------------------------------------------------
MobileOne Asia Ltd. (Telecommunications - Wireless) 610,000 433,307
- ----------------------------------------------------------------------------------------------------
Singapore Telecommunications Ltd. (Telecommunications) 3,185,000 2,603,591
- ----------------------------------------------------------------------------------------------------
United Overseas Bank Ltd. (Banks & Credit Cos.) 266,000 1,559,590
- ----------------------------------------------------------------------------------------------------
$5,626,480
- ----------------------------------------------------------------------------------------------------
South Africa - 1.9%
- ----------------------------------------------------------------------------------------------------
ABSA Group Ltd. (Financial Services) 152,070 $669,228
- ----------------------------------------------------------------------------------------------------
Anglo American Platinum Corp., Ltd. (Metals) 30,130 847,948
- ----------------------------------------------------------------------------------------------------
AngloGold Ltd. (Mining) 19,600 561,066
- ----------------------------------------------------------------------------------------------------
Firstrand Ltd. (Financial Services) 384,000 376,123
- ----------------------------------------------------------------------------------------------------
Gold Fields Ltd. (Metals & Mining) 183,650 1,872,299
- ----------------------------------------------------------------------------------------------------
Impala Platinum Holdings Ltd. (Metals & Mining) 32,760 1,626,995
- ----------------------------------------------------------------------------------------------------
M-Cell Ltd. (Cellular Phones) 107,000 180,088
- ----------------------------------------------------------------------------------------------------
Nedcor Ltd. (Banks & Credit Cos.) 27,000 365,031
- ----------------------------------------------------------------------------------------------------
Sanlam Ltd. (Insurance) 372,300 309,706
- ----------------------------------------------------------------------------------------------------
Sasol Ltd. (Energy) 115,800 1,260,290
- ----------------------------------------------------------------------------------------------------
$8,068,774
- ----------------------------------------------------------------------------------------------------
South Korea - 3.1%
- ----------------------------------------------------------------------------------------------------
Hyundai Motor Co., Ltd. (Automotive) 28,960 $684,357
- ----------------------------------------------------------------------------------------------------
Kia Motors Corp. (Automotive) 49,100 341,618
- ----------------------------------------------------------------------------------------------------
Korea Electric Power Corp. (Utilities - Electric) 45,140 760,077
- ----------------------------------------------------------------------------------------------------
KT&G Corp. (Tobacco) 46,440 711,226
- ----------------------------------------------------------------------------------------------------
KT&G Corp., GDR (Tobacco)* 164,290 1,257,525
- ----------------------------------------------------------------------------------------------------
LG Chemical Ltd. (Chemicals) 18,320 607,901
- ----------------------------------------------------------------------------------------------------
LG Electronics, Inc. (Consumer Goods & Services) 14,680 506,457
- ----------------------------------------------------------------------------------------------------
POSCO (Steel) 57,980 1,191,489
- ----------------------------------------------------------------------------------------------------
Samsung Display Devices Co. (Electronics) 8,880 555,686
- ----------------------------------------------------------------------------------------------------
Samsung Electronics (Electronics) 17,110 $4,296,871
- ----------------------------------------------------------------------------------------------------
Samsung Fire & Marine Insurance Co., Ltd. (Insurance -
Property & Casualty)* 12,690 626,925
- ----------------------------------------------------------------------------------------------------
Shinhan Financial Group Co., Ltd. (Financial Services) 36,080 356,492
- ----------------------------------------------------------------------------------------------------
SK Telecom Co., Ltd. (Telecommunications) 5,380 748,637
- ----------------------------------------------------------------------------------------------------
$12,645,261
- ----------------------------------------------------------------------------------------------------
Spain - 1.5%
- ----------------------------------------------------------------------------------------------------
Altadis S.A. (Tobacco) 61,110 $1,578,074
- ----------------------------------------------------------------------------------------------------
Iberdrola S.A. (Utilities - Electric) 99,550 1,605,871
- ----------------------------------------------------------------------------------------------------
Telefonica S.A. (Telecommunications) 270,898 3,001,115
- ----------------------------------------------------------------------------------------------------
Telefonica S.A., New (Telecommunications)* 6,861 76,009
- ----------------------------------------------------------------------------------------------------
$6,261,069
- ----------------------------------------------------------------------------------------------------
Sweden - 0.3%
- ----------------------------------------------------------------------------------------------------
Alfa Laval (Engineering & Construction)* 109,200 $1,069,186
- ----------------------------------------------------------------------------------------------------
Switzerland - 5.1%
- ----------------------------------------------------------------------------------------------------
Converium Holding AG (Insurance) 26,390 $1,193,346
- ----------------------------------------------------------------------------------------------------
Givaudan S.A. (Chemicals) 1,750 678,295
- ----------------------------------------------------------------------------------------------------
Nestle S.A. (Food & Beverage Products) 16,232 3,313,509
- ----------------------------------------------------------------------------------------------------
Novartis AG (Medical & Health Products) 228,250 9,015,412
- ----------------------------------------------------------------------------------------------------
Syngenta AG (Chemicals)* 44,026 2,275,245
- ----------------------------------------------------------------------------------------------------
Synthes-Stratec, Inc. (Medical & Health Products) 2,593 1,636,777
- ----------------------------------------------------------------------------------------------------
UBS AG (Financial Services) 66,353 3,152,319
- ----------------------------------------------------------------------------------------------------
$21,264,903
- ----------------------------------------------------------------------------------------------------
Taiwan - 0.7%
- ----------------------------------------------------------------------------------------------------
Ambit Microsystems Corp. (Computer Software) 99,000 $283,631
- ----------------------------------------------------------------------------------------------------
Asustek Computer, Inc. (Electronics) 173,000 338,727
- ----------------------------------------------------------------------------------------------------
China Development Financial Holding Corp.
(Business Services) 850,000 297,365
- ----------------------------------------------------------------------------------------------------
Formosa Plastic Corp. (Chemicals) 586,610 726,295
- ----------------------------------------------------------------------------------------------------
Fubon Financial Holdings Co., Ltd. (Financial Services) 472,000 323,455
- ----------------------------------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd. (Computer Software -
Personal Computers) 199,000 624,561
- ----------------------------------------------------------------------------------------------------
President Chain Store Corp. (Retail) 353,555 448,943
- ----------------------------------------------------------------------------------------------------
$3,042,977
- ----------------------------------------------------------------------------------------------------
Thailand - 0.4%
- ----------------------------------------------------------------------------------------------------
Bangkok Bank (Banks & Credit Cos.) 259,800 $364,121
- ----------------------------------------------------------------------------------------------------
BEC World Public Co., Ltd. PLC (Television) 115,000 553,375
- ----------------------------------------------------------------------------------------------------
PTT Exploration and Production Public Co., Ltd.
(Natural Gas) 124,800 358,570
- ----------------------------------------------------------------------------------------------------
PTT Public Co., Ltd. (Oils) 396,500 416,784
- ----------------------------------------------------------------------------------------------------
$1,692,850
- ----------------------------------------------------------------------------------------------------
Turkey - 0.2%
- ----------------------------------------------------------------------------------------------------
Akbank T.A.S. (Banks & Credit Cos.) 245,368,700 $871,829
- ----------------------------------------------------------------------------------------------------
United Kingdom - 13.4%
- ----------------------------------------------------------------------------------------------------
Anglo American PLC (Metals & Mining)* 239,540 $3,432,541
- ----------------------------------------------------------------------------------------------------
AstraZeneca Group PLC (Medical & Health Products) 170,490 6,693,913
- ----------------------------------------------------------------------------------------------------
Aviva PLC (Insurance)* 265,543 1,868,603
- ----------------------------------------------------------------------------------------------------
BG Group PLC (Oils) 483,230 1,934,005
- ----------------------------------------------------------------------------------------------------
BHP Billiton PLC (Metals & Mining) 472,700 2,419,163
- ----------------------------------------------------------------------------------------------------
BP Amoco PLC, ADR (Oils) 156,454 6,029,737
- ----------------------------------------------------------------------------------------------------
British Sky Broadcasting Group PLC (Broadcasting) 144,440 1,498,053
- ----------------------------------------------------------------------------------------------------
Diageo PLC (Food & Beverage Products)* 252,492 2,802,443
- ----------------------------------------------------------------------------------------------------
Easy Jet PLC (Airlines) 177,850 537,583
- ----------------------------------------------------------------------------------------------------
Intertek Testing Servicing PLC (Business Services) 236,880 1,373,302
- ----------------------------------------------------------------------------------------------------
Johnston Press PLC (Printing & Publishing) 238,599 1,432,875
- ----------------------------------------------------------------------------------------------------
Kingfisher PLC (Retail)* 780,790 3,053,112
- ----------------------------------------------------------------------------------------------------
Lonmin (Metals & Minerals)* 132,670 1,474,644
- ----------------------------------------------------------------------------------------------------
Marks and Spencer Group PLC (Retail)* 216,220 1,008,008
- ----------------------------------------------------------------------------------------------------
Next PLC (Retail)* 139,553 2,105,769
- ----------------------------------------------------------------------------------------------------
Old Mutual PLC (Insurance) 114,500 168,012
- ----------------------------------------------------------------------------------------------------
Reckitt Benckiser PLC (Consumer Goods & Services)* 124,670 2,200,209
- ----------------------------------------------------------------------------------------------------
Reed Elsevier PLC (Publishing) 371,220 2,962,522
- ----------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Banks & Credit Cos.)* 233,184 6,119,796
- ----------------------------------------------------------------------------------------------------
Standard Chartered PLC (Banks & Credit Cos.)* 122,886 1,371,789
- ----------------------------------------------------------------------------------------------------
Vodafone Group PLC (Telecommunications)* 1,589,080 3,138,646
- ----------------------------------------------------------------------------------------------------
Vodafone Group PLC, ADR (Telecommunications) 76,620 1,514,011
- ----------------------------------------------------------------------------------------------------
Willis Group Holdings Ltd. (Insurance) 9,600 299,424
- ----------------------------------------------------------------------------------------------------
$55,438,160
- ----------------------------------------------------------------------------------------------------
Total Foreign Stocks $256,107,642
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
U.S. Stocks - 34.4%
- ----------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 0.2%
- ----------------------------------------------------------------------------------------------------
Lamar Advertising Co., "A"* 23,500 $844,120
- ----------------------------------------------------------------------------------------------------
Aerospace - 0.5%
- ----------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 20,800 $1,041,040
- ----------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 13,300 1,169,735
- ----------------------------------------------------------------------------------------------------
$2,210,775
- ----------------------------------------------------------------------------------------------------
Automotive - 0.3%
- ----------------------------------------------------------------------------------------------------
Harley-Davidson, Inc. 27,020 $1,200,769
- ----------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 0.1%
- ----------------------------------------------------------------------------------------------------
Bank of New York Co., Inc. 21,600 $571,320
- ----------------------------------------------------------------------------------------------------
Biotechnology - 1.6%
- ----------------------------------------------------------------------------------------------------
Abbott Laboratories, Inc. 57,000 $2,315,910
- ----------------------------------------------------------------------------------------------------
Amgen, Inc.* 61,330 3,760,142
- ----------------------------------------------------------------------------------------------------
Genentech, Inc.* 13,600 516,664
- ----------------------------------------------------------------------------------------------------
$6,592,716
- ----------------------------------------------------------------------------------------------------
Business Machines - 0.9%
- ----------------------------------------------------------------------------------------------------
Affiliated Computer Services, Inc., "A"* 10,600 $505,620
- ----------------------------------------------------------------------------------------------------
International Business Machines Corp. 38,900 3,302,610
- ----------------------------------------------------------------------------------------------------
$3,808,230
- ----------------------------------------------------------------------------------------------------
Business Services - 1.2%
- ----------------------------------------------------------------------------------------------------
Apollo Group, Inc.* 10,900 $590,769
- ----------------------------------------------------------------------------------------------------
BISYS Group, Inc.* 63,410 1,070,361
- ----------------------------------------------------------------------------------------------------
DST Systems, Inc.* 22,400 687,680
- ----------------------------------------------------------------------------------------------------
First Data Corp. 40,220 1,577,831
- ----------------------------------------------------------------------------------------------------
Manpower, Inc. 31,530 1,036,706
- ----------------------------------------------------------------------------------------------------
$4,963,347
- ----------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.5%
- ----------------------------------------------------------------------------------------------------
Dell Computer Corp.* 69,720 $2,015,605
- ----------------------------------------------------------------------------------------------------
Computer Software - 0.7%
- ----------------------------------------------------------------------------------------------------
Oracle Corp.* 233,160 $2,769,941
- ----------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.5%
- ----------------------------------------------------------------------------------------------------
Mercury Interactive Corp.* 14,500 $492,130
- ----------------------------------------------------------------------------------------------------
Microsoft Corp. 221,600 5,666,312
- ----------------------------------------------------------------------------------------------------
$6,158,442
- ----------------------------------------------------------------------------------------------------
Computer Software - Services - 1.2%
- ----------------------------------------------------------------------------------------------------
SunGard Data Systems, Inc.* 75,660 $1,626,690
- ----------------------------------------------------------------------------------------------------
VERITAS Software Corp.* 121,110 2,665,631
- ----------------------------------------------------------------------------------------------------
Yahoo, Inc.* 21,200 525,336
- ----------------------------------------------------------------------------------------------------
$4,817,657
- ----------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.4%
- ----------------------------------------------------------------------------------------------------
Network Associates, Inc.* 60,500 $691,515
- ----------------------------------------------------------------------------------------------------
Peoplesoft, Inc.* 73,780 1,108,913
- ----------------------------------------------------------------------------------------------------
$1,800,428
- ----------------------------------------------------------------------------------------------------
Conglomerates - 1.2%
- ----------------------------------------------------------------------------------------------------
General Electric Co. 119,520 $3,519,864
- ----------------------------------------------------------------------------------------------------
Tyco International Ltd. 87,600 1,366,560
- ----------------------------------------------------------------------------------------------------
$4,886,424
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 1.4%
- ----------------------------------------------------------------------------------------------------
Avon Products, Inc. 34,600 $2,012,682
- ----------------------------------------------------------------------------------------------------
Gillette Co. 44,280 1,348,326
- ----------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 16,350 813,739
- ----------------------------------------------------------------------------------------------------
Procter & Gamble Co. 18,500 1,662,225
- ----------------------------------------------------------------------------------------------------
$5,836,972
- ----------------------------------------------------------------------------------------------------
Drugs & Health Care - 0.1%
- ----------------------------------------------------------------------------------------------------
Gilead Sciences, Inc.* 9,000 $415,260
- ----------------------------------------------------------------------------------------------------
Electronics - 1.3%
- ----------------------------------------------------------------------------------------------------
Analog Devices, Inc.* 68,780 $2,277,993
- ----------------------------------------------------------------------------------------------------
Linear Technology Corp. 30,910 1,065,468
- ----------------------------------------------------------------------------------------------------
Maxim Integrated Products, Inc. 29,530 1,160,234
- ----------------------------------------------------------------------------------------------------
Microchip Technology, Inc. 19,800 411,642
- ----------------------------------------------------------------------------------------------------
Novellus Systems, Inc.* 14,970 419,759
- ----------------------------------------------------------------------------------------------------
$5,335,096
- ----------------------------------------------------------------------------------------------------
Entertainment - 2.1%
- ----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc.* 177,860 $2,433,125
- ----------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc.* 55,410 2,167,085
- ----------------------------------------------------------------------------------------------------
Liberty Media Corp.* 77,800 855,800
- ----------------------------------------------------------------------------------------------------
Viacom, Inc., "B"* 76,600 3,325,206
- ----------------------------------------------------------------------------------------------------
$8,781,216
- ----------------------------------------------------------------------------------------------------
Financial Institutions - 3.1%
- ----------------------------------------------------------------------------------------------------
American Express Co. 21,080 $798,089
- ----------------------------------------------------------------------------------------------------
Citigroup, Inc. 85,477 3,354,972
- ----------------------------------------------------------------------------------------------------
Fannie Mae 44,000 3,185,160
- ----------------------------------------------------------------------------------------------------
Freddie Mac 13,300 770,070
- ----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. 33,230 2,522,157
- ----------------------------------------------------------------------------------------------------
MBNA Corp. 21,600 408,240
- ----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 43,480 1,784,854
- ----------------------------------------------------------------------------------------------------
$12,823,542
- ----------------------------------------------------------------------------------------------------
Financial Services - 0.4%
- ----------------------------------------------------------------------------------------------------
Mellon Financial Corp. 64,680 $1,710,786
- ----------------------------------------------------------------------------------------------------
Food & Beverage Products - 1.1%
- ----------------------------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 24,500 $271,460
- ----------------------------------------------------------------------------------------------------
Kellogg Co. 32,900 1,077,146
- ----------------------------------------------------------------------------------------------------
PepsiCo, Inc. 63,200 2,735,296
- ----------------------------------------------------------------------------------------------------
Sysco Corp. 13,700 393,601
- ----------------------------------------------------------------------------------------------------
$4,477,503
- ----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.2%
- ----------------------------------------------------------------------------------------------------
International Paper Co. 26,470 $946,302
- ----------------------------------------------------------------------------------------------------
Healthcare - 0.2%
- ----------------------------------------------------------------------------------------------------
Caremark Rx, Inc.* 32,900 $655,039
- ----------------------------------------------------------------------------------------------------
Industrial Gases - 0.4%
- ----------------------------------------------------------------------------------------------------
Praxair, Inc. 26,900 $1,562,352
- ----------------------------------------------------------------------------------------------------
Insurance - 0.9%
- ----------------------------------------------------------------------------------------------------
MetLife, Inc. 53,270 $1,530,447
- ----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp. 129,360 2,099,513
- ----------------------------------------------------------------------------------------------------
$3,629,960
- ----------------------------------------------------------------------------------------------------
Machinery - 0.4%
- ----------------------------------------------------------------------------------------------------
Danaher Corp. 23,900 $1,648,622
- ----------------------------------------------------------------------------------------------------
Medical & Health Products - 3.0%
- ----------------------------------------------------------------------------------------------------
Alcon, Inc.* 11,400 $502,170
- ----------------------------------------------------------------------------------------------------
AmerisourceBergen Corp. 19,400 1,122,290
- ----------------------------------------------------------------------------------------------------
Eli Lilly & Co. 34,500 2,201,790
- ----------------------------------------------------------------------------------------------------
Forest Laboratories, Inc.* 12,300 636,156
- ----------------------------------------------------------------------------------------------------
IDEC Pharmaceuticals Corp.* 12,100 396,275
- ----------------------------------------------------------------------------------------------------
Johnson & Johnson Co. 39,200 2,209,312
- ----------------------------------------------------------------------------------------------------
Pfizer, Inc. 137,280 4,221,360
- ----------------------------------------------------------------------------------------------------
Schering Plough Corp. 56,400 1,020,840
- ----------------------------------------------------------------------------------------------------
$12,310,193
- ----------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 1.0%
- ----------------------------------------------------------------------------------------------------
Discovery Partners International, Inc.* 120 $389
- ----------------------------------------------------------------------------------------------------
Express Scripts, Inc.* 27,500 1,621,400
- ----------------------------------------------------------------------------------------------------
Health Management Associates, Inc., "A" 34,100 581,746
- ----------------------------------------------------------------------------------------------------
Medtronic, Inc. 38,900 1,857,086
- ----------------------------------------------------------------------------------------------------
$4,060,621
- ----------------------------------------------------------------------------------------------------
Oil Services - 0.5%
- ----------------------------------------------------------------------------------------------------
Baker Hughes, Inc. 30,400 $851,200
- ----------------------------------------------------------------------------------------------------
BJ Services Co.* 9,900 361,449
- ----------------------------------------------------------------------------------------------------
Schlumberger Ltd. 24,700 1,035,671
- ----------------------------------------------------------------------------------------------------
$2,248,320
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals
