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
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MFS SERIES TRUST VIII
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31
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Date of reporting period: April 30, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) STRATEGIC INCOME FUND 4/30/06
SEMIANNUAL REPORT
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LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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EXPENSE TABLE 3
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PORTFOLIO OF INVESTMENTS 5
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FINANCIAL STATEMENTS 18
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NOTES TO FINANCIAL STATEMENTS 26
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BOARD REVIEW OF INVESTMENT
ADVISORY AGREEMENT 36
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PROXY VOTING POLICIES AND
INFORMATION 36
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QUARTERLY PORTFOLIO DISCLOSURE 36
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CONTACT INFORMATION BACK COVER
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THE REPORT IS PREPARED FOR THE GENERAL INFORMATION
OF SHAREHOLDERS. IT IS INTENDED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political
instability around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes
had a dramatic effect on the international economy, particularly on oil
prices. We witnessed political unrest in the Middle East, highlighted by
instability in Iraq, and in Africa, the usually stable Nigeria also
experienced violence. As a result, energy prices have bounced up and down,
with crude oil prices at one point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm in our
everyday lives. What does all of this mean to you as an investor? In times like
these, it helps to know that you're working with a seasoned investment
professional who has experience to guide you through difficult times. At
MFS(R), we believe our investment management team has the knowledge and
confidence to navigate through difficult cycles and at the same time see
through adversity to find investment opportunities for our clients and
shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a
college education, a comfortable retirement, or a secure family legacy - is to
follow a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. Rebalance assets regularly to maintain a desired asset
allocation. Of course, these strategies cannot guarantee a profit or protect
against a loss. This long-term approach requires diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer - through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE(i)
Bonds 92.0%
Cash & Other Net Assets 7.1%
Convertible Preferred Stocks 0.5%
Convertible Bonds 0.4%
MARKET SECTORS (i)
High Yield Corporates 34.9%
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Non U.S. Government Bonds 15.7%
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High Grade Corporates 13.4%
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Emerging Markets Debt 10.7%
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Cash & Other Net Assets 7.1%
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Commercial Mortgage-Backed
Securities 7.0%
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Mortgage-Backed Securities 5.6%
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U.S. Government Agencies 3.9%
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U.S. Convertibles 0.9%
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Asset-Backed Securities 0.7%
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U.S. Treasuries 0.1%
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CREDIT QUALITY OF BONDS (r)
AAA 30.4%
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AA 1.5%
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A 5.9%
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BBB 18.9%
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BB 18.8%
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B 18.2%
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CCC 6.1%
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Not Rated 0.2%
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PORTFOLIO FACTS
Average Duration (d) 4.1
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Average Life (m) 7.2 yrs.
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Average Maturity (m) 10.8 yrs.
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Average Credit Quality of Rated
Securities (a) BBB+
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Average Short Term Credit Quality A-1
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COUNTRY WEIGHTINGS (i)
United States 67.5%
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Germany 3.5%
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United Kingdom 3.1%
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Russia 3.0%
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Netherlands 2.3%
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France 2.3%
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Ireland 2.2%
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Finland 1.8%
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Spain 1.8%
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Other Countries 12.5%
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond price is likely to
fluctuate with general changes in interest rates, e.g., if rates rise
1.00%, a fund with a 5-year duration is likely to lose about 5.00% of its
value.
(i) For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre-refunded to an earlier date or which have a mandatory put
date prior to the stated maturity. The average life shown takes into
account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in a "AAA"-rating
category. Percentages are based on the total market value of investments as
of 4/30/06.
Percentages are based on net assets as of 4/30/06, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
NOVEMBER 1, 2005 THROUGH APRIL 30, 2006.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period November 1, 2005 through April 30,
2006.
ACTUAL EXPENSES
The first line for each share class in the following table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides
information about hypothetical account values and hypothetical expenses based
on the fund's actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
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Expenses
Paid During
Annualized Beginning Ending Period (p)
Share Expense Account Value Account Value 11/01/05-
Class Ratio 11/01/05 4/30/06 4/30/06
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Actual 0.83% $1,000.00 $1,024.20 $4.17
A ------------------------------------------------------------------------
Hypothetical(h) 0.83% $1,000.00 $1,020.68 $4.16
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Actual 1.48% $1,000.00 $1,022.30 $7.42
B ------------------------------------------------------------------------
Hypothetical(h) 1.48% $1,000.00 $1,017.46 $7.40
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Actual 1.48% $1,000.00 $1,022.30 $7.42
C ------------------------------------------------------------------------
Hypothetical(h) 1.48% $1,000.00 $1,017.46 $7.40
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Actual 0.48% $1,000.00 $1,027.50 $2.41
I ------------------------------------------------------------------------
Hypothetical(h) 0.48% $1,000.00 $1,022.41 $2.41
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(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS (unaudited) - 4/30/06
The Portfolio of Investments is a complete list of all
securities owned by your fund. It is categorized by broad-based
asset classes.
Bonds - 92.0%
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ISSUER SHARES/PAR VALUE ($)
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Advertising & Broadcasting - 2.4%
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Allbritton Communications Co., 7.75%, 2012 $ 980,000 $ 982,421
EchoStar DBS Corp., 6.375%, 2011 870,000 849,338
Granite Broadcasting Corp., 9.75%, 2010 840,000 760,200
Hughes Network Systems LLC, 9.5%, 2014 (a) 315,000 320,906
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 945,000 982,800
Lamar Media Corp., 7.25%, 2013 965,000 967,413
Liberty Media Corp., 5.7%, 2013 890,000 828,198
Panamsat Holding Corp., 0% to 2009, 10.375 to 2014 830,000 599,675
Paxson Communications Corp., FRN, 11.3183%, 2013 (a) 775,000 782,750
Viacom, Inc., 7.7%, 2010 530,000 567,111
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$ 7,640,812
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Aerospace - 0.4%
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DRS Technologies, Inc., 7.625%, 2018 $ 685,000 $ 702,981
Transdigm, Inc., 8.375%, 2011 700,000 735,000
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$ 1,437,981
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Airlines - 0.2%
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Continental Airlines, Inc., 7.566%, 2020 $ 761,775 $ 718,731
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Apparel Manufacturers - 0.2%
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Levi Strauss & Co., 12.25%, 2012 $ 435,000 $ 491,550
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Asset Backed & Securitized - 7.6%
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Anthracite CDO Ltd., 6%, 2037 (a) $ 1,200,000 $ 1,035,375
ARCap REIT, Inc., "H", 6.1%, 2045 (a) 900,000 778,534
Asset Securitization Corp., FRN, 8.0087%, 2029 1,485,000 1,543,655
Asset Securitization Corp., FRN, 8.4986%, 2029 (a) 790,000 750,739
Bayview Financial Revolving Mortgage Loan Trust, FRN,
5.8%, 2040 (a) 674,286 675,385
Chase Commercial Mortgage Securities Corp., 6.6%, 2012 3,640,000 3,738,536
Countrywide Asset-Backed Certificates, FRN, 4.575%, 2035 148,000 145,996
Crest Ltd., 7%, 2040 (a) 400,000 359,800
Deutsche Mortgage & Asset Receiving Corp., 7.5%, 2031 1,050,000 1,139,107
DLJ Commercial Mortgage Corp., 6.04%, 2031 550,000 555,186
DLJ Commercial Mortgage Corp., FRN, 7.621%, 2032 385,000 410,927
Falcon Franchise Loan LLC, 6.5%, 2014 (a) 700,000 592,813
Falcon Franchise Loan LLC, FRN, 3.0551%, 2023 (a)(i) 5,980,667 673,423
Falcon Franchise Loan LLC, FRN, 3.9256%, 2025 (a)(i) 4,274,172 702,246
First Union-Lehman Brothers Bank of America, FRN,
0.4943%, 2035 (i) 46,264,725 837,762
First Union-Lehman Brothers Commercial Mortgage Trust,
7%, 2029 (a) 600,000 658,175
GMAC Commercial Mortgage Securities, Inc., 6.02%, 2033 1,758,000 1,757,555
J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN,
5.3644%, 2043 1,789,097 1,738,903
Morgan Stanley Capital I, Inc., 7.18%, 2009 430,000 438,171
Morgan Stanley Capital I, Inc., FRN, 1.4629%, 2039 (a)(i) 10,951,115 753,743
Preferred Term Securities IV Ltd. FRN, 7.18%, 2031 (a) 1,290,000 1,305,480
Prudential Securities Secured Financing Corp., FRN,
7.3762%, 2013 (a) 875,000 914,749
Salomon Brothers Mortgage Securities, Inc., FRN, 7.0824%, 2032(a) 1,800,000 1,941,760
Wachovia Bank Commercial Mortgage Trust, FRN, 5.3163%, 2044 1,309,000 1,268,988
------------
$ 24,717,008
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Automotive - 2.5%
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Ford Motor Credit Co., 6.625%, 2008 $ 305,000 $ 286,561
Ford Motor Credit Co., 5.625%, 2008 135,000 122,883
Ford Motor Credit Co., 5.8%, 2009 2,633,000 2,383,260
General Motors Acceptance Corp., 6.125%, 2008 366,000 352,491
General Motors Acceptance Corp., 5.85%, 2009 1,179,000 1,108,523
General Motors Acceptance Corp., 6.75%, 2014 1,534,000 1,398,126
General Motors Acceptance Corp., 8%, 2031 466,000 441,867
General Motors Corp., 8.375%, 2033 220,000 164,725
Goodyear Tire & Rubber Co., 9%, 2015 880,000 906,400
Johnson Controls, Inc., 5.25%, 2011 290,000 284,544
Lear Corp., 8.11%, 2009 625,000 610,938
Lear Corp., 5.75%, 2014 155,000 130,200
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$ 8,190,518
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Banks & Credit Companies - 4.4%
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Banco BMG S.A., 9.15%, 2016 (a) $ 659,000 $ 676,464
Banco do Estado de Sao Paulo S.A., 8.7%, 2049 (a) 700,000 703,500
Banco Mercantil del Norte S.A., 5.875% to 2009, FRN to 2014 (a) 841,000 836,795
BNP Paribas, 5.186% to 2015, FRN to 2049, (a) 962,000 888,906
Bosphorus Financial Services Ltd., FRN, 6.5488%, 2012 (a) 800,000 805,927
Chuo Mitsui Trust & Banking Co., 5.506% to 2015, FRN to 2049(a) 773,000 722,990
Credit Suisse First Boston (USA), Inc., 4.875%, 2010 955,000 930,053
DFS Funding Corp., FRN, 6.91%, 2010 (a) 1,082,000 1,103,640
Kazkommerts International B.V., 10.125%, 2007 (a) 85,000 88,188
Kazkommerts International B.V., 10.125%, 2007 999,000 1,036,463
Mizuho Capital Investment 1 Ltd., 6.686% to 2016, FRN to 2049(a) 660,000 639,499
Resona Bank Ltd., 5.85% to 2016, FRN to 2049 (a) 246,000 234,944
Royal Bank of Scotland Group PLC, 9.118%, 2049 857,000 955,346
Russian Standard Finance S.A., 7.5%, 2010 (a) 168,000 161,700
Russian Standard Finance S.A., 8.625%, 2011 (a) 526,000 526,000
Turanalem Finance B.V., 7.75%, 2013 (a) 365,000 360,438
UFJ Finance Aruba AEC, 6.75%, 2013 648,000 680,577
UniCredito Italiano Capital Trust II, 9.2% to 2010, FRN to 2049(a) 1,187,000 1,338,315
Wachovia Capital Trust III, 5.8% to 2011, FRN to 2042 1,510,000 1,480,369
------------
$ 14,170,114
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Broadcast & Cable TV - 2.0%
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CCH I Holdings LLC, 11%, 2015 $ 1,147,000 $ 1,020,830
Charter Communications, Inc., 8.375%, 2014 (a) 905,000 909,525
CSC Holdings, Inc., 8.125%, 2009 1,634,000 1,695,275
Mediacom LLC, 9.5%, 2013 430,000 439,675
Rogers Cable, Inc., 5.5%, 2014 659,000 607,104
TCI Communications, Inc., 9.8%, 2012 841,000 985,260
Time Warner Entertainment Co. LP, 8.375%, 2033 642,000 734,327
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$ 6,391,996
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Building - 0.7%
