<PAGE>
[Logo] MFS(R) ANNUAL REPORT
INVESTMENT MANAGEMENT SEPTEMBER 30, 2000
We Invented the Mutual Fund(R)
[graphic omitted]
MFS(R) INTERNATIONAL
STRATEGIC GROWTH FUND
MFS(R) INTERNATIONAL
VALUE FUND
<PAGE>
<TABLE>
MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
MFS(R) INTERNATIONAL VALUE FUND
<S> <C>
TRUSTEES SECRETARY
J. Atwood Ives+ -- Chairman and Chief Stephen E. Cavan*
Executive Officer, Eastern Enterprises
(diversified services company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ -- Partner, Hemenway
& Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ -- Adjunct Professor,
Harvard University Graduate School of AUDITORS
Business Administration Ernst & Young LLP
Charles W. Schmidt+ -- Private Investor INVESTOR INFORMATION
For information on MFS mutual funds, call your
Arnold D. Scott* -- Senior Executive Vice investment professional or, for an information kit,
President, Director, and Secretary, call toll free: 1-800-637-2929 any business day
MFS Investment Management from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Jeffrey L. Shames* -- Chairman and Chief
Executive Officer, MFS Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Elaine R. Smith+ -- Independent Consultant P.O. Box 2281
Boston, MA 02107-9906
David B. Stone+ -- Chairman
North American Management Corp. For general information, call
(investment adviser) 1-800-225-2606 any business day from 8 a.m.
to 8 p.m. Eastern time.
INVESTMENT ADVISER
Massachusetts Financial Services Company For service to speech- or hearing-impaired, call
500 Boylston Street toll free: 1-800-637-6576 any business day from
Boston, MA 02116-3741 9 a.m. to 5 p.m. Eastern time. (To use this
service, your phone must be equipped with a
DISTRIBUTOR Telecommunications Device for the Deaf.)
MFS Fund Distributors, Inc.
500 Boylston Street For share prices, account balances, exchanges,
Boston, MA 02116-3741 or stock and bond outlooks, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime
CHAIRMAN AND PRESIDENT from a touch-tone telephone.
Jeffrey L. Shames*
WORLD WIDE WEB
PORTFOLIO MANAGERS www.mfs.com
David R. Mannheim*
Frederick J. Simmons*
TREASURER
James O. Yost*
ASSISTANT TREASURERS
Mark E. Bradley*
Robert R. Flaherty*
Laura F. Healy*
Ellen Moynihan*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company, one-
security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes managers will have when they read the daily notes is, "I could
never perform as well at any other investment company, because nowhere else
could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance by
finding opportunities before they are generally recognized by the market, and by
avoiding mistakes whenever possible. Original Research does, we believe, make a
difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
October 16, 2000
A prospectus containing more complete information on any MFS product, including
all charges and expenses, can be obtained from your investment professional.
Please read it carefully before you invest or send money. Investments in mutual
funds will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
International Strategic Growth Fund
Dear Shareholders,
For the 12 months ended September 30, 2000, Class A shares of the fund provided
a total return of 18.63% and Class I shares 18.59%. These returns, which include
the reinvestment of any distributions but exclude the effects of any sales
charges, compare to a 3.42% return over the same period for the fund's
benchmark, the Morgan Stanley Capital International (MSCI) EAFE (Europe,
Australasia, Far East) Index. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index of developed-country global
stock markets, excluding the United States, Canada, and the South African mining
component. During the same period, the average international fund tracked by
Lipper Inc., an independent firm that reports mutual fund performance, returned
10.81%.
The fund's investment objective is capital appreciation through investing mainly
in stocks of companies whose principal activities are outside the United States.
The fund invests in companies of any size but generally invests in established
foreign companies that we believe offer prospects for sustainable, above-average
growth in earnings or cash flow. The fund may also invest in emerging market
companies although we have been cautious on emerging markets and our holdings in
that area tend to be minimal. Because the fund is managed from the bottom up, we
buy stocks regardless of where a company is located. Therefore, our relative
country or regional weightings versus the MSCI EAFE Index are merely the
byproducts of MFS Original Research(R) finding companies that we believe offer
above-average earnings growth or cash flow and are trading at attractive
valuations.
The fund's outperformance over the past 12 months was due to a combination of
strong stock selection and broad sector diversification. Some of our best
performers early in the period were technology, media, and telecommunications
stocks, including Japanese companies Canon and NTT, and German television
broadcaster ProSieben. Beginning last March, however, we witnessed a market
rotation that tended to favor more defensive, steady-earner, slower-growth areas
such as pharmaceuticals, financial services, and energy. Portfolio holdings that
benefited strongly from that environment included pharmaceutical companies
Chugai Pharmaceutical (Japan), Sanofi-Synthelabo (France), and Akzo Nobel
(Netherlands); financial services companies HSBC Holdings (Great Britain) and
QBE Insurance (Australia); and energy services firm Anderson Exploration
(Canada).
Respectfully,
/s/ David R. Mannheim
David R. Mannheim
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK - continued
International Value Fund
Dear Shareholders,
For the 12 months ended September 30, 2000, Class A shares of the fund provided
a total return of 14.22% and Class I shares 13.80%. These returns assume the
reinvestment of any distributions but exclude the effects of any sales charges
and compare over the same period to a 3.42% return for the fund's benchmark,
MSCI EAFE Index. During the same period, the average international fund tracked
by Lipper Inc., returned 10.81%.
The fund's investment objective is capital appreciation through investing
primarily in stocks of companies whose principal activities are outside the
United States. Specifically, the fund focuses on established foreign companies,
many of which pay current dividends and whose stocks we believe are undervalued.