- ----------------------------------------------------------------------------------------------------
Wyeth 4,900 $213,297
- ----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.7%
- ----------------------------------------------------------------------------------------------------
E.W. Scripps Co. 8,870 $702,947
- ----------------------------------------------------------------------------------------------------
Gannett Co., Inc. 4,200 318,024
- ----------------------------------------------------------------------------------------------------
New York Times Co. 18,300 848,754
- ----------------------------------------------------------------------------------------------------
Tribune Co. 25,700 1,258,786
- ----------------------------------------------------------------------------------------------------
$3,128,511
- ----------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.1%
- ----------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Co. 23,820 $639,329
- ----------------------------------------------------------------------------------------------------
Restaurants & Lodging - 0.7%
- ----------------------------------------------------------------------------------------------------
Brinker International, Inc.* 33,000 $1,047,750
- ----------------------------------------------------------------------------------------------------
Cendant Corp.* 90,320 1,289,770
- ----------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. 15,400 550,396
- ----------------------------------------------------------------------------------------------------
$2,887,916
- ----------------------------------------------------------------------------------------------------
Retail - 2.9%
- ----------------------------------------------------------------------------------------------------
CVS Corp. 41,400 $1,002,294
- ----------------------------------------------------------------------------------------------------
Home Depot, Inc. 123,220 3,466,179
- ----------------------------------------------------------------------------------------------------
Kohl's Corp.* 38,780 2,202,704
- ----------------------------------------------------------------------------------------------------
Target Corp. 58,960 1,971,622
- ----------------------------------------------------------------------------------------------------
The TJX Cos., Inc. 57,500 1,106,875
- ----------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 36,500 2,055,680
- ----------------------------------------------------------------------------------------------------
Williams-Sonoma, Inc.* 9,400 243,272
- ----------------------------------------------------------------------------------------------------
$12,048,626
- ----------------------------------------------------------------------------------------------------
Special Products & Services - 0.4%
- ----------------------------------------------------------------------------------------------------
3M Co. 11,820 $1,489,793
- ----------------------------------------------------------------------------------------------------
Telecommunications - 0.5%
- ----------------------------------------------------------------------------------------------------
EchoStar Communications Corp.* 60,200 $1,803,592
- ----------------------------------------------------------------------------------------------------
Golden Telecom, Inc.* 27,800 471,488
- ----------------------------------------------------------------------------------------------------
$2,275,080
- ----------------------------------------------------------------------------------------------------
Telecommunications & Cable - 0.7%
- ----------------------------------------------------------------------------------------------------
Comcast Corp. "A"* 85,200 $2,718,732
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.2%
- ----------------------------------------------------------------------------------------------------
Cisco Systems, Inc.* 257,440 $3,871,898
- ----------------------------------------------------------------------------------------------------
USA Interactive, Inc.* 36,400 1,090,180
- ----------------------------------------------------------------------------------------------------
$4,962,078
- ----------------------------------------------------------------------------------------------------
Transportation - 0.4%
- ----------------------------------------------------------------------------------------------------
Fedex Corp. 14,000 $838,320
- ----------------------------------------------------------------------------------------------------
United Parcel Service, Inc. 13,600 844,832
- ----------------------------------------------------------------------------------------------------
$1,683,152
- ----------------------------------------------------------------------------------------------------
Utilities - Gas - 0.4%
- ----------------------------------------------------------------------------------------------------
Encana Corp. 46,300 $1,523,270
- ----------------------------------------------------------------------------------------------------
Total U.S. Stocks $142,651,342
- ----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $381,059,537) $398,758,984
- ----------------------------------------------------------------------------------------------------
Convertible Preferred Stock - 0.1%
- ----------------------------------------------------------------------------------------------------
Thailand - 0.1%
- ----------------------------------------------------------------------------------------------------
Siam Commercial Bank Public Co. Ltd., 5.25s (Banks &
Credit Companies) (Identified Cost, $258,070)* 333,300 $264,709
- ----------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.8%
- ----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ----------------------------------------------------------------------------------------------------
Abbey National LLC, due 5/01/03, at Amortized Cost $15,694 $15,694,000
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 8.1%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Amortized Cost 33,786,413 $33,786,413
- ----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $430,798,020) $448,504,106
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (8.2)% (34,124,829)
- ----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $414,379,277
- ----------------------------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- --------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 4/30/03
ASSETS
Investments, at value, including $32,196,051, of
securities on loan (identified cost, $430,798,020) $448,504,106
- ---------------------------------------------------------------------------------------------------
Cash 18,402
- ---------------------------------------------------------------------------------------------------
Foreign currency, at value (identified cost, $1,114,975) 1,114,810
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 2,710,451
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 102,455
- ---------------------------------------------------------------------------------------------------
Interest and dividends receivable 1,557,230
- ---------------------------------------------------------------------------------------------------
Other assets 10,244
- ---------------------------------------------------------------------------------------------------
Total assets $454,017,698
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $4,635,439
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 915,789
- ---------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 33,786,413
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 10,171
- ---------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 1,243
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 5,584
- ---------------------------------------------------------------------------------------------------
Administrative fee 198
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 283,584
- ---------------------------------------------------------------------------------------------------
Total liabilities $39,638,421
- ---------------------------------------------------------------------------------------------------
Net assets $414,379,277
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $689,871,202
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 17,728,962
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (293,326,356)
- ---------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 105,469
- ---------------------------------------------------------------------------------------------------
Total $414,379,277
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 32,034,958
- ---------------------------------------------------------------------------------------------------
Class A shares
Net assets $272,635,751
- ---------------------------------------------------------------------------------------------------
Shares outstanding 20,800,754
- ---------------------------------------------------------------------------------------------------
Net asset value per share $13.11
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of net asset
value per share) $13.91
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $114,759,002
- ---------------------------------------------------------------------------------------------------
Shares outstanding 9,098,775
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.61
- ---------------------------------------------------------------------------------------------------
Class C shares
Net assets $21,763,648
- ---------------------------------------------------------------------------------------------------
Shares outstanding 1,741,548
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.50
- ---------------------------------------------------------------------------------------------------
Class I shares
Net assets $5,068,810
- ---------------------------------------------------------------------------------------------------
Shares outstanding 382,267
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.26
- ---------------------------------------------------------------------------------------------------
Class R shares
Net assets $152,066
- ---------------------------------------------------------------------------------------------------
Shares outstanding 11,614
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $13.09
- ---------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- --------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
FOR SIX MONTHS ENDED 4/30/03
NET INVESTMENT INCOME
Income
- ---------------------------------------------------------------------------------------------------
Dividends $4,308,385
- ---------------------------------------------------------------------------------------------------
Interest 178,111
- ---------------------------------------------------------------------------------------------------
Foreign taxes withheld (394,032)
- ---------------------------------------------------------------------------------------------------
Total investment income $4,092,464
- ---------------------------------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------------------------------
Management fee $1,823,655
- ---------------------------------------------------------------------------------------------------
Trustees' compensation 10,623
- ---------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 205,893
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 452,620
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 597,465
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 110,514
- ---------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 112
- ---------------------------------------------------------------------------------------------------
Administrative fee 22,766
- ---------------------------------------------------------------------------------------------------
Custodian fee 270,329
- ---------------------------------------------------------------------------------------------------
Printing 48,467
- ---------------------------------------------------------------------------------------------------
Postage 58,677
- ---------------------------------------------------------------------------------------------------
Auditing fees 21,800
- ---------------------------------------------------------------------------------------------------
Legal fees 22
- ---------------------------------------------------------------------------------------------------
Miscellaneous 432,023
- ---------------------------------------------------------------------------------------------------
Total expenses $4,054,966
- ---------------------------------------------------------------------------------------------------
Fees paid indirectly (20,324)
- ---------------------------------------------------------------------------------------------------
Reduction of expenses by distributor (129,312)
- ---------------------------------------------------------------------------------------------------
Net expenses $3,905,330
- ---------------------------------------------------------------------------------------------------
Net investment income $187,134
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized loss (identified cost basis)
- ---------------------------------------------------------------------------------------------------
Investment transactions $(28,171,774)
- ---------------------------------------------------------------------------------------------------
Foreign currency transactions (249,071)
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions $(28,420,845)
- ---------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- ---------------------------------------------------------------------------------------------------
Investments $39,066,842
- ---------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 7,216
- ---------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation $39,074,058
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency $10,653,213
- ---------------------------------------------------------------------------------------------------
Increase in net assets from operations $10,840,347
- ---------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
SIX MONTHS YEAR
ENDED ENDED
4/30/03 10/31/02
(UNAUDITED)
OPERATIONS
Net investment income (loss) $187,134 $(2,335,921)
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions (28,420,845) (94,406,005)
- -------------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation 39,074,058 29,727,826
- ---------------------------------------------------------------- ------------ -------------
Increase (decrease) in net assets from operations $10,840,347 $(68,014,100)
- ---------------------------------------------------------------- ------------ -------------
Net decrease in net assets from fund share transactions $(29,121,389) $(86,716,358)
- ---------------------------------------------------------------- ------------ -------------
Total decrease in net assets $(18,281,042) $(154,730,458)
- ---------------------------------------------------------------- ------------ -------------
NET ASSETS
At beginning of period $432,660,319 $587,390,777
- -------------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed net
investment income of $105,469 and accumulated net investment
loss of $81,665 respectively) $414,379,277 $432,660,319
- -------------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Financial Highlights provide per share amounts and certain ratios to
summarize the effect of fund operations and any distributions to a shareholder
of each share class.
SIX MONTHS YEAR ENDED 10/31
ENDED ---------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS A (UNAUDITED)
Net asset value,
beginning of period $12.73 $14.60 $27.51 $23.20 $18.27 $20.79
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#
Net investment
income (loss)(S) $0.02 $(0.01) $(0.03) $0.07 $(0.05) $(0.01)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on investments
and foreign currency 0.36 (1.86) (6.91) 6.14 6.59 (0.41)
- ------------------------ ------ ------ ------ ----- ----- ------
Total from investment
operations $0.38 $(1.87) $(6.94) $6.21 $6.54 $(0.42)
- ------------------------ ------ ------ ------ ----- ----- ------
LESS DISTRIBUTIONS
DECLARED TO
SHAREHOLDERS
From net realized
gain on investments
and foreign currency
transactions $-- $-- $(5.67) $(1.90) $(1.61) $(2.10)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on
investments and
foreign currency
transactions -- -- (0.30) -- -- --
- ------------------------ ------ ------ ------ ----- ----- ------
Total distributions
declared to
shareholders $-- $-- $(5.97) $(1.90) $(1.61) $(2.10)
- ------------------------ ------ ------ ------ ----- ----- ------
Net asset value, end
of period $13.11 $12.73 $14.60 $27.51 $23.20 $18.27
- ------------------------ ------ ------ ------ ----- ----- ------
Total return (%)(+) 2.99++,* (12.81) (30.91) 27.22 38.13 (1.99)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.68+ 1.57 1.52 1.45 1.48 1.49
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) 0.37+ (0.08) (0.17) 0.26 (0.23) (0.06)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 130 112 182 146 104
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
period (000 Omitted) $272,636 $269,893 $268,548 $389,664 $244,777 $195,194
- -------------------------------------------------------------------------------------------------------------------------------
(S)The distributor voluntarily waived a portion of its fee for the periods
indicated. If this fee had been incurred by the fund, the net investment
income (loss) per share and the ratios would have been:
Net investment income
(loss) $0.02 $(0.03) $(0.05) $0.04 $(0.07) $(0.03)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO
AVERAGE NET ASSETS):
Expenses## 1.78+ 1.67 1.62 1.55 1.58 1.59
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) 0.27+ (0.18) (0.27) 0.16 (0.33) (0.16)
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
* The fund's total return calculation includes a payment received from a
non-recurring litigation settlement recorded as a realized gain in the
Statement of Operations. Excluding the effect of this payment from the
fund's ending net asset value per share, total return for the six months
ended April 30, 2003 would have been 2.44%.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED ---------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS B (UNAUDITED)
Net asset value,
beginning of period $12.29 $14.21 $26.87 $22.73 $18.06 $20.56
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#
Net investment loss $(0.03) $(0.13) $(0.16) $(0.14) $(0.20) $(0.16)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments and
foreign currency 0.35 (1.79) (6.74) 6.04 6.48 (0.40)
- -------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.32 $(1.92) $(6.90) $5.90 $6.28 $(0.56)
- -------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
DECLARED TO
SHAREHOLDERS
From net realized
gain on investments
and foreign currency
transactions $-- $-- $(5.47) $(1.76) $(1.61) $(1.94)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on
investments and
foreign currency
transactions -- -- (0.29) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions
declared to
shareholders $-- $-- $(5.76) $(1.76) $(1.61) $(1.94)
- -------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end
of period $12.61 $12.29 $14.21 $26.87 $22.73 $18.06
- -------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 2.60++,* (13.51) (31.39) 26.26 37.12 (2.70)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 2.43+ 2.32 2.27 2.20 2.23 2.24
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.43)+ (0.89) (0.92) (0.47) (0.99) (0.81)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 130 112 182 146 104
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
period
(000 Omitted) $114,759 $133,525 $268,518 $442,368 $330,542 $259,345
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
* The fund's total return calculation includes a payment received from a
non-recurring litigation settlement recorded as a realized gain in the
Statement of Operations. Excluding the effect of this payment from the fund's
ending net asset value per share, total return for the six months ended April
30, 2003 would have been 2.03%.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED ---------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS C (UNAUDITED)
Net asset value,
beginning of period $12.18 $14.08 $26.74 $22.64 $17.99 $20.49
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#
Net investment loss $(0.02) $(0.13) $(0.16) $(0.11) $(0.20) $(0.16)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments and
foreign currency 0.34 (1.77) (6.70) 5.99 6.46 (0.40)
- -------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.32 $(1.90) $(6.86) $5.88 $6.26 $(0.56)
- -------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
DECLARED TO
SHAREHOLDERS
From net realized
gain on investments
and foreign currency
transactions $-- $-- $(5.51) $(1.78) $(1.61) $(1.94)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on
investments and
foreign currency
transactions -- -- (0.29) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions
declared to
shareholders $-- $-- $(5.80) $(1.78) $(1.61) $(1.94)
- -------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end
of period $12.50 $12.18 $14.08 $26.74 $22.64 $17.99
- -------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 2.63++,* (13.49) (31.45) 26.28 37.15 (2.73)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 2.43+ 2.32 2.27 2.20 2.23 2.24
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.42)+ (0.91) (0.92) (0.39) (0.99) (0.83)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 130 112 182 146 104
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
period
(000 Omitted) $21,764 $24,035 $44,241 $62,520 $26,120 $19,149
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
* The fund's total return calculation includes a payment received from a
non-recurring litigation settlement recorded as a realized gain in the
Statement of Operations. Excluding the effect of this payment from the fund's
ending net asset value per share, total return for the six months ended April
30, 2003 would have been 2.05%.
See notes to financial statements.
SIX MONTHS YEAR ENDED 10/31
ENDED ---------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS I (UNAUDITED)
Net asset value,
beginning of period $12.86 $14.71 $27.71 $23.33 $18.32 $20.84
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS#
Net investment
income $0.04 $0.02 $0.01 $0.15 $-- $0.04
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments and
foreign currency 0.36 (1.87) (6.97) 6.19 6.62 (0.40)
- -------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.40 $(1.85) $(6.96) $6.34 $6.62 $(0.36)
- -------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
DECLARED TO
SHAREHOLDERS
From net realized
gain on investments
and foreign currency
transactions $-- $-- $(5.74) $(1.96) $(1.61) $(2.16)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on
investments and
foreign currency
transactions -- -- (0.30) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions
declared to
shareholders $-- $-- $(6.04) $(1.96) $(1.61) $(2.16)
- -------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end
of period $13.26 $12.86 $14.71 $27.71 $23.33 $18.32
- -------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 3.11++,* (12.64) (30.77) 27.56 38.55 (1.64)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.43+ 1.32 1.27 1.20 1.23 1.24
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.60+ 0.16 0.08 0.50 0.01 0.19
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 46 130 112 182 146 104
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
period
(000 Omitted) $5,069 $5,207 $6,085 $9,003 $7,272 $5,445
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
* The fund's total return calculation includes a payment received from a
non-recurring litigation settlement recorded as a realized gain in the
Statement of Operations. Excluding the effect of this payment from the fund's
ending net asset value per share, total return for the six months ended April
30, 2003 would have been 2.57%.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
4/30/03*
(UNAUDITED)
CLASS R
Net asset value, beginning of period $12.68
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.07
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 0.34
- --------------------------------------------------------------------------
Total from investment operations $0.41
- --------------------------------------------------------------------------
Net asset value, end of period $13.09
- --------------------------------------------------------------------------
Total return (%) 3.23++,(S)
- --------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 2.14+
- --------------------------------------------------------------------------
Net investment income 1.55+
- --------------------------------------------------------------------------
Portfolio turnover 46
- --------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $152
- --------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through April 30, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
(S) The fund's total return calculation includes a payment received from a
non-recurring litigation settlement recorded as a realized gain in the
Statement of Operations. Excluding the effect of this payment from the
fund's ending net asset value per share, total return for the six months
ended April 30, 2003 would have been 2.68%.
See notes to financial statements.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Global Growth Fund (the fund) is a diversified series of MFS Series Trust
VIII (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 accounting
principles generally accepted in the United States of America 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. The fund can invest in foreign securities. 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 in the fund's portfolio for which
market quotations are available are valued at the last sale or official closing
price on the primary market or exchange on which they are primarily traded or at
the last quoted bid price for securities in which there were no sales during the
day. If no sales are reported, as is the case for most securities traded over
the counter, securities are valued on the basis of quotations obtained from
brokers and dealers or on the basis of valuations furnished by a pricing
service. All other securities (other than short-term obligations), in the fund's
portfolio for which the principal market is one or more securities or
commodities exchanges (whether domestic or foreign) will be valued at the last
reported sale price or at the settlement price prior to the determination (or if
there has been no current sale, at the closing bid price) on the primary
exchange on which such securities, are traded; but if a securities exchange is
not the principal market for securities, such securities will, if market
quotations are readily available, be valued at current bid prices. Short-term
obligations in the fund's portfolio are valued at amortized cost, which
constitutes fair value as determined by the Board of Trustees. Short-term
obligations with a remaining maturity in excess of 60 days will be valued upon
dealer supplied valuations. Portfolio investments for which market quotations
are not readily available, or whose values have been materially affected by
events occurring after the close of their primary markets, are valued at fair
value as determined in good faith by or at the direction of the Board of
Trustees.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The fund requires that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the fund to obtain those securities
in the event of a default under the repurchase agreement. The fund monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the fund under each such
repurchase agreement. The fund, along with other affiliated entities of
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
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.
