<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) INTERNATIONAL
NEW DISCOVERY FUND
(FORMERLY MFS INTERNATIONAL OPPORTUNITIES FUND)
ANNUAL REPORT o SEPTEMBER 30, 2000
-----------------------------------
MUTUAL FUND GIFT KITS (see page 31)
-----------------------------------
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 10
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 19
Notes to Financial Statements ............................................. 24
Independent Auditors' Report .............................................. 29
Trustees and Officers ..................................................... 33
MFS(R) ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
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
[Photo of David A. Antonelli]
David A. Antonelli
For the 12 months ended September 30, 2000, Class A shares of the fund provided
a total return of 53.54% and Class I shares 53.50%. 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) Europe, Australasia,
Far East (EAFE) Index, a broad, unmanaged index of non-U.S. equities. During the
same period, the average international fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance, returned 10.81%.
Q. THE FUND OUTPACED IT'S BENCHMARK AND LIPPER PEER GROUP BY SIGNIFICANT
MARGINS. WHAT WERE THE MAIN CONTRIBUTORS?
A. Our strong stock selection across a broad range of industries was the
primary contributor. Significant positions in companies such as Stratos
Global, which provides integrated satellite and microwave telecommunications
services, and Japanese pharmaceutical company Eisai Co. produced strong
results for the portfolio. Another major contributor was our large exposure
to energy and energy services companies, which provided a major boost to the
fund's performance relative to the MSCI benchmark. Early in the period, we
recognized that a number of deep-water drillers, energy equipment
manufacturers, and energy service companies were poised to benefit from the
dramatic recovery in oil and natural gas prices. Large holdings in Anderson
Exploration, Talisman Energy Inc., and Smedvig provided a significant boost
to total return.
Q. EFFECTIVE OCTOBER 1, 2000, THE FUND'S NAME IS CHANGING TO MFS(R)
INTERNATIONAL NEW DISCOVERY FUND. WHY?
A. Because this portfolio has a similar investment objective to our domestic
emerging growth equity fund, MFS(R) New Discovery Fund, we felt it made
sense for our international emerging growth equity fund to have a similar
name.
Q. WILL THE FUND'S INVESTMENT PHILOSOPHY AND STRATEGY CHANGE?
A. No. The investment philosophy behind all MFS(R) portfolios is based on our
company-oriented, bottom-up Original Research(SM). In this portfolio, our
focus is on foreign emerging growth companies with relatively small market
capitalizations. While emerging growth companies may be of any size, the
fund will generally focus on small-cap growth companies that we believe are
in the early part of their life cycles and have strong potential to become
major enterprises. In particular, we are looking for companies that
demonstrate the potential for above-average earnings growth over a sustained
period of time, possess strong management teams with clear strategies, and
have catalysts that may accelerate growth, such as innovative products and
services, or substantial barriers to new market entries, such as patent
protection.
Q. WHAT DO YOU THINK SETS THIS PORTFOLIO APART FROM OTHER SMALL-CAP
INTERNATIONAL EQUITY PORTFOLIOS?
A. A few things. First and foremost, we believe the depth and talent of our
equity analyst team are big advantages. We have more than 35 equity analysts
at MFS, all contributing their best ideas to the portfolio. As a result,
there is a great deal of information sharing, starting with our in-depth
balance sheet and earnings analysis. At the same time, we all spend a great
deal of time on the road, meeting with company managements as well as with
employees, competitors, and suppliers. Our focus in this portfolio is on
small-cap stocks; however, we have a lot of flexibility and can look at any
market capitalization, location, or industry if we find attractive
opportunities. Overall, we lean toward the more dynamic areas of the
economy, focusing on companies that we believe are at the forefront of
innovation and are capitalizing on their competitive advantages.
Q. BEYOND STRONG POTENTIAL FOR ACCELERATING GROWTH AND INNOVATIVE PRODUCTS,
ARE THERE ANY OTHER CHARACTERISTICS A SMALL-CAP STOCK SHOULD HAVE BEFORE
YOU'LL CONSIDER IT?
A. For a small company to become a global player, we believe it needs to
develop a diversified revenue stream. Many companies have had great products
or services at start-up but haven't been able to follow up with additional
new products and services. Consequently, we look very closely at the quality
of management within an organization and attempt to determine if the company
has the ability to broaden its distribution capacity. For example, does the
company have an original manufacturing capability or the ability to form
joint ventures and partnerships? The more people it has out in the field
selling its products, the better known its products will become; we believe
this could translate into higher sales volume.