Early in the year, we made a couple of well-timed tactical moves that turned out
to be beneficial to the fund's performance relative to its benchmark. As
technology, media, and telecommunications (TMT) stocks appeared to be reaching
expensive valuations in March of this year, we became wary of the ability of
many of these TMT stocks to meet the aggressive earnings growth that many
investors were factoring into stock prices. It seemed to us that competition was
very tough and capacity was nearing saturation levels, especially in the
telecommunications industry. As a result, we reduced our positions in companies
such as Vodafone, Telefonica, and KPN. These companies produced exceptional
results for the fund last year and during the first quarter of 2000, so we felt
it was time to reduce our positions.
Another factor that aided the fund's results was our decision to buy a broad
range of stocks in the financial services and consumer products sectors. Within
financial services we concentrated on large multiline insurance providers and
asset management companies such as QBE Insurance and American International. In
addition, as TMT stocks were soaring during the first quarter of this year, old
economy stocks such as banks were at what we believed to be very attractive
valuations given their growth outlooks. In our view, the fundamental business
prospects were dramatically improving for banks such as San Paolo Imi, Standard
Chartered, and HSBC Holdings. Fortunately, investors started to recognize these
improving fundamentals, and many of our financial services holdings produced
strong results this year.
Consumer products companies offer another example of stocks that did not
participate in the strong market we experienced over the past few years but that
have performed well this year. Stocks such as Nestle, Anheuser Busch, and Diageo
remained at what we believed were very undervalued levels despite their strong
brands and favorable earnings outlooks. As the market rotated assets out of many
TMT stocks this year, our holdings in consumer products companies benefited.
Despite some mixed signals from the global economy, we continue to see a number
of favorable themes that fuel our optimism regarding international investing.
Demographic shifts such as aging populations in Europe, Japan, and the United
States are contributing to the rise in retirement planning and resulting in the
growing popularity of equity investing. We're also encouraged by the ongoing
acceleration in capital equipment spending, which we believe signifies the
continued improvement in business confidence in many economies. In terms of
structural reforms, we're finding a broad range of companies that are moving to
increase efficiencies and profitability by reducing costs. Many are also forging
strategic alliances with domestic and international companies to boost
profitability.
While uncertainties may persist regarding the pace of global economic growth, we
believe investors will continue to shift their attention away from the
momentum-driven environment of last year to one driven by fundamentals. In this
environment, selectivity and bottom-up research become increasingly important in
finding companies that could deliver strong earnings growth.
Respectfully,
/s/ Frederick J. Simmons
Frederick J. Simmons
Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
PERFORMANCE SUMMARY
Currently each fund offers only Class A and Class I shares, which are available
for purchase at net asset value only by residents of the Commonwealth of
Massachusetts who are employees (or certain relatives of employees) of MFS and
its affiliates or members of the governing boards of the various funds sponsored
by MFS.
The following information illustrates the historical performance of each fund in
comparison to various market indicators. Performance results include the maximum
applicable sales charge and reflect the percentage change in net asset value,
including the reinvestment of dividends. Benchmark comparisons are unmanaged and
do not reflect any fees or expenses. The performance of other share classes will
be greater than or less than the line shown. (See Notes to Performance Summary.)
It is not possible to invest directly in an index.
MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
October 9, 1997, through September 30, 2000. Index information is from October
1, 1997.)
MFS International
Strategic Growth
Fund - Class A MSCI EAFE Index
--------------------------------------------------------------------------------
10/97 $ 9,525 $10,000
9/98 9,220 9,192
9/99 13,257 12,070
9/00 15,727 12,484
TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 2000
CLASS A
1 Year Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +18.63% +65.11%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +18.63% +18.36%
-------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +12.99% +16.44%
-------------------------------------------------------------------------------
CLASS I
1 Year Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +18.59% +65.54%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +18.59% +18.46%
-------------------------------------------------------------------------------
COMPARATIVE INDICES(+)
1 Year Life*
-------------------------------------------------------------------------------
Average international fund** +10.81% + 8.26%
-------------------------------------------------------------------------------
MSCI EAFE Index+ + 3.42% + 7.67%
-------------------------------------------------------------------------------
(+) Average annual rates of return.
* For the period from the commencement of the fund's operations, October 9,
1997, through September 30, 2000.
Index information is from October 1, 1997.
** Source: Lipper Inc.
+ Source: Standard & Poor's Micropal, Inc.
MFS(R) INTERNATIONAL VALUE FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
October 9, 1997, through September 30, 2000. Index information is from October
1, 1997.)
MFS International
Value Fund
- Class A MSCI EAFE Index
--------------------------------------------------------------------------------
9/97 $ 9,525 $10,000
9/98 9,973 9,192
9/99 12,966 12,070
9/00 14,810 12,484
TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 2000
CLASS A
1 Year Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +14.22% +55.48%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +14.22% +15.99%
-------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge + 8.80% +14.11%
-------------------------------------------------------------------------------
CLASS I
1 Year Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +13.80% +55.02%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +13.80% +15.87%
-------------------------------------------------------------------------------
COMPARATIVE INDICES(+)
1 Year Life*
-------------------------------------------------------------------------------
Average international fund** +10.81% + 8.26%
-------------------------------------------------------------------------------
MSCI EAFE Index+ + 3.42% + 7.67%
-------------------------------------------------------------------------------
(+) Average annual rates of return.
* For the period from commencement of the fund's investment operations,
October 9, 1997, through September 30, 2000.
Index information is from October 1, 1997.
** Source: Lipper Inc.
+ Source: Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable subsidies and waivers in effect
during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and
include the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably affected
by changes in interest rates and currency exchange rates, market conditions, and
the economic and political conditions of the countries where investments are
made. These risks may increase share price volatility. See the prospectus for
details.