SECURITY LOANS - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the fund to certain qualified
institutions (the "Borrowers") approved by the fund. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned. State Street
provides the fund with indemnification against Borrower default. The fund bears
the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the fund and the lending agent. The dividend and
interest income earned on the securities loaned is accounted for in the same
manner as other dividend and interest income.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for 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 reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. During the period, the fund's custodian fees were reduced by $5,869 under
this arrangement. The fund has entered into a directed brokerage agreement,
under which the broker will credit the fund a portion of the commissions
generated, to offset certain expenses of the fund. For the period, the fund's
other expenses were reduced by $14,455 under this agreement. These amounts are
shown as a reduction of total 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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, and wash
sales.
The tax character of distributions declared for the years ended October 31, 2002
and October 31, 2001 was as follows:
10/31/02 10/31/01
Distributions declared from:
- --------------------------------------------------------------------------------
Ordinary income $-- $66,381,566
- --------------------------------------------------------------------------------
Long-term capital gain -- 127,106,160
- --------------------------------------------------------------------------------
Total distributions declared $-- $193,487,726
- --------------------------------------------------------------------------------
As of October 31, 2002, the components of accumulated losses on a tax basis were
as follows:
Capital loss carryforward $(255,381,795)
------------------------------------------------------------------------
Unrealized depreciation (30,868,812)
------------------------------------------------------------------------
Other temporary differences (81,665)
------------------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the earlier
of its utilization or expiration on October 31, 2009, ($159,427,826) and October
31, 2010 ($95,953,969).
Realized gain is reported net of any foreign capital gains tax in the Statement
of Operations.
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 daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. 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 MFS to
provide overall investment advisory and administrative services, and general
office facilities.
The management fee is computed daily and paid monthly at the following annual
rates:
First $1 billion of average net assets 0.90%
------------------------------------------------------------------------
Average net assets in excess of $1 billion 0.75%
------------------------------------------------------------------------
The fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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). On January
1, 2002, the Trustees terminated the Independent Trustee unfunded defined
benefit plan for active Trustees and converted it to an unfunded retirement
benefit deferral plan for active Trustees. Under the new plan, the unfunded
pension liability was converted into an equivalent value of notional shares of
the fund that will fluctuate with the performance of the fund. Included in
Trustees' compensation is a net decrease of $11,411 as a result of the change in
the fund's pension liability under this plan and a pension expense of $41,472
for inactive trustees for the six months ended April 30, 2003.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
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 $2 billion 0.0175%
------------------------------------------------------------------------
Next $2.5 billion 0.0130%
------------------------------------------------------------------------
Next $2.5 billion 0.0005%
------------------------------------------------------------------------
In excess of $7 billion 0.0000%
------------------------------------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$10,005 for the six months ended April 30, 2003, 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, Class C, and
Class R 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 an annual
percentage of its average daily net assets attributable to certain share classes
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 based
on the average daily net assets of accounts attributable to such dealers. These
fees are calculated based on each class' average daily net assets. The maximum
distribution and service fees for each class of shares are as follows:
CLASS A CLASS B CLASS C CLASS R
Distribution Fee 0.10% 0.75% 0.75% 0.25%
- --------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25%
- --------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50%
- --------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the six months ended April 30, 2003, amounted to:
CLASS A CLASS B CLASS C
Service Fee Retained by MFD $10,153 $797 $422
- --------------------------------------------------------------------------------
Fees incurred under the distribution plan during the six months ended April 30,
2003, were as follows:
CLASS A CLASS B CLASS C CLASS R
Total Distribution Plan 0.25% 1.00% 1.00% 0.50%
- --------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on
such a date as the Trustees of the trust may determine.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within, for class A shares, 12
months following the purchase, and, for class C shares, the first year from the
end of the calendar month of 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 from the end of the calendar month of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the six months ended April 30, 2003, were
as follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges
Imposed $5,660 $99,666 $810
- --------------------------------------------------------------------------------
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 annual rate of 0.11%.
Prior to April 1, 2003, the fee was 0.10% of the fund's average daily net
assets.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$185,068,657 and $208,487,863, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $406,536,975
----------------------------------------------------------------------
Gross unrealized appreciation $60,440,335
----------------------------------------------------------------------
Gross unrealized depreciation (18,473,204)
----------------------------------------------------------------------
Net unrealized appreciation $41,967,131
----------------------------------------------------------------------
(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. Transactions in
fund shares were as follows:
Six months ended Year ended
4/30/03 10/31/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 4,671,244 $58,653,108 13,019,511 $191,833,148
- ----------------------------------------------------------------------------------------------------------
Shares reacquired (5,076,402) (63,591,954) (10,207,370) (145,997,777)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) (405,158) $(4,938,846) 2,812,141 $45,835,371
- ----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 547,823 $6,644,035 1,720,834 $24,570,507
- ----------------------------------------------------------------------------------------------------------
Shares reacquired (2,311,242) (27,935,032) (9,759,345) (140,565,452)
- ----------------------------------------------------------------------------------------------------------
Net decrease (1,763,419) $(21,290,997) (8,038,511) $(115,994,945)
- ----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 92,447 $1,117,052 444,190 $6,428,494
- ----------------------------------------------------------------------------------------------------------
Shares reacquired (324,144) (3,855,317) (1,612,991) (22,918,492)
- ----------------------------------------------------------------------------------------------------------
Net decrease (231,697) $(2,738,265) (1,168,801) $(16,489,998)
- ----------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 34,796 $441,681 70,251 $1,029,348
- ------------------------------------------------------------------------------------------------------------
Shares reacquired (57,453) (727,616) (78,856) (1,096,134)
- ------------------------------------------------------------------------------------------------------------
Net decrease (22,657) $(285,935) (8,605) $(66,786)
- ------------------------------------------------------------------------------------------------------------
Period ended
4/30/03*
SHARES AMOUNT
CLASS R SHARES
Shares sold 28,010 $324,225
- ---------------------------------------------------------------------
Shares reacquired (16,396) (191,571)
- ---------------------------------------------------------------------
Net increase 11,614 $132,654
- ---------------------------------------------------------------------
* For the period from the commencement of Class R shares, December 31, 2002,
through April 30, 2003.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. A commitment fee of $1,292 which is based on the average daily unused
portion of the line of credit is included in miscellaneous expense. The fund had
no borrowings during the period.
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust VIII, of which the fund is a series, including
their principal occupations, which, unless specific dates are shown, are of more
than five years' duration, although the titles may not have been the same
throughout.
Name, age, position with the Trust, principal occupation, and other
directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Chairman Financial Services, Inc. (investment
advisers), Chairman and
Chief Executive Officer
JOHN W. BALLEN(2) (born 09/12/59)
Trustee and President LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Trustee
Company, Hemenway & Barnes (attorneys),
Chief Executive Officer and Director Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Private investor; Harvard University
Company, Graduate School of Business
President, Chief Investment Officer, and Administration, Class of 1961
Director Adjunct Professor in
Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc.
(real estate investment trust),
LAWRENCE H. COHN, M.D. (born 03/11/37) Director
Trustee
Brigham and Women's Hospital, Chief of J. DALE SHERRATT (born 09/23/38)
Cardiac Surgery; Harvard Medical School, Trustee
Professor of Surgery Insight Resources, Inc. (acquisition
planning specialists), President;
WILLIAM R. GUTOW (born 09/27/41) Wellfleet Investments (investor in
Trustee health care companies), Managing
Private investor and real estate General Partner (since 1993);
consultant; Cambridge Nutraceuticals
Capitol Entertainment Management Company (professional nutritional products),
(video franchise), Vice Chairman Chief Executive Officer (until May
2001)
J. ATWOOD IVES (born 05/01/36)
Trustee ELAINE R. SMITH (born 04/25/46)
Private investor; KeySpan Corporation Trustee
(energy related services), Director; Independent health care industry
Eastern Enterprises (diversified consultant
services company), Chairman, Trustee and
Chief Executive Officer (until November WARD SMITH (born 09/13/30)
2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) ROBERT R. FLAHERTY (born 09/18/63)
Chairman Assistant Treasurer
Massachusetts Financial Services Massachusetts Financial Services
Company, Chairman Company, Vice President (since
August 2000); UAM Fund Services,
JOHN W. BALLEN (born 09/12/59) Senior Vice President (prior to
Trustee and President August 2000)
Massachusetts Financial Services
Company, Chief Executive Officer and RICHARD M. HISEY (born 08/29/58)
Director Treasurer
Massachusetts Financial Services
JAMES R. BORDEWICK, JR. (born 03/06/59) Company, Senior Vice President
Assistant Secretary and Assistant Clerk (since July 2002); The Bank of New
Massachusetts Financial Services York, Senior Vice President
Company, Senior Vice President and (September 2000 to July 2002);
Associate General Counsel Lexington Global Asset Managers,
Inc., Executive Vice President and
STEPHEN E. CAVAN (born 11/06/53) Chief Financial Officer,
Secretary and Clerk General Manager, Mutual Funds (prior
Massachusetts Financial Services to September 2000)
Company, Senior Vice President, General
Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57)
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer
Assistant Treasurer Massachusetts Financial Services
Massachusetts Financial Services Company,
Company, Vice President (since April Vice President
2003); Brown Brothers Harriman & Co.,
Senior Vice President (November 2002 to JAMES O. YOST (born 06/12/60)
April 2003); ING Groep N.V./Aeltus Assistant Treasurer
Investment Management, Senior Vice Massachusetts Financial Services
President (prior to November 2002) Company, Senior Vice President
The Trust does not hold annual shareholder meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. This means that each
Trustee will be elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer will hold office until his or her successor is chosen and
qualified, or until he or she retires, resigns or is removed from office.
Messrs. Shames, Cohn, Sherratt, and Smith, and Ms. O'Neill, have served in
their capacity as Trustee of the Trust continuously since originally elected
or appointed. Messrs. Ballen, Gutow, Ives, Perera, and Poorvu, and Ms. Smith,
were elected by shareholders and have served as Trustees of the Trust since
January 1, 2002. Mr. Parke has served as Trustee of the Trust since January 1,
2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER PORTFOLIO MANAGERS
Massachusetts Financial Services Company John E. Lathrop(1)
500 Boylston Street, Boston, MA Nicholas D. Smithie(1)
02116-3741
CUSTODIANS
DISTRIBUTOR State Street Bank and Trust Company
MFS Fund Distributors, Inc. 225 Franklin Street, Boston, MA
500 Boylston Street, Boston, MA 02110
02116-3741
JP Morgan Chase Bank
DIRECTOR OF GLOBAL EQUITY RESEARCH One Chase Manhattan Plaza
David A. Antonelli(1) New York, NY 10081
(1)MFS Investment Management
- --------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- --------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international equity and
fixed-income investment across the full risk spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for building and
preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products for
high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and risks
associated with investing. Read the prospectus carefully before investing or
sending money.
- --------------------------------------------------------------------------------
CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges or (1-800-637-8255) 24 hours a day, 365 days a
stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send you
prospectuses, reports, and proxies electronically. You get timely information
without mailbox clutter (and help your fund save printing and postage costs).
SIGN-UP instructions: If your account is registered with us, go to www.mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available to
you.
[Logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116.
WGF-SEM-6/03 73M
MFS(R) Mutual Funds
SEMIANNUAL REPORT 4/30/03
MFS(R) STRATEGIC INCOME FUND
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) STRATEGIC INCOME FUND
The fund seeks high current income by investing in fixed-income securities. Its
secondary objective seeks to provide significant capital appreciation.
TABLE OF CONTENTS
- ------------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ------------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ------------------------------------------------------
MANAGEMENT REVIEW 5
- ------------------------------------------------------
PERFORMANCE SUMMARY 7
- ------------------------------------------------------
PORTFOLIO OF INVESTMENTS 12
- ------------------------------------------------------
FINANCIAL STATEMENTS 27
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 39
- ------------------------------------------------------
TRUSTEES AND OFFICERS 49
- ------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 51
- ------------------------------------------------------
CONTACT INFORMATION 52
- ------------------------------------------------------
ASSET ALLOCATION 53
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- ------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers - no matter how
talented they may be - can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
- --------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- --------------------------------------------------------------------------------
THE HUMAN SIDE OF MONEY MANAGEMENT
For more than 75 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with insight
and care.
Our success, we believe, has to do with the fact that we see investors as people
with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain
first-hand knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
This is our most diversified fixed-income fund as we actively manage its asset
mix across four broad sectors: U.S. government debt, high-grade debt, high-
yield debt, and international debt.
The period was unique in that both interest rate-sensitive and credit- sensitive
bonds experienced strong positive performance as investors showed renewed
interest in fixed-income securities. The period was marked by near- record
inflows into the high-yield sector, coupled with only a modest supply of new
high-yield issues. The result of this was a compression of spreads and a
significant appreciation in high-yield bond prices so that the high-yield market
outperformed other domestic fixed-income sectors.
High-grade corporate bonds also benefited from solid market conditions, but not
to the extent seen in the high-yield market. U.S. government bonds, meanwhile,
posted positive results but lagged most other fixed-income asset classes as
deflation concerns pushed U.S. Treasury yields to near 45-year lows. Foreign
government bonds benefited from falling interest rates and a weaker U.S. dollar
as many economies abroad struggled with lackluster growth. Emerging-market bonds
were among the top performers, as attractive yields combined with prudent
monetary and fiscal policies increased demand for them.
CONTRIBUTORS TO PERFORMANCE
The fund benefited from its exposure to high-yield debt, which we increased
during the period. In particular, a number of high-yield media companies, such
as Paxson Communications and Charter Communications, contributed to the fund's
performance. We funded the purchase of additional high-yield bonds by selling
U.S. government debt. The fund benefited from this asset shift as U.S.
government bonds proved to be the lowest performing sector of the fixed-income
market during the period.
On the international side, the fund benefited from its exposure to debt issued
by the Brazilian government as uncertainty surrounding newly elected political
leadership there subsided. We also increased our exposure to foreign government
bonds on an unhedged basis during the period. As the dollar has weakened, this
increased exposure has provided positive contributions to the fund's
performance.
DETRACTORS FROM PERFORMANCE
Although our allocation in the high-yield sector benefited absolute performance,
the fund would have performed better relative to its peers if it had had greater
exposure in this sector. In general, peer funds with the greatest exposure to
the high-yield sector had the best performance during the period.
The fund had relatively low exposure to the volatile distressed segments of the
corporate debt market, and these lowest rated corporate bonds posted the best
returns during the period due in part to the strong market technicals. In
essence, the fund did not perform as well as some of our peers because we took
less credit risk.
Credit concerns also helped detract from performance. For example, the fund had
exposure to debt issued by Fleming Companies, Inc. Fleming is one of the
nation's largest food wholesalers but defaulted on its debt during the period
after suffering from allegations of accounting improprieties.
A DIVERSIFIED PORTFOLIO
During the past six months, fixed-income securities overall around the globe
posted solid performance while our experienced team of investment professionals
has continued to diligently review securities in each of the four major
fixed-income sectors. Our goal is to provide shareholders with a diversified
portfolio that takes advantage of relative value opportunities between these
sectors.
/s/ Bernard Scozzafava
Bernard Scozzafava
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
The portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 4/30/03
- --------------------------------------------------------------------------------
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. Performance results reflect the percentage change in
net asset value, including the reinvestment of any dividends and capital gains
distributions. (See Notes to Performance Summary.)
TOTAL RETURNS
Cumulative without sales charge
Class
Share inception
class date 6-mo 1-yr 3-yr 5-yr 10-yr
A 10/29/87 9.16% 11.56% 17.65% 20.67% 86.50%
- ------------------------------------------------------------------------------
B 9/7/93 8.72% 10.95% 15.35% 16.83% 74.75%
- ------------------------------------------------------------------------------
C 9/1/94 8.91% 10.98% 15.41% 16.90% 76.44%
- ------------------------------------------------------------------------------
I 1/8/97 9.33% 11.93% 18.89% 22.82% 90.37%
Average annual without sales charge
A -- 11.56% 5.57% 3.83% 6.43%
- ------------------------------------------------------------------------------
B -- 10.95% 4.87% 3.16% 5.74%
- ------------------------------------------------------------------------------
C -- 10.98% 4.89% 3.17% 5.84%
- ------------------------------------------------------------------------------
I -- 11.93% 5.94% 4.20% 6.65%
Average annual with sales charge
A -- 6.26% 3.87% 2.82% 5.91%
- ------------------------------------------------------------------------------
B -- 6.95% 4.01% 2.88% 5.74%
- ------------------------------------------------------------------------------
C -- 9.98% 4.89% 3.17% 5.84%
I class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
Average Annual
Comparative benchmarks 6-mo 1-yr 3-yr 5-yr 10-yr
Average multisector
income fund+ 11.89% 11.56% 6.30% 3.83% 5.75%
- ------------------------------------------------------------------------------
J.P. Morgan Emerging Market
Bond Index Global# 19.43% 19.31% 12.21% 8.96% --
- ------------------------------------------------------------------------------
Lehman Brothers Aggregate
Bond Index# 4.31% 10.47% 10.21% 7.58% 7.24%
- ------------------------------------------------------------------------------
Lehman Brothers High Yield
Bond Index# 22.95% 11.82% 3.23% 1.29% 6.17%
- ------------------------------------------------------------------------------
Lehman Brothers Government/
Credit Index# 5.52% 12.43% 10.65% 7.77% 7.33%
- ------------------------------------------------------------------------------
Salomon Brothers World
Government Bond Index# 9.73% 22.35% 8.98% 6.22% 6.31%
- ------------------------------------------------------------------------------
Salomon Brothers World
Government Bond Non-Dollar
Hedged Index# 3.23% 8.04% 7.12% 6.93% 8.45%
Periods less than one year are actual, not annualized.
+Source: Lipper Inc., an independent firm that reports mutual fund performance.
#Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
J.P. MORGAN EMERGING MARKET BOND INDEX GLOBAL (EMBI GLOBAL) - Tracks debt
instruments in the emerging markets (includes a broader array of countries than
the EMBI Plus).
LEHMAN BROTHERS AGGREGATE BOND INDEX - A measure of the U.S. bond market.
LEHMAN BROTHERS HIGH YIELD BOND INDEX - Measures the performance of the high-
yield bond market.
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX - Measures the performance of all debt
obligations of the U.S. Treasury, U.S. Government agencies, and all
investment-grade domestic corporate debt.
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX - A measure of government bond
markets around the world.
SALOMON BROTHERS WORLD GOVERNMENT BOND NON-DOLLAR HEDGED INDEX - A measure of
goverment bond markets around the world.
NOTE TO SHAREHOLDERS:
Effective 4/30/03, the fund is replacing the Lehman Brothers Government Credit
Index with the Lehman Brothers Aggregate Bond Index, and is replacing the
Salomon Brothers World Government Bond Index with the Salomon Brothers World
Government Bond Non-Dollar Hedged Index.
The Lehman Brothers Aggregate Bond Index includes mortgage-backed securities, an
asset class which the fund may invest in. The Salomon Brothers World Government
Bond Non-Dollar Hedged Index excludes U.S. government bonds (which are included
within the Lehman Indexes), and reflects hedging non-dollar currency exposure
into U.S. dollars.