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American Standard Cos., Inc., 7.375%, 2008 $ 735,000 $ 754,043
Goodman Global Holdings, Inc., 7.875%, 2012 335,000 335,000
Nortek Holdings, Inc., 8.5%, 2014 665,000 681,625
Nortek Holdings, Inc., 0% to 2009, 10.75% to 2014 795,000 605,194
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$ 2,375,862
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Business Services - 1.1%
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Iron Mountain, Inc., 8.625%, 2013 $ 650,000 $ 676,813
Iron Mountain, Inc., 7.75%, 2015 1,055,000 1,070,825
SunGard Data Systems, Inc., 10.25%, 2015 (a) 605,000 650,375
Xerox Corp., 7.625%, 2013 1,185,000 1,223,513
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$ 3,621,526
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Chemicals - 2.6%
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Basell AF SCA, 8.375%, 2015 (a) $ 410,000 $ 406,413
BCP Crystal Holdings Corp., 9.625%, 2014 571,000 628,100
Crystal U.S. Holdings LLC, "B", 0% to 2009, 10.5% to 2014 785,000 620,150
Equistar Chemicals, 10.625%, 2011 835,000 910,150
Hexion U.S. Financial Corp., 9%, 2014 565,000 583,363
Huntsman International LLC, 10.125%, 2009 438,000 445,665
Huntsman International LLC, 7.375%, 2015 (a) 450,000 451,125
Kronos International, Inc., 8.875%, 2009 EUR70,000 92,260
Lyondell Chemical Co., 11.125%, 2012 $1,340,000 1,480,700
Nalco Co., 7.75%, 2011 595,000 597,975
Nalco Co., 8.875%, 2013 435,000 449,138
Nalco Finance Holdings, Inc, 0% to 2009, 9% to 2014 605,000 462,825
Yara International A.S.A., 5.25%, 2014 (a) 1,300,000 1,218,498
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$ 8,346,362
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Construction - 0.3%
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Pulte Homes, Inc., 5.25%, 2014 $ 1,178,000 $ 1,094,461
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Consumer Goods & Services - 0.4%
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Fortune Brands, Inc., 5.125%, 2011 $ 345,000 $ 336,751
Jarden Corp., 9.75%, 2012 265,000 275,600
Revlon Consumer Products Corp., 9.5%, 2011 590,000 578,200
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$ 1,190,551
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Containers - 0.9%
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Crown Americas, 7.75%, 2015 (a) $ 610,000 $ 626,775
Graham Packaging Co. LP, 9.875%, 2014 385,000 395,588
Owens-Brockway Glass Container, Inc., 8.875%, 2009 390,000 405,600
Owens-Brockway Glass Container, Inc., 8.25%, 2013 1,460,000 1,500,150
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$ 2,928,113
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Defense Electronics - 0.8%
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BAE Systems Holdings, Inc., 5.2%, 2015 (a) $ 1,297,000 $ 1,208,962
L-3 Communications Holdings, Inc, 6.125%, 2014 1,575,000 1,512,000
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$ 2,720,962
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Electronics - 0.3%
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Flextronics International Ltd., 6.5%, 2013 $ 575,000 $566,375
Sensata Technologies B.V., 8%, 2014 (a) 255,000 256,275
------------
$ 822,650
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Emerging Market Quasi-Sovereign - 2.1%
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Banco do Brasil S.A., 7.95%, 2049 (a) $ 153,000 $ 149,558
Gazprom OAO, 9.625%, 2013 1,370,000 1,620,025
Gazprom OAO, 8.625%, 2034 (a) 950,000 1,149,500
Pemex Project Funding Master Trust, 8.625%, 2022 1,366,000 1,581,828
Petroleum Export Peloil, 5.265%, 2011 (a) 292,947 286,013
Petronas Capital Ltd., 7.875%, 2022 (a) 1,020,000 1,184,692
Petronas Capital Ltd., 7.875%, 2022 791,000 918,717
------------
$ 6,890,333
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Emerging Market Sovereign - 4.7%
- -------------------------------------------------------------------------------------------------
Aries Vermogensverwaltungs, 9.6%, 2014 $ 500,000 $ 622,500
Federative Republic of Brazil, 8%, 2018 222,000 240,981
Federative Republic of Brazil, 8.875%, 2019 393,000 452,933
Republic of Argentina, FRN, 4.889%, 2012 1,281,750 1,403,207
Republic of Bulgaria, 8.25%, 2015 846,000 974,846
Republic of Colombia, FRN, 6.55%, 2015 941,000 989,494
Republic of Indonesia, 6.875%, 2017 (a) 173,000 171,270
Republic of Korea, 5.625%, 2025 795,000 755,314
Republic of Panama, 9.375%, 2029 1,136,000 1,418,296
Republic of South Africa, 9.125%, 2009 308,000 337,927
Russian Federation, 3%, 2008 4,477,000 4,242,405
Russian Federation, 11%, 2018 808,000 1,143,724
United Mexican States, 6.375%, 2013 538,000 546,877
United Mexican States, 6.625%, 2015 69,000 71,450
United Mexican States, 8.125%, 2019 1,603,000 1,851,465
------------
$ 15,222,689
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Energy - Independent - 1.5%
- -------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 7%, 2014 $ 120,000 $ 120,300
Chesapeake Energy Corp., 6.375%, 2015 1,755,000 1,680,413
Chesapeake Energy Corp., 6.875%, 2016 155,000 152,675
Newfield Exploration Co., 6.625%, 2014 665,000 655,025
Pioneer Natural Resource Co., 6.5%, 2008 647,000 658,367
Plains Exploration & Production Co., 7.125%, 2014 665,000 673,313
Quicksilver Resources, Inc., 7.125%, 2016 530,000 522,050
Whiting Petroleum Corp., 7%, 2014 360,000 356,400
------------
$ 4,818,543
- -------------------------------------------------------------------------------------------------
tertainment - 0.9%
- -------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.5%, 2011 $ 864,000 $ 857,520
AMC Entertainment, Inc., 11%, 2016 (a) 345,000 374,325
Six Flags, Inc., 9.75%, 2013 913,000 928,978
Turner Broadcasting System, Inc., 8.375%, 2013 653,000 724,137
------------
$ 2,884,960
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Food & Non Alcoholic Beverages - 0.3%
- -------------------------------------------------------------------------------------------------
Michael Foods, Inc., 8%, 2013 $ 880,000 $ 882,200
- -------------------------------------------------------------------------------------------------
Forest & Paper Products - 2.2%
- -------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.5%, 2013 $ 1,145,000 $ 1,147,863
Graphic Packaging International Corp., 8.5%, 2011 1,035,000 1,035,000
Graphic Packaging International Corp., 9.5%, 2013 1,250,000 1,212,500
Jefferson Smurfit Corp., 8.25%, 2012 610,000 591,700
JSG Funding PLC, 7.75%, 2015 EUR 530,000 651,751
MDP Acquisitions PLC, 9.625%, 2012 $ 775,000 817,625
Millar Western Forest Products Ltd., 7.75%, 2013 170,000 135,150
Stone Container Corp., 7.375%, 2014 890,000 818,800
Stora Enso Oyj, 6.404%, 2016 (a) 690,000 684,225
------------
$ 7,094,614
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Gaming & Lodging - 3.1%
- -------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 6.75%, 2014 $ 720,000 $ 712,800
Host Marriott LP, 7.125%, 2013 900,000 913,500
Host Marriott LP, 6.375%, 2015 510,000 493,425
Majestic Star Casino LLC, 9.75%, 2011 (a) 335,000 343,375
MGM Mirage, Inc., 8.375%, 2011 1,740,000 1,831,350
MGM Mirage, Inc., 6.75%, 2013 (a) 365,000 359,525
MGM Mirage, Inc., 6.875%, 2016 (a) 355,000 346,125
Pinnacle Entertainment, Inc., 8.75%, 2013 895,000 962,125
Royal Caribbean Cruises Ltd., 8%, 2010 935,000 998,606
Scientific Games Corp., 6.25%, 2012 750,000 723,750
Starwood Hotels & Resorts Worldwide, Inc., 7.875%, 2012 1,000,000 1,075,000
Station Casinos, Inc., 6.5%, 2014 505,000 491,113
Trump Entertainment Resorts Holdings, Inc., 8.5%, 2015 715,000 704,275
------------
$ 9,954,969
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Industrial - 1.0%
- -------------------------------------------------------------------------------------------------
Amsted Industries, Inc., 10.25%, 2011 (a) $ 1,280,000 $ 1,395,200
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 1,000,000 1,021,250
JohnsonDiversey Holdings, Inc., 0% to 2007, 10.67% to 2013 490,000 423,850
Milacron Escrow Corp., 11.5%, 2011 430,000 409,575
------------
$ 3,249,875
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Insurance - 1.4%
- -------------------------------------------------------------------------------------------------
American International Group, Inc., 4.25%, 2013 $ 1,724,000 $ 1,578,319
ING Groep N.V., 5.775% to 2015, FRN to 2049 2,160,000 2,068,764
UnumProvident Corp., 7.625%, 2011 350,000 367,048
UnumProvident Corp., 6.85%, 2015 (a) 517,000 514,521
------------
$ 4,528,652
- -------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.6%
- -------------------------------------------------------------------------------------------------
Allianz AG, 5.5% to 2014, FRN to 2049 EUR 947,000 $ 1,243,033
AXIS Capital Holdings Ltd., 5.75%, 2014 $ 775,000 741,160
------------
$ 1,984,193
- -------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 1.8%
- -------------------------------------------------------------------------------------------------
KfW Bankengruppe, FRN, 2.563%, 2007 EUR 1,421,000 $ 1,790,70
Landesbank Baden-Wurttemberg, FRN, 2.764%, 2007 EUR 468,000 590,158
Landesbank Baden-Wurttemberg, FRN, 2.594%, 2007 EUR 433,000 545,801
Landesbank Baden-Wurttemberg, FRN, 2.704%, 2007 EUR 820,000 1,034,244
Network Rail MTN Finance PLC, FRN, 2.628%, 2007 EUR 1,398,000 1,763,161
------------
$ 5,724,067
- -------------------------------------------------------------------------------------------------
International Market Sovereign - 13.6%
- -------------------------------------------------------------------------------------------------
Federal Republic of Germany, 3.5%, 2008 EUR 1,741,000 $ 2,196,579
Federal Republic of Germany, 3.75%, 2015 EUR 1,616,000 2,008,770
Federal Republic of Germany, 6.25%, 2030 EUR 321,000 527,249
Government of New Zealand, 6.5%, 2013 NZD 3,997,000 2,646,277
Government of New Zealand, 6%, 2017 NZD 817,000 528,239
Kingdom of Netherlands, 5.75%, 2007 EUR 1,873,000 2,410,286
Kingdom of Netherlands, 3.75%, 2009 EUR 2,215,000 2,808,867
Kingdom of Spain, 6%, 2008 EUR 2,070,328 2,723,350
Kingdom of Spain, 5.35%, 2011 EUR 1,288,000 1,746,002
Republic of Austria, 5.5%, 2007 EUR 2,182,000 2,835,554
Republic of Finland, 5.375%, 2013 EUR 3,547,000 4,884,422
Republic of France, 4.75%, 2007 EUR 3,942,000 5,060,979
Republic of France, 4.75%, 2012 EUR 504,000 669,287
Republic of France, 6%, 2025 EUR 337,000 527,284
Republic of Ireland, 4.25%, 2007 EUR 3,907,000 4,993,372
Republic of Ireland, 4.6%, 2016 EUR 451,000 596,928
United Kingdom Treasury, 5.75%, 2009 GBP 1,301,000 2,453,389
United Kingdom Treasury, 8%, 2015 GBP 2,036,000 4,672,671
United Kingdom Treasury, 4.25%, 2036 GBP 58,000 105,102
------------
$ 44,394,607
- -------------------------------------------------------------------------------------------------
Machinery & Tools - 1.2%
- -------------------------------------------------------------------------------------------------
Case Corp., 7.25%, 2016 $ 140,000 $ 136,500
Case New Holland, Inc., 9.25%, 2011 955,000 1,014,688
Case New Holland, Inc., 7.125%, 2014 (a) 595,000 584,588
Manitowoc Co., Inc., 10.5%, 2012 562,000 612,580
Terex Corp., 10.375%, 2011 565,000 594,663
Terex Corp., 9.25%, 2011 420,000 447,300
Terex Corp., 7.375%, 2014 415,000 420,188
------------
$ 3,810,507
- -------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 1.9%
- -------------------------------------------------------------------------------------------------
Baxter International, Inc., 9.5%, 2008 $ 677,000 $ 726,461
Cardinal Health, Inc., 5.85%, 2017 1,211,000 1,176,174
CDRV Investors, Inc., 0% to 2010, 9.625% to 2015 1,020,000 721,650
DaVita, Inc., 6.625%, 2013 270,000 266,625
HCA, Inc., 6.375%, 2015 1,515,000 1,458,733
Omnicare, Inc., 6.875%, 2015 565,000 558,644
Owens & Minor, Inc., 6.35%, 2016 710,000 703,760
Triad Hospitals, Inc., 7%, 2013 600,000 585,750
------------
$ 6,197,797
- -------------------------------------------------------------------------------------------------
Metals & Mining - 0.9%
- -------------------------------------------------------------------------------------------------
Codelco, Inc., 5.625%, 2035 (a) $ 922,000 $ 832,207
Foundation PA Coal Co., 7.25%, 2014 115,000 115,288
Massey Energy Co., 6.875%, 2013 (a) 515,000 495,688
Peabody Energy Corp., "B", 6.875%, 2013 860,000 866,450
U.S. Steel Corp., 9.75%, 2010 627,000 677,160
------------
$ 2,986,793
- -------------------------------------------------------------------------------------------------
Mortgage Backed - 5.6%
- -------------------------------------------------------------------------------------------------
Fannie Mae, 5.5%, 2018 - 2035 $ 13,507,641 $ 13,240,904
Fannie Mae, 6.5%, 2031 413,076 421,649
Fannie Mae, 6%, 2034 4,652,079 4,639,118
------------
$ 18,301,671
- -------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.1%
- -------------------------------------------------------------------------------------------------
AmeriGas Partners LP, 7.125%, 2016 $ 375,000 $ 371,250
- -------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 2.8%
- -------------------------------------------------------------------------------------------------
ANR Pipeline Co., 8.875%, 2010 $ 300,000 $ 318,450
Atlas Pipeline Partners LP, 8.125%, 2015 (a) 365,000 376,863
CenterPoint Energy Resources Corp., 7.875%, 2013 1,826,000 2,015,172
El Paso Energy Corp., 7%, 2011 570,000 568,575
El Paso Energy Corp., 7.75%, 2013 1,090,000 1,124,063
Kinder Morgan Finance, 5.35%, 2011 1,516,000 1,489,387
Southern Natural Gas Co., Inc., 8.875%, 2010 1,250,000 1,326,875
Williams Cos., Inc., 7.125%, 2011 1,940,000 1,993,350
------------
$ 9,212,735
- -------------------------------------------------------------------------------------------------
Network & Telecom - 2.0%
- -------------------------------------------------------------------------------------------------
Cincinnati Bell, Inc., 8.375%, 2014 $ 590,000 $ 603,275
Citizens Communications Co., 9.25%, 2011 1,398,000 1,536,053
Citizens Communications Co., 9%, 2031 630,000 675,675
Deutsche Telekom International Finance B.V., 8%, 2010 543,000 590,232
Hawaiian Telecom Communications, Inc., 9.75%, 2013 (a) 180,000 186,300
