[MFS logo]
MFS(R)/
FOREIGN &
COLONIAL
INTERNATIONAL
FUNDS
[photo of Bogota, Colombia]
MFS(R)/ Annual Report
Foreign & Colonial for Year Ended
Emerging Markets May 31, 1997
Equity Fund
MFS(R)/
Foreign & Colonial
International Growth
and Income Fund
MFS(R)/
Foreign & Colonial
International
Growth Fund
<PAGE>
Table of Contents
Letter from the Chairman ....................................... 1
MFS(R)/Foreign & Colonial International Funds Overview .......... 2
Investment Strategies .......................................... 3
Portfolio Managers' Profiles .................................... 4, 6
Fund Facts ...................................................... 9
MFS(R)/Foreign & Colonial Emerging Markets Equity Fund
Performance Summary .......................................... 10
Portfolio Concentration ....................................... 12
Tax Form Summary ................................................ 12
Portfolio of Investments ....................................... 13
MFS(R)/Foreign & Colonial International Growth and Income Fund
Performance Summary .......................................... 16
Portfolio Concentration ....................................... 18
Tax Form Summary ................................................ 18
Portfolio of Investments ....................................... 19
MFS(R)/Foreign & Colonial International Growth Fund
Performance Summary .......................................... 22
Portfolio Concentration ....................................... 24
Tax Form Summary ................................................ 24
Portfolio of Investments ....................................... 25
Financial Statements ............................................. 29
Notes to Financial Statements .................................... 35
Report of Independent Auditors ................................. 42
It's Easy to Contact Us .......................................... 43
The MFS Family of Funds(R) ..................................... 44
Trustees and Officers ............................................. 45
Cover Photo: Bogota, Colombia
Highlights
[bullet] Several emerging-country equity markets are outperforming the strong
U.S. stock market, as these countries reap the benefits of both their
own economic growth and that of developed countries.
[bullet] The renewed strength of the U.S. dollar versus the Japanese yen
resulted in a strong performance from Japanese blue-chip stocks, many
of which reached all-time highs.
[bullet] Uncertainty over monetary union continued to be a factor in European
markets, although some European stocks, such as Volkswagen, performed
well as they benefited from restructuring.
[bullet] As of May 31, 1997, assets in the three MFS/F&C funds exceeded $241
million, a 30% increase over the past six months, reflecting a growing
interest in international investing.
<PAGE>
Letter from the Chairman
[photo of A. Keith Brodkin]
Dear Shareholders:
We are pleased to report that, in their second full year of operation, the
MFS/Foreign & Colonial (F&C) International Funds continue to see a steady growth
of assets thanks to investors' renewed interest in international securities
markets, particularly the increasingly vibrant emerging markets.
In fact, in what may be one of the biggest investment stories of the past
year, some rapidly growing emerging-country equity markets are outperforming the
strong U.S. stock market. Many of these countries are not only reaping the
benefits of their own economic growth, they are also benefiting from demands for
their services and manufactured goods by developed countries. This trend is
reflected in the performance of MFS(R)/Foreign & Colonial Emerging Markets
Equity Fund, whose performance within this category has been quite favorable.
Assets for the three MFS/F&C funds have reached over $241 million -- a 30%
increase since November 1996. This growing interest in international investing
has come in spite of the continuing strength of the U.S. equity market. We
regard this as a sign of investors' understanding of the need for
diversification across a range of global markets as well as their belief that,
in time, the recent trend of underperformance by international markets will
begin to reverse itself. Before the recent upsurge in U.S. equities, many
overseas markets were outperforming the U.S. market, a situation we expect to
see again, particularly as investors continue to seek the world's highest-growth
areas.
We are pleased to report that Arnab Kumar Banerji, chief investment officer
of Foreign & Colonial Emerging Markets Ltd. and portfolio manager of MFS/Foreign
& Colonial Emerging Markets Equity Fund, has accepted the additional
responsibility of chief investment officer of Foreign & Colonial Management Ltd.
Dr. Banerji succeeds Tony Thomson, whom we thank for his contribution in helping
launch the MFS/F&C funds.
Also, we would like to remind investors using annuities for their
long-term, tax-deferred retirement investing that MFS/Foreign & Colonial
Emerging Markets Equity Series, MFS(R)/Foreign & Colonial International Growth
and Income Series, and MFS(R)/Foreign & Colonial International Growth Series are
available as part of the MFS Regatta Gold(R) annuity.
This annual report to shareholders covers all three MFS/F&C funds. Each of
these funds has varying objectives, which are outlined on page 9 of this report.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/A. Keith Brodkin
A. Keith Brodkin
Chairman and President
June 12, 1997
1
<PAGE>
MFS/Foreign & Colonial International Funds Overview
[photo of Arnab Kumar Banerji]
Dear Shareholders:
Liquidity continued to underpin international equity markets over the past
year, while disinflationary forces remained in place despite somewhat stronger
world economic growth. International markets experienced increased volatility
following the interest-rate increase by the U.S. Federal Reserve Board in
February, which also caused a setback for the bond markets.
One of the major events in international markets over this period was the
strength of the U.S. dollar versus the Japanese yen. The yen started the year
at just under 116 to the dollar and fell to a low of 127 on May 2, 1997, a fall
of just under 10%. This weakening resulted in a strong performance from
Japanese blue-chip stocks, many of which reached all-time highs. The story in
the financial services sector was somewhat different. On top of bad-debt
worries, this sector was rocked by the "sokaiya" racketeering scandal at Nomura
Securities.