The fund believes these changes are more appropriate to its strategies. For
comparison, returns for the Lehman Brothers Government Credit Index and Salomon
Brothers World Government Bond Index will continue to be shown for one year.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results, including sales charge, reflects the deduction of the maximum
4.75% sales charge. Class B results, including sales charge, reflects the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%. Class C results, including sales charge,
redeemed within one year from the end of the calendar month of purchase reflects
the deduction of the 1% CDSC. Class I shares have no sales charges and are
available only to certain investors.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences in
sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of blended
performance generally results in higher performance for share classes with
higher operating expenses than the initial share class, and lower performance
for share classes with lower operating expenses than the initial share class.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. 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, AND THE PERFORMANCE SHOWN DOES NOT REFLECT THE
DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS
OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
From time to time, a portion of the fund's distributions may include a return of
capital for shareholders. Distributions that are treated for federal income tax
purposes as a return of capital will reduce a shareholder's tax basis in his or
her shares and, to the extent the distribution exceeds a shareholder's adjusted
tax basis, will be treated as a gain to the shareholder from a sale of shares.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
Investing in high yield or lower-rated securities may provide greater returns
but are subject to greater-than-average risk.
Because the portfolio invests in a limited number of companies a change in one
security's value may have a more significant effect on the portfolio's value.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
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.
- ------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (unaudited ) 4/30/03
- ------------------------------------------------------------------------------
The Portfolio of Investments is a list of all securities owned by your fund. It
is categorized by broad-based asset classes.
Bonds - 94.9%
- ----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ----------------------------------------------------------------------------------------------------
U.S. Bonds - 66.5%
- ----------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 4.0%
- ----------------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75s, 2012 $1,000 $1,040,000
- ----------------------------------------------------------------------------------------------------
Chancellor Media Corp., 8s, 2008 1,250 1,431,250
- ----------------------------------------------------------------------------------------------------
Dex Media East LLC, 9.875s, 2009## 1,100 1,259,500
- ----------------------------------------------------------------------------------------------------
Directv Holdings LLC, 8.375s, 2013## 495 554,400
- ----------------------------------------------------------------------------------------------------
Echostar DBS Corp., 9.375s, 2009 1,930 2,081,987
- ----------------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 8.875s, 2008 280 263,200
- ----------------------------------------------------------------------------------------------------
LIN Televison Corp., 8.375s, 2008 700 733,250
- ----------------------------------------------------------------------------------------------------
Panamsat Corp., 8.5s, 2012 1,670 1,807,775
- ----------------------------------------------------------------------------------------------------
Paxson Communications Corp., 0s to 2006, 12.25s, 2009 1,645 1,381,800
- ----------------------------------------------------------------------------------------------------
Radio One, Inc., 8.875s, 2011 1,000 1,100,000
- ----------------------------------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc., 9.625s, 2009 1,550 1,639,125
- ----------------------------------------------------------------------------------------------------
Xm Satellite Radio, Inc., 14s, 2009 305 215,025
- ----------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 8.5s, 2008 2,000 2,142,500
- ----------------------------------------------------------------------------------------------------
$15,649,812
- ----------------------------------------------------------------------------------------------------
Aerospace - 1.0%
- ----------------------------------------------------------------------------------------------------
Argo-Tech Corp., 8.625s, 2007 $690 $607,200
- ----------------------------------------------------------------------------------------------------
Bae Systems Holding, 6.4s, 2011## 1,321 1,393,247
- ----------------------------------------------------------------------------------------------------
Hexcel Corp., 9.875s, 2008## 885 946,950
- ----------------------------------------------------------------------------------------------------
K & F Industries, Inc., 9.25s, 2007 1,000 1,042,500
- ----------------------------------------------------------------------------------------------------
$3,989,897
- ----------------------------------------------------------------------------------------------------
Airlines - 0.2%
- ----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 6.545s, 2019 $871 $757,135
- ----------------------------------------------------------------------------------------------------
Apparel & Textiles
- ----------------------------------------------------------------------------------------------------
Westpoint Stevens, Inc., 7.875s, 2008 $360 $66,600
- ----------------------------------------------------------------------------------------------------
Automotive - 2.4%
- ----------------------------------------------------------------------------------------------------
Collins & Aikman Co., 10.75s, 2011 $1,154 $1,182,850
- ----------------------------------------------------------------------------------------------------
DaimlerChrysler AG, 7.45s, 2097 896 956,092
- ----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7.5s, 2005 1,517 1,586,758
- ----------------------------------------------------------------------------------------------------
GMAC, 7s, 2012 1,836 1,881,140
- ----------------------------------------------------------------------------------------------------
GMAC, 8s, 2031 936 974,879
- ----------------------------------------------------------------------------------------------------
Navistar International Corp., 9.375s, 2006 1,000 1,067,500
- ----------------------------------------------------------------------------------------------------
TRW Automotive Acquisition, 9.375s, 2013## 1,295 1,414,788
- ----------------------------------------------------------------------------------------------------
TRW Automotive Acquisition, 11s, 2013## 555 607,725
- ----------------------------------------------------------------------------------------------------
$9,671,732
- ----------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 4.1%
- ----------------------------------------------------------------------------------------------------
Abbey National Capital, 8.963s, 2049 $1,464 $1,961,095
- ----------------------------------------------------------------------------------------------------
Bank of America Corp., 7.4s, 2011 1,690 2,028,826
- ----------------------------------------------------------------------------------------------------
Credit Suisse First Boston, 4.625s, 2008 515 536,713
- ----------------------------------------------------------------------------------------------------
Credit Suisse First Boston, 6.125s, 2011 617 670,014
- ----------------------------------------------------------------------------------------------------
Credit Suisse First Boston, 6.5s, 2012 1,496 1,666,469
- ----------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049## 3,427 4,064,388
- ----------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.25s, 2008 1,061 1,073,223
- ----------------------------------------------------------------------------------------------------
Socgen Real Estate Co., 7.64s, 2049## 625 695,531
- ----------------------------------------------------------------------------------------------------
Unicredito Italiano Capital Trust, 9.2s, 2049## 2,709 3,395,569
- ----------------------------------------------------------------------------------------------------
$16,091,828
- ----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 3.4%
- ----------------------------------------------------------------------------------------------------
Charter Communications Holdings, 8.625s, 2009 $2,300 $1,512,250
- ----------------------------------------------------------------------------------------------------
Comcast Corp., 6.5s, 2015 1,539 1,671,962
- ----------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 9.5s, 2013 1,628 1,921,916
- ----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.125s, 2012 1,679 1,960,501
- ----------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 8.125s, 2009 2,319 2,458,140
- ----------------------------------------------------------------------------------------------------
Jones Intercable, Inc., 8.875s, 2007 500 536,637
- ----------------------------------------------------------------------------------------------------
Mediacom Broadband LLC & Media, 11s, 2013 1,850 2,104,375
- ----------------------------------------------------------------------------------------------------
Mediacom LLC, 9.5s, 2013 340 365,500
- ----------------------------------------------------------------------------------------------------
Tele Communications, Inc., 9.8s, 2012 791 1,020,540
- ----------------------------------------------------------------------------------------------------
$13,551,821
- ----------------------------------------------------------------------------------------------------
Building - 2.0%
- ----------------------------------------------------------------------------------------------------
American Standard, Inc., 7.375s, 2008 $1,690 $1,825,200
- ----------------------------------------------------------------------------------------------------
Atrium Cos, Inc., 10.5s, 2009 1,000 1,050,000
- ----------------------------------------------------------------------------------------------------
CRH America, Inc., 6.95s, 2012 752 854,150
- ----------------------------------------------------------------------------------------------------
Nortek, Inc., 9.25s, 2007 1,800 1,856,250
- ----------------------------------------------------------------------------------------------------
Nortek, Inc., 8.875s, 2008 135 139,725
- ----------------------------------------------------------------------------------------------------
Williams Scotsman, Inc., 9.875s, 2007 2,000 1,990,000
- ----------------------------------------------------------------------------------------------------
$7,715,325
- ----------------------------------------------------------------------------------------------------
Business Services - 0.5%
- ----------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 8.625s, 2013 $650 $708,500
- ----------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 7.75s, 2015 1,250 1,343,750
- ----------------------------------------------------------------------------------------------------
$2,052,250
- ----------------------------------------------------------------------------------------------------
Chemicals - 0.9%
- ----------------------------------------------------------------------------------------------------
Huntsman ICI Holdings, 10.125s, 2009 $1,375 $1,416,250
- ----------------------------------------------------------------------------------------------------
Johnson Diversey, Inc., 9.625s, 2012 1,000 1,102,500
- ----------------------------------------------------------------------------------------------------
Lyondell Chemical Co., 9.625s, 2007 530 545,900
- ----------------------------------------------------------------------------------------------------
Lyondell Chemical Co., 11.125s, 2012 325 351,000
- ----------------------------------------------------------------------------------------------------
$3,415,650
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.4%
- ----------------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.5s, 2009 $240 $236,400
- ----------------------------------------------------------------------------------------------------
Samsonite Corp., 10.75s, 2008 660 623,700
- ----------------------------------------------------------------------------------------------------
Sealy Mattress, 9.875s, 2007## 700 721,000
- ----------------------------------------------------------------------------------------------------
$1,581,100
- ----------------------------------------------------------------------------------------------------
Containers - 1.6%
- ----------------------------------------------------------------------------------------------------
Ball Corp., 8.25s, 2008 $2,250 $2,362,500
- ----------------------------------------------------------------------------------------------------
Owens Brockway Glass Container, 8.875s, 2009 390 418,275
- ----------------------------------------------------------------------------------------------------
Owens Brockway Glass Container, 8.25s, 2013## 1,460 1,503,800
- ----------------------------------------------------------------------------------------------------
Pliant Corp., 13s, 2010 900 832,500
- ----------------------------------------------------------------------------------------------------
Silgan Holdings, Inc., 9s, 2009 1,000 1,040,000
- ----------------------------------------------------------------------------------------------------
$6,157,075
- ----------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 7.4%
- ----------------------------------------------------------------------------------------------------
Anthracite CDO I Ltd., 6s, 2037## $1,200 $875,109
- ----------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 6.6s, 2012 3,640 3,490,735
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 5.44s, 2030 2,000 1,681,149
- ----------------------------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp., 7.5s, 2005 (Interest Only) 58,000 952,140
- ----------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp., 8s, 2003+ 1,064 1,015,040
- ----------------------------------------------------------------------------------------------------
Falcon Auto Dealership LLC, 3.408s, 2023## 7,174 1,088,361
- ----------------------------------------------------------------------------------------------------
Falcon Auto Dealership LLC, 4.198s, 2023 5,147 984,323
- ----------------------------------------------------------------------------------------------------
First Union Lehman Brothers Bank, 7.2s, 2028
(Interest Only) 59,843 1,611,708
- ----------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Security, Inc., 6.02s, 2033 3,500 3,071,250
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., 6.86s, 2010 1,680 1,670,624
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., 7.642s, 2039 4,000 3,858,608
- ----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 7.214s, 2007 2,500 2,393,955
- ----------------------------------------------------------------------------------------------------
Nationslink Funding Corp., 5s, 2031 3,000 2,671,230
- ----------------------------------------------------------------------------------------------------
Residential Accredit Loans Inc., 7.75s, 2027 2,083 2,105,463
- ----------------------------------------------------------------------------------------------------
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032## 1,366 1,509,243
- ----------------------------------------------------------------------------------------------------
$28,978,938
- ----------------------------------------------------------------------------------------------------
Defense Electronics - 0.3%
- ----------------------------------------------------------------------------------------------------
L-3 Communications Corp., 7.625s, 2012 $1,045 $1,152,113
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 0.7%
- ----------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 8.125s, 2011## $1,875 $2,025,000
- ----------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375s, 2007 639 661,251
- ----------------------------------------------------------------------------------------------------
$2,686,251
- ----------------------------------------------------------------------------------------------------
Entertainment - 2.2%
- ----------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.5s, 2011 $1,200 $1,254,000
- ----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 7.7s, 2025 360 406,766
- ----------------------------------------------------------------------------------------------------
News America Holdings, Inc., 6.55s, 2033## 367 372,764
- ----------------------------------------------------------------------------------------------------
Regal Cinemas Corp., 9.375s, 2012 1,735 1,908,500
- ----------------------------------------------------------------------------------------------------
Time Warner, Inc., 6.95s, 2028 941 965,862
- ----------------------------------------------------------------------------------------------------
Turner Broadcasting Systems, Inc., 8.375s, 2013 1,963 2,274,833
- ----------------------------------------------------------------------------------------------------
Walt Disney Co., 6.75s, 2006 1,468 1,610,183
- ----------------------------------------------------------------------------------------------------
$8,792,908
- ----------------------------------------------------------------------------------------------------
Food & Beverage Products - 0.9%
- ----------------------------------------------------------------------------------------------------
Burns Philip Capital Property Ltd., 9.75s, 2012## $2,515 $2,515,000
- ----------------------------------------------------------------------------------------------------
Michael Foods, Inc., 11.75s, 2011 1,000 1,140,000
- ----------------------------------------------------------------------------------------------------
$3,655,000
- ----------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.8%
- ----------------------------------------------------------------------------------------------------
Buckeye Cellulose Corp., 8.5s, 2005 $610 $600,850
- ----------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8s, 2010 1,270 1,168,400
- ----------------------------------------------------------------------------------------------------
Cascades, Inc., 7.25s, 2013## 1,345 1,418,975
- ----------------------------------------------------------------------------------------------------
Georgia Pacific Corp., 9.375s, 2013## 420 462,000
- ----------------------------------------------------------------------------------------------------
Meadwestvaco Corp., 6.8s, 2032 1,859 1,967,311
- ----------------------------------------------------------------------------------------------------
Riverwood International Corp., 10.875s, 2008 165 170,362
- ----------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 6.75s, 2012 1,047 1,172,909
- ----------------------------------------------------------------------------------------------------
$6,960,807
- ----------------------------------------------------------------------------------------------------
Gaming & Lodging - 3.2%
- ----------------------------------------------------------------------------------------------------
Aztar Corp., 8.875s, 2007 $1,150 $1,201,750
- ----------------------------------------------------------------------------------------------------
Coast Hotels & Casinos, Inc., 9.5s, 2009 930 999,750
- ----------------------------------------------------------------------------------------------------
HMH Properties, Inc., 8.45s, 2008 1,875 1,921,875
- ----------------------------------------------------------------------------------------------------
Hollywood Park, Inc., 9.5s, 2007 1,400 1,372,000
- ----------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.375s, 2011 1,035 1,130,738
- ----------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 8.875s, 2008 1,020 1,101,600
- ----------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts, 7.875s, 2012 1,900 1,987,875
- ----------------------------------------------------------------------------------------------------
Station Casinos, Inc., 8.375s, 2008 525 563,062
- ----------------------------------------------------------------------------------------------------
Station Casinos, Inc., 8.875s, 2008 1,000 1,052,500
- ----------------------------------------------------------------------------------------------------
Venetian Casino Resort LLC, 11s, 2010 1,040 1,141,400
- ----------------------------------------------------------------------------------------------------
$12,472,550
- ----------------------------------------------------------------------------------------------------
Home Construction - 0.5%
- ----------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 8s, 2009 $1,915 $2,077,775
- ----------------------------------------------------------------------------------------------------
Industrial - 0.1%
- ----------------------------------------------------------------------------------------------------
Thermadyne Holdings Corp., 12.5s, 2008 $2,000 $200
- ----------------------------------------------------------------------------------------------------
Timken Co., 5.75s, 2010 332 338,354
- ----------------------------------------------------------------------------------------------------
$338,554
- ----------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.8%
- ----------------------------------------------------------------------------------------------------
Safeco Corp., 4.2s, 2008 $1,356 $1,368,094
- ----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 5s, 2013## 1,604 1,633,432
- ----------------------------------------------------------------------------------------------------
$3,001,526
- ----------------------------------------------------------------------------------------------------
Machinery - 1.2%
- ----------------------------------------------------------------------------------------------------
Agco Corp., 9.5s, 2008 $1,750 $1,907,419
- ----------------------------------------------------------------------------------------------------
Terex Corp., 8.875s, 2008 695 722,800
- ----------------------------------------------------------------------------------------------------
Terex Corp., 9.25s, 2011 995 1,064,650
- ----------------------------------------------------------------------------------------------------
Terex Corp., 10.375s, 2011 795 882,450
- ----------------------------------------------------------------------------------------------------
$4,577,319
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 0.6%
- ----------------------------------------------------------------------------------------------------
Manitowoc Inc., 10.5s, 2012 $865 $942,850
- ----------------------------------------------------------------------------------------------------
United Rentals North America, Inc., 10.75s, 2008 1,150 1,242,000
- ----------------------------------------------------------------------------------------------------
$2,184,850
- ----------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 0.5%
- ----------------------------------------------------------------------------------------------------
Alliance Imaging, Inc., 10.375s, 2011 $1,100 $1,034,000
- ----------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 8.125s, 2012 940 1,010,500
- ----------------------------------------------------------------------------------------------------
$2,044,500
- ----------------------------------------------------------------------------------------------------
Metals & Mining - 0.4%
- ----------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625s, 2008 $927 $973,350
- ----------------------------------------------------------------------------------------------------
Peabody Energy Corp., 6.875s, 2013## 245 254,800
- ----------------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75s, 2011 344 388,307
- ----------------------------------------------------------------------------------------------------
$1,616,457
- ----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.7%
- ----------------------------------------------------------------------------------------------------
Amerigas Partners, 8.875s, 2011 $610 $658,800
- ----------------------------------------------------------------------------------------------------
ANR Pipeline Co., 8.875s, 2010## 300 331,500
- ----------------------------------------------------------------------------------------------------
Dynegy Holdings, Inc., 6.875s, 2011 1,100 935,000
- ----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.3s, 2033 1,789 2,089,189
- ----------------------------------------------------------------------------------------------------
Southern Natural Gas Co., 8.875s, 2010## 1,050 1,160,250
- ----------------------------------------------------------------------------------------------------
Williams Cos., Inc., 7.125s, 2011 1,500 1,417,500
- ----------------------------------------------------------------------------------------------------
$6,592,239
- ----------------------------------------------------------------------------------------------------
Oils - 0.6%
- ----------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.875s, 2012 $952 $1,059,274
- ----------------------------------------------------------------------------------------------------
XTO Energy, Inc., 6.25s, 2013## 1,126 1,173,855
- ----------------------------------------------------------------------------------------------------
$2,233,129
- ----------------------------------------------------------------------------------------------------
Pollution Control - 0.5%
- ----------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 10s, 2009 $1,900 $2,030,625
- ----------------------------------------------------------------------------------------------------
Printing & Publishing - 1.0%
- ----------------------------------------------------------------------------------------------------
American Media Operations, Inc., 8.875s, 2011## $1,150 $1,244,875
- ----------------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 9s, 2010## 525 561,750
- ----------------------------------------------------------------------------------------------------
Houghton Mifflin Co., 8.25s, 2011## 675 717,187
- ----------------------------------------------------------------------------------------------------
Houghton Mifflin Co., 9.875s, 2013## 430 464,400
- ----------------------------------------------------------------------------------------------------
Mail Well Corp., 9.625s, 2012 800 812,000
- ----------------------------------------------------------------------------------------------------
$3,800,212
- ----------------------------------------------------------------------------------------------------
Real Estate - 1.2%
- ----------------------------------------------------------------------------------------------------
Equity Office Partnership, 5.875s, 2013 $1,509 $1,594,912
- ----------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6s, 2012 974 1,048,584
- ----------------------------------------------------------------------------------------------------
Vornado Reality Trust, 5.625s, 2007 1,965 2,023,235
- ----------------------------------------------------------------------------------------------------
$4,666,731
- ----------------------------------------------------------------------------------------------------
Steel - 0.3%
- ----------------------------------------------------------------------------------------------------
AK Steel Corp., 7.75s, 2012 $1,150 $1,004,813
- ----------------------------------------------------------------------------------------------------
WCI Steel, Inc., 10s, 2004 515 159,650
- ----------------------------------------------------------------------------------------------------
$1,164,463
- ----------------------------------------------------------------------------------------------------
Stores - 0.8%
- ----------------------------------------------------------------------------------------------------
J.Crew Operating Corp., 10.375s, 2007 $560 $504,000
- ----------------------------------------------------------------------------------------------------
JC Penney Corp., Inc., 8s, 2010 497 528,063
- ----------------------------------------------------------------------------------------------------
Rite Aid Corp., 9.5s, 2011## 1,230 1,309,950
- ----------------------------------------------------------------------------------------------------
Sears Roebuck Acceptance Corp., 7s, 2032 980 1,000,859
- ----------------------------------------------------------------------------------------------------
$3,342,872
- ----------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
- ----------------------------------------------------------------------------------------------------
Fleming Cos., Inc., 9.25s, 2010 $1,205 $171,713
- ----------------------------------------------------------------------------------------------------
Roundys, Inc., 8.875s, 2012 1,125 1,158,750
- ----------------------------------------------------------------------------------------------------
$1,330,463
- ----------------------------------------------------------------------------------------------------
Supranational - 0.5%
- ----------------------------------------------------------------------------------------------------
Andina De Fomento Corp., 6.875s, 2012 $1,921 $2,047,267
- ----------------------------------------------------------------------------------------------------
Technology - 0.7%