Hawaiian Telecom Communications, Inc., 12.5%, 2015 (a) 55,000 58,025
Nordic Telephone Co. Holdings, 8.25%, 2016 (a) EUR 150,000 188,951
Nordic Telephone Co. Holdings, 8.875%, 2016 (a) $165,000 171,600
Nordic Telephone Co. Holdings, FRN, 8.352%, 2016 (a) EUR 130,000 163,758
Qwest Corp., 8.875%, 2012 $430,000 470,850
Telecom Italia Capital, 4.875%, 2010 248,000 238,407
Telefonica Europe B.V., 7.75%, 2010 1,090,000 1,170,328
Time Warner Telecom Holdings, Inc., 9.25%, 2014 540,000 575,100
------------
$ 6,628,554
- -------------------------------------------------------------------------------------------------
Oil Services - 0.1%
- -------------------------------------------------------------------------------------------------
Basic Energy Services, Inc., 7.125%, 2016 (a) $ 235,000 $ 232,063
- -------------------------------------------------------------------------------------------------
Oils - 0.4%
- -------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 7.5%, 2015 $ 1,290,000 $ 1,355,487
- -------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1%
- -------------------------------------------------------------------------------------------------
Teva Pharmaceutical Finance LLC, 5.55%, 2016 $ 359,000 $ 342,867
- -------------------------------------------------------------------------------------------------
Printing & Publishing - 1.7%
- -------------------------------------------------------------------------------------------------
American Media Operations, Inc., 8.875%, 2011 $ 720,000 $ 637,200
Cenveo, Inc., 9.625%, 2012 878,000 937,265
Dex Media East LLC, 9.875%, 2009 1,100,000 1,171,500
Dex Media West LLC, 9.875%, 2013 986,000 1,085,833
MediaNews Group, Inc., 6.875%, 2013 1,180,000 1,079,700
R.H. Donnelley Corp., 8.875%, 2016 (a) 575,000 591,531
------------
$ 5,503,029
- -------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.2%
- -------------------------------------------------------------------------------------------------
TFM S.A. de C.V., 9.375%, 2012 $ 520,000 $ 559,000
- -------------------------------------------------------------------------------------------------
Real Estate - 1.0%
- -------------------------------------------------------------------------------------------------
EOP Operating LP, 4.65%, 2010 $ 1,090,000 $ 1,044,934
ProLogis, 5.75%, 2016 2,212,000 2,153,853
------------
$ 3,198,787
- -------------------------------------------------------------------------------------------------
Restaurants - 0.1%
- -------------------------------------------------------------------------------------------------
YUM! Brands, Inc., 6.25%, 2016 $ 420,000 $ 419,978
- -------------------------------------------------------------------------------------------------
Retailers - 1.2%
- -------------------------------------------------------------------------------------------------
Couche-Tard, Inc., 7.5%, 2013 $ 815,000 $ 829,263
GSC Holdings Corp., 8%, 2012 (a) 550,000 550,688
Jean Coutu Group (PJC), Inc., 7.625%, 2012 295,000 289,838
Jean Coutu Group (PJC), Inc., 8.5%, 2014 325,000 304,688
Limited Brands, Inc., 5.25%, 2014 1,126,000 1,033,843
Rite Aid Corp., 8.125%, 2010 390,000 398,775
Steinway Musical Instruments, Inc., 7%, 2014 (a) 500,000 496,250
------------
$ 3,903,345
- -------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
- -------------------------------------------------------------------------------------------------
Safeway, Inc., 4.95%, 2010 $ 470,000 $ 455,179
Safeway, Inc., 6.5%, 2011 650,000 666,789
------------
$ 1,121,968
- -------------------------------------------------------------------------------------------------
Supranational - 0.4%
- -------------------------------------------------------------------------------------------------
Central American Bank, 4.875%, 2012 (a) $ 1,269,000 $ 1,196,031
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.5%
- -------------------------------------------------------------------------------------------------
Alamosa Holdings, Inc., 11%, 2010 $ 744,000 $ 823,050
Centennial Communications Corp., 10%, 2013 110,000 114,400
Centennial Communications Corp., 10.125%, 2013 430,000 470,313
Excelcomindo Finance Co., 7.125%, 2013 (a) 100,000 99,250
Nextel Communications, Inc., 5.95%, 2014 1,545,000 1,519,313
Rogers Wireless, Inc., 7.5%, 2015 955,000 1,005,138
Rural Cellular Corp., 9.875%, 2010 650,000 690,625
------------
$ 4,722,089
- -------------------------------------------------------------------------------------------------
Tobacco - 0.3%
- -------------------------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc., 7.25%, 2012 $ 1,069,000 $ 1,090,380
- -------------------------------------------------------------------------------------------------
Transportation - Services - 0.4%
- -------------------------------------------------------------------------------------------------
Hertz Corp., 8.875%, 2014 (a) $ 540,000 $ 573,750
Stena AB, 7%, 2016 465,000 439,425
Westinghouse Air Brake Technologies Corp., 6.875%, 2013 335,000 332,488
------------
$ 1,345,663
- -------------------------------------------------------------------------------------------------
U.S. Government Agencies - 3.8%
- -------------------------------------------------------------------------------------------------
Fannie Mae, 3.25%, 2006 $910,000 $905,663
Fannie Mae, 4.25%, 2007 3,750,000 3,701,295
Small Business Administration, 4.34%, 2024 2,720,215 2,505,964
Small Business Administration, 4.77%, 2024 916,935 869,771
Small Business Administration, 5.18%, 2024 2,272,239 2,215,045
Small Business Administration, 4.86%, 2025 687,263 653,782
Small Business Administration, 4.625%, 2025 945,253 883,852
Small Business Administration, 5.11%, 2025 783,717 755,860
------------
$12,491,232
- -------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 1.6%
- -------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.25%, 2008 (f) $ 1,000,000 $ 965,117
U.S. Treasury Notes, 4.125%, 2015 504,000 470,374
U.S. Treasury Notes, 4.25%, 2015 1,100,000 1,034,300
U.S. Treasury Notes, 4.5%, 2015 380,000 363,672
U.S. Treasury Notes, TIPS, 0.875%, 2010 730,902 695,100
U.S. Treasury Notes, TIPS, 3%, 2012 870,653 907,486
U.S. Treasury Notes, TIPS, 1.625%, 2015 944,683 890,401
------------
$ 5,326,450
- -------------------------------------------------------------------------------------------------
Utilities - Electric Power - 4.4%
- -------------------------------------------------------------------------------------------------
AES Corp., 9%, 2015 (a) $ 835,000 $ 910,150
Allegheny Energy Supply Co. LLC, 8.25%, 2012 (a) 535,000 581,813
Beaver Valley Funding Corp., 9%, 2017 1,705,000 1,904,417
Duke Capital Corp., 8%, 2019 679,000 781,001
Dynegy Holdings, Inc., 8.375%, 2016 (a) 250,000 249,375
Empresa Nacional de Electricidad S.A., 8.35%, 2013 103,000 112,618
Enersis S.A., 7.375%, 2014 1,489,000 1,537,741
FirstEnergy Corp., 6.45%, 2011 857,000 883,758
HQI Transelec Chile S.A., 7.875%, 2011 1,200,000 1,280,191
Midland Funding II, 13.25%, 2006 1,107,475 1,121,882
Mirant North America LLC, 7.375%, 2013 (a) 580,000 582,175
MSW Energy Holdings LLC, 7.375%, 2010 785,000 806,588
NRG Energy, Inc., 7.375%, 2016 1,525,000 1,538,344
Progress Energy, Inc., 5.625%, 2016 357,000 344,963
TXU Corp., 5.55%, 2014 1,245,000 1,156,944
Waterford 3 Funding Corp., 8.09%, 2017 544,998 554,525
------------
$ 14,346,485
- -------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $298,514,955) $299,153,060
- -------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 0.5%
- -------------------------------------------------------------------------------------------------
Automotive - 0.3%
- -------------------------------------------------------------------------------------------------
Ford Motor Co. Capital Trust II, 6.5% 13,755 $ 383,765
General Motors Corp., "B", 5.25% 33,400 554,774
------------
$ 938,539
- -------------------------------------------------------------------------------------------------
Real Estate - 0.2%
- -------------------------------------------------------------------------------------------------
Mills Corp., 6.75% (a) 500 $ 442,500
Mills Corp., "F", 6.75% 200 177,000
------------
$ 619,500
- -------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST, $1,810,099) $1,558,039
- -------------------------------------------------------------------------------------------------
Preferred Stocks - 0.0%
- -------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.0%
- -------------------------------------------------------------------------------------------------
Renaissance Cosmetics, Inc., 14% (n) 809 $ 0
- -------------------------------------------------------------------------------------------------
Real Estate - 0.0%
- -------------------------------------------------------------------------------------------------
HRPT Properties Trust, REIT, "B", 8.75% 2,725 $ 69,678
- -------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $74,529) $69,678
- -------------------------------------------------------------------------------------------------
Convertible Bonds - 0.4%
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.4%
- -------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 5.25%, 2010
(Identified Cost, $1,256,432) $ 1,300,000 $ 1,282,125
- -------------------------------------------------------------------------------------------------
Repurchase Agreement - 5.2%
- -------------------------------------------------------------------------------------------------
Merrill Lynch & Co., 4.77%, dated 4/28/06, due 5/01/06,
total to be received $16,982,748 (secured by various
U.S. Treasury and Federal Agency obligations in a
jointly traded account), at Cost $ 16,976,000 $ 16,976,000
- -------------------------------------------------------------------------------------------------
Rights - 0.0%
- -------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.0%
- -------------------------------------------------------------------------------------------------
Banco Central del Uruguay, Value Recovery Rights, Expiring
January 2021 (Identified Cost, $0) 1,250,000 $0
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $318,632,015) (k) $319,038,902
- -------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.9% 6,337,707
- -------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $325,376,609
- -------------------------------------------------------------------------------------------------
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be sold in transactions exempt from registration, normally to qualified
institutional buyers. At period end, the aggregate value of these securities was $43,583,017,
representing 13.4% of net assets.
(f) All or a portion of the security has been segregated as collateral for an open futures
contract.
(i) Interest only security for which the fund receives interest on notional principal (Par
amount). Par amount shown is the notional principal and does not reflect the cost of the
security.
(k) As of April 30, 2006, the fund held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $287,305,122 and 90.05% of market value, of
which 90.05% of market value was provided by an independent pricing service using an evaluated
bid.
(n) Non-income producing security.
DERIVATIVES
CREDIT DEFAULT SWAPS
UNREALIZED
NOTIONAL PRINCIPAL APPRECIATION
EXPIRATION AMOUNT OF CONTRACT DESCRIPTION (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------
12/20/12 $1,290,000 Agreement between the fund and Merrill Lynch $(3,321)
Capital Services to exchange the credit risk of
Bear Stearns Co., Inc. As a buyer of protection,
the fund agrees to pay Merrill Lynch quarterly
at a fixed annual rate of 0.30% of the notional
amount of $1,290,000 until maturity on
December 20, 2012. If Bear Stearns Co., Inc.
experiences one of the following credit events:
bankruptcy, failure to pay, or a restructuring,
the fund would then purchase $1,290,000 par of
Bear Stearns Co., Inc. bonds at the post credit
event market price, and then deliver those bonds
to Merrill Lynch, who in turn would deliver
$1,290,000 in cash to the fund.
FUTURES CONTRACTS OUTSTANDING AT APRIL 30, 2006:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note 5 yr (Long) 4 $ 416,625 Jun-06 $(4,826)
U.S. Treasury Note 10 yr (Short) 51 5,384,484 Jun-06 80,251
-------
$75,425
=======
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are reported by currency.
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
SALES
CAD 18,371 5/15/06 $ 15,919 $ 16,423 $ (504)
DKK 167,499 5/10/06 27,261 28,339 (1,078)
EUR 22,652,471 5/17/06 - 6/13/06 27,609,159 28,654,788 (1,045,629)
GBP 4,511,219 6/05/06 7,891,476 8,222,095 (330,619)
NOK 11,498,924 5/10/06 1,762,655 1,864,922 (102,267)
NZD 6,873,326 6/06/06 4,171,733 4,370,538 (198,805)
----------- ----------- -----------
$41,478,203 $43,157,105 $(1,678,902)
=========== =========== ===========
PURCHASES
DKK 167,499 5/10/06 $ 26,886 $ 28,339 $ 1,453
EUR 3,767,115 5/10/06 - 5/17/06 4,563,901 4,757,293 193,392
GBP 418,912 6/05/06 748,965 763,504 14,539
NOK 11,498,924 5/10/06 1,716,795 1,864,922 148,127
NZD 1,739,822 6/06/06 1,091,216 1,106,300 15,084
----------- ----------- -----------
$ 8,147,763 $ 8,520,358 $ 372,595
=========== =========== ===========
At April 30, 2006, forward foreign currency purchases and sales under master netting agreements excluded above
amounted to a net receivable of $317,744 with Merrill Lynch International.
At April 30, 2006, the fund had sufficient cash and/or securities to cover any commitments under these derivative contracts.
The following abbreviations are used in the Portfolio of Investments and are defined:
FRN Floating Rate Note. The interest rate is the rate in effect as of period end.
REIT Real Estate Investment Trust
TIPS Treasury Inflation Protected Security
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than
the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise
indicated. A list of abbreviations is shown below:
CAD Canadian Dollar GBP British Pound
DKK Danish Krone NOK Norwegian Krone
EUR Euro NZD New Zealand Dollar
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 comprising the total value of the fund.