<PAGE>
PORTFOLIO OF INVESTMENTS - September 30, 2000
MFS INTERNATIONAL STRATEGIC GROWTH FUND
Stocks - 96.1%
------------------------------------------------------------------------------
ISSUER SHARES VALUE
------------------------------------------------------------------------------
Foreign Stocks - 94.0%
Australia - 1.8%
QBE Insurance Group Ltd. (Insurance) 4,945 $ 23,430
------------------------------------------------------------------------------
Bermuda - 0.4%
FLAG Telecom Holdings Ltd. (Telecommunications)* 500 $ 5,500
------------------------------------------------------------------------------
Brazil - 1.6%
Empresa Brasileira de Aeronautica S.A., ADR (Aerospace
and Defense)* 660 $ 20,460
------------------------------------------------------------------------------
Canada - 3.0%
Anderson Exploration Ltd. (Oils)* 440 $ 9,607
BCE, Inc. (Telecommunications) 925 21,517
Nortel Networks Corp. (Telecommunications Equipment) 142 8,514
Stuart Energy Systems Corp. (Energy)* 30 518
----------
$ 40,156
------------------------------------------------------------------------------
Finland - 2.1%
HPY Holding - HTF Holding Oyj Abp (Telecommunications) 774 $ 27,685
------------------------------------------------------------------------------
France - 11.2%
Alcatel (Telecommunications Equipment) 310 $ 19,854
Aventis S.A. (Medical and Health Products) 215 16,144
Bouygues (Media, Telecom, and Construction
Conglomerate) 480 24,212
Bouygues Offshore S.A. (Oil Services) 410 21,370
Sanofi-Synthelabo S.A. (Medical and Health Products) 585 31,473
Technip S.A. (Construction) 160 22,332
Total S.A., "B" (Oils) 90 13,182
----------
$ 148,567
------------------------------------------------------------------------------
Germany - 4.0%
Hornbach Holding AG - Preferred (Retail) 210 $ 9,647
Prosieben Media AG, Preferred (Entertainment) 380 43,472
----------
$ 53,119
------------------------------------------------------------------------------
Japan - 24.5%
Canon, Inc., ADR (Special Products and Services) 1,170 $ 51,773
Chugai Pharmaceutical Co. Ltd. (Medical and
Health Products) 2,000 36,409
Fast Retailing Co. (Retail) 200 40,805
Hitachi Ltd. (Electronics) 3,000 34,888
NTT Mobile Communications Network, Inc.
(Telecommunications) 2 57,498
Pioneer Corp., ADR (Electronics)* 330 13,613
Shionogi & Co., Ltd. (Medical and Health Products) 1,000 18,687
Sony Corp. (Electronics) 300 30,492
Tokyo Broadcasting System, Inc. (Entertainment) 1,000 40,341
----------
$ 324,506
------------------------------------------------------------------------------
Mexico - 1.5%
Grupo Television S.A. de C.V., GDR (Entertainment)* 350 $ 20,191
------------------------------------------------------------------------------
Netherlands - 10.7%
Akzo Nobel N.V. (Chemicals) 1,600 $ 67,562
ING Groep N.V. (Financial Services) 237 15,803
KPN N.V. (Telecommunications)* 610 13,299
Libertel N.V. (Cellular Telecommunications)* 1,130 13,676
Philips Electronics N.V. (Electronics) 717 30,891
----------
$ 141,231
------------------------------------------------------------------------------
Norway - 4.2%
P4 Radio Hele Norge ASA (Broadcasting) 6,300 $ 34,732
Smedvig ASA (Oil Services) 1,040 20,411
----------
$ 55,143
------------------------------------------------------------------------------
Portugal - 1.0%
Telecel - Comunicacoes Pessoais, S.A.
(Telecommunications) 1,040 $ 13,055
------------------------------------------------------------------------------
Singapore - 4.7%
Overseas Union Bank Ltd. (Banks and Credit Cos.) 6,142 $ 28,612
Overseas-Chinese Banking Corp. Ltd.
(Banks and Credit Cos.) 3,000 18,979
Singapore Press Holdings Ltd. (Printing and
Publishing) 1,000 15,010
----------
$ 62,601
------------------------------------------------------------------------------
Sweden - 2.4%
Micronic Laser Systems AB (Electronics)* 290 $ 8,812
Saab AB, "B" (Aerospace) 2,800 22,289
----------
$ 31,101
------------------------------------------------------------------------------
Switzerland - 4.9%
Novartis AG (Medical and Health Products) 27 $ 41,469
Synthes-Stratec, Inc. (Medical and Health Products)* 34 22,712
----------
$ 64,181
------------------------------------------------------------------------------
United Kingdom - 16.0%
AstraZeneca Group PLC (Medical and Health Products) 470 $ 24,698
BP Amoco PLC (Oils) 1,610 14,332
Carlton Communications PLC (Broadcasting) 1,850 14,444
Diageo PLC (Food and Beverage Products) 3,033 27,111
HSBC Holdings PLC (Banks and Credit Cos.) 2,000 28,450
Reckitt Benckiser PLC (Consumer Goods and Services) 1,340 16,377
Royal Bank of Scotland PLC (Banks and Credit Cos.) 700 14,781
Standard Chartered PLC (Banks and Credit Cos.) 1,320 19,226
Vodafone Group PLC (Telecommunications) 14,101 52,649
----------
$ 212,068
------------------------------------------------------------------------------
Total Foreign Stocks $1,242,994
------------------------------------------------------------------------------
U.S. Stocks - 2.1%
Telecommunications - 2.1%
NTL, Inc.* 520 $ 24,082
Voicestream Wireless Corp.* 30 3,482
------------------------------------------------------------------------------
Total U.S. Stocks $ 27,564
------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,143,902) $1,270,558
------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,143,902) $1,270,558
Other Assets, Less Liabilities - 3.9% 52,201
------------------------------------------------------------------------------
Net Assets - 100.0% $1,322,759
------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS - September 30, 2000
MFS INTERNATIONAL VALUE FUND
Stocks - 94.4%
------------------------------------------------------------------------------
ISSUER SHARES VALUE
------------------------------------------------------------------------------
Foreign Stocks - 69.9%
Australia - 3.6%
Australia & New Zealand Banking Group Ltd.