Q. WHERE HAVE YOU BEEN FINDING OPPORTUNITIES?
A. We have found attractive growth opportunities across a wide range of
industries and sectors that have been exhibiting accelerating earnings and
sales results. In the energy sector, despite the significant price
appreciation we experienced this year, we continue to find attractive
opportunities among deep-water drillers, equipment manufacturers, and energy
services providers. While oil prices may not remain at such high levels, we
don't expect a significant drop. As a result, we expect growth and earnings
to remain strong for the industry in the near term. Despite a lackluster
economy in Japan, discount retailers such as Fast Retailing have posted
attractive growth and have taken away market share from full-price
department stores in Japan. In the technology sector, we have been
particularly attracted to the information-technology-service companies that
we believe could benefit from the surge in technology spending we anticipate
in Europe and Asia. A good example is Victor of Japan, also known as JVC,
which performed well for the fund despite the weak environment for the
technology sector. We believe the company's innovative spirit and
technological breakthroughs in the areas of digital imaging, information,
and networking could propel future earnings growth.
Q. WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
A. Concerns about increased competition, new technology, and higher licensing
fees hurt stock prices for many telecommunications stocks. While we were
underweighted in the utilities and communications sector compared to our
benchmark, a number of our holdings in this group detracted from the fund's
total return. Positions in telecommunications companies such as Libertel and
Telefonica produced weak results during the period.
Q. ARE YOU CONCERNED ABOUT RISING INTEREST RATES STIFLING GROWTH OVERSEAS?
A. The European Central Bank recently hiked interest rates because of concern
that inflation may be on the rise, a move that has not helped stock prices.
However, we believe that a number of positive themes exist, such as an
upswing in corporate streamlining and productivity, which should help offset
inflationary pressures. Also, the political stirrings about tax reform
suggest to us that the long-term future looks bright for European stocks.
While the interest rate and economic environment in Japan remains somewhat
cloudy, we think there are growing signs that a recovery is under way. More
importantly, however, the country continues to produce what we believe are
some of the most innovative and dynamic companies in the world, particularly
in the technology and telecommunications sectors.
Respectfully,
/s/ David A. Antonelli
David A. Antonelli
Portfolio Manager
Note to Shareholders: The fund will open to the public on October 1, 2000. Prior
to that date, the fund was available only to MFS employees and had limited
assets.
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
His views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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DAVID A. ANTONELLI IS SENIOR VICE PRESIDENT AND DIRECTOR OF INTERNATIONAL EQUITY
RESEARCH OF MFS INVESTMENT MANAGEMENT(R). HE IS RESPONSIBLE FOR THE HIRING,
TRAINING AND INDUSTRY ASSIGNMENTS OF OUR TEAM OF INTERNATIONAL EQUITY RESEARCH
ANALYSTS AND COORDINATES COVERAGE OF GLOBAL INDUSTRIES WITH THE U.S. DIRECTOR OF
RESEARCH.
IN HIS DIRECTOR ROLE, DAVID ALSO OVERSEES THE PROCESS OF PORTFOLIO MANAGEMENT OF
THE INTERNATIONAL RESEARCH AND EMERGING MARKET PORTFOLIOS OF OUR MUTUAL FUNDS,
VARIABLE ANNUITIES, INSTITUTIONAL ACCOUNTS, AND OFFSHORE FUNDS. THESE PORTFOLIOS
ARE MANAGED BY THE TEAM OF MFS INTERNATIONAL ANALYSTS. HE ALSO MANAGES OUR
INTERNATIONAL SMALL-CAP PORTFOLIOS AND THE INTERNATIONAL PORTIONS OF OUR GLOBAL
GROWTH PORTFOLIOS.
DAVID JOINED MFS IN 1991 AS A RESEARCH ANALYST FOLLOWING FOREIGN STOCKS, WITH A
CONCENTRATION IN CONTINENTAL EUROPE. HE WAS NAMED VICE PRESIDENT IN 1995,
PORTFOLIO MANAGER IN 1997, AND SENIOR VICE PRESIDENT AND DIRECTOR OF
INTERNATIONAL EQUITY RESEARCH IN 1999. DAVID IS A GRADUATE OF PENNSYLVANIA STATE
UNIVERSITY AND THE WHARTON SCHOOL OF FINANCE AND COMMERCE OF THE UNIVERSITY OF
PENNSYLVANIA.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any MFS
product is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS CAPITAL APPRECIATION.
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 9, 1997
CLASS INCEPTION: CLASS A OCTOBER 9, 1997
CLASS I OCTOBER 9, 1997
SIZE: $2.9 MILLION NET ASSETS AS OF SEPTEMBER 30, 2000
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PERFORMANCE SUMMARY
The following information illustrates the historical performance of the fund's
original share class in comparison to various market indicators. Performance
results include the deduction of 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.
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
New Discovery
Fund - Class A MSCI EAFE Index
-------------------------------------------------------
10/97 $ 9,425 $10,000
9/98 8,878 9,192
9/99 12,440 12,070
9/00 19,100 12,484
TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 2000
Class A
1 Year Life*
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Cumulative Total Return Excluding Sales Charge +53.54% +102.66%
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Average Annual Total Return Excluding Sales Charge +53.54% + 26.79%
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Average Annual Total Return Including Sales Charge +44.72% + 24.30%
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Class I
1 Year Life*
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Cumulative Total Return Excluding Sales Charge +53.50% +102.75%
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Average Annual Total Return Excluding Sales Charge +53.50% + 26.81%
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Comparative Indices(+)
1 Year Life*
-------------------------------------------------------------------------------
Average international fund** +10.81% + 8.26%
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MSCI EAFE Index+ + 3.42% + 7.67%
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* 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.