AT 4/30/06
ASSETS
- --------------------------------------------------------------------------------------------
Investments, at value (identified cost, $318,632,015) $319,038,902
Cash 751,650
Receivable for forward foreign currency exchange contracts 372,595
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 317,744
Receivable for investments sold 4,737,999
Receivable for fund shares sold 198,736
Interest and dividends receivable 5,395,519
Receivable from investment adviser 215,377
- ------------------------------------------------------------------------------------------------------
Total assets $331,028,522
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Distributions payable $391,302
Payable for forward foreign currency exchange contracts 1,678,902
Payable for daily variation margin on open futures contracts 8,141
Payable for investments purchased 2,910,374
Payable for fund shares reacquired 394,580
Unrealized depreciation on credit default swaps 3,321
Payable to affiliates
Management fee 10,648
Shareholder servicing costs 53,170
Distribution and service fees 15,322
Administrative services fee 585
Payable for independent trustees' compensation 48,907
Accrued expenses and other liabilities 136,661
- ------------------------------------------------------------------------------------------------------
Total liabilities $5,651,913
- ------------------------------------------------------------------------------------------------------
Net assets $325,376,609
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid-in capital $400,977,184
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies (465,050)
Accumulated net realized gain (loss) on investments and foreign
currency transactions (74,192,078)
Accumulated distributions in excess of net investment income (943,447)
- ------------------------------------------------------------------------------------------------------
Net assets $325,376,609
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 49,260,791
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $192,417,960
Shares outstanding 29,004,539
- ------------------------------------------------------------------------------------------------------
Net asset value per share $6.63
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/95.25Xnet asset value per
share) $6.96
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $89,418,994
Shares outstanding 13,624,903
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.56
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $30,147,470
Shares outstanding 4,615,108
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $6.53
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $13,392,185
Shares outstanding 2,016,241
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $6.64
- ------------------------------------------------------------------------------------------------------
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 earned in investment income and
accrued in expenses. It also describes any gains and/or losses generated by
fund operations.
SIX MONTHS ENDED 4/30/06
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Interest $10,492,244
Dividends 53,366
Foreign taxes withheld (470)
- ------------------------------------------------------------------------------------------------------
Total investment income $10,545,140
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $1,093,578
Distribution and service fees 977,873
Shareholder servicing costs 305,613
Administrative services fee 22,346
Independent trustees' compensation 9,758
Custodian fee 78,366
Shareholder communications 32,283
Auditing fees 27,283
Legal fees 4,643
Miscellaneous 66,873
- ------------------------------------------------------------------------------------------------------
Total expenses $2,618,616
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (20,729)
Reduction of expenses by investment adviser (838,520)
- ------------------------------------------------------------------------------------------------------
Net expenses $1,759,367
- ------------------------------------------------------------------------------------------------------
Net investment income $8,785,773
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $544,181
Futures contracts (3,104)
Swap transactions (1,086)
Foreign currency transactions 237,037
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $777,028
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(533,127)
Futures contracts 78,273
Swap transactions (3,321)
Translation of assets and liabilities in foreign currencies (965,763)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $(1,423,938)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $(646,910)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $8,138,863
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements 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 ENDED YEAR ENDED
4/30/06 10/31/05
(UNAUDITED)
CHANGE IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income $8,785,773 $18,973,146
Net realized gain (loss) on investments and foreign
currency transactions 777,028 8,673,125
Net unrealized gain (loss) on investments and foreign
currency translation (1,423,938) (19,236,160)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $8,138,863 $8,410,111
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net investment income
Class A $(5,844,485) $(11,723,434)
Class B (2,617,397) (6,438,530)
Class C (832,216) (1,905,524)
Class I (418,726) (807,911)
- ------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(9,712,824) $(20,875,399)
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(20,305,229) $(9,022,268)
- ------------------------------------------------------------------------------------------------------
Redemption fees $-- $1,105
- ------------------------------------------------------------------------------------------------------
Total change in net assets $(21,879,190) $(21,486,451)
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period $347,255,799 $368,742,250
At end of period (including accumulated distributions
in excess of net investment income of $943,447 and
$16,396, respectively) $325,376,609 $347,255,799
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Financial Highlights
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the
table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming
reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 10/31
ENDED -------------------------------------------------------------------------
CLASS A 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning
of period $6.67 $6.90 $6.69 $6.24 $6.46 $6.67
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.18 $0.38 $0.40 $0.38 $0.41 $0.52
Net realized and unrealized gain
(loss) on investments and foreign
currency (0.02) (0.20) 0.22 0.46 (0.20) (0.16)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.16 $0.18 $0.62 $0.84 $0.21 $0.36
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.20) $(0.41) $(0.41) $(0.39) $(0.39) $(0.49)
From paid-in capital -- -- -- -- (0.04) (0.08)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.20) $(0.41) $(0.41) $(0.39) $(0.43) $(0.57)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.63 $6.67 $6.90 $6.69 $6.24 $6.46
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 2.42(n) 2.68 9.57 13.81 3.39 5.54
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.33(a) 1.34 1.32 1.32 1.40 1.80
Expenses after expense
reductions (f) 0.83(a) 0.83 0.87 0.93 0.94 0.96
Net investment income (x) 5.49(a) 5.51 5.92 5.89 6.59 7.83
Portfolio turnover 34 63 64 136 147 153
Net assets at end of period
(000 Omitted) $192,418 $196,672 $190,165 $190,926 $176,624 $184,482
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 10/31
ENDED -------------------------------------------------------------------------
CLASS B 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning
of period $6.59 $6.83 $6.62 $6.18 $6.39 $6.61
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.16 $0.33 $0.35 $0.34 $0.37 $0.47
Net realized and unrealized gain
(loss) on investments and foreign
currency (0.01) (0.21) 0.22 0.45 (0.19) (0.17)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.15 $0.12 $0.57 $0.79 $0.18 $0.30
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.36) $(0.36) $(0.35) $(0.36) $(0.45)
From paid-in capital -- -- -- -- (0.03) (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.18) $(0.36) $(0.36) $(0.35) $(0.39) $(0.52)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.56 $6.59 $6.83 $6.62 $6.18 $6.39
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 2.23(n) 1.83 8.90 13.00 2.93 4.71
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.98(a) 1.99 1.97 1.97 2.05 2.45
Expenses after expense
reductions (f) 1.48(a) 1.48 1.52 1.58 1.59 1.61
Net investment income (x) 4.84(a) 4.89 5.27 5.25 5.95 7.22
Portfolio turnover 34 63 64 136 147 153
Net assets at end of period
(000 Omitted) $89,419 $105,223 $130,075 $146,903 $146,096 $163,299
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 10/31
ENDED --------------------------------------------------------------------
CLASS C 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $6.56 $6.80 $6.59 $6.15 $6.37 $6.59
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.16 $0.33 $0.35 $0.33 $0.37 $0.47
Net realized and unrealized gain (loss)
on investments and foreign currency (0.01) (0.21) 0.22 0.45 (0.20) (0.17)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.15 $0.12 $0.57 $0.78 $0.17 $0.30
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.36) $(0.36) $(0.34) $(0.36) $(0.45)
From paid-in capital -- -- -- -- (0.03) (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.18) $(0.36) $(0.36) $(0.34) $(0.39) $(0.52)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.53 $6.56 $6.80 $6.59 $6.15 $6.37
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 2.23(n) 1.81 8.91 13.04 2.78 4.73
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.98(a) 1.99 1.98 1.97 2.05 2.45
Expenses after expense reductions (f) 1.48(a) 1.48 1.53 1.58 1.59 1.61
Net investment income (x) 4.84(a) 4.87 5.26 5.23 5.95 7.18
Portfolio turnover 34 63 64 136 147 153
Net assets at end of period (000 Omitted) $30,148 $32,413 $36,537 $40,703 $35,952 $40,787
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 10/31
ENDED --------------------------------------------------------------------
CLASS I 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $6.67 $6.91 $6.70 $6.25 $6.47 $6.68
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.19 $0.40 $0.42 $0.40 $0.44 $0.55
Net realized and unrealized gain (loss)
on investments and foreign currency (0.01) (0.20) 0.22 0.46 (0.21) (0.17)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.18 $0.20 $0.64 $0.86 $0.23 $0.38
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.21) $(0.44) $(0.43) $(0.41) $(0.41) $(0.51)
From paid-in capital -- -- -- -- (0.04) (0.08)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.21) $(0.44) $(0.43) $(0.41) $(0.45) $(0.59)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.64 $6.67 $6.91 $6.70 $6.25 $6.47
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 2.75(n) 2.90 9.95 14.19 3.75 5.92
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.98(a) 0.99 0.97 0.97 1.05 1.45
Expenses after expense reductions (f) 0.48(a) 0.48 0.52 0.58 0.59 0.61
Net investment income (x) 5.84(a) 5.86 6.28 6.23 6.93 8.21
Portfolio turnover 34 63 64 136 147 153
Net assets at end of period (000 Omitted) $13,392 $12,947 $11,965 $9,764 $10,029 $10,249
- -------------------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less than $0.01.
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(x) Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing and accreting all premiums and discounts on debt securities. Per share data and ratios for
periods prior to October 31, 2002 have not been restated to reflect this change.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Strategic Income Fund (the fund) is a 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 U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. 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, including securities of emerging market issuers.
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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the
market or exchange on which they are primarily traded. Debt instruments (other
than short-term instruments), including restricted debt instruments, are
generally valued at an evaluated or composite bid as reported by an
independent pricing service. Values of debt instruments obtained from pricing
services can utilize both dealer-supplied valuations and electronic data
processing techniques, which take into account 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. Short-
term instruments with a maturity at issuance of 397 days or less are generally
valued at amortized cost, which approximates market value. Futures contracts
are generally valued at last posted settlement price as reported by an
independent pricing service on the market on which they are primarily traded.
Futures contracts for which there were no trades that day for a particular
position are generally valued at the closing bid quotation as reported by an
independent pricing service on the market on which they are primarily traded.
Forward foreign currency contracts are generally valued at the mean of bid and
asked prices for the time period interpolated from rates reported by an
independent pricing service for proximate time periods. Swaps are generally
valued at a broker-dealer bid quotation. Securities and other assets generally
valued on the basis of information from an independent pricing service may
also be valued at a broker-dealer quotation. The values of foreign securities
and other assets and liabilities expressed in foreign currencies are converted
to U.S. dollars using the mean of bid and asked prices for rates reported by
an independent pricing service. The Board of Trustees has delegated primary
responsibility for determining or causing to be determined the value of the
fund's investments (including any fair valuation) to the adviser pursuant to
valuation policies and procedures approved by the Board. If the adviser
determines that reliable market quotations are not readily available,
investments are valued at fair value as determined in good faith by the
adviser in accordance with such procedures under the oversight of the Board of
Trustees.
Under the fund's valuation policies and procedures, market quotations are not
considered to be readily available for many types of debt instruments. These
investments are generally valued at fair value based on information from
independent pricing services. These valuations can be based on both dealer-
supplied valuations and electronic data processing techniques, which take into
account 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. The adviser may rely on independent
pricing services or other information (such as the correlation with price
movements of similar securities in the same or other markets; the type, cost
and investment characteristics of the security; the business and financial
condition of the issuer; and trading and other market data) to assist in
determining whether to fair value and at what value to fair value an
investment. The value of an investment for purposes of calculating the fund's
net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published
prices for the same investments. In addition, investments may be valued at
fair value if the adviser determines that an investment's value has been
materially affected by events occurring after the close of the exchange or
market on which the investment is principally traded (such as foreign exchange
or market) and prior to the determination of the fund's net asset value, or
after the halting of trading of a specific security where trading does not
resume prior to the close of the exchange or market on which the security is
principally traded. Events that occur on a frequent basis after foreign
markets close (such as developments in foreign markets and significant
movements in the U.S. markets) and prior to the determination of the fund's
net asset value may be deemed to have a material affect on the value of
securities traded in foreign markets. Accordingly, the fund's foreign equity
securities may often be valued at fair value.
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.
INFLATION-ADJUSTED DEBT SECURITIES - The fund invests in inflation-adjusted debt
securities issued by the U.S. Treasury. The fund may also invest in
inflation-adjusted debt securities issued by U.S. Government agencies and
instrumentalities other than the U.S. Treasury and by other entities such as
U.S. and foreign corporations and foreign governments. The principal value of
these debt securities is adjusted by references to changes in the Consumer Price
Index or another general price or wage index. These debt securities typically
pay a fixed rate of interest, but this fixed rate is applied to the inflation-
adjusted principal amount. The principal paid at maturity of the debt security
is typically equal to the inflation-adjusted principal amount, or the security's
original par value, whichever is greater. Other types of inflation- adjusted
securities may use other methods to adjust for other measures of inflation.
FOREIGN CURRENCY TRANSLATION - 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.
DERIVATIVE RISK - The fund may invest in derivatives for hedging or non- hedging
purposes. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. When the fund uses derivatives as an investment to gain market
exposure, or for hedging purposes, gains and losses from derivative instruments
may be substantially greater than the derivative's original cost. Derivative
instruments include forward foreign currency exchange contracts, swap
agreements, and futures contracts.
FUTURES CONTRACTS - The fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the fund is required
to deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the fund each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the fund. Upon entering into such contracts, the fund bears
the risk of interest or exchange rates or securities prices moving unexpectedly,
in which case, the fund may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
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 the contract. 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.
SWAP AGREEMENTS - The fund may enter into swap agreements. A swap is an exchange
of cash payments between the fund and another party. Net cash payments are
exchanged at specified intervals and are recorded as a realized gain or loss in
the Statement of Operations. The value of the swap is adjusted daily and the
change in value is recorded as unrealized appreciation or depreciation in the
Statement of Operations. Risks may arise upon entering into these agreements
from the potential inability of counterparties to meet the terms of their
contract and from unanticipated changes in the value of the financial index on
which the swap agreement is based. The fund may enter into credit default swaps
to limit or to reduce risk exposure of the fund to credit events such as
bankruptcy, failure to pay, or a restructuring of corporate and sovereign
issuers. The fund may also use credit default swaps to create direct or
synthetic short or long exposure to domestic or foreign corporate debt
securities or certain sovereign debt securities to which the fund is not
otherwise exposed. In a credit default swap, one party makes a stream of
payments to another party in exchange for the right to receive a specified
return in the event of a default by a third party, such as a corporate issuer or
foreign issuer on its obligation.