(Banks and Credit Cos.)* 1,276 $ 9,176
Broken Hill Proprietary Co. Ltd. (Mining) 500 5,185
QBE Insurance Group Ltd. (Insurance) 4,287 20,312
--------
$ 34,673
------------------------------------------------------------------------------
Brazil - 1.0%
Empresa Brasileira de Aeronautica S.A., ADR
(Aerospace and Defense) 310 $ 9,610
------------------------------------------------------------------------------
Canada - 3.8%
BCE, Inc. (Telecommunications) 130 $ 3,039
Canadian National Railway Co. (Railroads) 360 10,552
Manitoba Telecom Services (Telecommunications) 300 6,023
Nortel Networks Corp. (Telecommunications Equipment) 284 16,916
--------
$ 36,530
------------------------------------------------------------------------------
Denmark - 0.6%
ISS International Service System (Commercial
Services)* 100 $ 6,217
------------------------------------------------------------------------------
France - 11.8%
Aventis S.A. (Pharmaceuticals) 130 $ 9,762
Axa (Insurance) 60 7,845
Castorama Dubois Investisse (Stores) 88 19,435
Pin Printemps Redo (Retailer) 48 8,459
Sanofi-Synthelabo S.A. (Medical and Health Products) 212 11,405
Societe Television Francaise 1 (Entertainment) 470 26,988
STMicroelectronics N.V. (Electronics) 275 13,495
Total Fina S.A., ADR (Oils) 202 14,834
--------
$112,223
------------------------------------------------------------------------------
Germany - 2.3%
Henkel KGaA, Preferred (Chemicals) 177 $ 10,681
Prosieben Media AG, Preferred (Entertainment) 100 11,440
--------
$ 22,121
------------------------------------------------------------------------------
Hong Kong - 1.7%
China Mobile (Hong Kong) Ltd. (Telecommunications)* 2,500 $ 16,675
------------------------------------------------------------------------------
Italy - 1.6%
San Paolo - Imi S.p.A. (Banks and Credit Cos.) 930 $ 15,133
------------------------------------------------------------------------------
Japan - 8.0%
Fujitsu Ltd. (Computer Hardware - Systems) 1,000 $ 23,278
Hitachi Ltd. (Electronics) 1,000 11,630
Mitsubishi Electric Corp. (Electronics) 1,000 8,300
Sony Corp. (Electronics) 100 10,164
Terumo Corp. (Hospital and Medical Equipment) 300 8,597
Tokyo Gas Co. Ltd. (Gas) 2,000 5,323
Victor Company of Japan (Electronics) 1,000 8,578
--------
$ 75,870
------------------------------------------------------------------------------
Mexico - 1.4%
Fomento Economico Mexicano S.A. (Food and Beverage
Products) 130 $ 5,070
Grupo Television S.A. de C.V., GDR (Entertainment)* 140 8,076
--------
$ 13,146
------------------------------------------------------------------------------
Netherlands - 7.3%
Akzo Nobel N.V. (Chemicals) 583 $ 24,618
ING Groep N.V. (Financial Services) 216 14,403
KPN N.V. (Telecommunications)* 201 4,382
Royal Dutch Petroleum Co., ADR (Oils) 433 25,953
--------
$ 69,356
------------------------------------------------------------------------------
Norway - 0.3%
Schibsted ASA (Publishing) 160 $ 2,814
------------------------------------------------------------------------------
Spain - 5.1%
Altadis S.A. (Tobacco) 1,417 $ 20,091
Cortefiel S.A. (Retail) 560 11,507
Repsol S.A. (Oils) 370 6,815
Telefonica S.A. (Telecommunications)* 504 9,995
--------
$ 48,408
------------------------------------------------------------------------------
Sweden - 2.0%
Saab AB, "B" (Aerospace) 1,533 $ 12,203
Skandia Forsakrings AB (Insurance) 324 6,440
--------
$ 18,643
------------------------------------------------------------------------------
Switzerland - 3.1%
Nestle S.A. (Food and Beverage Products) 11 $ 22,951
Serono S. A. (Biotechnology)* 220 6,655
--------
$ 29,606
------------------------------------------------------------------------------
United Kingdom - 16.3%
AstraZeneca Group PLC (Medical and Health Products) 214 $ 11,246
BAE Systems PLC (Aerospace)* 236 1,274
Boots Co. PLC (Retail)* 970 7,344
BP Amoco PLC, ADR (Oils) 376 19,928
British Telecommunications PLC (Telecommunications) 623 6,550
Carlton Communications PLC (Broadcasting) 704 5,496
CGU PLC (Insurance)* 987 14,011
Diageo PLC (Food and Beverage Products) 2,088 18,664
HSBC Holdings PLC (Banks and Credit Cos.) 1,250 17,781
Reckitt Benckiser PLC (Consumer Goods and Services) 560 6,844
Reuters Group PLC (Business Services) 1,065 20,189
Standard Chartered PLC (Banks and Credit Cos.) 445 6,481
Vodafone Group PLC (Telecommunications) 5,188 19,371
--------
$155,179
------------------------------------------------------------------------------
Total Foreign Stocks $666,204
------------------------------------------------------------------------------
U.S. Stocks - 24.5%
Aerospace - 2.1%
Boeing Co. 310 $ 19,530
------------------------------------------------------------------------------
Automotive - 0.2%
Delphi Automotive Systems Corp. 118 $ 1,785
------------------------------------------------------------------------------
Biotechnology - 2.2%
Pharmacia Corp. 354 $ 21,306
------------------------------------------------------------------------------
Business Machines - 2.6%
Hewlett-Packard Co. 260 $ 25,220
------------------------------------------------------------------------------
Business Services - 1.2%
Computer Sciences Corp.* 140 $ 10,395
United Parcel Service, Inc. 20 1,127
--------
$ 11,522
------------------------------------------------------------------------------
Conglomerates - 1.4%
Tyco International Ltd. 258 $ 13,384
------------------------------------------------------------------------------
Consumer Goods and Services - 1.0%
Philip Morris Cos., Inc. 313 $ 9,214
------------------------------------------------------------------------------
Electrical Equipment - 1.6%
General Electric Co. 270 $ 15,576
------------------------------------------------------------------------------
Financial Institutions - 0.6%
Goldman Sachs Group, Inc. 50 $ 5,697
------------------------------------------------------------------------------
Food and Beverage Products - 2.0%
Anheuser-Busch Cos., Inc. 452 $ 19,125
------------------------------------------------------------------------------
Insurance - 3.9%
American International Group, Inc. 210 $ 20,094
MetLife, Inc.* 200 5,238