(+) Average annual rates of return.
** Source: Lipper Inc.
+ Source: Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY
Class A share performance including sales charge takes into account the
deduction of the maximum 5.75% sales charge. Class I shares have no sales charge
and are available to certain institutional investors.
Performance results reflect any applicable subsidies and waivers in effect
during the period 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. RECENT RETURNS WERE
PRIMARILY ACHIEVED DURING FAVORABLE MARKET CONDITIONS, WHICH MAY OR MAY NOT BE
REPEATED. 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 be affected by
interest-rate and currency-exchange-rate charges, as well as market, economic,
and political conditions of the countries where investments are made. There may
be greater returns but also greater risk with U.S. investments.
Investing in small or emerging growth companies is riskier than investing in
more-established companies.
The portfolio's geographic concentration makes it more volatile than a portfolio
that is more geographically diversified.
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 2000
FIVE LARGEST STOCK SECTORS
ENERGY 15.1%
TECHNOLOGY 14.9%
HEALTH CARE 11.8%
FINANCIAL SERVICES 10.7%
RETAILING 9.9%
TOP 10 STOCK HOLDINGS
FAST RETAILING CO. 7.4% STRATOS GLOBAL CORP. 1.7%
Japanese discount retailer Mobile satellite products and services
provider
EISAI COMPANY LTD. 2.3%
Japanese pharmaceutical TALISMAN ENERGY, INC. 1.7%
company Oil and natural gas exploration and
production company
VICTOR COMPANY OF JAPAN 2.2%
Digital imaging, information, SMEDVIG, ASA 1.7%
and networking company Offshore oil and natural gas drilling
contractor
JOMED N.V. 2.1%
Medical technology company TECHNIP S.A. 1.7%
Engineering services company
C-MAC INDUSTRIES, INC. 1.8%
Integrated electronic systems PETROLEUM GEO-SERVICES ASA 1.7%
manufacturer Geophysical services provider
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- September 30, 2000
<TABLE>
<CAPTION>
Stocks - 95.0%
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ISSUER SHARES VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - 87.1%
Bermuda - 2.1%
FLAG Telecom Holdings Ltd. (Telecommunications)* 2,580 $ 28,380
Li & Fung Ltd. (Apparel and Textiles)* 16,000 33,761
----------
$ 62,141
--------------------------------------------------------------------------------------------------
Brazil - 3.5%
Brasil Telecom Participacoes, ADR (Telecommunications) 195 $ 11,359
Empresa Brasileira de Aeronautica S.A., ADR (Aerospace and
Defense)* 1,370 42,470
Petroleo Brasileiro S.A. (Oils) 520 14,882
Tele Norte Celular Participacoes S.A., ADR (Telecommunications)* 170 6,800
Tele Norte Leste Participacoes S.A., ADR (Telecommunications) 853 19,512
Uniao de Banco Brasiliero S.A. (Banks and Credit Cos.) 200 6,600
----------
$ 101,623
--------------------------------------------------------------------------------------------------
Canada - 13.2%
Alberta Energy Limited (Energy) 565 $ 23,417
Aliant, Inc. (Telecommunications) 1,340 33,082
Anderson Exploration Ltd. (Oils)* 1,470 32,096
BCE, Inc. (Telecommunications) 400 9,350
Bell Canada International, Inc. (Telecommunications)* 190 4,109
C Mac Industries, Inc. (Electronics)* 890 50,796
Canadian Hunter Exploration Ltd. (Oils)* 800 19,379
Canadian National Railway Co. (Railroads) 500 14,656
Celestica, Inc. (Electronics)* 190 13,070
Industrial Alliance Life Insurance Co. (Insurance)* 1,250 26,339
Magna International, Inc. (Automotive) 185 8,042
Manulife Financial Corp. (Insurance)* 620 13,002
Microcell Telecommunications, "B" (Telecommunications)* 340 9,881
Rogers Wireless Communications Inc. (Telecommunications)* 250 7,632
Royal Group Technologies Ltd. (Construction)* 950 18,914
724 Solutions, Inc. (Internet)* 94 4,465
Stratos Global Corp. (Telecommunications)* 2,340 47,754
Stuart Energy Systems Corp. (Energy)* 70 1,208
Talisman Energy, Inc. (Oils)* 1,340 46,911
----------
$ 384,103
--------------------------------------------------------------------------------------------------
Chile - 0.8%
Banco de A. Edwards, ADR (Banks and Credit Cos.)* 1,700 $ 22,100
--------------------------------------------------------------------------------------------------
China - 0.5%
Huaneng Power International, Inc., ADR (Utilities - Electric)* 500 $ 8,000
PetroChina Co. Ltd. (Oils)* 32,000 6,526
----------
$ 14,526
--------------------------------------------------------------------------------------------------
Denmark - 1.1%
Carlsberg (Food and Beverage Products) 800 $ 33,157
--------------------------------------------------------------------------------------------------
Finland - 0.7%
F-Secure Oyj (Computer Software - Systems)* 475 $ 3,122
HPY Holding - HTF Holding Oyj Abp (Telecommunications)* 281 10,051
Tieto Corp. (Computer Software - Systems) 305 8,622
----------
$ 21,795
--------------------------------------------------------------------------------------------------
France - 7.1%
April Group (Insurance) 100 $ 16,334
Business Objects S.A., ADR (Computer Software - Systems)* 150 16,959
Coflexip, ADR (Oil Services) 200 12,450