SHORT TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund charged a 2% redemption fee (which was retained by the fund)
on proceeds from Class A, Class B, Class C, and Class I shares redeemed or
exchanged within 5 business days following their acquisition (either by
purchase or exchange). Effective April 1, 2005, the fund no longer charges a
redemption fee. See the fund's prospectus for details. Any redemption fees
charged are accounted for as an addition to paid-in capital.
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 U.S. 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.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to 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.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss
in the Statement of Operations, or in unrealized gain/loss if the security is
still held by the fund.
Legal fees and other related expenses incurred to preserve and protect the
value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions made directly to the security issuer,
which are generally non-recurring, incurred to protect or enhance the value of
high-yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
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, for the six months ended April 30, 2006, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to continue to qualify as a
regulated investment company, as defined under Subchapter M of the Internal
Revenue Code, and to distribute all of its taxable income, including realized
capital gains. Accordingly, no provision for federal income tax is required in
the financial statements. Foreign taxes, if any, have been accrued by the fund
in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
Certain capital accounts in the financial statements are periodically adjusted
for permanent differences in order to reflect their tax character. These
adjustments have no impact on net assets or net asset value per share.
Temporary differences which arise from recognizing certain items of income,
expense, gain or loss in different periods for financial statement and tax
purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and
tax purposes.
Book/tax differences primarily relate to amortization and accretion of debt
securities, defaulted bonds, wash sale loss deferrals, straddle loss
deferrals, foreign currency transactions, and derivative transactions.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
OCTOBER 31, 2005 OCTOBER 31, 2004
Ordinary income (including any
short-term capital gains) $20,875,399 $21,704,738
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF APRIL 30, 2006
Cost of investments $320,512,590
----------------------------------------------------------
Gross appreciation $5,526,856
Gross depreciation (7,000,544)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $(1,473,688)
AS OF OCTOBER 31, 2005
Undistributed ordinary income $2,878,121
Capital loss carryforwards (70,418,377)
Other temporary differences (2,872,795)
Net unrealized appreciation (depreciation) (3,613,563)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of October 31, 2005, the fund had available capital loss carryforwards to
offset future realized gains. Such losses expire as follows:
October 31, 2006 $(9,245,930)
October 31, 2007 (11,626,162)
October 31, 2008 (3,849,634)
October 31, 2009 (17,590,678)
October 31, 2010 (28,105,973)
----------------------------------------------------------
$(70,418,377)
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 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. As part of a settlement agreement with
the New York Attorney General concerning market timing and related matters,
MFS has agreed to reduce the management fee to 0.40% of the fund's average
daily net assets for the period March 1, 2004 through February 28, 2009.
For the six months ended April 30, 2006, this waiver amounted to $424,965 and
is reflected as a reduction of total expenses in the Statement of Operations.
The management fee incurred for the six months ended April 30, 2006 was
equivalent to an annual effective rate of 0.40% of the fund's average daily
net assets. The investment adviser has contractually agreed to pay a portion
of the fund's operating expenses, exclusive of management, distribution and
service, and certain other fees and expenses, such that operating expenses do
not exceed 0.08% annually of the fund's average daily net assets. This
contractual fee arrangement will continue until March 1, 2007. For the six
months ended April 30, 2006, this reduction amounted to $412,379 and is
reflected as a reduction of total expenses in the Statement of Operations.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $20,032 for the six months ended April 30, 2006,
as its portion of the initial sales charge on sales of Class A shares of the
fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) FEE
Class A 0.10% 0.25% 0.35% 0.35% $338,271
Class B 0.75% 0.25% 1.00% 1.00% 485,323
Class C 0.75% 0.25% 1.00% 1.00% 154,279
- -----------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees$977,873
(1) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees up to
these annual percentage rates of each class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the distribution plan for the six months ended
April 30, 2006 based on each class' average daily net assets. Assets attributable to Class A shares
sold prior to May 14, 1991 are subject to a service fee of 0.15% annually.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. All contingent
deferred sales charges are paid to MFD and during the six months ended April
30, 2006, were as follows:
AMOUNT
Class A $3,871
Class B $69,928
Class C $1,262
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS.
MFSC receives a fee from the fund, for its services as shareholder servicing
agent, set periodically under the supervision of the fund's Board of Trustees.
For the six months ended April 30, 2006, the fee was $159,283, which equated
to 0.0953% annually of the fund's average daily net assets. MFSC also receives
payment from the fund for out-of-pocket and sub-accounting expenses paid by
MFSC on behalf of the fund. For the six months ended April 30, 2006, these
costs amounted to $137,270.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. From July 1, 2005 through March 31, 2006, the fund's annual fixed amount
was $10,000. Effective April 1, 2006, the fund's annual fixed amount is $17,500.
The administrative services fee incurred for the six months ended April 30, 2006
was equivalent to an annual effective rate of 0.0134% of the fund's average
daily net assets.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to Independent
Trustees in the form of a retainer, attendance fees, and additional compensation
to Board and Committee chairpersons. The fund does not pay compensation directly
to 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, MFD,
and MFSC.
The fund has an unfunded, defined benefit plan for retired Independent Trustees
which resulted in a pension expense of $3,425. This amount is included in
Independent trustees' compensation for the six months ended April 30, 2006. The
deferred liability for retirement benefits payable to retired Trustees amounted
to $268 at April 30, 2006, and is included in payable for independent trustees'
compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
funds and the sole member of Tarantino LLC. The funds can terminate the
Agreement with Tarantino LLC at any time under the terms of the Agreement. For
the six months ended April 30, 2006, the fee paid to Tarantino LLC was $1,440.
MFS has agreed to reimburse the fund for a portion of the payments made by the
funds to Tarantino LLC in the amount of $1,176, which is shown as a reduction of
total expenses in the Statement of Operations. Additionally, MFS has agreed to
bear all expenses associated with office space, other administrative support,
and supplies provided to the ICCO.
(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 $2,764,052 $13,459,099
- -------------------------------------------------------------------------------------------------------
Investments (non-U.S. government securities) $105,560,155 $117,456,640
- -------------------------------------------------------------------------------------------------------
(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
APRIL 30, 2006 OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 3,553,408 $23,732,971 7,084,535 $48,473,747
Class B 837,465 5,526,410 2,563,239 17,354,036
Class C 373,760 2,455,510 1,175,188 7,918,678
Class I 283,304 1,893,395 612,319 4,182,602
- -------------------------------------------------------------------------------------------------------
5,047,937 $33,608,286 11,435,281 $77,929,063
Shares issued to shareholders in reinvestment of distributions
Class A 672,641 $4,487,650 1,328,861 $9,073,574
Class B 260,019 1,716,798 632,755 4,277,333
Class C 86,522 568,621 193,534 1,301,741
Class I 61,532 411,117 117,226 801,159
- -------------------------------------------------------------------------------------------------------
1,080,714 $7,184,186 2,272,376 $15,453,807
Shares reacquired
Class A (4,724,512) $(31,513,780) (6,458,423) $(44,214,430)
Class B (3,428,766) (22,640,139) (6,289,685) (42,503,537)
Class C (783,346) (5,151,259) (1,805,105) (12,125,937)
Class I (268,513) (1,792,523) (520,680) (3,561,234)
- -------------------------------------------------------------------------------------------------------
(9,205,137) $(61,097,701) (15,073,893) $(102,405,138)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
Net change
Class A (498,463) $(3,293,159) 1,954,973 $13,332,891
Class B (2,331,282) (15,396,931) (3,093,691) (20,872,168)
Class C (323,064) (2,127,128) (436,383) (2,905,518)
Class I 76,323 511,989 208,865 1,422,527
- -------------------------------------------------------------------------------------------------------
(3,076,486) $(20,305,229) (1,366,236) $(9,022,268)
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 Federal Reserve
funds rate plus 0.35%. 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 calendar quarter. The commitment fee
allocated to the fund for the six months ended April 30, 2006 was $1,179, and
is included in miscellaneous expense on the Statement of Operations. The fund
had no significant borrowings during the six months ended April 30, 2006.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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 (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MFO-SEM-6/06 21M
MFS(R) GLOBAL GROWTH FUND 4/30/06
SEMIANNUAL REPORT
- -------------------------------------------------------------------------------
LETTER FROM THE CEO 1
- ---------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------
EXPENSE TABLE 3
- ---------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ---------------------------------------------------
FINANCIAL STATEMENTS 11
- ---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 24
- ---------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 33
- ---------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 33
- ---------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 33
- ---------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF
SHAREHOLDERS. IT IS INTENDED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
[logo] M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political instability
around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes had
a dramatic effect on the international economy, particularly on oil prices. We
witnessed political unrest in the Middle East, highlighted by instability in
Iraq, and in Africa, the usually stable Nigeria also experienced violence. As a
result, energy prices have bounced up and down, with crude oil prices at one
point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm in our
everyday lives. What does all of this mean to you as an investor? In times like
these, it helps to know that you're working with a seasoned investment
professional who has experience to guide you through difficult times. At MFS(R),
we believe our investment management team has the knowledge and confidence to
navigate through difficult cycles and at the same time see through adversity to
find investment opportunities for our clients and shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a college
education, a comfortable retirement, or a secure family legacy - is to follow a
three-pronged approach that focuses on longer time horizons. Allocate holdings
across the major asset classes - including stocks, bonds, and cash. Diversify
within each class to take advantage of different market segments and investing
styles. Rebalance assets regularly to maintain a desired asset allocation. Of
course, these strategies cannot guarantee a profit or protect against a loss.
This long-term approach requires diligence and patience, two traits that in our
experience are essential to capitalizing on the many opportunities the financial
markets can offer - through both up and down economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Stocks 99.9%
Cash & Other Net Assets 0.1%
TOP TEN HOLDINGS
Samsung Electronics Co. Ltd. 2.1%
------------------------------------------------
LVMH Moet Hennessy
Louis Vuilton S.A. 1.8%
------------------------------------------------
BHP Billiton Ltd. 1.7%
------------------------------------------------
Royal Philips Electronics N.V. 1.5%
------------------------------------------------
TOTAL S.A. 1.4%
------------------------------------------------
GlaxoSmithKline PLC 1.3%
------------------------------------------------
UBS AG 1.3%
------------------------------------------------
Roche Holding AG 1.3%
------------------------------------------------
Aiful Corp. 1.2%
------------------------------------------------
Reliance Industries Ltd. 1.2%
------------------------------------------------
SECTOR WEIGHTINGS
Financial Services 18.5%
------------------------------------------------
Technology 14.5%
------------------------------------------------
Health Care 11.8%
------------------------------------------------
Consumer Staples 8.2%
------------------------------------------------
Retailing 8.1%
------------------------------------------------
Energy 7.8%
------------------------------------------------
Leisure 7.1%
------------------------------------------------
Autos & Housing 6.3%
------------------------------------------------
Basic Materials 5.5%
------------------------------------------------
Utilities & Communications 5.2%
------------------------------------------------
Special Products & Services 3.4%
------------------------------------------------
Industrial Goods & Services 3.0%
------------------------------------------------
Transportation 0.5%
------------------------------------------------
COUNTRY WEIGHTINGS
United States 30.5%
------------------------------------------------
Japan 10.0%
------------------------------------------------
France 8.7%
------------------------------------------------
United Kingdom 8.6%
------------------------------------------------
Switzerland 5.8%
------------------------------------------------
South Korea 4.0%
------------------------------------------------
Mexico 3.2%
------------------------------------------------
Italy 2.3%
------------------------------------------------
Brazil 2.2%
------------------------------------------------
Others 24.7%
------------------------------------------------
Percentages are based on net assets as of 4/30/06.
The portfolio is actively managed, and current holdings may be different.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD, NOVEMBER 1, 2005
THROUGH APRIL 30, 2006.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period November 1, 2005 through April 30, 2006.