St. Paul Cos., Inc. 240 11,835
--------
37,167
------------------------------------------------------------------------------
Machinery - 1.1%
Deere & Co., Inc. 200 $ 6,650
Ingersoll Rand Co. 100 3,388
--------
$ 10,038
------------------------------------------------------------------------------
Medical and Health Products - 1.2%
American Home Products Corp. 200 $ 11,312
------------------------------------------------------------------------------
Metals and Minerals - 0.5%
Alcoa, Inc. 200 $ 5,063
------------------------------------------------------------------------------
Oil Services - 1.4%
Halliburton Co. 280 $ 13,702
------------------------------------------------------------------------------
Utilities - Telephone - 1.5%
Verizon Communications 300 $ 14,531
------------------------------------------------------------------------------
Total U.S. Stocks $234,172
------------------------------------------------------------------------------
Total Investments (Identified Cost, $804,770) $900,376
Other Assets, Less Liabilities - 5.6% $ 52,945
------------------------------------------------------------------------------
Net Assets - 100.0% $953,321
------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
-----------------------------------------------------------------------------------------------------
INTERNATIONAL INTERNATIONAL
STRATEGIC VALUE
SEPTEMBER 30, 2000 GROWTH FUND FUND
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $1,143,902 and
$804,770, respectively) $1,270,558 $ 900,376
Cash 19,846 54,554
Foreign currency, at value (identified cost $7,630 and $2,689,
respectively) 7,507 2,593
Receivable for investments sold 81,565 5,681
Interest and dividends receivable 2,726 1,619
---------- ----------
Total assets $1,382,202 $ 964,823
---------- ----------
Liabilities:
Payable for investments purchased $ 59,317 $ 11,410
Payable to affiliate for reimbursement fee 126 92
---------- ----------
Total liabilities $ 59,443 $ 11,502
---------- ----------
Net assets $1,322,759 $ 953,321
========== ==========
Net assets consist of:
Paid-in-capital $ 993,111 $ 712,667
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 126,371 95,479
Accumulated undistributed net realized gain on investments and
foreign currency transactions 195,342 136,325
Accumulated undistributed net investment income 7,935 8,850
---------- ----------
Total $1,322,759 $ 953,321
========== ==========
Shares of beneficial interest outstanding:
Class A 34,822 81,565
Class I 64,420 12.977
---------- ----------
Total shares of beneficial interest outstanding 99,242 81,578
========== ==========
Net assets:
Class A $ 463,279 $ 953,169
Class I 859,480 152
---------- ----------
Total net assets $1,322,759 $ 953,321
========== ==========
Class A shares:
Net asset value and redemption price per share
(net assets / shares of beneficial interest outstanding) $13.30 $11.69
====== ======
Offering price per share
(100/95.25 of net asset value per share) $13.96 $12.27
====== ======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest outstanding) $13.34 $11.67
====== ======
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statements of Operations
-----------------------------------------------------------------------------------------------------
INTERNATIONAL INTERNATIONAL
STRATEGIC VALUE
YEAR ENDED SEPTEMBER 30, 2000 GROWTH FUND FUND
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss):
Income -
Dividends $ 38,324 $ 29,926
Interest 4,451 4,922
Foreign taxes withheld (3,640) (2,369)
---------- ----------
Total investment income $ 39,135 $ 32,479
---------- ----------
Expenses -
Management fee $ 16,902 $ 9,987
Shareholder servicing agent fee 1,733 1,024
Distribution and service fee (Class A) 1,908 4,900
Administrative fee 249 141
Custodian fee 14,636 10,769
Printing 8,760 1,618
Postage 121 --
Auditing fees 20,149 20,024
Legal fees 185 734
Miscellaneous 3,760 2,590
---------- ----------
Total expenses $ 68,403 $ 51,787
Fees paid indirectly -- (310)
Reduction of expenses by investment adviser and distributor (38,067) (33,551)
---------- ----------
Net expenses $ 30,336 $ 17,926
---------- ----------
Net investment income $ 8,799 $ 14,553
---------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 203,137 $ 142,660
Foreign currency transactions (665) (1,001)
---------- ----------
Net realized gain on investments and foreign currency
transactions $ 202,472 $ 141,659
---------- ----------
Change in unrealized appreciation (depreciation) -
Investments $ 93,951 $ (6,267)
Translation of assets and liabilities in foreign currencies (305) (29)
---------- ----------
Net unrealized gain (loss) on investments and foreign
currency translation $ 93,646 $ (6,296)
---------- ----------
Net realized and unrealized gain on investments and
foreign currency $ 296,118 $ 135,363
---------- ----------
Increase in net assets from operations $ 304,917 $ 149,916
========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
----------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
INTERNATIONAL STRATEGIC GROWTH FUND SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 8,799 $ 2,131
Net realized gain on investments and foreign currency
transactions 202,472 270,480
Net unrealized gain on investments and foreign currency
translation 93,646 84,982
---------- ----------
Increase in net assets from operations $ 304,917 $ 357,593
---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (180) $ (335)
From net investment income (Class I) (841) (3,397)
From net realized gain on investments and foreign currency
transactions (Class A) (48,541) (2,982)
From net realized gain on investments and foreign currency
transactions (Class I) (227,152) (30,212)
---------- ----------
Total distributions declared to shareholders $ (276,714) $ (36,926)
---------- ----------
Net increase (decrease) in net assets from fund share transactions $ 25,986 $ (17,817)
---------- ----------
Total increase in net assets $ 54,189 $ 302,850
Net assets:
At beginning of year 1,268,570 965,720
---------- ----------
At end of year (including accumulated undistributed net
investment income of $7,935 and $822, respectively) $1,322,759 $1,268,570