In continental Europe, uncertainty over European monetary union (EMU)
remained. Slow growth in Germany raised the prospect that this key EMU member
would have to be creative with its accounting policies in order to meet the
Maastricht criteria, allowing weaker members such as Italy to join at the first
stage. However, some European stocks such as Volkswagen performed well as
restructuring gathered pace. Growth in continental Europe remained weak
relative to the United States and the United Kingdom, and there appears to be
little need for interest rates to rise in the near term.
In the United Kingdom, the strength of sterling hit some exporters,
resulting in lower profits. The economy remained robust, and interest rates we
believe are set to continue their upward trend to offset inflation. The market
is likely to experience some volatility following the new Labor Party's first
budget, which is expected to detail the proposed windfall tax on privatized
utilities.
As an asset class, emerging markets performed well over the past 12
months, although Southeast Asia severely underperformed Latin America and
Eastern Europe. Structural imbalances have led to sharp falls in markets such
as Korea and Thailand. On the other hand, markets such as Brazil, Mexico,
Russia, and Egypt, driven by significant shifts in their economic policies and
relative political stability, have moved smartly higher.
Respectfully,
/s/Arnab Kumar Banerji
Arnab Kumar Banerji
Chief Investment Officer
Foreign & Colonial Management Ltd.
2
<PAGE>
Investment Strategies
MFS/Foreign & Colonial Emerging Markets Equity Fund
[photo of Jeff Chowdhry]
Jeff Chowdhry
For the 12 months ended May 31, 1997, Class A shares of the Fund provided a
total return of 16.43%, Class B shares 15.87%, Class C shares 15.97%, and Class
I shares 16.67%. These returns assume the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 10.90% return for the
Lipper Emerging Markets Funds Index (the Lipper Index) and to a 7.76% return
for the Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index. The Lipper mutual fund indices are unmanaged indices of the largest
qualifying mutual funds within their respective investment objectives, adjusted
for the reinvestment of capital gains distributions and income dividends, while
the MSCI EMF Index is a broad, unmanaged, market-capitalization-weighted index
of equities in emerging markets. It is not possible to invest directly in an
index.
Emerging markets have shown much better performance over the past year
after a generally poor performance in 1994 and 1995. The Fund has outperformed
the MSCI EMF Index by having above-index weightings in most of Latin America,
including Brazil, Mexico, Colombia, and Peru, and below-index weightings in
Korea and South Africa. The Fund has outperformed the Lipper Index primarily
due to its higher weightings in Brazil, Mexico, Colombia, Russia, Egypt, and
Morocco and its lower weightings in Malaysia, Indonesia, Thailand, and the
Philippines.
The Fund remains well diversified at the country level, with major
industry weightings in telecommunications, banking, electric utilities, and
food and beverages. The largest country weightings are Brazil, Mexico, Hong
Kong, and India. Within Asia, we have sold most of our investments in Thailand,
Korea, the Philippines, and Indonesia, preferring instead Hong Kong, which is
being re-rated upward as the handover to China in mid-1997 approaches. We also
remain positive on India due to improving domestic liquidity and falling
interest rates. Elsewhere in Asia, we remain cautious, given our concern that
structural imbalances in that region's economies may continue to have a
negative impact on their stock markets.
We remain, on the whole, positive on other emerging market countries. Our
largest position in Latin America remains in Brazil, where interest rates have
been easing steadily and reforms are continuing while the stock market
continues to rise on the back of strong earnings growth. We are also positive
on the smaller Latin American markets of Colombia and Peru. In Colombia,
political worries have overshadowed what we believe are an improving inflation
environment and very attractive valuations. In Peru, economic growth is among
the best in the region, while valuations remain among the lowest.
In other emerging markets, Russia, Egypt, Portugal, and Greece deserve
special mention. Russia was among the best-performing markets in the world in
1996 and continues to move strongly higher in 1997, primarily due to continued
liberalization at the political and company level. The Egyptian economy is the
strongest in the Middle East as a result of efforts by the current
administration to introduce large-scale privatization of state-run companies.
Portugal has demonstrated over the past 12 months that its management of its
economy is among the best in western Europe. This has been validated by the
MSCI, which recently announced that Portugal's stock market will be in its
developed, rather than emerging market, index series beginning in December
1997. Greece is another country that has decided on an accelerated reform
program following
3
<PAGE>
Investment Strategies - continued
MFS/Foreign & Colonial Emerging Markets Equity Fund
the landslide victory by Prime Minister Simitis in September last year, which
has led to inflation and interest rates. Having been cautious on the South
African stock market for most of the past year, we are now seeing some value
there following the sharp fall of the rand and the likely peaking in inflation
and interest rates.
Looking forward, we would expect to build up positions in South Africa and
will be monitoring our underweighted position in Asia very closely for signs of
a turn. Our positive stance toward Latin America is likely to be maintained,
although some trimming back of positions may be appropriate later this year.
Respectfully,
/s/Arnab Kumar Banerji /s/Jeff Chowdhry
Arnab Kumar Banerji Jeff Chowdhry
Portfolio Manager Portfolio Manager
Portfolio Managers' Profiles
Arnab Kumar Banerji is Chief Investment Officer of Foreign & Colonial
Management Ltd. Dr. Banerji earned degrees in physiology and medicine from
Oxford University before entering the investment management business with J.
Henry Schroder Wagg in London. He left that firm to become a research
analyst and later director of Nomura Securities before moving to Citibank
Global Asset Management to set up their Emerging Markets operation, which he
headed until 1993, when he joined Foreign & Colonial.
Jeff Chowdhry is a Director and Global Funds Manager of Foreign & Colonial
Emerging Markets Ltd. Mr. Chowdhry joined Foreign & Colonial in 1994 from
BZW Investment Management in London, where he was a Director in the Emerging
Markets Division. Mr. Chowdhry is a graduate of Brunel University and has a
Master of Business Administration degree from Kingston Business School.