ACTUAL EXPENSES
The first line for each share class in the following table provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period (p)
Share Expense Account Value Account Value 11/01/05-
Class Ratio 11/01/05 4/30/06 4/30/06
- --------------------------------------------------------------------------------
Actual 1.54% $1,000.00 $1,166.70 $8.27
A -----------------------------------------------------------------------
Hypothetical (h) 1.54% $1,000.00 $1,017.16 $7.70
- --------------------------------------------------------------------------------
Actual 2.29% $1,000.00 $1,162.80 $12.28
B -------------------------------------------------------------------------
Hypothetical (h) 2.29% $1,000.00 $1,013.44 $11.43
- --------------------------------------------------------------------------------
Actual 2.29% $1,000.00 $1,162.80 $12.28
C ------------------------------------------------------------------------
Hypothetical (h) 2.29% $1,000.00 $1,013.44 $11.43
- --------------------------------------------------------------------------------
Actual 1.29% $1,000.00 $1,168.60 $6.94
I ------------------------------------------------------------------------
Hypothetical (h) 1.29% $1,000.00 $1,018.40 $6.46
- --------------------------------------------------------------------------------
Actual 1.79% $1,000.00 $1,165.40 $9.61
R ------------------------------------------------------------------------
Hypothetical (h) 1.79% $1,000.00 $1,015.92 $8.95
- --------------------------------------------------------------------------------
Actual 2.39% $1,000.00 $1,161.90 $12.81
R1 ------------------------------------------------------------------------
Hypothetical (h) 2.39% $1,000.00 $1,012.95 $11.92
- --------------------------------------------------------------------------------
Actual 2.04% $1,000.00 $1,164.30 $10.95
R2 ------------------------------------------------------------------------
Hypothetical (h) 2.04% $1,000.00 $1,014.68 $10.19
- --------------------------------------------------------------------------------
Actual 1.94% $1,000.00 $1,164.70 $10.41
R3 ------------------------------------------------------------------------
Hypothetical (h) 1.94% $1,000.00 $1,015.17 $9.69
- --------------------------------------------------------------------------------
Actual 1.69% $1,000.00 $1,165.80 $9.08
R4 ------------------------------------------------------------------------
Hypothetical (h) 1.69% $1,000.00 $1,016.41 $8.45
- --------------------------------------------------------------------------------
Actual 1.39% $1,000.00 $1,168.10 $7.47
R5 ------------------------------------------------------------------------
Hypothetical (h) 1.39% $1,000.00 $1,017.90 $6.95
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS (unaudited) - 4/30/06
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Common Stocks - 99.9%
- --------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- --------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 3.7%
- --------------------------------------------------------------------------------------------------
Grupo Televisa S.A., ADR 228,700 $ 4,848,440
PagesJaunes Groupe S.A. (l) 105,190 3,039,491
Viacom, Inc., "B" (n) 26,825 1,068,440
Walt Disney Co. 86,620 2,421,896
WPP Group PLC 375,510 4,631,002
------------
$ 16,009,269
- --------------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.6%
- --------------------------------------------------------------------------------------------------
Pernod Ricard S.A. (l) 14,500 $ 2,810,886
- --------------------------------------------------------------------------------------------------
Apparel Manufacturers - 2.3%
- --------------------------------------------------------------------------------------------------
Burberry Group PLC 239,180 $ 2,054,336
LVMH Moet Hennessy Louis Vuitton S.A. (l) 76,770 8,080,146
------------
$ 10,134,482
- --------------------------------------------------------------------------------------------------
Automotive - 4.3%
- --------------------------------------------------------------------------------------------------
Autoliv, Inc. (l) 42,950 $ 2,391,166
Bayerische Motoren Werke AG (l) 64,680 3,516,813
Continental AG 18,000 2,142,436
Hyundai Motor Co. Ltd. 48,920 4,299,918
Kongsberg Automotive A.S.A. 170,450 1,657,160
Toyota Industries Corp. 109,800 4,902,949
------------
$ 18,910,442
- --------------------------------------------------------------------------------------------------
Banks & Credit Companies - 11.6%
- --------------------------------------------------------------------------------------------------
AEON Credit Service Co. Ltd. 166,100 $ 4,599,086
Aiful Corp. (l) 90,450 5,406,408
American Express Co. 85,110 4,579,769
Anglo Irish Bank Corp. PLC 133,540 2,201,346
Bank of Cyprus Public Co. Ltd. 269,850 2,627,490
Erste Bank der Oesterreichischen Sparkassen AG (l) 60,370 3,662,415
Nedbank Group Ltd. 248,720 5,190,452
ORIX Corp. 12,040 3,619,461
Standard Chartered PLC 164,820 4,371,556
Sumitomo Mitsui Financial Group, Inc. (l) 375 4,120,336
UBS AG (l) 48,650 5,760,875
UniCredito Italiano S.p.A. (l) 611,180 4,601,980
------------
$ 50,741,174
- --------------------------------------------------------------------------------------------------
Biotechnology - 1.3%
- --------------------------------------------------------------------------------------------------
Amgen, Inc. (n) 54,540 $ 3,692,358
Genzyme Corp. (n) 33,160 2,028,066
------------
$ 5,720,424
- --------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 4.8%
- --------------------------------------------------------------------------------------------------
Affiliated Managers Group, Inc. (l)(n) 19,870 $ 2,012,831
Franklin Resources, Inc. 38,610 3,595,363
Goldman Sachs Group, Inc. 27,460 4,401,563
Julius Baer Holding Ltd. (l) 42,971 4,115,718
Morgan Stanley 65,110 4,186,573
Partners Group Holdings (n) 5,470 341,489
Singapore Exchange Ltd. 822,000 2,235,674
------------
$ 20,889,211
- --------------------------------------------------------------------------------------------------
Business Services - 2.3%
- --------------------------------------------------------------------------------------------------
Amdocs Ltd. (n) 83,040 $ 3,089,088
Euronet Worldwide, Inc. (l)(n) 55,700 1,990,718
Li & Fung Ltd. 2,046,000 4,855,564
------------
$ 9,935,370
- --------------------------------------------------------------------------------------------------
Computer Software - 1.0%
- --------------------------------------------------------------------------------------------------
Oracle Corp. (n) 293,490 $ 4,282,019
- --------------------------------------------------------------------------------------------------
Computer Software - Systems - 1.4%
- --------------------------------------------------------------------------------------------------
MICROS Systems, Inc. (n) 43,880 $ 1,834,184
Satyam Computer Services Ltd., ADR 122,400 4,403,952
------------
$ 6,238,136
- --------------------------------------------------------------------------------------------------
Construction - 1.1%
- --------------------------------------------------------------------------------------------------
CEMEX S.A. de C.V., ADR (l) 69,130 $ 4,667,657
- --------------------------------------------------------------------------------------------------
Consumer Goods & Services - 5.6%
- --------------------------------------------------------------------------------------------------
Avon Products, Inc. 68,240 $ 2,225,306
Colgate-Palmolive Co. 34,190 2,021,312
eBay, Inc. (n) 69,550 2,393,216
Estee Lauder Cos., Inc., "A" 80,870 3,001,894
Kao Corp. 149,000 4,007,735
L'Oreal S.A. (l) 37,510 3,477,248
Monster Worldwide, Inc. (n) 41,540 2,384,396
Reckitt Benckiser PLC 137,290 4,999,384
------------
$ 24,510,491
- --------------------------------------------------------------------------------------------------
Electrical Equipment - 2.4%
- --------------------------------------------------------------------------------------------------
Keyence Corp. 8,100 $ 2,127,438
MSC Industrial Direct Co., Inc., "A" 41,510 2,152,709
Nitto Denko Corp. (l) 43,500 3,651,606
Schneider Electric S.A. (l) 22,707 2,570,369
------------
$ 10,502,122
- --------------------------------------------------------------------------------------------------
Electronics - 8.7%
- --------------------------------------------------------------------------------------------------
Canon, Inc. 57,800 $ 4,425,245
Intel Corp. 205,720 4,110,286
KLA-Tencor Corp. 42,280 2,036,205
Kronos, Inc. (l)(n) 37,380 1,706,023
Marvell Technology Group Ltd. (n) 39,740 2,268,757
Nippon Electric Glass Co. Ltd. (l) 97,000 2,191,271
Royal Philips Electronics N.V. (l) 190,030 6,555,122
Samsung Electronics Co. Ltd. 13,610 9,293,156
Taiwan Semiconductor Manufacturing Co. Ltd., ADR (l) 501,520 5,255,930
------------
$ 37,841,995
- --------------------------------------------------------------------------------------------------
Energy - Independent - 4.8%
- --------------------------------------------------------------------------------------------------
Anadarko Petroleum Corp. 18,710 $ 1,961,182
Apache Corp. 26,300 1,868,352
Canadian Natural Resources Ltd. 34,830 2,091,293
CNOOC Ltd. 5,458,000 4,399,768
Norsk Hydro A.S.A. (l) 16,500 2,537,269
Reliance Industries Ltd. 235,270 5,294,623
Talisman Energy, Inc. 52,550 2,964,624
------------
$ 21,117,111
- --------------------------------------------------------------------------------------------------
Energy - Integrated - 2.5%
- --------------------------------------------------------------------------------------------------
Petroleo Brasileiro S.A., ADR 49,190 $ 4,861,448
TOTAL S.A. (l) 22,510 6,223,251
------------
$ 11,084,699
- --------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.9%
- --------------------------------------------------------------------------------------------------
Tesco PLC 701,970 $ 4,085,585
- --------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 3.1%
- --------------------------------------------------------------------------------------------------
Fomento Economico Mexicano S.A. de C.V., ADR 48,960 $ 4,547,405
Groupe Danone (l) 30,220 3,769,572
Nestle S.A. 16,992 5,177,400
------------
$ 13,494,377
- --------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.1%
- --------------------------------------------------------------------------------------------------
Aracruz Celulose S.A., ADR (l) 89,700 $ 4,940,676
- --------------------------------------------------------------------------------------------------
Furniture & Appliances - 0.9%
- --------------------------------------------------------------------------------------------------
LG Electronics, Inc. 46,770 $ 3,872,912
- --------------------------------------------------------------------------------------------------
Gaming & Lodging - 2.0%
- --------------------------------------------------------------------------------------------------
International Game Technology 59,590 $ 2,260,249
Ladbrokes PLC 581,792 4,445,950
William Hill Organization Ltd. 165,510 1,913,025
------------
$ 8,619,224
- --------------------------------------------------------------------------------------------------
Insurance - 2.1%
- --------------------------------------------------------------------------------------------------
AFLAC, Inc. 66,290 $ 3,151,425
Assicurazioni Generali S.p.A. (l) 105,230 3,943,152
Corporacion Mapfre S.A. (l) 106,770 2,256,964
------------
$ 9,351,541
- --------------------------------------------------------------------------------------------------
Internet - 0.5%
- --------------------------------------------------------------------------------------------------
Yahoo!, Inc. (n) 72,660 $ 2,381,795
- --------------------------------------------------------------------------------------------------
Leisure & Toys - 0.6%
- --------------------------------------------------------------------------------------------------
Electronic Arts, Inc. (n) 47,820 $ 2,716,176
- --------------------------------------------------------------------------------------------------
Machinery & Tools - 0.6%
- --------------------------------------------------------------------------------------------------
Sandvik AB (l) 38,510 $ 2,504,792
- --------------------------------------------------------------------------------------------------
Medical Equipment - 4.4%
- --------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc. (n) 49,360 $ 2,300,176
Cyberonics, Inc. (l)(n) 84,170 1,951,903
Cytyc Corp. (n) 68,010 1,758,059
Medtronic, Inc. 88,560 4,438,627
Millipore Corp. (n) 28,680 2,116,010
ResMed, Inc. (l)(n) 51,210 2,209,712
Straumann Holding AG 8,170 2,007,290
Synthes, Inc. 18,540 2,299,952
------------
$ 19,081,729
- --------------------------------------------------------------------------------------------------
Metals & Mining - 1.7%
- --------------------------------------------------------------------------------------------------
BHP Billiton Ltd. 332,960 $ 7,412,891
- --------------------------------------------------------------------------------------------------
Network & Telecom - 1.8%
- --------------------------------------------------------------------------------------------------
Juniper Networks, Inc. (n) 243,170 $ 4,493,782
NICE Systems Ltd., ADR (n) 15,900 871,320
QUALCOMM, Inc. 50,900 2,613,206
------------
$ 7,978,308
- --------------------------------------------------------------------------------------------------
Oil Services - 0.5%
- --------------------------------------------------------------------------------------------------
Dresser-Rand Group, Inc. (n) 88,700 $ 2,214,839
- --------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 1.1%
- --------------------------------------------------------------------------------------------------
EMC Corp. (n) 138,460 $ 1,870,594
Network Appliance, Inc. (n) 74,010 2,743,551
------------
$ 4,614,145
- --------------------------------------------------------------------------------------------------
Pharmaceuticals - 6.1%
- --------------------------------------------------------------------------------------------------
Eli Lilly & Co. 64,750 $ 3,426,570
GlaxoSmithKline PLC 206,000 5,839,042
Johnson & Johnson 87,110 5,105,517
Roche Holding AG 37,250 5,722,229
Sanofi-Aventis (l) 33,020 3,113,075
Teva Pharmaceutical Industries Ltd., ADR 88,770 3,595,185
------------
$ 26,801,618
- --------------------------------------------------------------------------------------------------
Printing & Publishing - 0.8%
- --------------------------------------------------------------------------------------------------
Yell Group PLC 364,110 $ 3,409,263
- --------------------------------------------------------------------------------------------------
Specialty Chemicals - 2.7%
- --------------------------------------------------------------------------------------------------
Kaneka Corp. 216,000 $ 2,437,868
L'Air Liquide S.A., Bearer Shares (l) 22,937 4,961,375
Praxair, Inc. 75,530 4,239,499
------------
$ 11,638,742
- --------------------------------------------------------------------------------------------------
Specialty Stores - 4.9%
- --------------------------------------------------------------------------------------------------
Aeropostale, Inc. (n) 65,310 $ 2,005,670
Esprit Holdings Ltd. 396,000 3,171,780
Home Depot, Inc. 97,980 3,912,341
Industria de Diseno Textil S.A. 62,980 2,561,732
Nishimatsuya Chain Co. Ltd. 103,100 2,315,479
PETsMART, Inc. 123,200 3,407,712
Photo-Me International PLC 953,290 1,662,757
Williams-Sonoma, Inc. 57,250 2,397,058
------------
$ 21,434,529
- --------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.1%
- --------------------------------------------------------------------------------------------------
China Mobile Ltd. 803,500 $ 4,673,892
- --------------------------------------------------------------------------------------------------
Telephone Services - 4.1%
- --------------------------------------------------------------------------------------------------
FastWeb S.p.A. (n) 33,429 $ 1,676,796
Philippine Long Distance Telephone Co. 116,700 4,614,744
Singapore Telecommunications Ltd. 2,506,000 4,343,099
Telenor A.S.A. (l) 313,700 3,634,435
TELUS Corp. 87,190 3,649,796
------------
$ 17,918,870
- --------------------------------------------------------------------------------------------------
Trucking - 0.5%
- --------------------------------------------------------------------------------------------------
FedEx Corp. 17,840 $ 2,053,919
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $370,285,168) $436,595,311
- --------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 21.3%
- --------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 93,009,175 $ 93,009,175
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $463,294,343) $529,604,486
- --------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (21.2)% (92,590,755)
- --------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $437,013,731
- --------------------------------------------------------------------------------------------------
(l) All or a portion of this security is on loan.
(n) Non-income producing security.
The following abbreviations are used in the Portfolio of Investments and are defined:
ADR American Depository Receipt
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
comprising the total value of the fund.