- ----------------------------------------------------------------------------------------------------
Unisystem Corp., 8.125s, 2006 $1,100 $1,177,000
- ----------------------------------------------------------------------------------------------------
Unisystem Corp., 7.875s, 2008 1,700 1,772,250
- ----------------------------------------------------------------------------------------------------
$2,949,250
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.8%
- ----------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 $836 $968,514
- ----------------------------------------------------------------------------------------------------
Qwest Services Corp., 13.5s, 2010## 1,100 1,221,000
- ----------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.875s, 2028 1,043 964,775
- ----------------------------------------------------------------------------------------------------
$3,154,289
- ----------------------------------------------------------------------------------------------------
Tobacco - 0.1%
- ----------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc., 6.8s, 2003 $413 $415,081
- ----------------------------------------------------------------------------------------------------
U.S. Government Agencies - 5.5%
- ----------------------------------------------------------------------------------------------------
FNMA, 6s, 2016 $3,023 $3,168,615
- ----------------------------------------------------------------------------------------------------
FNMA, 6s, 2017 2,834 2,970,932
- ----------------------------------------------------------------------------------------------------
FNMA, 6.5s, 2031 9,389 9,810,146
- ----------------------------------------------------------------------------------------------------
FNMA, 5.5s, 2032 5,696 5,812,374
- ----------------------------------------------------------------------------------------------------
$21,762,067
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 5.1%
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375s, 2031 $1,377 $1,502,544
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2007 6,421 6,509,038
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.375s, 2007 1,038 1,130,099
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2010 3,266 3,765,614
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2012 2,157 2,317,109
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.875s, 2013 4,750 4,756,308
- ----------------------------------------------------------------------------------------------------
$19,980,712
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 4.8%
- ----------------------------------------------------------------------------------------------------
AES Corp., 8.875s, 2011 $1,200 $1,146,000
- ----------------------------------------------------------------------------------------------------
Firstenergy Corp., 5.5s, 2006 1,634 1,726,653
- ----------------------------------------------------------------------------------------------------
Midamerican Energy Holdings Co., 5.875s, 2012 2,490 2,602,374
- ----------------------------------------------------------------------------------------------------
Midland Funding Corp., "B", 13.25s, 2006 1,500 1,691,250
- ----------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 8.77s, 2018 3,735 3,890,129
- ----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 5.85s, 2008 1,752 1,918,538
- ----------------------------------------------------------------------------------------------------
Pseg Energy Holdings LLC, 7.75s, 2007## 553 579,268
- ----------------------------------------------------------------------------------------------------
Pseg Power LLC, 7.75s, 2011 1,291 1,530,861
- ----------------------------------------------------------------------------------------------------
TXU Corp., 6.375s, 2006 2,725 2,902,125
- ----------------------------------------------------------------------------------------------------
Waterford 3 Funding Entergy Corp., 8.09s, 2017 609 655,311
- ----------------------------------------------------------------------------------------------------
$18,642,509
- ----------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.7%
- ----------------------------------------------------------------------------------------------------
Verizon New York Inc., 6.875s, 2012 $2,411 $2,777,879
- ----------------------------------------------------------------------------------------------------
Wireless Communication - 0.8%
- ----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.75s, 2031 $375 $466,963
- ----------------------------------------------------------------------------------------------------
Centennial Cellular Operating Co., 10.75s, 2008 1,000 835,000
- ----------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.75s, 2010 775 674,250
- ----------------------------------------------------------------------------------------------------
Triton PCS, Inc., 11s, 2008 375 375,937
- ----------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 864 931,063
- ----------------------------------------------------------------------------------------------------
$3,283,213
- ----------------------------------------------------------------------------------------------------
Total U.S. Bonds $261,412,774
- ----------------------------------------------------------------------------------------------------
Foreign Bonds - 28.4%
- ----------------------------------------------------------------------------------------------------
Australia - 0.4%
- ----------------------------------------------------------------------------------------------------
Government of Australia, 5.75s, 2011 AUD 994 $643,779
- ----------------------------------------------------------------------------------------------------
Government of Australia, 6.25s, 2015 1,530 1,020,487
- ----------------------------------------------------------------------------------------------------
$1,664,266
- ----------------------------------------------------------------------------------------------------
Austria - 1.4%
- ----------------------------------------------------------------------------------------------------
Republic of Austria, 5.5s, 2007 EUR 3,347 $4,094,492
- ----------------------------------------------------------------------------------------------------
Republic of Austria, 5s, 2012 1,050 1,257,135
- ----------------------------------------------------------------------------------------------------
$5,351,627
- ----------------------------------------------------------------------------------------------------
Belgium - 0.5%
- ----------------------------------------------------------------------------------------------------
Kingdom of Belgium, 3.75s, 2009 EUR 572 $647,741
- ----------------------------------------------------------------------------------------------------
Kingdom of Belgium, 5s, 2012 1,055 1,262,414
- ----------------------------------------------------------------------------------------------------
$1,910,155
- ----------------------------------------------------------------------------------------------------
Brazil - 1.3%
- ----------------------------------------------------------------------------------------------------
Federal Republic of Brazil, 2.125s, 2006 $909 $852,023
- ----------------------------------------------------------------------------------------------------
Federal Republic of Brazil, 2.188s, 2009 1,139 945,614
- ----------------------------------------------------------------------------------------------------
Federal Republic of Brazil, 8s, 2014 1,406 1,230,486
- ----------------------------------------------------------------------------------------------------
Federal Republic of Brazil, 8.875s, 2024 2,307 1,730,250
- ----------------------------------------------------------------------------------------------------
Federal Republic of Brazil, 10.125s, 2027 400 326,160
- ----------------------------------------------------------------------------------------------------
$5,084,533
- ----------------------------------------------------------------------------------------------------
Bulgaria - 0.2%
- ----------------------------------------------------------------------------------------------------
Republic of Bulgaria, 8.25s, 2015## $673 $757,125
- ----------------------------------------------------------------------------------------------------
Canada - 2.0%
- ----------------------------------------------------------------------------------------------------
Abitibi Consolidated, Inc., 8.55s, 2010 (Forest & Paper
Products) $995 $1,125,976
- ----------------------------------------------------------------------------------------------------
Abitibi Consolidated, Inc., 8.85s, 2030 (Forest & Paper
Products) 791 876,531
- ----------------------------------------------------------------------------------------------------
Government of Canada, 5.75s, 2006 CAD 1,212 890,860
- ----------------------------------------------------------------------------------------------------
Government of Canada, 5.5s, 2009 1,355 991,820
- ----------------------------------------------------------------------------------------------------
Government of Canada, 5.25s, 2012 1,645 1,174,164
- ----------------------------------------------------------------------------------------------------
Government of Canada, 8s, 2023 1,889 1,731,476
- ----------------------------------------------------------------------------------------------------
Tembec Inds., Inc., 7.75s, 2012 (Forest & Paper Products) $1,000 1,015,000
- ----------------------------------------------------------------------------------------------------
$7,805,827
- ----------------------------------------------------------------------------------------------------
Colombia - 0.4%
- ----------------------------------------------------------------------------------------------------
Republic of Columbia, 9.75s, 2009 $688 $756,800
- ----------------------------------------------------------------------------------------------------
Republic of Colombia, 10.75s, 2013 660 759,000
- ----------------------------------------------------------------------------------------------------
$1,515,800
- ----------------------------------------------------------------------------------------------------
Denmark - 1.5%
- ----------------------------------------------------------------------------------------------------
Kingdom of Denmark, 7s, 2007 DKK 25,504 $4,412,073
- ----------------------------------------------------------------------------------------------------
Kingdom of Denmark, 6s, 2009 3,726 630,035
- ----------------------------------------------------------------------------------------------------
Nordea Kredit, 5s, 2035 4,467 647,686
- ----------------------------------------------------------------------------------------------------
$5,689,794
- ----------------------------------------------------------------------------------------------------
Dominican Republic - 0.4%
- ----------------------------------------------------------------------------------------------------
Dominican Republic, 9.5s, 2006## $654 $691,605
- ----------------------------------------------------------------------------------------------------
Dominican Republic, 9.04s, 2013## 1,014 1,020,337
- ----------------------------------------------------------------------------------------------------
$1,711,942
- ----------------------------------------------------------------------------------------------------
Finland - 1.3%
- ----------------------------------------------------------------------------------------------------
Republic of Finland, 5.375s, 2013 EUR 4,159 $5,120,327
- ----------------------------------------------------------------------------------------------------
France - 2.1%
- ----------------------------------------------------------------------------------------------------
Crown European Holdings S.A., 9.5s, 2011 (Containers)## $1,435 $1,528,275
- ----------------------------------------------------------------------------------------------------
Crown European Holdings S.A., 10.25s, 2011 (Containers)## EUR 355 412,729
- ----------------------------------------------------------------------------------------------------
Crown European Holdings S.A., 10.875s, 2013
(Containers)## $555 598,012
- ----------------------------------------------------------------------------------------------------
France Telecom SA, 10s, 2031 (Telecom - Wireline) 1,490 1,981,873
- ----------------------------------------------------------------------------------------------------
Republic of France, 4.75s, 2007 EUR 1,083 1,284,296
- ----------------------------------------------------------------------------------------------------
Republic of France, 3s, 2009 827 984,035
- ----------------------------------------------------------------------------------------------------
Republic of France, 4.75s, 2012 1,159 1,362,114
- ----------------------------------------------------------------------------------------------------
$8,151,334
- ----------------------------------------------------------------------------------------------------
Germany - 0.9%
- ----------------------------------------------------------------------------------------------------
Federal Republic of Germany, 4.5s, 2009 EUR 3,130 $3,673,126
- ----------------------------------------------------------------------------------------------------
Greece - 0.6%
- ----------------------------------------------------------------------------------------------------
Fage Dairy Industries S.A., 9s, 2007 (Food & Beverage
Products) $2,300 $2,233,875
- ----------------------------------------------------------------------------------------------------
Republic of Greece, 6.5s, 2014 EUR 233 307,954
- ----------------------------------------------------------------------------------------------------
$2,541,829
- ----------------------------------------------------------------------------------------------------
Ireland - 1.5%
- ----------------------------------------------------------------------------------------------------
MDP Acquisitions PLC, 9.625s, 2012 (Forest & Paper
Products)## $660 $716,100
- ----------------------------------------------------------------------------------------------------
Republic of Ireland, 4.25s, 2007 EUR 2,430 2,834,761
- ----------------------------------------------------------------------------------------------------
Republic of Ireland, 5s, 2013 2,037 2,435,198
- ----------------------------------------------------------------------------------------------------
$5,986,059
- ----------------------------------------------------------------------------------------------------
Italy - 0.6%
- ----------------------------------------------------------------------------------------------------
Republic of Italy, 4.5s, 2007 EUR 1,592 $1,874,020
- ----------------------------------------------------------------------------------------------------
Republic of Italy, 4.75s, 2013 531 620,555
- ----------------------------------------------------------------------------------------------------
$2,494,575
- ----------------------------------------------------------------------------------------------------
Kazakhstan - 0.4%
- ----------------------------------------------------------------------------------------------------
Kazkommerts International BV, 10.125s, 2007 (Banks &
Credit Cos.)+ $130 $141,960
- ----------------------------------------------------------------------------------------------------
Kazkommerts International BV, 10.125s, 2007 (Banks &
Credit Cos.)## 123 134,839
- ----------------------------------------------------------------------------------------------------
Kazkommerts International BV, 8.5s, 2013 (Banks &
Credit Cos.)## 650 644,312
- ----------------------------------------------------------------------------------------------------
Kaztransoil Co., 8.5s, 2006 (Oil Services)## 750 787,500
- ----------------------------------------------------------------------------------------------------
$1,708,611
- ----------------------------------------------------------------------------------------------------
Luxembourg - 0.3%
- ----------------------------------------------------------------------------------------------------
Tyco International Group S.A., 7s, 2028 (Conglomerates) $1,300 $1,222,000
- ----------------------------------------------------------------------------------------------------
Malaysia - 0.5%
- ----------------------------------------------------------------------------------------------------
Petroliam Nasional, 7.75s, 2015 (Oil) $714 $822,885
- ----------------------------------------------------------------------------------------------------
Petronas Capital Ltd., 7.875s, 2022 (Oil Services)## 1,020 1,123,330
- ----------------------------------------------------------------------------------------------------
$1,946,215
- ----------------------------------------------------------------------------------------------------
Mexico - 1.8%
- ----------------------------------------------------------------------------------------------------
BBVA Bancomer, 10.5s, 2011 (Banks & Credit Cos.)## $1,325 $1,510,500
- ----------------------------------------------------------------------------------------------------
Grupo Televisa S.A. de C.V., 8.5s, 2032 (Broadcast &
Cable TV) 872 872,000
- ----------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 8.625s, 2022
(Finance) 1,027 1,139,970
- ----------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 8.625s, 2022 (Oil)## 596 661,560
- ----------------------------------------------------------------------------------------------------
United Mexican States, 11.375s, 2016 300 429,000
- ----------------------------------------------------------------------------------------------------
United Mexican States, 8.125s, 2019 59 66,582
- ----------------------------------------------------------------------------------------------------
United Mexican States, 11.5s, 2026 1,508 2,185,819
- ----------------------------------------------------------------------------------------------------
$6,865,431
- ----------------------------------------------------------------------------------------------------
Netherlands - 1.4%
- ----------------------------------------------------------------------------------------------------
Deutsche Telekom Intl Fin BV, 8.75s, 2030 (Telecom -
Wireline) $973 $1,202,399
- ----------------------------------------------------------------------------------------------------
Kingdom of Netherlands, 3.75s, 2009 EUR 500 564,646
- ----------------------------------------------------------------------------------------------------
Kingdom of Netherlands, 5s, 2012 3,058 3,666,726
- ----------------------------------------------------------------------------------------------------
$5,433,771
- ----------------------------------------------------------------------------------------------------
New Zealand - 1.0%
- ----------------------------------------------------------------------------------------------------
Government of New Zealand, 7s, 2009 NZD 4,645 $2,773,487
- ----------------------------------------------------------------------------------------------------
Government of New Zealand, 6.5s, 2013 2,296 1,340,998
- ----------------------------------------------------------------------------------------------------
$4,114,485
- ----------------------------------------------------------------------------------------------------
Norway - 0.5%
- ----------------------------------------------------------------------------------------------------
Kingdom of Norway, 5.5s, 2009 NOK 4,834 $707,296
- ----------------------------------------------------------------------------------------------------
Union Bank of Norway, 7.35s, 2049 (Banks & Credit Cos.)## $1,400 1,412,362
- ----------------------------------------------------------------------------------------------------
$2,119,658
- ----------------------------------------------------------------------------------------------------
Panama - 0.4%
- ----------------------------------------------------------------------------------------------------
Republic of Panama, 9.375s, 2023 $166 $179,280
- ----------------------------------------------------------------------------------------------------
Republic of Panama, 9.375s, 2029 1,201 1,336,113
- ----------------------------------------------------------------------------------------------------
$1,515,393
- ----------------------------------------------------------------------------------------------------
Poland - 0.3%
- ----------------------------------------------------------------------------------------------------
PTC International Finance B.V., 10.75s, 2007 (Wireless
Communications) $219 $229,950
- ----------------------------------------------------------------------------------------------------
PTC International Finance II S.A., 11.25s, 2009 (Wireless
Communications) 729 812,835
- ----------------------------------------------------------------------------------------------------
$1,042,785
- ----------------------------------------------------------------------------------------------------
Qatar - 0.3%
- ----------------------------------------------------------------------------------------------------
State of Qatar, 9.75s, 2030 $808 $1,061,308
- ----------------------------------------------------------------------------------------------------
Russia - 1.9%
- ----------------------------------------------------------------------------------------------------
Gazprom, 9.625s, 2013 (Utilities - Gas)## $800 $852,000
- ----------------------------------------------------------------------------------------------------
Mobile Telesystems Fin SA, 9.75s, 2008 (Wireless
Communications)## 1,621 1,726,365
- ----------------------------------------------------------------------------------------------------
Russian Federation, 3s, 2008 1,641 1,444,080
- ----------------------------------------------------------------------------------------------------
Russian Federation, 12.75s, 2028 537 829,665
- ----------------------------------------------------------------------------------------------------
Russian Federation, 5s, 2030 673 605,700
- ----------------------------------------------------------------------------------------------------
Russian Federation, 5s, 2030## 1,080 975,909
- ----------------------------------------------------------------------------------------------------
Vimplecom, 10.45s, 2005 (Wireless Communications)## 1,077 1,147,005
- ----------------------------------------------------------------------------------------------------
$7,580,724
- ----------------------------------------------------------------------------------------------------
Singapore - 0.9%
- ----------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks &
Credit Cos.)## $1,654 $1,884,063
- ----------------------------------------------------------------------------------------------------
Flextronics International Ltd., 9.875s, 2010
(Electronics) 1,420 1,590,400
- ----------------------------------------------------------------------------------------------------
$3,474,463
- ----------------------------------------------------------------------------------------------------
Spain - 1.3%
- ----------------------------------------------------------------------------------------------------
Kingdom of Spain, 6s, 2008 EUR 3,156 $3,937,924
- ----------------------------------------------------------------------------------------------------
Kingdom of Spain, 5.5s, 2017 866 1,071,799
- ----------------------------------------------------------------------------------------------------
$5,009,723
- ----------------------------------------------------------------------------------------------------
Sweden - 0.6%
- ----------------------------------------------------------------------------------------------------
Kingdom of Sweden, 8s, 2007 SEK 3,315 $468,564
- ----------------------------------------------------------------------------------------------------
Kingdom of Sweden, 5.25s, 2011 6,410 820,284
- ----------------------------------------------------------------------------------------------------
Kingdom of Sweden, 5.5s, 2012 6,935 899,605
- ----------------------------------------------------------------------------------------------------
$2,188,453
- ----------------------------------------------------------------------------------------------------
United Kingdom - 1.7%
- ----------------------------------------------------------------------------------------------------
Bank of Ireland UK Holdings, 6s, 2049 (Banks &
Credit Cos.) EUR 635 $817,157
- ----------------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit Cos.)## $1,601 2,008,045
- ----------------------------------------------------------------------------------------------------
Jazztel, 13.25s, 2009 (Telecom - Wireline) EUR 249 119,603
- ----------------------------------------------------------------------------------------------------
UK Treasury, 7.25s, 2007 GBP 174 316,402
- ----------------------------------------------------------------------------------------------------
UK Treasury, 5s, 2008 2,072 3,462,429
- ----------------------------------------------------------------------------------------------------
$6,723,636
- ----------------------------------------------------------------------------------------------------
Total Foreign Bonds $111,464,975
- ----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $350,225,219) $372,878,289
- ----------------------------------------------------------------------------------------------------
Stocks - 0.1%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
U.S. Stocks - 0.1%
- ----------------------------------------------------------------------------------------------------
Apparel & Textiles
- ----------------------------------------------------------------------------------------------------
Sind Holdings, Inc. 814 $52,910
- ----------------------------------------------------------------------------------------------------
Machinery
- ----------------------------------------------------------------------------------------------------
IKS Corp. 4,721 $6,373
- ----------------------------------------------------------------------------------------------------
Metals & Minerals - 0.1%
- ----------------------------------------------------------------------------------------------------
Metal Management, Inc. 33,396 $287,206
- ----------------------------------------------------------------------------------------------------
Utilities - Telephone
- ----------------------------------------------------------------------------------------------------
ITC Deltacom, Inc. 37,714 $67,885
- ----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,019,903) $414,374
- ----------------------------------------------------------------------------------------------------
Convertible Bonds
- ----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ----------------------------------------------------------------------------------------------------
United Kingdom
- ----------------------------------------------------------------------------------------------------
Jazztel, 12s, 2012 (Telecom - Wireline) $51 $27,368
- ----------------------------------------------------------------------------------------------------
Total Convertible Bond (Identified Cost, $40,744) $27,368
- ----------------------------------------------------------------------------------------------------
Rights
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
Banco Central de Uruguay* 1,250 $0
- ----------------------------------------------------------------------------------------------------
United Mexican States* 1,000 $5
- ----------------------------------------------------------------------------------------------------
Total Rights (Identified Cost, $0) $5
- ----------------------------------------------------------------------------------------------------
Warrants
- ----------------------------------------------------------------------------------------------------
DWC Construction 6/22/05 (Utility)* 67,756 $0
- ----------------------------------------------------------------------------------------------------
DWC Trading 6/22/05 (Utility)* 26,835 0
- ----------------------------------------------------------------------------------------------------
Ono Finance PLC 2/15/11 (Broadcast & Cable TV)* 250 3
- ----------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. 12/19/08 (Chemicals)* 77 540
- ----------------------------------------------------------------------------------------------------
Republic of Venezuela 4/15/20* 12,500 0
- ----------------------------------------------------------------------------------------------------
Total Warrants (Identified Cost, $34,490) $543
- ----------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.7%
- ----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- ----------------------------------------------------------------------------------------------------
Citigroup, Inc., due 5/01/03, at Amortized Cost $2,667 $2,667,000
- ----------------------------------------------------------------------------------------------------
Repurchase Agreement - 4.6%
- ----------------------------------------------------------------------------------------------------
Goldman Sachs, dated 04/30/03, due 05/01/03, total to be
received $17,923,657 (secured by various U.S. Treasury
and Federal Agency Obligations), at Cost $17,923 $17,923,000
- ----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $372,910,356) $393,910,039
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.3)% (1,078,310)
- ----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $392,831,729
- ----------------------------------------------------------------------------------------------------
*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 Dollar GBP = British Pound
CAD = Canadian Dollar NOK = Norwegian Kroner
DKK = Danish Krone NZD = New Zealand Dollar
EUR = Euro SEK = Swedish Kronor
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
- --------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets
and liabilities composing the total value of your fund.