========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets - continued
-----------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
INTERNATIONAL VALUE FUND SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 14,553 $ 95
Net realized gain on investments and foreign currency
transactions 141,659 234,923
Net unrealized gain (loss) on investments and foreign
currency translation (6,296) 75,336
---------- ----------
Increase in net assets from operations $ 149,916 $ 310,354
---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (4,280) $ (9,628)
From net investment income (Class I) (286) (1,179)
In excess of net investment income (Class A) -- (618)
In excess of net investment income (Class I) -- (76)
From net realized gain on investments and foreign currency
transactions (Class A) (212,682) (20,108)
From net realized gain on investments and foreign currency
transactions (Class I) (14,192) (2,464)
---------- ----------
Total distributions declared to shareholders $ (231,440) $ (34,073)
---------- ----------
Net decrease in net assets from fund share transactions $ (99,034) $ (256,745)
---------- ----------
Total increase (decrease) in net assets $ (180,558) $ 19,536
Net assets:
At beginning of year 1,133,879 1,114,343
---------- ----------
At end of year (including accumulated undistributed net
investment income and accumulated net investment loss of
$8,850 and $666, respectively) $ 953,321 $1,133,879
========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL STRATEGIC GROWTH FUND
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998*
----------------------------------------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $13.44 $ 9.68 $10.00
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.08 $ 0.05 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency 2.35 4.08 (0.36)
------ ------ ------
Total from investment operations $ 2.43 $ 4.13 $(0.32)
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.01) $(0.04) $ --
From net realized gain on investments and foreign
currency transactions (2.56) (0.33) --
------ ------ ------
Total distributions declared to shareholders $(2.57) $(0.37) $ --
------ ------ ------
Net asset value - end of period $13.30 $13.44 $ 9.68
====== ====== ======
Total return 18.63% 43.79% (3.20)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.75% 1.78% 1.77%+
Net investment income 0.55% 0.44% 0.34%+
Portfolio turnover 137% 175% 103%
Net assets at end of period (000 Omitted) $463 $253 $90
(S) Subject to reimbursement by the fund, the investment adviser has voluntarily agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management and distribution and service fees. In
consideration, the fund pays the investment adviser a fee not greater than 1.75% of average daily net assets. In addition, the
investment adviser and the distributor voluntarily waived their fees for the periods indicated. To the extent actual expenses
were over this limitation and the waivers had not been in place, the net investment loss per share and the ratios would have
been:
Net investment loss $(0.28) $(0.39) $(0.20)
Ratios (to average net assets):
Expenses## 4.34% 5.23% 3.88%+
Net investment loss (2.04)% (3.01)% (1.79)%+
* For the period from the commencement of the fund's investment operations, October 9, 1997, through September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL STRATEGIC GROWTH FUND
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998*
----------------------------------------------------------------------------------------------------------------------
CLASS I
----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $13.48 $ 9.70 $10.00
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.07 $ 0.02 $ 0.05
Net realized and unrealized gain (loss) on
investments and foreign currency 2.36 4.13 (0.35)
------ ------ ------
Total from investment operations $ 2.43 $ 4.15 $(0.30)
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.01) $(0.04) $ --
From net realized gain on investments and foreign
currency transactions (2.56) (0.33) --
------ ------ ------
Total distributions declared to shareholders $(2.57) $(0.37) $ --
------ ------ ------
Net asset value - end of period $13.34 $13.48 $ 9.70
====== ====== ======
Total return 18.59% 43.91% (3.00)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.75% 1.78% 1.77%+
Net investment income 0.50% 0.16% 0.48%+
Portfolio turnover 137% 175% 103%
Net assets at end of period (000 Omitted) $859 $1,015 $876
(S) Subject to reimbursement by the fund, the investment adviser has voluntarily agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management fee. In consideration, the fund pays the
investment adviser a fee not greater than 1.75% of average daily net assets. In addition, the investment adviser voluntarily
waived its fee for the periods indicated. To the extent actual expenses were over this limitation and the waiver had not been
in place, the net investment loss per share and the ratios would have been:
Net investment loss $(0.22) $(0.36) $(0.13)
Ratios (to average net assets):
Expenses## 3.84% 4.73% 3.38%+
Net investment loss (1.59)% (2.79)% (1.15)%+
* For the period from the commencement of the fund's investment operations, October 9, 1997, through September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL VALUE FUND
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998*
----------------------------------------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $13.24 $10.46 $10.00
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.18 $ -- +++ $ 0.10
Net realized and unrealized gain on investments and
foreign currency 1.57 3.10 0.36
------ ------ ------
Total from investment operations $ 1.75 $ 3.10 $ 0.46
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.07) $(0.10) $ --
From net realized gain on investments and foreign
currency transactions (3.23) (0.21) --
In excess of net investment income -- (0.01) --
------ ------ ------
Total distributions declared to shareholders $(3.30) $(0.32) $ --
------ ------ ------
Net asset value - end of period $11.69 $13.24 $10.46
====== ====== ======