4
<PAGE>
Investment Strategies - continued
MFS/Foreign & Colonial International Growth and Income Fund
[photo of June Scott]
June Scott
For the 12 months ended May 31, 1997, Class A shares of the Fund provided a
total return of 2.88%, Class B shares 2.33%, Class C shares 2.61%, and Class I
shares 2.88%. These returns assume the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 15.56% return for the
Lipper International Funds Index and to a 6.24% return for a blend (70% and
30%) of the unmanaged MSCI EAFE (Europe, Australia, Far East) Index and the
J.P. Morgan Global Bond Index (the Morgan Index). The EAFE Index is an
unmanaged index of international stocks, while the Morgan Index is an unmanaged
index of bonds issued from 13 countries with remaining maturities of at least
one year.
The major feature in international markets over the past year was the
strength of the dollar, particularly against the Japanese yen, the German mark,
and the French franc. In January, half of the yen exposure and three-quarters
of the mark and franc exposures were hedged into dollars. Stronger growth in
the United States, weakness in the Japanese economy, and uncertainties in
Europe concerning EMU supported a stronger dollar, and we expect this dollar
strength to continue.
[photo of Ian K. Wright]
Ian K. Wright
The performance of Japanese equities during this period was a good
illustration of the current three-tier market: the international "nifty fifty"
blue chips such as Canon and TDK, which outperformed the market; the heavily
sold-off cyclicals; and the underperforming financial services sector. Japanese
blue-chip stocks were the main beneficiaries of the weak Japanese currency,
with many reaching all-time highs. The Fund held several of these stocks and
benefited from this upswing. Going forward, we expect the "nifty fifty" stocks
to continue to do well.
The U.K. market performed well, and sterling remained strong despite the
prospect of a left-wing victory in the general election. Economic growth was
strong, and the interest-rate cycle has turned. However, companies with high
overseas earnings are beginning to feel the effects of the strong currency, and
profit warnings are starting to come through. We believe that the portfolio
should benefit from the mini-consumer boom likely to be generated by the
windfalls resulting from the public offerings of several building societies
(savings and loans). However, the market is likely to experience some
uncertainty following Labor's first budget in July.
[photo of Richard O. Hawkins]
Richard O. Hawkins
Economic growth and the equity markets in continental Europe continued to
be affected by fiscal restraint as member states struggled to meet the
Maastricht criteria. In France, an unexpected general election was called for
late May/early June. This was a gamble by the French President, Jacques Chirac,
in the vain hope that a right-wing government would be returned with a
sufficient majority to push through the economic policies necessary for
monetary union. In Germany, a row erupted between the government and the
Bundesbank over revaluation of gold reserves that might be used to reduce the
budget deficit. This led to accusations of financial dishonesty and increased
the chance that some of the weaker European countries, such as Italy, would be
included in the first round of EMU. The outlook for Europe remains uncertain,
with political upheavals, high unemployment, and EMU concerns on the horizon.
Asian markets have shown a mixed performance over the past year. Hong Kong
has performed well due to positive sentiment over the imminent handover to
China. Other markets, however, have not performed as well due to worries over
high valuation levels.
5
<PAGE>
Investment Strategies - continued
MFS/Foreign & Colonial International Growth and Income Fund
The fixed-income portion of the Fund reflects a neutral weighting among
Europe, Japan, the United States, and the other dollar-bloc countries. U.S.
interest rates appear increasingly attractive from a global perspective. Hence,
we anticipate increasing the weighting in the dollar bloc relative to Europe
once the pickup in core European growth is confirmed and the U.S. market
adjusts to the Federal Reserve Board's tighter policy. In the meantime, we are
maintaining a defensive posture with respect to duration, or interest-rate
sensitivity, in both the dollar bloc and Europe.
The Fund remains overweighted in Australian bonds because we believe
current yield spreads reflect undue fears of a rate hike. Within Europe,
several potential developments suggest possible opportunities: the return of
the single-currency theme to the market, which would help potential entrants
such as Ireland and Spain; the likelihood of interest-rate cuts in Italy,
Spain, and possibly Sweden; and a more attractive U.K. market following the
election and moderate interest-rate hikes. Despite extremely low absolute
yields, the Japanese bond market should be well supported by accommodative
monetary policy and domestic institutional flows. Although some of the forces
pushing the dollar up are waning, we believe it should remain firm due to
capital inflows induced by favorable interest rates and moderate growth.
Respectfully,
/s/June Scott /s/Ian K. Wright /s/Richard O. Hawkins
June Scott Ian K. Wright Richard O. Hawkins
Portfolio Manager Portfolio Manager Portfolio Manager
Portfolio Managers' Profiles
June Scott is a Global Funds Manager of Foreign & Colonial Management Ltd. A
graduate of London Guildhall University, Ms. Scott joined Foreign & Colonial
in 1995 after completing her M.B.A. at the London Business School. Ms. Scott
worked previously as a Quantitative Portfolio Analyst in the Equity Research
Group at J.P. Morgan Investment Management in London.
Ian K. Wright is a Director of Foreign & Colonial Management Ltd. Mr.
Wright joined Foreign & Colonial in 1981. He heads up Foreign & Colonial's
Japanese equity investment team and is the manager of the Foreign & Colonial
Pacific Investment Trust. He is a graduate of the University of Southampton
and is an Associate of the Institute of Actuaries.
Richard O. Hawkins joined MFS in 1988 as Assistant Vice President -
Investments. A graduate of Brown University and the University of
Pennsylvania's Wharton Graduate School of Business Administration, he was
named Vice President - Investments in 1991 and Senior Vice President in
1993. On January 1, 1996, Mr. Hawkins became Director of the International
Fixed Income Department of MFS.