AT 4/30/03
ASSETS
Investments, at value (identified cost, $372,910,356) $393,910,039
- ---------------------------------------------------------------------------------------------------
Cash 677,040
- ---------------------------------------------------------------------------------------------------
Receivable for forward foreign currency exchange
contracts 114,478
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 15,347,854
- ---------------------------------------------------------------------------------------------------
Receivable for fund shares sold 788,788
- ---------------------------------------------------------------------------------------------------
Interest receivable 7,041,008
- ---------------------------------------------------------------------------------------------------
Other assets 6,151
- ---------------------------------------------------------------------------------------------------
Total assets $417,885,358
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $1,849,127
- ---------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 606,587
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased 21,448,101
- ---------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange contracts 981,308
- ---------------------------------------------------------------------------------------------------
Payable to affiliates
- ---------------------------------------------------------------------------------------------------
Management fee 6,992
- ---------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 1,076
- ---------------------------------------------------------------------------------------------------
Distribution and service fee 8,191
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 152,247
- ---------------------------------------------------------------------------------------------------
Total liabilities $25,053,629
- ---------------------------------------------------------------------------------------------------
Net assets $392,831,729
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $469,492,459
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of asset and liabilities in foreign currencies 20,231,294
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (94,734,617)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income (2,157,407)
- ---------------------------------------------------------------------------------------------------
Total $392,831,729
- ---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 59,735,961
- ---------------------------------------------------------------------------------------------------
Class A shares
Net assets $192,142,810
- ---------------------------------------------------------------------------------------------------
Shares outstanding 29,052,187
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per share $6.61
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$6.61) $6.94
- ---------------------------------------------------------------------------------------------------
Class B shares
Net assets $153,897,622
- ---------------------------------------------------------------------------------------------------
Shares outstanding 23,525,399
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.54
- ---------------------------------------------------------------------------------------------------
Class C shares
Net assets $37,320,800
- ---------------------------------------------------------------------------------------------------
Shares outstanding 5,728,268
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.52
- ---------------------------------------------------------------------------------------------------
Class I shares
Net assets $9,470,497
- ---------------------------------------------------------------------------------------------------
Shares outstanding 1,430,107
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.62
- ---------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
- --------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
FOR SIX MONTHS ENDED 4/30/03
NET INVESTMENT INCOME
Interest income $12,919,723
- --------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------
Management fee $1,212,326
- --------------------------------------------------------------------------------------------------
Trustees' compensation 10,638
- --------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 189,534
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 315,773
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 740,273
- --------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 177,109
- --------------------------------------------------------------------------------------------------
Administrative fee 21,575
- --------------------------------------------------------------------------------------------------
Custodian fee 137,746
- --------------------------------------------------------------------------------------------------
Printing 22,628
- --------------------------------------------------------------------------------------------------
Postage 9,967
- --------------------------------------------------------------------------------------------------
Auditing fees 21,481
- --------------------------------------------------------------------------------------------------
Legal fees 1,960
- --------------------------------------------------------------------------------------------------
Miscellaneous 200,687
- --------------------------------------------------------------------------------------------------
Total expenses $3,061,697
- --------------------------------------------------------------------------------------------------
Fees paid indirectly (1,423)
- --------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (745,195)
- --------------------------------------------------------------------------------------------------
Net expenses $2,315,079
- --------------------------------------------------------------------------------------------------
Net investment income $10,604,644
- --------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- --------------------------------------------------------------------------------------------------
Investment transactions $3,737,866
- --------------------------------------------------------------------------------------------------
Foreign currency transactions (5,597,582)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments $(1,859,716)
- --------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- --------------------------------------------------------------------------------------------------
Investments $23,866,637
- --------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 44,086
- --------------------------------------------------------------------------------------------------
Net unrealized gain on investments $23,910,723
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency $22,051,007
- --------------------------------------------------------------------------------------------------
Increase in net assets from operations $32,655,651
- --------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
SIX MONTHS YEAR
ENDED ENDED
4/30/03 10/31/02
(UNAUDITED)
OPERATIONS
Net investment income $10,604,644 $24,007,299
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions (1,859,716) (26,986,816)
- -------------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency
translation 23,910,723 14,529,806
- ---------------------------------------------------------------- ----------- ------------
Increase in net assets from operations $32,655,651 $11,550,289
- ---------------------------------------------------------------- ----------- ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (Class A) $(5,513,821) $(11,302,456)
- ---------------------------------------------------------------- ----------- ------------
From net investment income (Class B) (4,058,533) (8,718,372)
- ---------------------------------------------------------------- ----------- ------------
From net investment income (Class C) (972,374) (2,197,423)
- ---------------------------------------------------------------- ----------- ------------
From net investment income (Class I) (293,835) (664,800)
- ---------------------------------------------------------------- ----------- ------------
From paid in capital (Class A) -- (1,055,499)
- ---------------------------------------------------------------- ----------- ------------
From paid in capital (Class B) -- (814,180)
- ---------------------------------------------------------------- ----------- ------------
From paid in capital (Class C) -- (205,210)
- ---------------------------------------------------------------- ----------- ------------
From paid in capital (Class I) -- (62,084)
- ---------------------------------------------------------------- ----------- ------------
Total distributions declared to shareholders $(10,838,563) $(25,020,024)
- ---------------------------------------------------------------- ----------- ------------
Net increase (decrease) in net assets from fund share
transactions $2,313,598 $(16,645,993)
- ---------------------------------------------------------------- ----------- ------------
Total increase (decrease) in net assets $24,130,686 $(30,115,728)
- ---------------------------------------------------------------- ----------- ------------
NET ASSETS
At beginning of year $368,701,043 $398,816,771
- -------------------------------------------------------------------------------------------------------
At end of year (including accumulated distributions in excess
of net investment income and accumulated undistributed net
investment income of $2,157,407 and $1,923,488, respectively) $392,831,729 $368,701,043
- -------------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Financial Highlights provide per share amounts and certain ratios to
summarize the effect of fund operations and any distributions to a shareholder
of each share class.
SIX MONTHS YEAR ENDED 10/31
ENDED ------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS A (UNAUDITED)
Net asset value, beginning of
period $6.24 $6.46 $6.67 $7.30 $7.33 $8.24
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
Net investment income(S) $0.19 $0.41 $0.52 $0.60 $0.62 $0.66
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.37 (0.20) (0.16) (0.59) 0.06 (0.81
- ---------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.56 $0.21 $0.36 $0.01 $0.68 $(0.15
- ---------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.19) $(0.39) $(0.49) $(0.48) $(0.71) $(0.63
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.13
- -------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- (0.04) (0.08) (0.16) -- --
- ---------------------------------- ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.19) $(0.43) $(0.57) $(0.64) $(0.71) $(0.76
- ---------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $6.61 $6.24 $6.46 $6.67 $7.30 $7.33
- ---------------------------------- ------ ------ ------ ------ ------ ------
Total return (%)(+) 9.16++ 3.39 5.54 (0.03) 9.72 (2.21
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.93+ 0.94 0.96 0.92 0.88 0.85
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 6.00+ 6.59 7.83 8.57 8.42 8.26
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 147 153 127 204 299
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $192,143 $176,624 $184,482 $111,791 $100,469 $95,292
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. Additionally the investment adviser paid a portion
of the fund's operating expenses. If these fees had been incurred by the
fund, the net investment income per share and the ratios would have been:
Net investment income $0.18 $0.39 $0.46 $0.54 $0.55 $0.58
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.33+ 1.40 1.80 1.81 1.83 1.84
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.60+ 6.13 6.99 7.68 7.47 7.24
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements. (+) Total returns for Class A shares do not include the
applicable sales charge. If the charge had been included, the results
would have been lower.
(S)(S) As required, effective November 1, 2001, the trust has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium and accreting market discount on
debt securities. The effect of this change for the year ended October 31,
2002 was to decrease net investment income per share and increase net
realized and unrealized gains and losses per share. The impact of this
change calculates to less than $0.01 per share. In addition, the ratio of
net investment income to average net assets decreased by 0.05%. Per
share, ratios, and supplemental data for periods prior to October 31,
2002 have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED ------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS B (UNAUDITED)
Net asset value, beginning of
period $6.18 $6.39 $6.61 $7.24 $7.27 $8.18
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
Net investment income(S) $0.17 $0.37 $0.47 $0.55 $0.57 $0.61
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.36 (0.19) (0.17) (0.59) 0.07 (0.81)
- ----------------------------------- ------- ------ ------ ------ ------ ------
Total from investment operations $0.53 $0.18 $0.30 $(0.04) $0.64 $(0.20)
- ----------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.17) $(0.36) $(0.45) $(0.44) $(0.67) $(0.58)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.13)
- -------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- (0.03) (0.07) (0.15) -- --
- ----------------------------------- ------- ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.17) $(0.39) $(0.52) $(0.59) $(0.67) $(0.71)
- ----------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end of period $6.54 $6.18 $6.39 $6.61 $7.24 $7.27
- ----------------------------------- ------- ------ ------ ------ ------ ------
Total return (%) 8.72++ 2.93 4.71 (0.67) 9.10 (2.84)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.58+ 1.59 1.61 1.56 1.53 1.51
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 5.35+ 5.95 7.22 7.89 7.77 7.64
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 147 153 127 204 299
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $153,898 $146,096 $163,299 $137,013 $144,849 $133,872
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. Additionally the investment adviser paid a portion
of the fund's operating expenses. If these fees had been incurred by the
fund, the net investment income per share and the ratios would have been:
Net investment income $0.16 $0.34 $0.42 $0.49 $0.50 $0.53
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.98+ 2.05 2.45 2.45 2.48 2.50
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.95+ 5.49 6.38 7.00 6.82 6.62
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(S)(S) As required, effective November 1, 2001, the trust has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium and accreting market discount on
debt securities. The effect of this change for the year ended October 31,
2002 was to decrease net investment income per share and increase net
realized and unrealized gains and losses per share. The impact of this
change calculates to less than $0.01 per share. In addition, the ratio of
net investment income to average net assets decreased by 0.05%. Per
share, ratios, and supplemental data for periods prior to October 31,
2002 have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED ------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS C (UNAUDITED)
Net asset value, beginning of
period $6.15 $6.37 $6.59 $7.22 $7.25 $8.16
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
Net investment income(S) $0.17 $0.37 $0.47 $0.55 $0.57 $0.61
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.37 (0.20) (0.17) (0.59) 0.07 (0.81)
- --------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.54 $0.17 $0.30 $(0.04) $0.64 $(0.20)
- --------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.17) $(0.36) $(0.45) $(0.44) $(0.67) $(0.58)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.13)
- -------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- (0.03) (0.07) (0.15) -- --
- --------------------------------- ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.17) $(0.39) $(0.52) $(0.59) $(0.67) $(0.71)
- --------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $6.52 $6.15 $6.37 $6.59 $7.22 $7.25
- --------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 8.91++ 2.78 4.73 (0.67) 9.12 (2.84)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.58+ 1.59 1.61 1.56 1.53 1.51
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 5.35+ 5.95 7.18 7.90 7.78 7.65
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 147 153 127 204 299
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $37,321 $35,952 $40,787 $37,956 $38,808 $42,213
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. Additionally the investment adviser paid a portion
of the fund's operating expenses. If these fees had been incurred by the
fund, the net investment income per share and the ratios would have been:
Net investment income $0.15 $0.34 $0.42 $0.49 $0.50 $0.53
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.98+ 2.05 2.45 2.45 2.48 2.50
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.95+ 5.49 6.34 7.01 6.83 6.63
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(S)(S) As required, effective November 1, 2001, the trust has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium and accreting market discount on
debt securities. The effect of this change for the year ended October 31,
2002 was to decrease net investment income per share and increase net
realized and unrealized gains and losses per share. The impact of this
change calculates to less than $0.01 per share. In addition, the ratio of
net investment income to average net assets decreased by 0.05%. Per
share, ratios, and supplemental data for periods prior to October 31,
2002 have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED ------------------------------------------------------------------------
4/30/03 2002 2001 2000 1999 1998
CLASS I (UNAUDITED)
Net asset value, beginning of
period $6.25 $6.47 $6.68 $7.31 $7.33 $8.25
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
Net investment income(S) $0.20 $0.44 $0.55 $0.68 $0.65 $0.72
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.37 (0.21) (0.17) (0.65) 0.07 (0.85)
- ----------------------------------- ------ ------ ------ ------ ------ ------
Total from investment operations $0.57 $0.23 $0.38 $0.03 $0.72 $(0.13)
- ----------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.20) $(0.41) $(0.51) $(0.50) $(0.74) $(0.66)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.13)
- -------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- (0.04) (0.08) (0.16) -- --
- ----------------------------------- ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.20) $(0.45) $(0.59) $(0.66) $(0.74) $(0.79)
- ----------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $6.62 $6.25 $6.47 $6.68 $7.31 $7.33
- ----------------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 9.33++ 3.75 5.92 0.33 10.25 (2.00)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE
NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 0.58+ 0.59 0.61 0.60 0.53 0.50
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 6.34+ 6.93 8.21 9.53 8.77 8.51
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 65 147 153 127 204 299
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $9,470 $10,029 $10,249 $7,542 $304 $238
- -------------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser voluntarily waived a portion of its fee for certain
of the periods indicated. Additionally the investment adviser paid a portion
of the fund's operating expenses. If these fees had been incurred by the
fund, the net investment income per share and the ratios would have been:
Net investment income $0.18 $0.41 $0.49 $0.62 $0.58 $0.63
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 0.98+ 1.05 1.45 1.49 1.48 1.49
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.94+ 6.47 7.37 8.64 7.82 7.49
- -------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(S)(S) As required, effective November 1, 2001, the trust has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium and accreting market discount on
debt securities. The effect of this change for the year ended October 31,
2002 was to decrease net investment income per share and increase net
realized and unrealized gains and losses per share. The impact of this
change calculates to less than $0.01 per share. In addition, the ratio of
net investment income to average net assets decreased by 0.05%. Per
share, ratios, and supplemental data for periods prior to October 31,
2002 have not been restated to reflect this change in presentation.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Strategic Income Fund (the fund) is a non-diversified series of MFS Series
Trust VIII (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 accounting
principles generally accepted in the United States of America 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.
The fund can invest up to 100% of its portfolio in high-yield securities rated
below investment grade. Investments in high-yield securities involve greater
degrees of credit and market risk than investments in higher-rated securities
and tend to be more sensitive to economic conditions.
The fund can invest in foreign securities. 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 in the fund's portfolio for which
market quotations are available are valued at the last sale or official closing
price on the primary market or exchange on which they are primarily traded or at
the last quoted bid price for securities in which there were no sales during the
day. If no sales are reported, as is the case for most securities traded over
the counter, securities are valued on the basis of quotations obtained from
brokers and dealers or on the basis of valuations furnished by a pricing
service. Bonds and other fixed income securities (other than short-term
obligations) of U.S. issuers in the fund's portfolio are valued at an evaluated
bid price on the basis of quotes from brokers and dealers or on the basis of
valuations furnished by a pricing service. Prices obtained from pricing services
utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate 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 quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. Forward contracts will be valued
using a pricing model taking into consideration market data from external
pricing source. Use of the pricing services has been approved by the Board of
Trustees. Short-term obligations in the fund's portfolio are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Short-term obligations with a remaining maturity in excess of 60 days will be
valued upon dealer supplied valuations. Portfolio investments for which market
quotations are not readily available, or whose values have been materially
affected by events occurring after the close of their primary markets, are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The fund requires that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the fund to obtain those securities
in the event of a default under the repurchase agreement. The fund monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the fund under each such
repurchase agreement. The fund, along with other affiliated entities of
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
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 may enter into
forward foreign currency exchange 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 purposes in accordance
with generally accepted accounting principles. All discount is accreted for 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 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 total 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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
real estate investment trusts, defaulted bonds, capital losses, and amortization
and accretion on debt securities.