Compagnie Generale de Geophysique S.A., ADR (Oil Services)* 2,802 39,578
Infovista S.A. (Computer Software)* 80 2,474
Integra S.A. (Computer Software - Services)* 145 1,588
Natexis Co. (Financial Services) 494 38,752
Societe Television Francaise (Entertainment) 430 24,691
Technip S.A. (Construction) 330 46,061
Thomson Multimedia (Electronics)* 130 6,546
----------
$ 205,433
--------------------------------------------------------------------------------------------------
Germany - 5.3%
ADVA AG Optical Networking Co. (Telecommunications)* 30 $ 2,849
Fielmann AG, Preferred (Retail) 250 8,171
Fresenius AG (Medical Supplies) 130 32,386
Fresenius AG, Preferred (Medical Supplies) 130 6,431
GFT Technology AG (Computer Software - Services)* 180 11,131
Marschollek Lautenschlaeger, Preferred (Insurance) 80 12,014
Merck KGaA (Medical and Health Products) 890 30,278
Prosieben Media AG, Preferred (Entertainment) 320 36,608
Tecis Holding AG (Finance) 180 13,039
----------
$ 152,907
--------------------------------------------------------------------------------------------------
Greece - 0.5%
Antenna TV S.A., ADR (Broadcasting)* 613 $ 13,486
--------------------------------------------------------------------------------------------------
Hong Kong - 0.9%
Dah Sing Financial Group (Banks and Credit Cos.) 3,200 $ 15,639
Great Eagle Holdings Co. (Hotels and Motels)* 7,000 10,775
----------
$ 26,414
--------------------------------------------------------------------------------------------------
Hungary - 0.3%
Magyar Tavkozlesi Rt., ADR (Telecommunications)* 420 $ 9,896
--------------------------------------------------------------------------------------------------
Ireland - 0.9%
Anglo Irish Bank Corp. PLC (Banks and Credit Cos.)* 9,855 $ 22,151
Trintech Group PLC, ADR (Computer Software - Products)* 170 3,421
----------
$ 25,572
--------------------------------------------------------------------------------------------------
Israel - 2.4%
Check Point Software Technologies Ltd. (Computer Software -
Services)* 175 $ 27,563
Partner Communications Co. Ltd., ADR (Telecommunications)* 2,850 21,909
Teva Pharmaceutical Industries Ltd. (Pharmaceuticals) 280 20,492
----------
$ 69,964
--------------------------------------------------------------------------------------------------
Italy - 0.4%
Saipem (Construction Services) 1,900 $ 10,574
--------------------------------------------------------------------------------------------------
Japan - 21.1%
Chugai Pharmaceutical Co. Ltd. (Pharmaceuticals) 2,000 $ 36,409
Daikin Industries Ltd. (Consumer Goods and Services) 2,000 38,672
Eisai Co. Ltd. (Medical and Health Products) 2,000 63,248
Fast Retailing Co. (Retail)* 1,000 204,025
Hitachi Ltd. (Electronics) 1,000 11,630
Meitec Corp. (Computer Software - Systems) 400 18,548
Mimasu Semiconductor Industry Co. Ltd. (Electronics) 900 13,279
Moritex Corp. (Electronics) 200 23,741
Murata Manufacturing Co. Ltd. (Electronics) 200 27,636
Nitto Denko Corp. (Industrial Goods and Services) 400 15,024
Shionogi & Co., Ltd. (Pharmaceuticals) 1,000 18,687
Sumitomo Realty & Development (Real Estate) 6,000 31,438
Tokyo Broadcasting System, Inc. (Entertainment) 1,000 40,341
Tokyo Gas Co. Ltd. (Gas) 4,000 10,646
Victor Company of Japan (Telecommunications) 7,000 60,048
----------
$ 613,372
--------------------------------------------------------------------------------------------------
Mexico - 2.5%
Grupo Aeroportuario del Sureste S.A. de C.V., ADR
(Transportation)* 1,900 $ 28,856
Grupo Continental S.A. (Food and Beverage Products) 2,410 2,937
Grupo Financiero Banorte S.A. de C.V. (Finance)* 7,990 10,431
Grupo Mexico S.A. (Metals) 1,700 6,485
Kimberly-Clark de Mexico S.A. de C.V. (Forest and Paper
Products) 4,310 11,327
Wal-Mart de Mexico S.A. de C.V. (Retail)* 625 13,077
----------
$ 73,113
--------------------------------------------------------------------------------------------------
Netherlands - 7.6%
Completel Europe N.V. (Telecommunications)* 50 $ 398
Computer Services (Computer Software - Services)* 1,200 27,032
Fugro N.V. (Engineering)* 622 35,688
Hunter Douglas N.V., ADR (Consumer Goods and Services)* 1,162 31,514
Jomed N.V. (Medical and Health Products)* 765 57,085
Koninklijke Ahrend Groep N.V. (Consumer Goods and Services)* 722 7,749
Libertel N.V. (Telecommunications)* 2,500 30,257
Philips Electronics N.V. (Electronics)* 194 8,358
Versatel Telecommunications N.V. (Telecommunications)* 355 8,185
VNU N.V. (Publishing)* 281 14,149
----------
$ 220,415
--------------------------------------------------------------------------------------------------
New Zealand - 0.2%
Warehouse Group (Retail) 2,330 $ 5,552
--------------------------------------------------------------------------------------------------
Norway - 4.9%
P4 Radio Hele Norge ASA (Broadcasting) 5,850 $ 32,251
Petroleum Geo-Services ASA, ADR (Oils)* 2,670 46,057
Schibsted ASA (Publishing) 1,110 19,521
Smedvig ASA (Oil Services) 2,350 46,122
----------
$ 143,951
--------------------------------------------------------------------------------------------------
Panama - 0.3%
Banco Latinoamericano de Exportaciones (Banks and Credit Cos.) 300 $ 8,325