6
<PAGE>
Investment Strategies - continued
MFS/Foreign & Colonial International Growth Fund
For the 12 months ended May 31, 1997, Class A shares of the Fund provided a
total return of 2.13%, Class B shares 1.56%, Class C shares 1.82%, and Class I
shares 2.31%. These returns assume the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 15.56% return for the
Lipper International Funds Index and to a 7.88% return for the unmanaged MSCI
EAFE Index.
The Fund's exposure to smaller companies was reduced over the past 12
months, from 45% of assets to just over 30%. The money raised from this
asset-allocation shift was reinvested into blue-chip stocks. With liquidity
driving equity markets and deregulation and restructuring gathering pace, we
felt that blue chips would benefit more than smaller companies. Investors tend
to focus on larger, more liquid stocks when trying to invest large sums of
money, and restructuring tends to benefit larger companies with more room to
cut costs. During January, half of the Japanese yen exposure and three-quarters
of the German mark and French franc exposures were hedged into U.S. dollars.
Stronger growth in the United States, weakness in the Japanese economy, and
uncertainties in Europe concerning EMU all supported a strong dollar.
The Fund's weighting in Japan is similar to that of other funds in its
Lipper universe. Japanese blue-chip stocks with overseas exposure such as Canon
and TDK, both held in the Fund, continue to set all-time highs due to the yen's
weakness. The Fund's weighting in smaller Japanese companies has been reduced.
These companies continue to suffer from weak investor sentiment and, being
domestically oriented, have failed to benefit from the weak currency.
In the United Kingdom, we believe economic fundamentals remain strong,
although interest rates will almost certainly have to rise in the second or
third quarter in order to head off inflation. This, together with uncertainties
regarding the new government, the impact of a strong sterling on corporate
earnings, and volatility in the European and U.S. markets, may impact equities
in the short term. One of the best-performing sectors in the U.K. market has
been the banking sector. The Fund owns shares in Lloyds Bank, which is a
quality company with the fastest earnings growth in the sector and one of the
most profitable banks in the world. This stock is also benefiting from the
technical squeeze in the banking sector as index funds scramble to increase
their weightings in banks ahead of the public offerings of several building
societies (savings and loans).
Within continental Europe, growth remains weak relative to the United
States and the United Kingdom, and we see little need for interest rates to
rise in the near term. Worries over EMU continue, with the major concern being
whether or not it can proceed on time and in what form. Meanwhile, corporate
restructuring in Germany is beginning to gather pace. Volkswagen, a company
held in the Fund, has re-engineered its manufacturing process and can now
produce its main model, the VW Golf, in 17 hours, compared with the 34 hours it
used to take. All Volkswagen models are now produced from only four platforms,
which has significantly reduced costs.
7
<PAGE>
Investment Strategies - continued
MFS/Foreign & Colonial International Growth Fund
The Fund continues to have a sizable exposure to emerging markets, with a
tilt toward Latin America. Brazil is our favored market due to falling
inflation rates and structural changes in the telecommunications sector, in
which Telebras is a core holding. The Fund has also benefited from its exposure
to Eastern Europe, where the Russian economy, in particular, has moved sharply
upwards.
Respectfully,
/s/June Scott /s/Ian K. Wright
June Scott Ian K. Wright
Portfolio Manager Portfolio Manager
8
<PAGE>
Fund Facts
MFS/Foreign & Colonial Emerging Markets Equity Fund
Strategy: The investment objective of Emerging Markets Equity
Fund is capital appreciation. The Fund seeks to achieve
its investment objective by investing, under normal
market conditions, at least 65% of its total assets in
equity securities of issuers whose principal activities
are located in emerging market countries.
Commencement of
investment operations: Class A: October 24, 1995
Class B: October 24, 1995
Class C: June 27, 1996
Class I: January 2, 1997
Size: $91.5 million net assets as of May 31, 1997
MFS/Foreign & Colonial International Growth and Income Fund
Strategy: The investment objective of International Growth and
Income Fund is capital appreciation and current income.
The Fund seeks to achieve its investment objective by
investing, under normal market conditions, at least 65%
of its total assets in equity securities of issuers
whose principal activities are outside the United
States.
Commencement of
investment operations: Class A: October 24, 1995
Class B: October 24, 1995
Class C: July 1, 1996
Class I: January 2, 1997
Size: $29.4 million net assets as of May 31, 1997
MFS/Foreign & Colonial International Growth Fund
Strategy: The investment objective of International Growth Fund
is capital appreciation. The Fund seeks to achieve its
investment objective by investing, under normal market
conditions, at least 65% of its total assets in equity
securities of companies whose principal activities are
outside the United States and which are growing at
rates expected to be well above the growth rate of the
overall U.S. economy.
Commencement of
investment operations: Class A: October 24, 1995
Class B: October 24, 1995
Class C: July 1, 1996
Class I: January 2, 1997
Size: $122.2 million net assets as of May 31, 1997
9
<PAGE>
Performance Summary
MFS/Foreign & Colonial Emerging Markets Equity Fund
The information below illustrates the historical performance of MFS/Foreign &
Colonial Emerging Markets Equity Fund - Class A shares in comparison to various
market indicators. Class A share performance results reflect the deduction of
the 4.75% maximum sales charge; benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown, based on the differences in loads and
fees paid by shareholders investing in the different classes. It is not
possible to invest directly in an index.