The tax character of distributions declared for the years ended October 31, 2002
and October 31, 2001 was as follows:
10/31/02 10/31/01
Distributions declared from:
- --------------------------------------------------------------------------------
Ordinary income $22,883,052 $24,872,129
- --------------------------------------------------------------------------------
Long-term capital gain -- --
- --------------------------------------------------------------------------------
$22,883,052 $24,872,129
- --------------------------------------------------------------------------------
Tax return of capital 2,136,972 2,023,813
- --------------------------------------------------------------------------------
Total distributions declared $25,020,024 $26,895,942
- --------------------------------------------------------------------------------
During the year ended October 31, 2002, accumulated net investment loss
decreased by $1,124,082, accumulated undistributed net realized loss on
investments and foreign currency transactions increased by $665,644, and paid-
in capital decreased by $458,438 due to differences between book and tax
accounting for mortgage-backed securities currency transactions, and
amortization and accretion on debt securities. In addition, $2,136,972 was
designated a tax return of capital distribution. This change had no effect on
the net assets or net asset value per share.
As of October 31, 2002, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $--
------------------------------------------------------------------------
Undistributed long-term capital gain --
------------------------------------------------------------------------
Capital loss carryforward (92,721,213)
------------------------------------------------------------------------
Unrealized depreciation (3,198,360)
------------------------------------------------------------------------
Other temporary differences (2,636,765)
------------------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the earlier
of its utilization or expiration on:
EXPIRATION DATE
October 31, 2005 $(8,420,466)
------------------------------------------------------------------------
October 31, 2006 (23,128,300)
------------------------------------------------------------------------
October 31, 2007 (11,626,162)
------------------------------------------------------------------------
October 31, 2008 (3,849,634)
------------------------------------------------------------------------
October 31, 2009 (17,590,678)
------------------------------------------------------------------------
October 31, 2010 (28,105,973)
------------------------------------------------------------------------
Total $(92,721,213)
------------------------------------------------------------------------
The availability of a portion of theses respective capital loss carryforwards,
which were acquired on August 6, 2001, in connection with the MFS Global
Governments Fund acquisition, may be limited in a given year.
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 the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. Differences in per
share dividend rates are generally due to differences in separate class
expenses. Class B shares will convert to Class A shares, respectively
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 0.65% of
the fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee, which is shown as a reduction of expenses
in the Statement of Operations. Management fees incurred for the year ended
April 30, 2003 were 0.50%. The investment adviser has voluntarily agreed to pay
the fund's operating expenses exclusive of management and distribution fees such
that the fund's aggregate operating expenses do not exceed 0.08% of its average
daily net assets. This is reflected as a reduction of expenses in the Statement
of Operations.
The fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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). On January
1, 2002, the Trustees terminated the Independent Trustee unfunded defined
benefit plan for active Trustees and converted it to an unfunded retirement
benefit deferral plan for active Trustees. Under the new plan, the unfunded
pension liability was converted into an equivalent value of notional shares of
the fund that will fluctuate with the performance of the fund. Included in
Trustees' compensation is a net increase of $2,646 as a result of the change in
the fund's pension liability under this plan and a pension expense of $3,806 for
inactive trustees for the six months ended April 30, 2003.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
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 $2 billion 0.0175%
----------------------------------------------------------------------
Next $2.5 billion 0.0130%
----------------------------------------------------------------------
Next $2.5 billion 0.0005%
----------------------------------------------------------------------
In excess of $7 billion 0.0000%
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$119,861 the six months ended April 30, 2003, as its portion of the sales charge
on sales of Class A shares of the fund, respectively. The Trustees have adopted
a distribution plan for Class A, Class B, 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 an annual
percentage of its average daily net assets attributable to certain share classes
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 based
on the average daily net assets of accounts attributable to such dealers. These
fees are calculated based on each class' average daily net assets. The maximum
distribution and service fees for each class of shares are as follows:
CLASS A CLASS B CLASS C
Distribution Fee 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25%
- --------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities
dealer, which for the six months ended April 30, 2003, amounted to:
CLASS A CLASS B CLASS C
Service Fee Retained by MFD $5,606 $195 $217
- --------------------------------------------------------------------------------
Fees incurred under the distribution plan during the six months ended April 30,
2003, were as follows:
CLASS A CLASS B CLASS C
Total Distribution Plan 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within, for class A shares, 12
months following the purchase, and, for class C shares, the first year from the
end of the calendar month of 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 from the end of the calendar month of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the six months ended April 30, 2003, were
as follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges Imposed $5,556 $161,311 $1,429
- --------------------------------------------------------------------------------
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 annual rate of 0.11%.
(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 $43,697,117 $87,820,942
- --------------------------------------------------------------------------------
Investments (non-U.S. government securities) $192,132,163 $151,297,969
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $373,205,421
----------------------------------------------------------------
Gross unrealized appreciation $27,207,949
----------------------------------------------------------------
Gross unrealized depreciation (6,503,331)
----------------------------------------------------------------
Net unrealized appreciation $20,704,618
(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. Transactions in
fund shares were as follows:
Six months ended Year ended
4/30/03 10/31/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 3,492,504 $22,375,965 6,952,138 $43,689,546
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 659,339 4,196,398 1,370,803 8,618,359
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (3,390,440) (21,658,307) (8,601,396) (53,875,155)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) 761,403 $4,914,056 (278,455) $(1,567,250)
- -----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 2,811,797 $17,790,017 4,266,529 $26,481,564
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 428,638 2,698,613 947,374 5,894,289
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (3,371,110) (21,302,834) (7,102,808) (44,135,182)
- -----------------------------------------------------------------------------------------------------------
Net decrease (130,675) $(814,204) (1,888,905) $(11,759,329)
- -----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 805,664 $5,090,837 1,293,882 $8,018,284
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 105,181 659,414 244,212 1,513,965
- -----------------------------------------------------------------------------------------------------------
Shares
reacquired (1,027,435) (6,452,734) (2,097,550) (12,980,821)
- -----------------------------------------------------------------------------------------------------------
Net decrease (116,590) $(702,483) (559,456) $(3,448,572)
- -----------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 411,263 $2,644,185 616,584 $3,879,162
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 46,456 295,753 105,719 665,382
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (631,979) (4,023,709) (703,212) (4,415,386)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) (174,260) $(1,083,771) 19,091 $129,158
- -----------------------------------------------------------------------------------------------------------
(6) Line of Credit
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. 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, 2003, was $1,488. The fund had no borrowings during the period.
(7) Financial Instruments
The fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options and forward foreign currency exchange
contracts. The notional or contractual amounts of these instruments represent
the investment the fund has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
SALES
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
6/16/06 AUD 2,691,071 $1,656,432 $1,677,110 $(20,678)
6/16/03 CAD 4,407,397 3,024,929 3,066,267 (41,338)
6/16/03 DKK 32,812,965 4,839,670 4,933,118 (93,448)
5/05/03-6/30/03 EUR 27,719,226 30,224,055 30,939,627 (715,572)
6/16/03 GBP 2,198,174 3,451,133 3,505,364 (54,231)
6/16/03 NOK 5,115,687 710,650 728,358 (17,708)
6/16/03 NZD 7,420,109 4,133,966 4,130,183 3,783
6/16/03 SEK 16,824,479 2,014,666 2,052,999 (38,333)
----------- ----------- ---------
$50,055,501 $51,033,026 $(977,525)
=========== =========== =========
PURCHASES
5/05/03-6/16/03 EUR 6,322,231 $6,951,015 $7,061,710 $110,695
----------- ----------- ---------
$6,951,015 $7,061,710 $110,695
=========== =========== =========
/
At April 30, 2003, 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 total assets in securities which
are subject to legal or contractual restrictions on resale. At April 30, 2003,
the fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting less than 1% 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, in good faith at the direction of the
Trustees.
DATE OF SHARE/PRINCIPAL
DESCRIPTION ACQUISITION AMOUNT COST VALUE
DLJ Mortgage Acceptance Corp. 3/01/98 1,064,052 $668,764 $1,015,040
- ---------------------------------------------------------------------------------------------------------
Kazkommerts International BV 4/15/98 130,000 $142,038 $141,960
- ---------------------------------------------------------------------------------------------------------
$1,157,000
- ---------------------------------------------------------------------------------------------------------
(9) Change in Accounting Principle
As required, effective November 1, 2001, the fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting market discount on debt securities. Prior to November 1,
2001, the fund did not amortize premium nor accrete market discount on debt
securities. The cumulative effect of this accounting change had no impact on
total net assets of the fund, but resulted in a $289,216 reduction in cost of
securities and a corresponding $289,216 increase in net unrealized depreciation,
based on securities held by the fund on November 1, 2001.
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust VIII, of which the fund is a series, including
their principal occupations, which, unless specific dates are shown, are of more
than five years' duration, although the titles may not have been the same
throughout.
Name, age, position with the Trust, principal occupation, and
other directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Chairman Financial Services, Inc. (investment
advisers), Chairman and
Chief Executive Officer
JOHN W. BALLEN(2) (born 09/12/59)
Trustee and President LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Trustee
Company, Hemenway & Barnes (attorneys),
Chief Executive Officer and Director Partner
KEVIN R. PARKE(2) (born 12/14/59) WILLIAM J. POORVU (born 04/10/35)
Trustee Trustee
Massachusetts Financial Services Private investor; Harvard University
Company, Graduate School of Business
President, Chief Investment Officer, and Administration, Class of 1961
Director Adjunct Professor in
Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc.
(real estate investment trust),
LAWRENCE H. COHN, M.D. (born 03/11/37) Director
Trustee
Brigham and Women's Hospital, Chief of J. DALE SHERRATT (born 09/23/38)
Cardiac Surgery; Harvard Medical School, Trustee
Professor of Surgery Insight Resources, Inc. (acquisition
planning specialists), President;
WILLIAM R. GUTOW (born 09/27/41) Wellfleet Investments (investor in
Trustee health care companies), Managing
Private investor and real estate General Partner (since 1993);
consultant; Cambridge Nutraceuticals
Capitol Entertainment Management Company (professional nutritional products),
(video franchise), Vice Chairman Chief Executive Officer (until May
2001)
J. ATWOOD IVES (born 05/01/36)
Trustee ELAINE R. SMITH (born 04/25/46)
Private investor; KeySpan Corporation Trustee
(energy related services), Director; Independent health care industry
Eastern Enterprises (diversified consultant
services company), Chairman, Trustee and
Chief Executive Officer (until November WARD SMITH (born 09/13/30)
2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment
Company Act of 1940 (referred to as the 1940 Act) which is the
principal federal law governing investment companies like the
Trust. The address of MFS is 500 Boylston Street, Boston,
Massachusetts 02116.
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) ROBERT R. FLAHERTY (born 09/18/63)
Chairman Assistant Treasurer
Massachusetts Financial Services Massachusetts Financial Services
Company, Chairman Company, Vice President (since
August 2000); UAM Fund Services,
JOHN W. BALLEN (born 09/12/59) Senior Vice President (prior to
Trustee and President August 2000)
Massachusetts Financial Services
Company, Chief Executive Officer and RICHARD M. HISEY (born 08/29/58)
Director Treasurer
Massachusetts Financial Services
JAMES R. BORDEWICK, JR. (born 03/06/59) Company, Senior Vice President
Assistant Secretary and Assistant Clerk (since July 2002); The Bank of New
Massachusetts Financial Services York, Senior Vice President
Company, Senior Vice President and (September 2000 to July 2002);
Associate General Counsel Lexington Global Asset Managers,
Inc., Executive Vice President and
STEPHEN E. CAVAN (born 11/06/53) Chief Financial Officer,
Secretary and Clerk General Manager, Mutual Funds (prior
Massachusetts Financial Services to September 2000)
Company, Senior Vice President, General
Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57)
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer
Assistant Treasurer Massachusetts Financial Services
Massachusetts Financial Services Company, Vice President
Company, Vice President (since April
2003); Brown Brothers Harriman & Co.,
Senior Vice President (November 2002 to JAMES O. YOST (born 06/12/60)
April 2003); ING Groep N.V./Aeltus Assistant Treasurer
Investment Management, Senior Vice Massachusetts Financial Services
President (prior to November 2002) Company, Senior Vice President
The Trust does not hold annual shareholder meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. This means that each
Trustee will be elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer will hold office until his or her successor is chosen and
qualified, or until he or she retires, resigns or is removed from office.
Messrs. Shames, Cohn, Sherratt and Smith, and Ms. O'Neill, have served in
their capacity as Trustee of the Trust continuously since originally elected
or appointed. Messrs. Ballen, Gutow, Ives, Perera and Poorvu, and Ms. Smith,
were elected by shareholders and have served as Trustees of the Trust since
January 1, 2002. Mr. Parke has served as Trustee of the Trust since
January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER PORTFOLIO MANAGER
Massachusetts Financial Services Company Bernard Scozzafava(1)
500 Boylston Street, Boston, MA
02116-3741 CUSTODIAN
State Street Bank and Trust Company
DISTRIBUTOR 225 Franklin Street, Boston, MA
MFS Fund Distributors, Inc. 02110
500 Boylston Street, Boston, MA
02116-3741
(1) MFS Investment Management
- ------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- ------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international equity and
fixed-income investment across the full risk spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for building and
preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products for
high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and risks
associated with investing. Read the prospectus carefully before investing or
sending money.
- --------------------------------------------------------------------------------
CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges or (1-800-637-8255)
stock and bond outlooks touch-tone required 24 hours a day, 365 days a
year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education, account
access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send you
prospectuses, reports, and proxies electronically. You get timely information
without mailbox clutter (and help your fund save printing and postage costs).
SIGN-UP instructions: If your account is registered with us, go to www.mfs.com,
log in to your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available to
you.
[Logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116.
MFO-SEM-6/03 59.1M
[MFS LOGO] SEMIANNUAL REPORT
INVESTMENT MANAGEMENT APRIL 30, 2003
MFS(R) TAX MANAGED
EQUITY FUND
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
MFS(R) TAX MANAGED EQUITY FUND
The following tables present certain information regarding the Trustees and
officers of MFS Series Trust VIII, of which the fund is a series, including
their principal occupations, which, unless specific dates are shown, are of
more than five years' duration, although the titles may not have been the same
throughout.
NAME, POSITION WITH THE TRUST, AGE, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) Chairman LAWRENCE T. PERERA (born 06/23/35)
Massachusetts Financial Services Company, Chairman Trustee
Hemenway & Barnes (attorneys), Partner
JOHN W. BALLEN* (born 09/12/59) Trustee and
President WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Trustee
Chief Executive Officer and Director Private investor; Harvard University
Graduate School of Business
KEVIN R. PARKE* (born 12/14/59) Trustee Administration, Class of 1961 Adjunct
Massachusetts Financial Services Company, Professor in Entrepreneurship Emeritus;
President, Chief Investment Officer, and Director CBL & Associates Properties, Inc. (real
estate investment trust), Director
INDEPENDENT TRUSTEES
J. DALE SHERRATT (born 09/23/38) Trustee
LAWRENCE H. COHN, M.D. (born 03/11/37) Trustee Insight Resources, Inc. (acquisition
Brigham and Women's Hospital, Chief of Cardiac planning specialists), President;
Surgery; Harvard Medical School, Professor of Wellfleet Investments (investor in
Surgery health care companies), Managing General
Partner (since 1993); Cambridge
WILLIAM R. GUTOW (born 09/27/41) Trustee Nutraceuticals (professional nutritional
Private investor and real estate consultant; products), Chief Executive Officer
Capitol Entertainment Management Company (video (until May 2001)
franchise), Vice Chairman
ELAINE R. SMITH (born 04/25/46) Trustee
J. ATWOOD IVES (born 05/01/36) Trustee Independent health care industry
Private investor; KeySpan Corporation (energy consultant
related services), Director; Eastern Enterprises
(diversified services company), Chairman, Trustee WARD SMITH (born 09/13/30) Trustee
and Chief Executive Officer (until November 2000) Private investor
ABBY M. O'NEILL (born 04/27/28) Trustee
Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
Executive Officer
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) Chairman ROBERT R. FLAHERTY (born 09/18/63)
Massachusetts Financial Services Company, Chairman Assistant Treasurer
Massachusetts Financial Services
JOHN W. BALLEN (born 9/12/59) Trustee and Company, Vice President (since August
President 2000); UAM Fund Services, Senior Vice
Massachusetts Financial Services Company, Chief President (prior to August 2000)
Executive Officer
and Director RICHARD M. HISEY (born 08/29/58)
Treasurer
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant Massachusetts Financial Services
Secretary and Assistant Clerk Company, Senior Vice President (since
Massachusetts Financial Services Company, Senior July 2002); The Bank of New York, Senior
Vice President and Associate General Counsel Vice President (September 2000 to July
2002); Lexington Global Asset Managers,
STEPHEN E. CAVAN (born 11/06/53) Secretary and Inc., Executive Vice President and Chief
Clerk Financial Officer, General Manager,
Massachusetts Financial Services Company, Senior Mutual Funds (prior to September 2000)
Vice President, General Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57) Assistant
STEPHANIE A. DESISTO (born 10/01/53) Assistant Treasurer
Treasurer Massachusetts Financial Services
Massachusetts Financial Services Company, Vice Company, Vice President
President (since
April 2003); Brown Brothers Harriman & Co., Senior JAMES O. YOST (born 06/12/60) Assistant
Vice President (November 2002 to April 2003); ING Treasurer
Groep N.V./Aeltus Investment Management, Senior Massachusetts Financial Services
Vice President (prior to November 2002) Company, Senior Vice President
The Trust does not hold annual shareholder meetings for the purpose of
electing Trustees, and Trustees are not elected for fixed terms. This means
that each Trustee will be elected to hold office until his or her successor is
chosen and qualified or until his or her earlier death, resignation,
retirement or removal. Each officer will hold office until his or her
successor is chosen and qualified, or until he or she retires, resigns or is
removed from office.
Messrs. Shames, Cohn, Gibbons, Sherratt and Smith, and Ms. O'Neill, have
served in their capacity as Trustee of the Trust continuously since originally
elected or appointed. Messrs. Ballen, Gutow, Ives, Perera and Poorvu, and Ms.
Smith, were elected by shareholders and have served as Trustees of the Trust
since January 1, 2002. Mr. Parke has served as Trustee of the Trust since
January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
Matthew W. Krummell+
Deborah H. Miller+
CUSTODIANS
State Street Bank and Trust Company
225 Franklin Street, Boston MA 02110
JP Morgan Chase Bank
One Chase Manhattan Plaza
New York, NY 10081
+MFS Investment Management
PERFORMANCE SUMMARY
Currently, the fund offers Class A shares, which are available for purchase at
net asset value only by residents of the Commonwealth of Massachusetts who are
employees (or certain relatives of employees) of MFS and its affiliates or
members of the governing boards of the various funds sponsored by MFS.
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. Performance results include the deduction of the
maximum sales charge and reflect the percentage change in net asset value,
including reinvestment of dividends. (See Notes to Performance Summary for
more information.) It is not possible to invest directly in an index.