AT 4/30/06
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value, including $89,093,934 of securities
on loan (identified cost, $463,294,343) $529,604,486
Cash 12,695
Foreign currency, at value (identified cost, $4,488,445) 4,490,646
Receivable for investments sold 3,271,921
Receivable for fund shares sold 184,213
Interest and dividends receivable 481,947
Other assets 575
- -------------------------------------------------------------------------------------------------------
Total assets $538,046,483
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Notes payable $3,522,000
Payable for investments purchased 3,085,130
Payable for fund shares reacquired 803,573
Collateral for securities loaned, at value 93,009,175
Payable to affiliates
Management fee 32,410
Shareholder servicing costs 84,708
Distribution and service fees 18,342
Administrative services fee 717
Retirement plan administration and services fees 40
Payable for independent trustees' compensation 48,013
Accrued expenses and other liabilities 428,644
- -------------------------------------------------------------------------------------------------------
Total liabilities $101,032,752
- -------------------------------------------------------------------------------------------------------
Net assets $437,013,731
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------------
Paid-in capital $456,169,676
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign
currencies (net of $180,082 deferred country tax) 66,144,233
Accumulated net realized gain (loss) on investments and
foreign currency transactions (85,585,266)
Undistributed net investment income 285,088
- -------------------------------------------------------------------------------------------------------
Net assets $437,013,731
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 18,934,753
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $312,415,495
Shares outstanding 13,321,074
- -------------------------------------------------------------------------------------------------------
Net asset value per share $23.45
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per
share) $24.88
- -------------------------------------------------------------------------------------------------------
Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $88,317,029
Shares outstanding 4,002,484
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $22.07
- -------------------------------------------------------------------------------------------------------
Class C shares
- -------------------------------------------------------------------------------------------------------
Net assets $21,820,109
Shares outstanding 997,956
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $21.86
- -------------------------------------------------------------------------------------------------------
Class I shares
- -------------------------------------------------------------------------------------------------------
Net assets $7,922,273
Shares outstanding 331,394
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $23.91
- -------------------------------------------------------------------------------------------------------
Class R shares
- -------------------------------------------------------------------------------------------------------
Net assets $4,316,531
Shares outstanding 185,658
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $23.25
- -------------------------------------------------------------------------------------------------------
Class R1 shares
- -------------------------------------------------------------------------------------------------------
Net assets $120,713
Shares outstanding 5,478
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $22.03
- -------------------------------------------------------------------------------------------------------
Class R2 shares
- -------------------------------------------------------------------------------------------------------
Net assets $246,939
Shares outstanding 11,169
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $22.11
- -------------------------------------------------------------------------------------------------------
Class R3 shares
- -------------------------------------------------------------------------------------------------------
Net assets $612,128
Shares outstanding 26,479
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $23.12
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,181,022
Shares outstanding 50,443
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $23.41
- -------------------------------------------------------------------------------------------------------
Class R5 shares
- -------------------------------------------------------------------------------------------------------
Net assets $61,492
Shares outstanding 2,618
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $23.49
- -------------------------------------------------------------------------------------------------------
Shares outstanding are rounded for presentation purposes.
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 earned in investment income and accrued in expenses. It
also describes any gains and/or losses generated by fund operations.
SIX MONTHS ENDED 4/30/06
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $4,023,343
Interest 160,820
Foreign taxes withheld (165,620)
- ------------------------------------------------------------------------------------------------------
Total investment income $4,018,543
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $1,926,090
Distribution and service fees 1,100,772
Shareholder servicing costs 434,299
Administrative services fee 27,519
Retirement plan administration and services fees 1,716
Independent trustees' compensation 9,852
Custodian fee 164,997
Shareholder communications 51,629
Auditing fees 28,229
Legal fees 7,036
Miscellaneous 108,797
- ------------------------------------------------------------------------------------------------------
Total expenses $3,860,936
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (17,581)
Reduction of expenses by investment adviser and distributor (153,834)
- ------------------------------------------------------------------------------------------------------
Net expenses $3,689,521
- ------------------------------------------------------------------------------------------------------
Net investment income $329,022
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $50,382,280
Foreign currency transactions (58,571)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $50,323,709
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments (net of $180,082 deferred country tax) $14,896,167
Translation of assets and liabilities in foreign currencies 24,484
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $14,920,651
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $65,244,360
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $65,573,382
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
These statements describe the increases and/or decreases in net assets resulting from operations,
any distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/06 10/31/05
(UNAUDITED)
CHANGE IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) $329,022 $(638,512)
Net realized gain (loss) on investments and foreign
currency transactions 50,323,709 63,550,931
Net unrealized gain (loss) on investments and foreign
currency translation 14,920,651 (8,858,320)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $65,573,382 $54,054,099
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(39,270,347) $(86,835,314)
- ------------------------------------------------------------------------------------------------------
Redemption fees $-- $4,341
- ------------------------------------------------------------------------------------------------------
Total change in net assets $26,303,035 $(32,776,874)
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period 410,710,696 443,487,570
At end of period (including undistributed net investment
income of $285,088 and accumulated net investment loss of
$43,934) $437,013,731 $410,710,696
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Financial Highlights
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 10/31
ENDED ----------------------------------------------------------------------
CLASS A 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of
period $20.10 $17.76 $15.91 $12.73 $14.60 $27.51
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.04 $0.01 $(0.01) $0.04 $(0.01) $(0.03)
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.31 2.33 1.86 3.14 (1.86) (6.91)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.35 $2.34 $1.85 $3.18 $(1.87) $(6.94)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions $-- $-- $-- $-- $-- $(5.97)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.45 $20.10 $17.76 $15.91 $12.73 $14.60
- --------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 16.67(n) 13.18 11.70(b)(q) 24.90(j) (12.81) (30.91)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.64(a) 1.69 1.70 1.69 1.67 1.62
Expenses after expense reductions (f) 1.54(a) 1.59 1.60 1.59 1.57 1.52
Net investment income (loss) 0.35(a) 0.07 (0.04) 0.30 (0.08) (0.17)
Portfolio turnover 55 92 163 93 130 112
Net assets at end of period
(000 Omitted) $312,415 $290,256 $304,348 $306,333 $269,893 $268,548
- --------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 10/31
ENDED ----------------------------------------------------------------------
CLASS B 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of
period $18.98 $16.90 $15.25 $12.29 $14.21 $26.87
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.04) $(0.13) $(0.13) $(0.06) $(0.13) $(0.16)
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.13 2.21 1.78 3.02 (1.79) (6.74)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.09 $2.08 $1.65 $2.96 $(1.92) $(6.90)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions $-- $-- $-- $-- $-- $(5.76)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $22.07 $18.98 $16.90 $15.25 $12.29 $14.21
- --------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 16.28(n) 12.31 10.82(b)(q) 24.08(j) (13.51) (31.39)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.29(a) 2.34 2.35 2.34 2.32 2.27
Expenses after expense reductions (f) 2.29(a) 2.34 2.35 2.34 2.32 2.27
Net investment loss (0.42)(a) (0.70) (0.81) (0.47) (0.89) (0.92)
Portfolio turnover 55 92 163 93 130 112
Net assets at end of period
(000 Omitted) $88,317 $87,769 $108,750 $129,229 $133,525 $268,518
- --------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 10/31
ENDED ----------------------------------------------------------------------
CLASS C 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $18.80 $16.74 $15.11 $12.18 $14.08 $26.74
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.04) $(0.13) $(0.13) $(0.06) $(0.13) $(0.16)
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.10 2.19 1.76 2.99 (1.77) (6.70)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.06 $2.06 $1.63 $2.93 $(1.90) $(6.86)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $-- $-- $-- $-- $-- $(5.80)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.86 $18.80 $16.74 $15.11 $12.18 $14.08
- --------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 16.28(n) 12.31 10.79(b)(q ) 24.06(j) (13.49) (31.45)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.29(a) 2.34 2.35 2.34 2.32 2.27
Expenses after expense reductions (f) 2.29(a) 2.34 2.35 2.34 2.32 2.27
Net investment loss (0.41)(a) (0.69) (0.81) (0.47) (0.91) (0.92)
Portfolio turnover 55 92 163 93 130 112
Net assets at end of period
(000 Omitted) $21,820 $20,924 $21,945 $24,777 $24,035 $44,241
- --------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 10/31
ENDED ----------------------------------------------------------------------
CLASS I 4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $20.46 $18.04 $16.11 $12.86 $14.71 $27.71
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.07 $0.06 $0.04 $0.07 $0.02 $0.01
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.38 2.36 1.89 3.18 (1.87) (6.97)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.45 $2.42 $1.93 $3.25 $(1.85) $(6.96)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $-- $-- $-- $-- $-- $(6.04)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.91 $20.46 $18.04 $16.11 $12.86 $14.71
- --------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.86(n) 13.41 11.98(b)(q ) 25.27(j) (12.64) (30.77)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.29(a) 1.34 1.34 1.33 1.32 1.27
Expenses after expense reductions (f) 1.29(a) 1.34 1.34 1.33 1.32 1.27
Net investment income 0.60(a) 0.31 0.21 0.53 0.16 0.08
Portfolio turnover 55 92 163 93 130 112
Net assets at end of period
(000 Omitted) $7,922 $7,233 $7,011 $6,249 $5,207 $6,085
- --------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 10/31
ENDED --------------------------------------
CLASS R 4/30/06 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $19.95 $17.68 $15.87 $12.63
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.02 $(0.03) $(0.02) $0.03
Net realized and unrealized gain (loss) on
investments and foreign currency 3.28 2.30 1.83 3.21
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.30 $2.27 $1.81 $3.24
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.25 $19.95 $17.68 $15.87
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.54(n) 12.84 11.41(b)(q) 25.65(j)(n)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.79(a) 1.85 1.83 1.78(a)
Expenses after expense reductions (f) 1.79(a) 1.85 1.83 1.78(a)
Net investment income (loss) 0.14(a) (0.16) (0.10) 0.21(a)
Portfolio turnover 55 92 163 93
Net assets at end of period (000 Omitted) $4,317 $3,641 $1,194 $385
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
CLASS R1 ENDED 4/30/06 10/31/05(i)
(UNAUDITED)
Net asset value, beginning of period $18.96 $18.12
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.05) $(0.08)
Net realized and unrealized gain (loss) on investments
and foreign currency 3.12 0.92(g)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.07 $0.84
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $22.03 $18.96
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.19(n) 4.64(n)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.49(a) 2.54(a)
Expenses after expense reductions (f) 2.39(a) 2.52(a)
Net investment loss (0.46)(a) (0.77)(a)
Portfolio turnover 55 92
Net assets at end of period (000 Omitted) $121 $104
- ----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEAR ENDED
CLASS R2 ENDED 4/30/06 10/31/05(i)
(UNAUDITED)
Net asset value, beginning of period $18.99 $18.12
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.01) $(0.08)
Net realized and unrealized gain (loss) on investments
and foreign currency 3.13 0.95(g)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.12 $0.87
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $22.11 $18.99
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.43(n) 4.80(n)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.19(a) 2.24(a)
Expenses after expense reductions (f) 2.04(a) 2.20(a)
Net investment loss (0.14)(a) (0.71)(a)
Portfolio turnover 55 92
Net assets at end of period (000 Omitted) $247 $213
- ----------------------------------------------------------------------------------------------------------------------------
YEARS ENDED 10/31
SIX MONTHS ------------------------------
CLASS R3 ENDED 4/30/06 2005 2004
(UNAUDITED)
Net asset value, beginning of period $19.85 $17.63 $15.87
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.01 $(0.06) $(0.07)
Net realized and unrealized gain (loss) on investments and
foreign currency 3.26 2.28 1.83
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.27 $2.22 $1.76
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.12 $19.85 $17.63
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.47(n) 12.59 11.09(b)(q)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.04(a) 2.10 2.08
Expenses after expense reductions (f) 1.94(a) 2.09 2.08
Net investment income (loss) 0.05(a) (0.29) (0.45)
Portfolio turnover 55 92 163
Net assets at end of period (000 Omitted) $612 $466 $239
- ----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEAR ENDED
CLASS R4 ENDED 4/30/06 10/31/05(i)
(UNAUDITED)
Net asset value, beginning of period $20.08 $19.10
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.12 $0.02
Net realized and unrealized gain (loss) on investments
and foreign currency 3.21 0.96(g)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.33 $0.98
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.41 $20.08
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.58(n) 5.13(n)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.69(a) 1.75(a)
Expenses after expense reductions (f) 1.69(a) 1.75(a)
Net investment income 1.24(a) 0.20(a)
Portfolio turnover 55 92
Net assets at end of period (000 Omitted) $1,181 $53
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
CLASS R5 ENDED 4/30/06 10/31/05(i)
(UNAUDITED)
Net asset value, beginning of period $20.11 $19.10
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.06 $0.06
Net realized and unrealized gain (loss) on investments
and foreign currency 3.32 0.95(g)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.38 $1.01
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $23.49 $20.11
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.81(n) 5.29(n)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.39(a) 1.45(a)
Expenses after expense reductions (f) 1.39(a) 1.45(a)
Net investment income 0.53(a) 0.50(a)
Portfolio turnover 55 92
Net assets at end of period (000 Omitted) $61 $53
- ----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
(a) Annualized.
(b) The fund's net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales. The non-recurring accrual did not have a material impact on the
net asset value per share based on the shares outstanding on the day the
proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) The per share amount is not in accordance with the net realized and
unrealized gain/loss for the period because of the timing of sales of fund
shares and the amount of per share realized and unrealized gains and losses
at such time.
(i) For the period from the class' inception, December 31, 2002 (Class R) and
April 1, 2005 (Classes R1, R2, R4, and R5) through the stated period end.
(j) The fund's net asset value and total return calculation include proceeds
received on March 26, 2003 for the partial payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.07 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the ending
net asset value per share, total return for the year ended October 31, 2003
for Class A, Class B, Class C, Class I and Class R would have been would
have been 0.47%, 0.56%, 0.58%, 0.54%, and 0.55% lower, respectively.
(n) Not annualized.