--------------------------------------------------------------------------------------------------
Singapore - 3.0%
Datacraft Asia Ltd. (Telecommunications) 3,000 $ 24,900
Overseas Union Bank Ltd. (Banks and Credit Cos.) 6,540 30,466
Overseas-Chinese Banking Corp. Ltd. (Banks and Credit Cos.) 1,280 8,097
Singapore Press Holdings Ltd. (Printing and Publishing) 1,270 19,063
Trek 2000 International Ltd. (Technology) 10,000 6,154
----------
$ 88,680
--------------------------------------------------------------------------------------------------
Spain - 1.6%
Centros Comerciales Continente, S.A. (Retail) 320 $ 5,377
Cortefiel S.A. (Retail) 1,480 30,411
Telefonica de Espana S.A., ADR (Telecommunications) 149 8,856
Tpi Telef Pub Info (Telecommunications)* 380 3,222
----------
$ 47,866
--------------------------------------------------------------------------------------------------
Sweden - 1.1%
Saab AB, "B" (Aerospace) 2,590 $ 20,618
Tele1 Europe Holdings AB (Telecommunications)* 40 375
Telefonaktiebolaget LM Ericsson AB (Telecommunications) 300 4,573
Trio AB (Computer Software - Products and Services)* 5,000 7,076
----------
$ 32,642
--------------------------------------------------------------------------------------------------
Switzerland - 1.3%
Leica Geosystems AG (Technology) * 10 $ 3,135
Synthes-Stratec, Inc. (Medical and Health Products)* 50 33,400
----------
$ 36,535
--------------------------------------------------------------------------------------------------
Thailand - 0.6%
BEC World Public Co. Ltd. (Television) 1,200 $ 5,699
Hana Microelectronics Public Co. Ltd. (Electronics)* 4,000 10,544
----------
$ 16,243
--------------------------------------------------------------------------------------------------
United Kingdom - 3.2%
Autonomy Corp. PLC, ADR (Software Development) 100 $ 5,500
Capital Radio PLC (Broadcasting) 650 13,696
Energis PLC (Telecommunications)* 1,750 12,369
Granada Compass PLC (Telecommunications)* 1,270 11,887
Granada Media PLC (Hospitality and Media Services)* 1,150 7,669
Matalan PLC (Apparel and Textiles) 900 7,320
NDS Group PLC, ADR (Internet)* 190 14,630
Royal Bank of Scotland PLC (Banks and Credit Cos.)* 325 6,863
Shire Pharmaceuticals Group PLC (Pharmaceuticals)* 640 11,044
Standard Chartered PLC (Banks and Credit Cos.)* 240 3,496
----------
$ 94,474
--------------------------------------------------------------------------------------------------
Total Foreign Stocks $2,534,859
--------------------------------------------------------------------------------------------------
U.S. Stocks - 7.9%
Agricultural Products - 0.4%
AGCO Corp. 1,070 $ 12,706
--------------------------------------------------------------------------------------------------
Business Services - 0.8%
IMRglobal Corp.* 485 $ 5,638
VeriSign, Inc.* 81 16,408
----------
$ 22,046
--------------------------------------------------------------------------------------------------
Cellular Telephones - 0.5%
Powertel, Inc.* 200 $ 15,212
--------------------------------------------------------------------------------------------------
Computer Software - Services - 1.0%
Internet Security Systems, Inc.* 400 $ 30,050
--------------------------------------------------------------------------------------------------
Electronics - 0.3%
Tektronix, Inc.* 125 $ 9,602
--------------------------------------------------------------------------------------------------
Oil Services - 1.5%
Carbo Ceramics, Inc. 880 $ 23,375
Global Marine, Inc.* 650 20,069
----------
$ 43,444
--------------------------------------------------------------------------------------------------
Oils - 2.2%
Santa Fe International Corp. 750 $ 33,797
Transocean Sedco Forex, Inc. 495 29,019
----------
$ 62,816
--------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.6%
ICN Pharmaceuticals, Inc. 500 $ 16,625
--------------------------------------------------------------------------------------------------
Telecommunications - 0.6%
Emulex Corp.* 100 $ 12,250
Exfo Electro - Optical Engineering, Inc.* 80 3,485
NTL, Inc.* 55 2,547
----------
$ 18,282
--------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 230,783
--------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,434,334) $2,765,642
--------------------------------------------------------------------------------------------------
Warrants
--------------------------------------------------------------------------------------------------
Thomson (Electronics)* (Identified Cost, $0) 130 $ 426
--------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,434,334) $2,766,068
Other Assets, Less Liabilities - 5.0% 145,003
--------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,911,071
--------------------------------------------------------------------------------------------------
* Non-income producing security.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
------------------------------------------------------------------------------
SEPTEMBER 30, 2000
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $2,434,334) $2,766,068
Cash 269,984
Foreign currency, at value (identified cost, $3,475) 3,422
Receivable for investments sold 58,449
Interest and dividends receivable 3,601