[TABULAR REPRESENTATION OF LINE CHART]
Growth of a Hypothetical $10,000 Investment
(For the period from November 1, 1995, through May 31, 1997)
<TABLE>
<CAPTION>
MFS/F&C Emerging
Lipper Emerging Markets Equity Fund -- Consumer Price MSCI EMF
Markets Funds Index Class A Index -- U.S. Index
------------------- ---------------------- -------------- ---------
<S> <C> <C> <C> <C>
11/1/95 10000 9524 10000 10000
5/31/96 11281 10499 10214 10847
5/31/97 13999 12224 10465 11456
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of May 31, 1997 1 Year Life of Fund*
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS/F&C Emerging Markets Equity Fund (Class A) including 4.75% sales charge
(SEC results) +10.92% +13.35%
- ------------------------------------------------------------------------------------------------------
MFS/F&C Emerging Markets Equity Fund (Class A) at net asset value +16.43% +16.85%
- ------------------------------------------------------------------------------------------------------
MFS/F&C Emerging Markets Equity Fund (Class B) with CDSC (SEC results) +11.87% +13.95%
- ------------------------------------------------------------------------------------------------------
MFS/F&C Emerging Markets Equity Fund (Class B) at net asset value +15.87% +16.24%
- ------------------------------------------------------------------------------------------------------
MFS/F&C Emerging Markets Equity Fund (Class C) with CDSC (SEC results) +14.96% +16.30%
- ------------------------------------------------------------------------------------------------------
MFS/F&C Emerging Markets Equity Fund (Class C) at net asset value +15.97% +16.30%
- ------------------------------------------------------------------------------------------------------
MFS/F&C Emerging Markets Equity Fund (Class I) at net asset value +16.67% +17.00%
- ------------------------------------------------------------------------------------------------------
MSCI EMF Index+ + 7.76% + 8.87%
- ------------------------------------------------------------------------------------------------------
Lipper Emerging Markets Funds Index++ +10.90% +16.30%
- ------------------------------------------------------------------------------------------------------
Consumer Price Index**+ + 2.47% + 2.88%
- ------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
October 24, 1995, through May 31, 1997.
+Source: CDA/Wiesenberger.
++Source: Lipper Analytical Services.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
10
<PAGE>
Performance Summary - continued
Class A share SEC results include the maximum 4.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares,
which became available on January 2, 1997, have no sales charge or Rule 12b-1
fees and are only available to certain institutional investors.
Class C share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
commencement of offering of Class C shares. Operating expenses attributable to
Class C shares are not significantly different than those of Class B shares.
The Class B share performance included in the Class C share SEC performance has
been adjusted to reflect the CDSC generally applicable to Class C shares rather
than the CDSC generally applicable to Class B shares.
Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the
commencement of offering of Class I shares. Because operating expenses
attributable to Class A shares are greater than those of Class I shares, Class
I share performance generally would have been higher than Class A share
performance. The Class A share performance included in the Class I share
performance has been adjusted to reflect the fact that Class I shares have no
initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.
11
<PAGE>
Portfolio Concentration as of May 31, 1997
MFS/Foreign & Colonial Emerging Markets Equity Fund
Country Weightings (% of Net Assets)
[TABULAR REPRESENTATION OF PIE CHART]
Other 36.6%
Brazil 14.0%
Mexico 10.0%
Hong Kong 6.9%
India 6.2%
South Africa 5.5%
Portugal 4.6%
Russia 4.5%
Greece 4.0%
Argentina 4.0%
Egypt 3.7%
For a more complete breakdown, refer to the Portfolio of Investments.
Top 5 Industry Weightings (% of Net Assets)
Communications 18.9%
Banking 14.6%
Electricity, Gas, or Sanitation 11.3%
Food and Kindred Products 7.4%
Petroleum Refining 5.8%
Top 10 Holdings
Telecomunicacoes Brasileiras
Brazilian telecommunications company
Petroleo Brasileiro
Brazilian petroleum and natural
gas company
Taipei Fund
Closed-end Taiwan country fund
Telefonos de Mexico
Mexican telecommunications company
Compania Anonima Nacional Telefonos
de Venezuela
Venezuelan telecommunications company
Cheung Kong
Hong Kong property development
and investment company
Portugal Telecom
Portuguese telecommunications company
Credicorp Ltd.
Peruvian bank holding company
Swire Pacific
Diversif ied Hong Kong trading, property,
and manufacturing company
Hindustan Lever
Indian cosmetics and toiletries company
Portfolio Structure (% of Net Assets)
Stocks 95.1%
Cash 4.9%
Tax Form Summary
In January 1998, shareholders will be mailed a tax form summary reporting the
federal tax status of all distributions paid during the calendar year 1997.
Foreign Tax Credit
The Fund is estimated to have derived approximately 84% of its ordinary income
from dividends paid by foreign companies, and to have paid foreign taxes
equivalent to approximately 5.2% of its ordinary income.
12
<PAGE>
Portfolio of Investments - May 31, 1997
MFS/Foreign & Colonial Emerging Markets Equity Fund
Stocks - 95.1%
- -------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------
Argentina - 4.0%
Banco de Galicia y Buenos Aires S.A. de
C.V., ADR (Banks and Credit Cos.) 15,016 $ 394,170
Perez Companc S.A. (Oils) 89,308 683,548
Siderar S.A.I.C., ADR (Steel)*## 11,900 401,625
Telecom Argentina S.A.
(Telecommunications) 7,450 397,644
Telefonica de Argentina, ADR
(Utilities - Telephone) 9,850 357,063
Transportadora de Gas del Sur, S.A.