TOTAL RATES OF RETURN THROUGH APRIL 30, 2003
CLASS A
6 Months 1 Year Life*
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +3.20% -15.07% -23.74%
- ---------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -15.07% -18.35%
- ---------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge** -19.96% -21.88%
- ---------------------------------------------------------------------------------------------------------------------------------
COMPARATIVE INDICES
6 Months 1 Year Life*
- ---------------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index# +4.47% -13.30% -14.09%
- ---------------------------------------------------------------------------------------------------------------------------------
Periods less than one year are actual, not annualized.
*For the period from the commencement of the fund's investment operations,
December 28, 2001, through April 30, 2003. Index information is from January
1, 2002.
**Takes into account the maximum sales charge of 5.75%.
#Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
THE STANDARD AND POOR'S 500 STOCK INDEX (THE S&P 500) - A commonly used
measure of the broad U.S. stock market.
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable subsidies and waivers in effect
during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. All
results are historical and include the reinvestment of any 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, AND THE PERFORMANCE SHOWN ABOVE DOES NOT
REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDUCTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
These risks may increase share price volatility. Please see the prospectus for
these and other risks.
PORTFOLIO OF INVESTMENTS (Unaudited) - April 30, 2003
Stocks - 99.6%
- ---------------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------
U.S. Stocks - 98.3%
Aerospace - 2.3%
General Dynamics Corp. 38 $ 2,359
Lockheed Martin Corp. 100 5,005
Northrop Grumman Corp. 10 880
Raytheon Co. 23 688
--------
$ 8,932
- ---------------------------------------------------------------------------------------------------------------
Apparel & Textiles - 0.5%
Nike, Inc., "B" 38 $ 2,034
- ---------------------------------------------------------------------------------------------------------------
Automotive - 0.6%
American Axle & MFG Holdings, Inc.* 26 $ 648
Delphi Automotive Systems Corp. 172 1,445
--------
$ 2,093
- ---------------------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 6.4%
Bank of America Corp. 120 $ 8,886
Bank One Corp. 137 4,939
FleetBoston Financial Corp. 199 5,277
National City Corp. 90 2,696
Washington Mutual, Inc. 65 2,568
--------
$ 24,366
- ---------------------------------------------------------------------------------------------------------------
Biotechnology - 1.0%
Genentech, Inc.* 64 $ 2,431
Waters Corp.* 53 1,273
--------
$ 3,704
- ---------------------------------------------------------------------------------------------------------------
Business Machines - 3.5%
Hewlett-Packard Co. 130 $ 2,119
International Business Machines Corp. 133 11,292
--------
$ 13,411
- ---------------------------------------------------------------------------------------------------------------
Business Services - 2.8%
Apollo Group, Inc.* 51 $ 2,764
Certegy, Inc.* 40 1,000
DST Systems, Inc.* 46 1,412
First Data Corp. 140 5,492
--------
$ 10,668
- ---------------------------------------------------------------------------------------------------------------
Cellular Phones - 0.7%
Motorola, Inc. 357 $ 2,824
- ---------------------------------------------------------------------------------------------------------------
Chemicals - 0.8%
Air Products & Chemicals, Inc. 17 $ 732
Ashland, Inc. 84 2,491
--------
$ 3,223
- ---------------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 2.0%
Dell Computer Corp.* 96 $ 2,775
Intel Corp. 82 1,509
Lexmark International, Inc.* 45 3,353
--------
$ 7,637
- ---------------------------------------------------------------------------------------------------------------
Computer Software - 1.3%
Oracle Corp.* 415 $ 4,930
- ---------------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.4%
Microsoft Corp. 350 $ 8,949
- ---------------------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.3%
Adobe Systems, Inc. 31 $ 1,071
- ---------------------------------------------------------------------------------------------------------------
Conglomerates - 4.6%
General Electric Co. 501 $ 14,755
Tyco International Ltd. 169 2,636
--------
$ 17,391
- ---------------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 3.1%
Gillette Co. 81 $ 2,467
Procter & Gamble Co. 104 9,344
--------
$ 11,811
- ---------------------------------------------------------------------------------------------------------------
Consumer Products - 1.4%
Altria Group, Inc. 173 $ 5,321
- ---------------------------------------------------------------------------------------------------------------
Containers - 0.3%
Owens Illinois, Inc.* 131 $ 1,165
- ---------------------------------------------------------------------------------------------------------------
Electronics - 1.3%
Intersil Holding Corp.* 127 $ 2,349
National Semiconductor Corp.* 134 2,510
--------
$ 4,859
- ---------------------------------------------------------------------------------------------------------------
Energy - 0.6%
ConocoPhillips 44 $ 2,213
- ---------------------------------------------------------------------------------------------------------------
Entertainment - 0.7%
Hearst-Argyle Television, Inc.* 57 $ 1,373
Sinclair Broadcast Group, Inc., "A"* 119 1,262
--------
$ 2,635
- ---------------------------------------------------------------------------------------------------------------
Financial Institutions - 7.7%
Charter One Financial, Inc. 86 $ 2,498
Citigroup, Inc. 339 13,306
Fannie Mae 81 5,864
Lehman Brothers Holdings, Inc. 87 5,478
Merrill Lynch & Co., Inc. 54 2,217
--------
$ 29,363
- ---------------------------------------------------------------------------------------------------------------
Food & Beverage Products - 3.8%
Anheuser-Busch Cos., Inc. 52 $ 2,594
Archer-Daniels-Midland Co. 94 1,041
Coca-Cola Co. 73 2,949
Kellogg Co. 136 4,453
Tyson Foods, Inc., "A" 367 3,534
--------
$ 14,571
- ---------------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.7%
International Paper Co. 74 $ 2,646
- ---------------------------------------------------------------------------------------------------------------
Healthcare - 0.6%
Apria Healthcare Group, Inc.* 68 $ 1,594
Caremark Rx, Inc.* 35 697
--------
$ 2,291
- ---------------------------------------------------------------------------------------------------------------
Home Construction - 0.3%
Lennar Corp., "A" 22 $ 1,193
Lennar Corp., "B" 2 107
--------
$ 1,300
- ---------------------------------------------------------------------------------------------------------------
Insurance - 3.6%
Allstate Corp. 129 $ 4,875
American International Group, Inc. 27 1,565
CIGNA Corp. 47 2,458
MetLife, Inc. 168 4,826
--------
$ 13,724
- ---------------------------------------------------------------------------------------------------------------
Leisure - 1.2%
Carnival Corp. 168 $ 4,635
- ---------------------------------------------------------------------------------------------------------------
Medical & Health Products - 11.5%
Boston Scientific Corp.* 105 $ 4,520
Eli Lilly & Co. 115 7,340
Forest Laboratories, Inc.* 50 2,586
Johnson & Johnson Co. 117 6,594
Merck & Co., Inc. 160 9,309
Pfizer, Inc. 391 12,023
Stryker Corp. 23 1,541
--------
$ 43,913
- ---------------------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 0.8%
Genzyme Corp.* 78 $ 3,142
- ---------------------------------------------------------------------------------------------------------------
Metals & Minerals - 0.8%
Alcoa, Inc. 133 $ 3,050
- ---------------------------------------------------------------------------------------------------------------
Oil Services - 1.4%
Halliburton Co. 63 $ 1,349
Tidewater, Inc. 99 2,663
Valero Energy Corp. 36 1,323
--------
$ 5,335
- ---------------------------------------------------------------------------------------------------------------
Oils - 4.0%
Anadarko Petroleum Corp. 19 $ 843
ExxonMobil Corp. 409 14,397
--------
$ 15,240
- ---------------------------------------------------------------------------------------------------------------
Pollution Control - 0.3%
Waste Management, Inc. 45 $ 977
- ---------------------------------------------------------------------------------------------------------------
Printing & Publishing - 1.7%
Gannett Co., Inc. 49 $ 3,710
Tribune Co. 55 2,694
--------
$ 6,404
- ---------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.7%
Starwood Hotels & Resorts Co. 99 $ 2,657
- ---------------------------------------------------------------------------------------------------------------
Restaurants & Lodging - 1.0%
Brinker International, Inc.* 114 $ 3,620
- ---------------------------------------------------------------------------------------------------------------
Retail - 7.4%
Gap, Inc. 171 $ 2,844
Home Depot, Inc. 102 2,869
Lowe's Cos., Inc. 95 4,169
Sears, Roebuck & Co. 118 3,344
Target Corp. 99 3,311
Wal-Mart Stores, Inc. 208 11,715
--------
$ 28,252
- ---------------------------------------------------------------------------------------------------------------
Special Products & Services - 2.4%
3M Co. 45 $ 5,672
Illinois Tool Works, Inc. 15 960
SPX Corp.* 74 2,501
--------
$ 9,133
- ---------------------------------------------------------------------------------------------------------------
Supermarkets - 0.8%
Kroger Co.* 222 $ 3,175
- ---------------------------------------------------------------------------------------------------------------
Telecommunications - 3.6%
AT&T Corp. 95 $ 1,620
BellSouth Corp. 215 5,480
Verizon Communications, Inc. 178 6,654
--------
$ 13,754
- ---------------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.8%
QUALCOMM, Inc. 91 $ 2,902
- ---------------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 2.6%
Cisco Systems, Inc.* 182 $ 2,737
QLogic Corp.* 67 2,947
USA Interactive, Inc.* 143 4,283
--------
$ 9,967
- ---------------------------------------------------------------------------------------------------------------
Transportation - 1.4%
Fedex Corp. 28 $ 1,677
Union Pacific Corp. 64 3,809
--------
$ 5,486
- ---------------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.6%
Dominion Resources, Inc. 46 $ 2,722
Duke Energy Corp. 25 440
Exelon Corp. 7 371
PG&E Corp.* 89 1,333
Pinnacle West Capital Corp. 73 2,425
PPL Corp. 49 1,774
Sempra Energy 33 886
--------
$ 9,951
- ---------------------------------------------------------------------------------------------------------------
Total U.S. Stocks $374,725
- ---------------------------------------------------------------------------------------------------------------
Foreign Stocks - 1.3%
Bermuda - 1.3%
Ace Ltd. (Insurance) 149 $ 4,929
- ---------------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $429,460) $379,654
- ---------------------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.3%
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ---------------------------------------------------------------------------------------------------------------
UBS Finance, Inc., due 5/01/03, at Amortized Cost $ 1 $ 1,000
- ---------------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $430,460) $380,654
Other Assets, Less Liabilities - 0.1% 442
- ---------------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $381,096
- ---------------------------------------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements.
Financial Statements
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
APRIL 30, 2003
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $430,460) $380,654
Cash 130
Interest and dividends receivable 324
--------
Total assets $381,108
--------
Liabilities:
Payable to affiliate for management fee $ 7
Accrued expenses and other liabilities $ 5
--------
Total liabilities $ 12
--------
Net assets $381,096
--------
Net assets consist of:
Paid-in capital $501,847
Unrealized depreciation on investments (49,806)
Accumulated net realized loss on investments (71,634)
Accumulated undistributed net investment income 689
--------
Total $381,096
--------
Shares of beneficial interest outstanding 50,240
------
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $7.59
-----
See notes to financial statements.
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 3,344
Interest 7
--------
Total investment income $ 3,351
--------
Expenses -
Management fee $ 1,364
Shareholder servicing agent fee 185
Administrative fee 21
Custodian fee 880
Printing 2,923
Auditing fees 8,020
Legal fees 386
Professional services 3,542
Miscellaneous 25
--------
Total expenses $ 17,346
Fees paid indirectly (7)
Reduction of expenses by investment adviser (15,247)
--------
Net expenses $ 2,092
--------
Net investment income $ 1,259
--------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) $(21,104)
Change in unrealized appreciation 31,390
--------
Net realized and unrealized gain on investments $ 10,286
--------
Increase in net assets from operations $ 11,545
--------
See notes to financial statements.
Financial Statements - continued
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 2003 OCTOBER 31, 2002*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,259 $ 1,228
Net realized loss on investments (21,104) (50,530)
Net unrealized gain (loss) on investments 31,390 (81,196)
-------- ---------
Increase (decrease) in net assets from operations $ 11,545 $(130,498)
-------- ---------
Distributions declared to shareholders from net investment income $ (1,798) $ --
-------- ---------
Net increase in net assets from fund share transactions $ 1,647 $ 500,200
-------- ---------
Total increase in net assets $ 11,394 $ 369,702
Net assets:
At beginning of period 369,702 --
-------- ---------
At end of period (accumulated undistributed net investment income of $689
and $1,228, respectively) $381,096 $ 369,702
-------- ---------
*For the period from commencement of the fund's investment operations,
December 28, 2001, through October 31, 2002.
See notes to financial statements.
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED APRIL 30, 2003 OCTOBER 31, 2002* (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.39 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.03 $ 0.02
Net realized and unrealized gain (loss) on investments 0.21 (2.63)
------ ------
Total from investment operations $ 0.24 $(2.61)
------ ------
Less distributions declared to shareholders from net investment income $(0.04) $ --
------ ------
Net asset value - end of period $ 7.59 $ 7.39
------ ------
Total return(+) 3.20%++ (26.10)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.15%+ 1.15%+
Net investment income 0.69%+ 0.34%+
Portfolio turnover 14% 36%
Net assets at end of period (000 Omitted) $381 $370
(S)Subject to reimbursement by the fund, the investment adviser voluntarily
agreed under a temporary expense reimbursement agreement to pay all of the
fund's operating expenses, exclusive of management fees. In consideration,
the fund pays the investment adviser a reimbursement fee not greater than
0.40% of average daily net assets. To the extent actual expenses were over
this limitation, the net investment loss per share and ratios would have
been:
Net investment loss $(0.28) $(0.77)
Ratios (to average net assets):
Expenses## 9.53%+ 12.18%+
Net investment loss (7.69)%+ (10.68)%+
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total return does not include the applicable sales charge. If the charge
had been included, the results would have been lower.
* For the period from the commencement of the fund's investment operations,
December 28, 2001, through October 31, 2002.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Tax Managed Equity Fund (the fund) is a diversified series of MFS Series
Trust VIII (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
accounting principles generally accepted in the United States of America
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. The fund can invest in foreign securities.
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 in the fund's portfolio for which
market quotations are available are valued at the last sale or official
closing price on the primary market or exchange on which they are primarily
traded or at the last quoted bid price for securities in which there were no
sales during the day. If no sales are reported, as is the case for most
securities traded over the counter, securities are valued on the basis of
quotations obtained from brokers and dealers or on the basis of valuations
furnished by a pricing service. Short-term obligations in the fund's portfolio
are valued at amortized cost, which constitutes fair value as determined by
the Board of Trustees. Short-term obligations with a remaining maturity in
excess of 60 days will be valued upon dealer-supplied valuations. Portfolio
investments for which market quotations are not readily available, or where
values have been materially affected by events occurring after the close of
their primary markets, are valued at fair value as determined in good faith by
or at the direction of the Board of Trustees.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. Dividends
received in cash are recorded on the
ex-dividend date.
Fees Paid Indirectly - The fund's custody 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 total 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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, real estate investment trusts, capital
losses.
During the period ended October 31, 2002 there were no reclassifications due
to differences between book and tax accounting.
As of October 31, 2002 the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $ 1,228
Capital loss carryforward (50,530)
Unrealized depreciation (81,196)
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on October 31, 2010, ($50,530).
(3) Transactions with Affiliates
Investment Adviser - The 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 0.75%
of the fund's average daily net assets.
The fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the fund's operating expenses, exclusive of
management fees. The fund in turn will pay MFS an expense reimbursement fee
not greater than 0.40% of average daily net assets. To the extent that the
expense reimbursement fee exceeds the fund's actual expenses, the excess will
be applied to amounts paid by MFS in prior years. At April 30, 2003, aggregate
unreimbursed expenses amounted to $54,996.
Administrator - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
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 $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
The Trustees have adopted a distribution plan for Class A 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 in behalf of the fund related to the
distribution and servicing of its shares. These expenses include 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 daily are assets attributable to Class A
shares which are attributable to that securities dealer and distribution fee
up to MFD up to 0.10% per annum of the fund's average daily net assets
attributable to Class A shares. Distribution and service fees under the Class
A distribution plan are currently being waived.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within, for class A shares, 12 months
following the purchase. There were no contingent deferred sales charges
imposed during the six months ended April 30, 2003.
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 annual rate of
0.11%. Prior to April 1, 2003, the fee was 0.10% of the fund's average daily
net assets.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated $54,357
and $52,783, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $430,460
--------
Gross unrealized depreciation $(62,473)
Gross unrealized appreciation 12,667
--------
Net unrealized depreciation $(49,806)
--------
(5) Shares of Beneficial Interest
APRIL 30, 2003 OCTOBER 31, 2002
------------------- -----------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
Shares sold -- $ -- 50,020 $ 500,200
Shares issued to shareholders in
reinvestment of distributions 240 1,798 -- --
Shares reacquired (20) (151) -- --
------- --------- ------- ---------
Net increase 220 $ 1,647 50,020 $ 500,200
------- --------- ------- ---------
*For the period from the commencement of the fund's investment operations,
December 28, 2001, through April 31, 2003.
(6) Line of Credit
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. 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, 2003, was $1. The fund had no borrowings during the
period.
--------------------------------------------
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.
MFS(R) TAX MANAGED EQUITY FUND
[MFS LOGO]
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116. INCIA-6/03 480
ITEM 2. CODE OF ETHICS.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time. Applicable for annual reports filed for the first
fiscal year ending after December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
If applicable, not applicable at this time. Applicable for annual reports
covering periods ending on or after the compliance date for the listing
standards applicable to the particular issuer. Listed issuers must be in
compliance with the new listing rules by the earlier of the registrant's first
annual shareholders meeting after January 15, 2004 or October 31, 2004.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
If applicable, not applicable at this time. Applicable for annual reports filed
on or after July 1, 2003.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal financial officer and principal
executive officer have concluded that those disclosure controls and
procedures provide reasonable assurance that the material information
requir ed to be disclosed by the registrant on this report is recorded,
processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit: Not applicable.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule
30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.
[If the report is filed under Section 13(a) or 15(d) of the Exchange
Act, provide the certifications required by Rule 30a-2(b) under the Act
(17 CFR 270.30a-2(b)) and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. 1350) as an exhibit. A certification
furnished pursuant to this paragraph will not be deemed "filed" for the
purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or
otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933 or the Exchange Act, except to the
extent that the registrant specifically incorporates it by reference:
Attached hereto.][The submission of Section 906 certifications has been
proposed by the SEC, but has not yet been finalized. The SEC has
encouraged issuers to submit Section 906 certifications as an exhibit
to Form N-CSR until the final rule has been adopted. Please see
Proposed Rule: Certification of Disclosure in Certain Exchange Act
Reports, Release No. 33-8212 (March 21, 2003)].
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST VIII
-------------------------------------------------------------------
By (Signature and Title)* /s/ JOHN W. BALLEN
-----------------------------------------------------
John W. Ballen, President
Date: June 23, 2003
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ JOHN W. BALLEN
-----------------------------------------------------
John W. Ballen, President
(Principal Executive Officer)
Date: June 23, 2003
-------------
By (Signature and Title)* /s/ RICHARD M. HISEY
-----------------------------------------------------
Richard M. Hisey, Treasurer
(Principal Financial Officer and Accounting Officer)
Date: June 23, 2003
-------------
* Print name and title of each signing officer under his or her signature.