Other assets 157
----------
Total assets $3,101,681
----------
Liabilities:
Payable for investments purchased $ 190,351
Payable to affiliate for reimbursement fee 259
----------
Total liabilities $ 190,610
----------
Net assets $2,911,071
==========
Net assets consist of:
Paid-in capital $2,546,264
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 331,534
Accumulated undistributed net realized gain on investments
and foreign currency transactions 33,506
Accumulated net investment loss (233)
----------
Total $2,911,071
==========
Shares of beneficial interest outstanding 190,911
=======
Class A shares:
Net asset value, and redemption price per share
(net assets, $201,848 / 13,243 shares of beneficial
interest outstanding) $15.24
Offering price per share (100 / 94.25 of net asset value
per share) $16.17
======
Class I shares:
Net asset value, offering price and redemption price per
share (net assets of $2,709,223 / 177,668 shares of
beneficial interest outstanding) $15.25
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2000
------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 18,687
Interest 6,839
Foreign taxes withheld (2,320)
--------
Total investment income $ 23,206
--------
Expenses -
Management fee $ 19,576
Shareholder servicing agent fee 2,009
Distribution and service fee (Class A) 664
Administrative fee 302
Custodian fee 12,897
Printing 8,808
Postage 275
Auditing fees 20,149
Legal fees 1,149
Miscellaneous 3,596
--------
Total expenses $ 69,425
Fees paid indirectly (329)
Reduction of expenses by investment adviser and distributor (33,963)
--------
Net expenses $ 35,133
--------
Net investment loss $(11,927)
--------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $380,540
Foreign currency transactions (693)
--------
Net realized gain on investments and foreign currency
transactions $379,847
--------
Change in unrealized appreciation (depreciation) -
Investments $302,065
Translation of assets and liabilities in foreign currencies (121)
--------
Net unrealized gain on investments and foreign currency
translation $301,944
--------
Net realized and unrealized gain on investments and
foreign currency $681,791
--------
Increase in net assets from operations $669,864
========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
---------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2000 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (11,927) $ (2,270)
Net realized gain on investments and foreign currency transactions 379,847 245,016
Net unrealized gain on investments and foreign currency translation 301,944 142,028
----------- -----------
Increase in net assets from operations $ 669,864 $ 384,774
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (1,540)
From net investment income (Class I) -- (2,627)
From net realized gain on investments and foreign currency
transactions (Class A) (34,892) (118)
From net realized gain on investments and foreign currency
transactions (Class I) (525,496) (201)
----------- -----------
Total distributions declared to shareholders $ (560,388) $ (4,486)
----------- -----------
Net increase (decrease) in net assets from fund share transactions $ 1,694,828 $ (538,795)
----------- -----------
Total increase (decrease) in net assets $ 1,804,304 $ (158,507)
Net assets:
At beginning of period 1,106,767 1,265,274
----------- -----------
At end of period (including accumulated net investment loss of
$233 and $72, respectively) $ 2,911,071 $ 1,106,767
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
--------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
---------------------------- SEPTEMBER 30,
2000 1999 1998*
--------------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.15 $ 9.42 $10.00
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.10) $(0.01) $ 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency 6.62 3.78 (0.64)
------ ------ ------
Total from investment operations $ 6.52 $ 3.77 $(0.58)
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.04) $ --
From net realized gain on investments and
foreign currency transactions (4.43) -- ** --
------ ------ ------
Total distributions declared to shareholders $(4.43) $(0.04) $ --
------ ------ ------
Net asset value - end of period $15.24 $13.15 $ 9.42
====== ====== ======
Total return(+) 53.54% 40.11% (5.80)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.77% 1.78% 1.75%+
Net investment income (loss) (0.62)% (0.13)% 0.54%+
Portfolio turnover 152% 162% 165%
Net assets at end of period (000 Omitted) $202 $122 $573
(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. Effective October 1, 2000, the fund will pay the investment adviser a fee not greater than 0.30% of
average daily net assets and the investment adviser and the distributor will no longer waive their fees. To the
extent actual expenses were over this limitation, net investment loss per share and the ratios would have been:
Net investment loss $(0.43) $(0.32) $(0.13)
Ratios (to average net assets):
Expenses## 3.92% 4.54% 3.57%+
Net investment loss (2.77)% (2.89)% (1.32)%+
* For the period from commencement of the fund's investment operations, October 9, 1997, through September 30, 1998.