(Pipelines) 31,300 395,162
YPF Sociedad Anonima, ADR (Oils) 33,200 996,000
------------
$ 3,625,212
- -------------------------------------------------------------------------
Brazil - 15.3%
Ing Baring Financial Products (Finance) 7,530 $ 1,030,047
Aracruz Celulos S.A. (Paper Products) 277,000 564,197
Banco Bradesco S.A., Preferred (Banks and
Credit Cos.) 57,000,000 454,807
Centrais Eletricas Brasileiras, ADR
(Utilities - Electric) 50,050 1,176,175
Centrais Eletricas Brasileiras S.A. -
Eletrobras, Preferred, "B"
(Utilities - Electric) 950,000 467,766
Cia Cervejaria Brahma, Preferred
(Beverages) 965,000 700,556
Cia Vale Rio Doce (Diversified Minerals) 24,000 0
Cia Vale Rio Doce, Preferred (Diversified
Minerals) 24,000 530,319
Companhia Energetica S.A., ADR
(Utilities - Electric) 8,700 386,062
Companhia Paranaense de Energia -
COPEL "B", Preferred (Electrical) 38,800 572,774
Itausa Investimentos Itau S.A.
(Conglomerate) 450,000 374,194
Petroleo Brasileiro S.A., Preferred (Oils) 10,400,000 2,487,527
Telebras (Telecommunications) 7,000,000 965,991
Telecomunicacoes Brasileiras S.A., ADR
(Utilities - Telephone) 29,650 4,062,050
Usinas Siderurgicas de Minas Gerais S.A.,
ADR, Preferred (Iron/Steel) 16,300 179,300
------------
$13,951,765
- -------------------------------------------------------------------------
Canada - 0.6%
Super Sol Ltd. (Supermarkets) 155,550 $ 515,015
- -------------------------------------------------------------------------
Chile - 0.9%
Compania de Telecom de Chile
(Telecommunications) 24,692 $ 845,701
- -------------------------------------------------------------------------
China - 2.0%
Huaneng Power International, Inc., ADR
(Utilities - Electric) 40,850 $ 980,400
Qingling Motors Co. "H" (Automotive) 938,000 520,573
Yizheng Chemical Fibre Co. Ltd. (Textiles) 1,686,000 330,759
------------
1,831,732
- -------------------------------------------------------------------------
Stocks - continued
- -------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------
Colombia - 3.2%
Banco Ganadero S.A., ADR (Banks and
Credit Cos.) 26,700 $ 1,021,275
Banco Industrial Colombiano, ADR
(Banks and Credit Cos.) 55,450 977,306
Cementos Diamante S.A., ADR
(Construction)## 59,900 943,425
------------
$ 2,942,006
- -------------------------------------------------------------------------
Egypt - 3.6%
Commercial International Bank (Banks and
Credit Cos.)## 11,765 $ 229,417
Nasar City For Housing (Housing
Development) 8,150 1,124,137
North Cairo Mills (Food) 11,700 557,480
Suez Cement Co., GDR (Construction)*## 64,185 1,177,795
Torah For Cement (Construction) 7,935 201,334
------------
$ 3,290,163
- -------------------------------------------------------------------------
Greece - 4.0%
Attica Enterprises (Transportation) 25,000 $ 224,812
Ergo Bank (Banks and Credit Cos.) 14,800 1,045,696
Hellenic Telecommunication Organization
S.A. (Telecommunications) 37,300 930,960
Intracom (Telecommunications) 15,300 745,766
Titan Cement Co (Building Materials) 7,500 749,037
------------
$ 3,696,271
- -------------------------------------------------------------------------
Hong Kong - 7.2%
Bank of East Asia Ltd. (Banks and Credit
Cos.) 234,400 $ 853,134
Cheung Kong Holdings Ltd. (Real Estate) 141,000 1,442,211
Citic Pacific Ltd. (Conglomerate) 52,000 297,315
Hong Kong & China Gas Ltd. (Oil and
Gas) 414,000 721,347
New World Development Co.
(Real Estate) 147,000 933,454
Swire Pacific Air Ltd., "A"
(Transportation) 150,500 1,262,584
Wharf Holdings Ltd. (Real Estate) 183,000 819,579
Zhenhai Refining and Chemical Co., Ltd.
(Oils) 515,000 212,700
------------
$ 6,542,324
- -------------------------------------------------------------------------
Hungary - 2.1%
Borsodchem Rt (Chemicals) 11,050 $ 404,917
Mol Magyar Olaj Es Gazipari Rt (Oils)## 18,400 340,400
Pannonplast Muanuagipari (Chemicals) 8,330 409,803
Richter Gedeon Veg (Medical) 8,840 734,894
------------
$ 1,890,014
- -------------------------------------------------------------------------
India - 6.2%
Bajaj Auto Ltd. (Automotive) 300 $ 7,240
East India Hotels (Lodging) 25,300 291,991
Eih Ltd. (Consumer Goods and Services) 12,700 146,573
Hindustan Lever Ltd. (Consumer Goods
and Services) 39,000 1,217,112
13
<PAGE>
Portfolio of Investments - continued
Stocks - continued
- ------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------
India - continued
Hindustan Petroleum Corp. Ltd.
(Oil and Gas) 55,000 $ 655,935
Industrial Development Bank of India Ltd.
(Banks and Credit Cos.) 170,000 436,660
Mahanagar Telephone Nigam Ltd.
(Telecommunications) 114,000 911,170
State Bank of India (Banks and
Credit Cos.) 91,000 781,474
Tata Engineering and Locomotive Co. Ltd.
(Automotive) 270 2,986
Tata Steel (Steel) 100,000 483,622
Videsh Sanchar Nigam Ltd., GDR
(Telecommunications)## 36,120 744,072
------------
$ 5,678,835
- ------------------------------------------------------------------------------
Israel - 2.2%
Israel Chemicals Ltd. (Chemicals) 400,000 $ 490,626
Makhteshim Chemical Works Ltd.
(Chemicals)* 81,442 527,294
NICE Systems Ltd., ADR
(Telecommunications) 8,850 269,925
Tadiran Telecommunications Ltd.