Total return 14.22% 30.01% 4.70%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.79% 1.77% 1.77%+
Net investment income 1.51% --% 0.98%+
Portfolio turnover 77% 107% 71%
Net assets at end of period (000 Omitted) $953 $929 $1,002
(S) Subject to reimbursement by the fund, the investment adviser voluntarily agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management and distribution and service fees. In
consideration, the fund pays the investment adviser a reimbursement fee not greater than 1.75% of average daily net assets. In
addition, the investment adviser and the distributor voluntarily waived their fees for the periods indicated. To the extent
actual expenses were over this limitation and the waivers had not been in place, the net investment loss per share and the
ratios would have been:
Net investment loss $(0.23) $(0.28) $(0.13)
Ratios (to average net assets):
Expenses## 5.09% 4.07% 3.92%+
Net investment loss (1.79)% (2.30)% (1.19)%+
*For the period from the commencement of the fund's investment operations, October 9, 1997, through September 30, 1998.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
---------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL VALUE FUND
---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998*
---------------------------------------------------------------------------------------------------------------------------------
CLASS I
---------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $13.25 $10.47 $10.00
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.02) $ 0.01 $ 0.11
Net realized and unrealized gain on investments and
foreign currency 1.74 3.09 0.36
------ ------ ------
Total from investment operations $ 1.72 $ 3.10 $ 0.47
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.07) $(0.10) $ --
From net realized gain on investments and foreign
currency transactions (3.23) (0.21) --
In excess of net investment income -- (0.01) --
------ ------ ------
Total distributions declared to shareholders $(3.30) $(0.32) $ --
------ ------ ------
Net asset value - end of period $11.67 $13.25 $10.47
====== ====== ======
Total return 13.80% 30.11% 4.70%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.74% 1.77% 1.77%+
Net investment income (loss) (0.15)% 0.08% 1.00%+
Portfolio turnover 77% 107% 71%
Net assets at end of period (000 Omitted) $ -- $205 $112
(S) Subject to reimbursement by the fund, the investment adviser voluntarily agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management fee. In consideration, the fund pays the
investment adviser a reimbursement fee not greater than 1.75% of average daily net assets. In addition, the investment adviser
voluntarily waived its fee for the periods indicated. To the extent actual expenses were over this limitation and the waiver
had not been in place, the net investment loss per share and the ratios would have been:
Net investment loss $(0.38) $(0.21) $(0.07)
Ratios (to average net assets):
Expenses## 4.54% 3.58% 3.42%+
Net investment loss (2.95)% (1.73)% (0.67)%+
* For the period from the commencement of the fund's investment operations, October 9, 1997, through September 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS International Strategic Growth Fund and MFS International Value Fund (the
funds) are each a diversified series of MFS Series Trust V (the trust). The
trust is organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The funds
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there are
no such quotations or valuations are valued in good faith, at fair value, by the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - Each fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by each
fund. This amount is shown as a reduction of total expenses on the Statement of
Operations.
Tax Matters and Distributions - Each fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. Each fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended September 30, 2000, the following amounts were reclassified
between accumulated undistributed net investment income and accumulated
undistributed net realized gain on investments and foreign currency
transactions, primarily due to differences between book and tax accounting for
currency transactions. These changes had no effect on the net assets or net
asset values per share.
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
STRATEGIC VALUE
GROWTH FUND FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated undistributed net realized gain on investments
and foreign currency transactions $ 665 $ 471
Accumulated undistributed net investment income $(665) $(471)
</TABLE>
Multiple Classes of Shares of Beneficial Interest - Each fund offers multiple
classes of shares that 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.
(3) Transactions with Affiliates
Investment Adviser - Each 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 the following annual rates:
First $500 million of average net assets 0.975%
Average net assets in excess of $500 million 0.925%
The investment adviser has voluntarily agreed to waive its fee, which is shown
as a reduction of total expenses in the Statement of Operations.
Each fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the fund's operating expenses, exclusive of
management, distribution, and service fees. The fund in turn will pay MFS an
expense reimbursement fee not greater than 1.75% of average daily net assets. To
the extent that the expense reimbursement fee exceeds the fund's actual
expenses, the excess will be applied to amounts paid by MFS in prior years. At
September 30, 2000, the aggregate unreimbursed expenses owed to MFS by the funds
amounted to:
INTERNATIONAL INTERNATIONAL
STRATEGIC VALUE
GROWTH FUND FUND
------------------------------------------------------------------------------
$46,829 $36,144
Each fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the funds, all of whom receive
remuneration for their services to the funds from MFS. Certain officers and
Trustees of the fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trustees are currently not
receiving any payments for their services to each fund.