(q) The fund's net asset value and total return calculation include proceeds
received on March 19, 2004 for the remaining payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.01 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the ending
net asset value per share, total return for the year ended October 31, 2004
for Class A, Class B, Class C, Class I, Class R and Class R3 would have been
0.05%, 0.05%, 0.06%, 0.05%, 0.06%, and 0.05% lower, respectively.
(r) Certain expenses have been reduced without which performance would have been
lower.
(s) From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Global Growth Fund (the fund) is a 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 U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The fund can
invest in foreign securities, including securities of emerging market issuers.
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. The
markets of emerging markets countries are generally more volatile than the
markets of developed countries with more mature economies. All of the risks of
investing in foreign securities previously described are heightened when
investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales reported
that day, equity securities are generally valued at the last quoted daily bid
quotation as reported by an independent pricing service on the market or
exchange on which they are primarily traded. Short-term instruments with a
maturity at issuance of 397 days or less are generally valued at amortized cost,
which approximates market value. Open-end investment companies are generally
valued at their net asset value per share. Securities and other assets generally
valued on the basis of information from an independent pricing service may also
be valued at a broker-dealer bid quotation. The values of foreign securities and
other assets and liabilities expressed in foreign currencies are converted to
U.S. dollars using the mean of bid and asked prices for rates reported by an
independent pricing service. The Board of Trustees has delegated primary
responsibility for determining or causing to be determined the value of the
fund's investments (including any fair valuation) to the adviser pursuant to
valuation policies and procedures approved by the Board. If the adviser
determines that reliable market quotations are not readily available,
investments are valued at fair value as determined in good faith by the adviser
in accordance with such procedures under the oversight of the Board of Trustees.
Under the fund's valuation policies and procedures, market quotations are not
considered to be readily available for many types of debt instruments. These
investments are generally valued at fair value based on information from
independent pricing services. These valuations can be based on both
dealer-supplied valuations and electronic data processing techniques, which take
into account 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. The adviser may rely on independent
pricing services or other information (such as the correlation with price
movements of similar securities in the same or other markets; the type, cost and
investment characteristics of the security; the business and financial condition
of the issuer; and trading and other market data) to assist in determining
whether to fair value and at what value to fair value an investment. The value
of an investment for purposes of calculating the fund's net asset value can
differ depending on the source and method used to determine value. When fair
valuation is used, the value of investments used to determine the fund's net
asset value may differ from quoted or published prices for the same investments.
In addition, investments may be valued at fair value if the adviser determines
that an investment's value has been materially affected by events occurring
after the close of the exchange or market on which the investment is principally
traded (such as foreign exchange or market) and prior to the determination of
the fund's net asset value, or after the halting of trading of a specific
security where trading does not resume prior to the close of the exchange or
market on which the security is principally traded. Events that occur on a
frequent basis after foreign markets close (such as developments in foreign
markets and significant movements in the U.S. markets) and prior to the
determination of the fund's net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
fund's foreign equity securities may often be valued at fair value.
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 - 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. On loans
collateralized by cash, the cash collateral is invested in a money market fund
or 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. Income from securities lending is included in
interest income on the Statement of Operations. The dividend and interest income
earned on the securities loaned is accounted for in the same manner as other
dividend and interest income.
SHORT TERM FEES - For purchases made on or after July 1, 2004 and before April
1, 2005, the fund charged a 2% redemption fee on proceeds from Class A, Class B,
Class C, and Class I shares redeemed or exchanged within 5 business days
following their acquisition. Due to systems limitations associated with the
transition from applying a 30 calendar day redemption fee to a 5 business day
redemption fee, the fund did not impose redemption fees with respect to
purchases made in June 2004 followed by redemptions made in July 2004. Effective
April 1, 2005, the fund no longer charges a redemption fee. See the fund's
prospectus for details. Any redemption fees charged are accounted for as an
addition to paid-in capital.
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 U.S. 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. Certain dividends from
foreign securities will be recorded when the fund is informed of the dividend if
such information is obtained subsequent to 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.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss in
the Statement of Operations, or in unrealized gain/loss if the security is still
held by the fund.
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 six months ended April 30, 2006 the fund's custodian fees were
reduced by $13,947 under this arrangement. The fund has entered into a
commission recapture agreement, under which certain brokers will credit the fund
a portion of the commissions generated, to offset certain expenses of the fund.
For the six months ended April 30, 2006 the fund's custodian expenses were
reduced by $3,634 under this agreement. These amounts are shown as a reduction
of total expenses on the Statement of Operations. Effective January 1, 2006, the
commission recapture agreement was terminated.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to continue to qualify as a
regulated investment company, as defined under Subchapter M of the Internal
Revenue Code, and to distribute all of its taxable income, including realized
capital gains. Accordingly, no provision for federal income tax is required in
the financial statements. Foreign taxes, if any, have been accrued by the fund
in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
Certain capital accounts in the financial statements are periodically adjusted
for permanent differences in order to reflect their tax character. These
adjustments have no impact on net assets or net asset value per share. Temporary
differences which arise from recognizing certain items of income, expense, gain
or loss in different periods for financial statement and tax purposes will
reverse at some time in the future. Distributions in excess of net investment
income or net realized gains are temporary overdistributions for financial
statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to net operating losses, wash sale loss
deferrals, and foreign currency transactions.
The fund declared no distributions for the years ended October 31, 2005 and
October 31, 2004.
The federal tax cost and the tax basis components of distributable earnings were
as follows:
AS OF APRIL 30, 2006
Cost of investments $463,998,123
---------------------------------------------------------------
Gross appreciation $72,538,678
Gross depreciation (6,932,315)
---------------------------------------------------------------
Net unrealized appreciation (depreciation) $65,606,363
AS OF OCTOBER 31, 2005
Capital loss carryforwards (135,205,196)
Other temporary differences (54,246)
Net unrealized appreciation (depreciation) 50,530,115
The aggregate cost above includes prior fiscal year end tax adjustments.
As of October 31, 2005, the fund had available capital loss carryforwards to
offset future realized gains. Such losses expire as follows:
October 31, 200 $(26,094,462)
October 31, 2010 (95,953,969)
October 31, 2011 (13,156,765)
---------------------------------------------------------------
$(135,205,196)
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 daily net assets 0.90%
Next $1 billion of average daily net assets 0.75%
Average daily net assets in excess of $2 billion 0.65%
The management fee incurred for the six months ended April 30, 2006 was
equivalent to an annual effective rate of 0.90% of the fund's average daily net
assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $8,258 for the six months ended April 30, 2006 as
its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the distribution
and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee
paid to MFD. MFD may subsequently pay all, or a portion, of the distribution
and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) FEE
Class A 0.10% 0.25% 0.35% 0.25% $531,541
Class B 0.75% 0.25% 1.00% 1.00% 448,576
Class C 0.75% 0.25% 1.00% 1.00% 107,828
Class R 0.25% 0.25% 0.50% 0.50% 9,995
Class R1 0.50% 0.25% 0.75% 0.75% 416
Class R2 0.25% 0.25% 0.50% 0.50% 589
Class R3 0.25% 0.25% 0.50% 0.50% 1,297
Class R4 -- 0.25% 0.25% 0.25% 530
- -------------------------------------------------------------------------------
Total Distribution and Service Fees $1,100,772
----------
(1) In accordance with the distribution plan for certain classes, the fund pays
distribution and/or service fees up to these annual percentage rates of each
class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the
distribution plan for the six months ended April 30, 2006 based on each
class' average daily net assets. 0.10% of the Class A distribution fee is
currently being waived under a contractual waiver arrangement. For the six
months ended April 30, 2006 this waiver amounted to $151,869 and is
reflected as a reduction of total expenses in the Statement of Operations.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months of purchase.
Class B shares are subject to a contingent deferred sales charge in the event of
a shareholder redemption within six years of purchase. All contingent deferred
sales charges are paid to MFD and during the six months ended April 30, 2006
were as follows:
AMOUNT
Class A $5,344
Class B $49,380
Class C $998
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS. MFSC
receives a fee from the fund, for its services as shareholder servicing agent,
set periodically under the supervision of the fund's Board of Trustees. For the
six months ended April 30, 2006 the fee was $204,485, which equated to 0.0956%
annually of the fund's average daily net assets. MFSC also receives payment from
the fund for out-of-pocket and sub-accounting expenses paid by MFSC on behalf of
the fund. For the six months ended April 30, 2006 these costs amounted to
$123,464.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. From July 1, 2005 through March 31, 2006, the fund's annual fixed amount
was $10,000. Effective April 1, 2006, the fund's annual fixed amount is $17,500.
The administrative services fee incurred for the six months ended April 30, 2006
was equivalent to an annual effective rate of 0.0129% of the fund's average
daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares, and
may be provided directly by MFS or by a third party. MFS may subsequently pay
all, or a portion, of the retirement plan administration and services fee to
affiliated or unaffiliated third parties. For the six months ended April 30,
2006, the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily net
assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(1) AMOUNT
Class R1 0.45% 0.35% $249
Class R2 0.40% 0.25% 471
Class R3 0.25% 0.15% 649
Class R4 0.15% 0.15% 318
Class R5 0.10% 0.10% 29
- -------------------------------------------------------------------------------
Total Retirement Plan Administration and Services Fees $1,716
------
(1) Effective October 1, 2005, MFS has contractually agreed to waive a portion
of the retirement plan administration and services fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
This agreement will continue until at least September 30, 2007. For the six
months ended April 30, 2006 this waiver amounted to $492 and is reflected as
a reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to Independent
Trustees in the form of a retainer, attendance fees, and additional compensation
to Board and Committee chairpersons. The fund does not pay compensation directly
to Trustees or officers of the fund who are also officers of the investment
adviser, 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,
MFD, and MFSC. The fund has an unfunded, defined benefit plan for retired
Independent Trustees which resulted in a pension expense of $1,509. The fund
also has an unfunded retirement benefit deferral plan for certain current
Independent Trustees which resulted in an expense of $2,702. Both amounts are
included in Independent trustees' compensation for the six months ended April
30, 2006. The deferred liability for retirement benefits payable to retired
Trustees and certain current Trustees amounted to $20,042 and $26,600,
respectively, at April 30, 2006 and is included in payable for independent
trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
funds and the sole member of Tarantino LLC. The funds can terminate the
Agreement with Tarantino LLC at any time under the terms of the Agreement. For
the six months ended April 30, 2006 the fee paid to Tarantino LLC was $1,798.
MFS has agreed to reimburse the fund for a portion of the payments made by the
funds to Tarantino LLC in the amount of $1,473, which is shown as a reduction of
total expenses in the Statement of Operations. Additionally, MFS has agreed to
bear all expenses associated with office space, other administrative support,
and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$235,851,459 and $280,475,175, respectively.
(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
APRIL 30, 2006 OCTOBER 31, 2005 (i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 1,035,600 $22,876,842 2,363,476 $45,304,341
Class B 302,524 6,316,653 610,157 11,088,823
Class C 50,378 1,048,366 142,008 2,535,644
Class I 21,676 490,569 38,353 752,968
Class R 26,708 586,393 156,585 2,986,933
Class R1 240 5,043 6,108 112,095
Class R2 1,257 25,987 11,233 211,284
Class R3 4,999 111,448 45,856 891,112
Class R4 51,157 1,147,319 2,618 50,000
Class R5 -- -- 2,618 50,000
- ------------------------------------------------------------------------------------------
1,494,539 $32,608,620 3,379,012 $63,983,200
Shares reacquired
Class A (2,158,173) $(47,517,931) (5,055,375) $(97,458,855)
Class B (924,928) (19,295,382) (2,420,779) (44,235,419)
Class C (165,120) (3,400,433) (340,162) (6,147,379)
Class I (43,843) (996,478) (73,476) (1,468,991)
Class R (23,576) (515,906) (41,589) (800,438)
Class R1 (223) (4,524) (647) (11,688)
Class R2 (1,321) (27,931) -- --
Class R3 (1,981) (44,374) (35,958) (695,744)
Class R4 (3,332) (76,008) -- --
- -------------------------------------------------------------------------------------------
(3,322,497) $(71,878,967) (7,967,986) $(150,818,514)
Net change
Class A (1,122,573) $(24,641,089) (2,691,899) $(52,154,514)
Class B (622,404) (12,978,729) (1,810,622) (33,146,596)
Class C (114,742) (2,352,067) (198,154) (3,611,735)
Class I (22,167) (505,909) (35,123) (716,023)
Class R 3,132 70,487 114,996 2,186,495
Class R1 17 519 5,461 100,407
Class R2 (64) (1,944) 11,233 211,284
Class R3 3,018 67,074 9,898 195,368
Class R4 47,825 1,071,311 2,618 50,000
Class R5 -- -- 2,618 50,000
- -------------------------------------------------------------------------------------------
(1,827,958) $(39,270,347) (4,588,974) $(86,835,314)
(i) For the period from the class' inception, April 1, 2005 (Classes R1, R2, R4,
and R5) through the stated period end.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 Federal Reserve funds
rate plus 0.35%. 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 calendar quarter. The commitment fee allocated to the fund
for the six months ended April 30, 2006 was $1,474, and is included in
miscellaneous expense on the Statement of Operations. The fund had no
significant borrowings during the six months ended April 30, 2006.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- --------------------------------------------------------------------------------
Share prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc., 500
Boylston Street, Boston, MA 02116.
WGF-SEM-6/06 32M
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph (b)
of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act")) 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 required 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 changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by the report that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) 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.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) 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)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(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.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of the Commonwealth of Massachusetts and notice
is hereby given that this instrument is executed on behalf of the Registrant by
an officer of the Registrant as an officer and not individually and the
obligations of or arising out of this instrument are not binding upon any of the
Trustees or shareholders individually, but are binding only upon the assets and
property of the respective constituent series of the Registrant.
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: June 23, 2006
-------------
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: June 23, 2006
-------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: June 23, 2006
-------------
* Print name and title of each signing officer under his or her signature.