** Per share amount was less than $(0.01).
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
--------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
---------------------------- SEPTEMBER 30,
1999 1998 1997*
--------------------------------------------------------------------------------------------------------------
CLASS I
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.16 $ 9.42 $10.00
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.10) $(0.03) $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency 6.62 3.81 (0.65)
------ ------ ------
Total from investment operations $ 6.52 $ 3.78 $(0.58)
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.04) $ --
From net realized gain on investments and
foreign currency transactions (4.43) -- ** --
------ ------ ------
Total distributions declared to
shareholders $(4.43) $(0.04) --
------ ------ ------
Net asset value - end of period $15.25 $13.16 $ 9.42
====== ====== ======
Total return 53.50% 40.22% (5.80)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.77% 1.78% 1.75%+
Net investment income (loss) (0.59)% (0.23)% 0.65%+
Portfolio turnover 152% 162% 165%
Net assets at end of period (000 Omitted) $2,709 $985 $692
(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. Effective October 1, 2000, the fund will
pay the investment adviser a fee not greater than 0.30% of average daily net assets and the investment adviser will
no longer waive its fee. To the extent actual expenses were over this limitation, net investment loss per share and
the ratios would have been:
Net investment loss $(0.36) $(0.29) $(0.07)
Ratios (to average net assets):
Expenses## 3.42% 4.04% 3.07%+
Net investment loss (2.27)% (2.49)% (0.71)%+
* For the period from commencement of the fund's investment operations, October 9, 1997, through September 30, 1998.
** Per share amount was less than $(0.01).
+ 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 New Discovery Fund (formerly MFS International Opportunities
Fund) (the fund) is 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. 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 - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. This amount is shown as a reduction of total expenses on the Statement of
Operations.
Tax Matters and Distributions - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended September 30, 2000, accumulated undistributed net investment
income increased by $11,766, accumulated undistributed net realized gain on
investments and foreign currency transactions decreased by $13,324, and paid in
capital from common shareholders increased by $1,558 due to differences between
book and tax accounting for currency transactions and the offset of net
investment loss against short-term capital gains. This change had no effect on
the net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares 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 - 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 the following annual rates:
First $500 million of average net assets 0.975%
Average net assets in excess of $500 million 0.925%
During the year ended September 30, 2000, the investment adviser waived its fee,
which is shown as a reduction of total expenses in the Statement of Operations.
The fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the fund's operating expenses, exclusive of
management, distribution, and service fees. Effective October 1, 2000, the fund
in turn will pay MFS an expense reimbursement fee not greater than 0.30% of
average daily net assets. During the year ended September 30, 2000, the fund
paid MFS an expense reimbursement fee of 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, aggregate unreimbursed expenses amounted to $33,127.
The fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the fund, all of whom receive remuneration
for their services to the fund from MFS. Certain officers and Trustees of the
fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Trustees are currently not receiving any
payments for their services to the fund.
Administrator - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund incurs 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 the fund for the year
ended September 30, 2000.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.10% per annum of the fund's average daily net assets attributable to
Class A shares. During the year ended September 30, 2000, the fund's
distribution plan provided that the fund would 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 included a service fee of 0.25% per annum and a
distribution fee of 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 were waived during the year ended September 30, 2000.
The fund's distribution plan provides that the fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be consideration for services
rendered by the dealer with respect to Class B and Class C shares. MFD retains
the service fee for accounts not attributable to a securities dealer. Class B
and Class C shares were not offered prior to October 1, 2000.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges. There
were no contingent deferred sales charges imposed during the year ended
September 30, 2000, on Class A shares of the fund. Class B and Class C shares
were not offered prior to October 1, 2000.