Administrator - Each fund has an administrative services agreement with MFS to
provide each fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the funds incur an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales of Class A shares of each fund for the year
ended September 30, 2000.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each fund's distribution plan provides that the fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum of the fund's average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.25% per annum of the fund's average daily net assets
attributable to Class A shares. Distribution and service fees under the Class A
distribution plan are currently being waived.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. There
were no contingent deferred sales charges imposed during the year ended
September 30, 2000, on Class A shares of each fund.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
STRATEGIC GROWTH VALUE
FUND FUND
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchases
---------
Investments (non-U.S. government securities) $2,256,745 $ 718,987
---------- ----------
Sales
-----
Investments (non-U.S. government securities) $2,490,070 $1,043,144
---------- ----------
The cost and unrealized appreciation and depreciation in the value of the investments owned by each fund, as computed on a federal
income tax basis, are as follows:
<CAPTION>
INTERNATIONAL INTERNATIONAL
STRATEGIC GROWTH VALUE
FUND FUND
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate cost $1,162,271 $ 806,629
---------- ----------
Gross unrealized appreciation 161,460 137,535
Gross unrealized depreciation (53,173) (43,788)
---------- ----------
Net unrealized appreciation $ 108,287 $ 93,747
========== ==========
</TABLE>
(5) Shares of Beneficial Interest
Each 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:
Class A shares
INTERNATIONAL STRATEGIC GROWTH FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
--------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------
Shares sold 13,342 $ 177,394 9,673 $ 117,480
Shares issued to shareholders in
reinvestment of distributions 3,756 48,708 320 3,315
Shares reacquired (1,116) (15,180) (435) (4,607)
-------- ---------- ------- ---------
Net increase 15,982 $ 210,922 9,558 $ 116,188
======== ========== ======= =========
Class I shares
INTERNATIONAL STRATEGIC GROWTH FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
--------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------
Shares sold 155,951 $2,221,875 26,952 $ 332,055
Shares issued to shareholders in
reinvestment of distributions 17,537 227,980 3,241 33,607
Shares reacquired (184,411) (2,634,791) (45,157) (499,667)
-------- ---------- ------- ---------
Net decrease (10,923) $ (184,936) (14,964) $(134,005)
======== ========== ======= =========
Class A shares
INTERNATIONAL VALUE FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
--------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------
Shares sold -- $ -- 279 $ 3,219
Shares issued to shareholders in
reinvestment of distributions 19,336 216,946 2,693 30,353
Shares reacquired (7,906) (101,072) (28,592) (349,000)
-------- ---------- ------- ---------
Net increase (decrease) 11,430 $ 115,874 (25,620) $(315,428)
======== ========== ======= =========
Class I shares
INTERNATIONAL VALUE FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
--------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------
Shares sold 3,786 $ 50,886 6,036 $ 75,977
Shares issued to shareholders in
reinvestment of distributions 1,287 14,461 330 3,718
Shares reacquired (20,548) (280,255) (1,623) (21,012)
-------- ---------- ------- ---------
Net increase (decrease) (15,475) $ (214,908) 4,743 $ 58,683
======== ========== ======= =========
(6) Line of Credit
Each fund and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at the
end of each quarter. Interest expense incurred on the borrowings amounted to
$957 and $210 for the International Strategic Growth Fund and the International
Value Fund, respectively, for the year ended September 30, 2000. The average
dollar amount of borrowings were $12,921 and $3,468 and the weighted average
interest rate on these borrowings was 7.27% and 5.9% for the International
Strategic Growth Fund and the International Value Fund, respectively. A
commitment fee of $12 and $11, was allocated to the International Strategic
Growth Fund and the International Value Fund, respectively. The commitment fee,
which is based on the average daily unused portion of the line of credit, is
included in miscellaneous expense.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust V and Shareholders of MFS International
Strategic Growth Fund and MFS International Value Fund:
We have audited the accompanying statements of assets and liabilities of MFS
International Strategic Growth Fund and MFS International Value Fund (the
Funds), including the schedules of portfolio investments, as of September 30,
2000, the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and financial highlights for each of the two years in the period then
ended and for the period from October 9, 1997 (commencement of operations) to
September 30, 1998. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2000, by correspondence
with the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of MFS
International Strategic Growth Fund and MFS International Value Fund at
September 30, 2000, and the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended and the financial highlights for each of the two years in the period then
ended and for the period from October 9, 1997 (commencement of operations) to
September 30, 1998, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
November 9, 2000
<PAGE>
FEDERAL TAX INFORMATION
In January 2001, shareholders will be mailed a Tax Form Summary or Form 1099-
DIV, if applicable, reporting the federal tax status of all distributions paid
during the calendar year 2000.
The funds below have designated the following as a capital gain dividend for the
year ended September 30, 2000:
<TABLE>
<CAPTION>
LONG-TERM
CAPITAL GAINS
----------------------------------------------------------------------------------------------------------------
<S> <C>
International Strategic Growth Fund $29,976
International Value Fund $47,061
For the year ended September 30, 2000, the amount of distributions from income eligible for the 70% dividends
received deduction for corporation is:
<CAPTION>
DIVIDENDS
RECEIVED
DEDUCTION
----------------------------------------------------------------------------------------------------------------
<S> <C>
International Strategic Growth Fund 0.00%
International Value Fund 1.56%
For the year ended September 30, 2000, income from foreign sources and the foreign tax credit were as follows:
<CAPTION>
FOREIGN FOREIGN
INCOME TAX CREDIT
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Strategic Growth Fund $37,528 $3,617
International Value Fund $26,134 $2,392
</TABLE>
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors
only when preceded or accompanied by a current prospectus.
<PAGE>
MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
MFS(R) INTERNATIONAL VALUE FUND
[Logo] MFS(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
INC-2-V 11/00 1M