(Telecommunications) 22,250 403,281
Teva Pharmaceutical Industries Ltd., ADR
(Pharmaceuticals) 5,850 351,000
------------
$ 2,042,126
- ------------------------------------------------------------------------------
Malaysia - 3.1%
DCB Holdings Berhad (Finance) 120,000 $ 386,866
Malayan Banking Berhad (Finance) 82,600 871,204
Petronas Gas Berhad (Oil and Gas)*## 150,000 543,283
Resorts World Berhad (Entertainment) 63,000 210,627
Tenaga Nasional Berhad
(Utilities - Electric) 180,000 823,881
------------
$ 2,835,861
- ------------------------------------------------------------------------------
Mauritius - 2.1%
Mauritius Commercial Bank (Banks and
Credit Cos.) 130,000 $ 564,247
New Mauritius Hotels (Lodging) 170,000 302,649
Rogers & Co. Ltd. (Finance) 90,000 434,772
State Bank Mauritius (Banks and Credit
Cos.) 1,150,000 648,602
------------
$ 1,950,270
- ------------------------------------------------------------------------------
Mexico - 10.0%
Apasco S.A. (Building Materials) 56,000 $ 366,018
Cemex S.A., "B" (Construction) 175,000 654,867
Cifra S.A. de C.V. (Consumer Goods and
Services) 400,000 685,714
Corporacion GEO S.A. de C.V.
(Housing)## 22,500 455,625
Desc S.A. de C.V. (Special Products and
Services) 64,000 436,915
Empresas ICA Sociedad Controladora S.A.,
ADR (Special Products and Services) 26,400 382,800
Stocks - continued
- ------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------
Mexico - continued
Fomento Economico Mexicano S.A., "B"
(Beverages) 84,376 $ 448,014
Gruma S.A. (Food Products) 245,493 1,163,842
Grupo Carso, "A1" (Conglomerate) 80,201 455,250
Grupo Financiero Banamex, "B" (Finance) 127,000 274,872
Grupo Financiero Inbursa S.A. de C.V. (Finance) 2,798 9,710
Hylsamex S.A. de C.V. (Steel) 133,000 643,982
Kimberly-Clark de Mexico S.A. de C.V.
(Forest and Paper Products) 70,000 242,478
Telefonos de Mexico S.A. (Utilities - Telephone) 1,011,000 2,246,951
Tubos de Acero de Mexico S.A. (Steel)* 38,678 680,655
------------
$ 9,147,693
- ------------------------------------------------------------------------------
Morocco - 2.5%
Banque Marocaine du Commerce (Banks
and Credit Cos.) 12,500 $ 744,901
Brasserica du Maroc (Consumer Goods and
Services) 2,100 366,953
Credit Eqdom (Financial Institutions) 2,182 220,657
ONA S.A. (Conglomerate) 6,600 534,226
Societe Nationale d'Investissement
(Conglomerate) 5,600 416,401
------------
$ 2,283,138
- ------------------------------------------------------------------------------
Pakistan - 1.6%
Hub Power Co. Ltd., GDR
(Utilities - Electric)* 40,200 $ 928,620
Pakistan Telecommunications Corp., GDR
(Utilities - Telephone) 8,950 554,900
------------
$ 1,483,520
- ------------------------------------------------------------------------------
Peru - 3.7%
Alicorp S.A. (Consumer Goods and Services) 185,000 $ 322,343
Compania de Minas Buenaventura S.A.
(Mining) 66,640 613,098
CPT Telefonica del Peru S.A., "B"
(Utilities - Telephone) 449,870 1,152,127
Credicorp Ltd. Holding Co. (Banks and
Credit Cos.) 58,584 1,325,463
------------
$ 3,413,031
- ------------------------------------------------------------------------------
Poland - 3.0%
Agros Holding S.A. (Food Products) 9,900 $ 266,063
Bank Slaski S.A. w Katowicach (Banks and
Credit Cos.) 3,800 296,875
Bydgoska Fabryka Kabli S.A.
(Electrical Equipment) 46,375 347,812
Elektrim Spolka Akcyjna S.A.
(Electrical Equipment) 70,300 628,306
Exbud S.A. (Construction) 20,000 218,125
Stomil Olsztyn S.A. (Tires and Rubber) 26,500 331,250
Wedel S.A. (Food) 7,000 428,750
Zywiec (Brewery) 4,000 224,375
------------
$ 2,741,556
- ------------------------------------------------------------------------------
14
<PAGE>
Portfolio of Investments - continued
Stocks - continued
- -----------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------
Portugal - 4.6%
Banco Espirito Santo e Comercial de
Lisboa S.A. (Banks and Credit Cos.) 45,289 $ 938,822
Cimentos de Portugal S.A.
(Building Materials) 31,526 693,499
Jeronimo Martins & Filho S.A. (Retail) 6,200 421,471
Portugal Telecom S.A.
(Utilities - Telephone) 36,042 1,383,871
Sonae Investimentos-Sociedade Gestora de
Participacoes Sociais, S.A. (Finance) 3,000 112,635
Telecel - Comunicacaoes Pessoais S.A.
(Cellular Telephones) 8,246 633,848
------------
$ 4,184,146
- -----------------------------------------------------------------------
Russia - 3.3%
Lukoil Oil Co., ADR (Oils) 18,100 $ 1,079,212
Mosenergo, ADR (Utilities - Electric)## 14,410 544,698
Rostelecom (Telecommunications)## 20 758,000
Surgutneftegaz (Oil and Gas) 15,400 656,425
------------
$ 3,038,335
- -----------------------------------------------------------------------
South Africa - 5.5%
Anglo American Corp. of South Africa
Ltd. (Mining) 8,000 $ 468,428
De Beers Centenary AG (Diamonds -
Precious Stones) 29,000 1,016,234
Liberty Life Association of Africa Ltd.