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, aggregated $3,888,242
and $2,885,685, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $2,457,646
----------
Gross unrealized appreciation $ 426,259
Gross unrealized depreciation (117,837)
----------
Net unrealized appreciation $ 308,422
==========
(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:
<TABLE>
<CAPTION>
Class A shares
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,051 $ 116,049 350 $ 4,265
Shares issued to shareholders in
reinvestment of distributions 2,360 34,870 159 1,657
Shares reacquired (5,414) (86,155) (52,069) (594,263)
-------- ----------- ------- -----------
Net increase (decrease) 3,997 $ 64,764 (51,560) $ (588,341)
======== =========== ======= ===========
<CAPTION>
Class I shares
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 191,187 $ 3,178,751 24,543 $ 308,165
Shares issued to shareholders in
reinvestment of distributions 35,643 525,474 272 2,828
Shares reacquired (124,036) (2,074,161) (23,398) (261,447)
-------- ----------- ------- -----------
Net increase 102,794 $ 1,630,064 1,417 $ 49,546
======== =========== ======= ===========
</TABLE>
(6) Line of Credit
The 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 to temporarily finance the repurchase of fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. Interest expense incurred on the borrowings amounted to
$210 for the year ended September 30, 2000. The average dollar amount of
borrowings was $3,311 and the weighted average interest rate on these borrowings
was 6.14%. A commitment fee of $17 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 New
Discovery Fund:
We have audited the accompanying statement of assets and liabilities of MFS
International New Discovery Fund (the Fund), including the schedule of portfolio
investments, as of September 30, 2000, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and 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 Fund's 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 position of MFS
International New Discovery Fund at September 30, 2000, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the 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.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
November 9, 2000
<PAGE>
-------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
-------------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 2000.
THE FUND HAS DESIGNATED $142,577 AS A CAPITAL GAIN DIVIDEND FOR THE YEAR ENDED
SEPTEMBER 30, 2000.
FOR THE YEAR ENDED SEPTEMBER 30, 2000, INCOME FROM FOREIGN SOURCES WAS $15,930
AND THE FUND DESIGNATED A FOREIGN TAX CREDIT OF $2,159.
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<PAGE>
MFS(R) INTERNATIONAL NEW DISCOVERY FUND
<TABLE>
<S>
TRUSTEES <C>
J. Atwood Ives+ - Chairman and Chief Executive SECRETARY
Officer, Eastern Enterprises (diversified services Stephen E. Cavan*
company)
ASSISTANT SECRETARY
Lawrence T. Perera+ - Partner, Hemenway & Barnes James R. Bordewick, Jr.*
(attorneys)
CUSTODIAN
William J. Poorvu+ - Adjunct Professor, Harvard State Street Bank and Trust Company
University Graduate School of Business
Administration AUDITORS
Ernst & Young LLP
Charles W. Schmidt+ - Private Investor
INVESTOR INFORMATION
Arnold D. Scott* - Senior Executive Vice For information on MFS mutual funds, call your
President, Director, and Secretary, MFS Investment investment professional or, for an information
Management kit, call toll free: 1-800-637-2929 any business
day from 9 a.m. to 5 p.m. Eastern time (or leave a
Jeffrey L. Shames* - Chairman and Chief Executive message anytime).
Officer, MFS Investment Management
INVESTOR SERVICE
Elaine R. Smith+ - Independent Consultant MFS Service Center, Inc.
P.O. Box 2281
David B. Stone+ - Chairman, North American Boston, MA 02107-9906
Management Corp. (investment adviser)
For general information, call toll free:
INVESTMENT ADVISER 1-800-225-2606 any business day from 8 a.m. to 8
Massachusetts Financial Services Company p.m. Eastern time.
500 Boylston Street
Boston, MA 02116-3741 For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from
DISTRIBUTOR 9 a.m. to 5 p.m. Eastern time. (To use this service,
MFS Fund Distributors, Inc. your phone must be equipped with a
500 Boylston Street Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, exchanges, or
CHAIRMAN AND PRESIDENT stock and bond outlooks, call toll free:
Jeffrey L. Shames* 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
PORTFOLIO MANAGER
David A. Antonelli* WORLD WIDE WEB
www.mfs.com
TREASURER
James O. Yost*
ASSISTANT TREASURERS
Mark E. Bradley*
Robert R. Flaherty*
Laura F. Healy*
Ellen Moynihan*
</TABLE>
+ Independent Trustee
*MFS Investment Management
<PAGE>
MFS(R) INTERNATIONAL NEW DISCOVERY FUND ------------
PRSRT STD
[Logo] M F S(R) U.S. POSTAGE
INVESTMENT MANAGEMENT PAID
We invented the mutual fund(R) MFS
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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
MNI-2 11/00 2.3M 74/874