(Insurance) 28,000 783,699
Nedcor Ltd. (Financial Services) 38,964 759,039
Stocks - continued
- -----------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------
South Africa - continued
Sappi (Paper Products) 30,000 $ 275,414
Sasol Ltd. (Oils) 62,700 768,658
South African Breweries Ltd. (Brewery) 35,000 983,542
------------
$ 5,055,014
- -----------------------------------------------------------------------
Taiwan - 2.5%
Taipei Fund (Finance) 207 $ 2,256,300
- -----------------------------------------------------------------------
Turkey - 0.2%
Adana Cimento (Building Materials) 3,257,000 $ 214,656
- -----------------------------------------------------------------------
Venezuela - 1.7%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications)* 43,000 $ 1,596,375
- -----------------------------------------------------------------------
Total Stocks (Identified Cost, $73,539,525) $87,051,059
- -----------------------------------------------------------------------
Short-Term Obligations - 3.1%
- -----------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------
Student Loan Marketing Assn., due
6/24/97 $1,750 $ 1,743,963
General Electric Capital Corp., due
6/02/97 1,060 1,059,835
- -----------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 2,803,798
- -----------------------------------------------------------------------
Total Investments (Identified Cost, $76,343,323) $89,854,857
Other Assets, Less Liabilities - 1.8% 1,662,782
- -----------------------------------------------------------------------
Net Assets - 100.0% $91,517,639
- -----------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
15
<PAGE>
Performance Summary
MFS/Foreign & Colonial International Growth and Income Fund
The information below illustrates the historical performance of MFS/Foreign &
Colonial International Growth and Income Fund - Class A shares in comparison to
various market indicators. Class A share performance results reflect the
deduction of the 4.75% maximum sales charge; benchmark comparisons are
unmanaged and do not reflect any fees or expenses. The performance of other
share classes will be greater than or less than the line shown, based on the
differences in loads and fees paid by shareholders investing in the different
classes. It is not possible to invest directly in an index.
[TABULAR REPRESENTATION OF LINE CHART]
Growth of a Hypothetical $10,000 Investment
(For the period from November 1, 1995, through May 31, 1997)
<TABLE>
<CAPTION>
MFS/F&C International 70% MSCI EAFE/30%
Lipper International Growth and Income Consumer Price J.P. Morgan Global
Funds Index Fund -- Class A Index -- U.S. Bond Index
-------------------- -------------------- -------------- ------------------
<S> <C> <C> <C> <C>
11/1/95 10000 9524 10000 10000
5/31/96 11067 10162 10214 10794
5/31/97 12940 10455 10465 11468
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of May 31, 1997 1 Year Life of Fund*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS/F&C International Growth and Income Fund (Class A) including 4.75% sales
charge (SEC results) - 2.02% +2.82%
- -------------------------------------------------------------------------------------------------------
MFS/F&C International Growth and Income Fund (Class A) at net asset value + 2.88% +6.00%
- -------------------------------------------------------------------------------------------------------
MFS/F&C International Growth and Income Fund (Class B) with CDSC (SEC results) - 1.67% +3.00%
- -------------------------------------------------------------------------------------------------------
MFS/F&C International Growth and Income Fund (Class B) at net asset value + 2.33% +5.43%
- -------------------------------------------------------------------------------------------------------
MFS/F&C International Growth and Income Fund (Class C) with CDSC (SEC results) + 1.61% +5.61%
- -------------------------------------------------------------------------------------------------------
MFS/F&C International Growth and Income Fund (Class C) at net asset value + 2.61% +5.61%
- -------------------------------------------------------------------------------------------------------
MFS/F&C International Growth and Income Fund (Class I) at net asset value + 2.88% +6.00%
- -------------------------------------------------------------------------------------------------------
70% MSCI EAFE/30% J.P. Morgan Global Bond Index+ + 6.24% +9.03%
- -------------------------------------------------------------------------------------------------------
Lipper International Funds Index+ +15.56% +17.68%
- -------------------------------------------------------------------------------------------------------
Consumer Price Index**++ + 2.47% +2.88%
- -------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
October 24, 1995, through May 31, 1997.
+Source: Lipper Analytical Services.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
++Source: CDA/Wiesenberger.
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
16
<PAGE>
Performance Summary - continued
Class A share SEC results include the maximum 4.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares,
which became available on January 2, 1997, have no sales charge or Rule 12b-1
fees and are only available to certain institutional investors.
Class C share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
commencement of offering of Class C shares. Operating expenses attributable to
Class C shares are not significantly different than those of Class B shares.
The Class B share performance included in the Class C share SEC performance has
been adjusted to reflect the CDSC generally applicable to Class C shares rather
than the CDSC generally applicable to Class B shares.
Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the
commencement of offering of Class I shares. Because operating expenses
attributable to Class A shares are greater than those of Class I shares, Class
I share performance generally would have been higher than Class A share
performance. The Class A share performance included in the Class I share
performance has been adjusted to reflect the fact that Class I shares have no
initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.
17
<PAGE>
Portfolio Concentration as of May 31, 1997
MFS/Foreign & Colonial International Growth and Income Fund
Country Weightings (% of Net Assets)
[TABULAR REPRESENTATION OF PIE CHART]
Other 26.1%
Japan 21.7%
United Kingdom 14.8%
France 7.1%
Germany 6.6%
Hong Kong 6.4%
Switzerland 5.2%
Netherlands 5.1%
Sweden 3.0%
Australia 2.0%
Spain 2.0%
For a more complete breakdown, refer to the Portfolio of Investments.
Top 5 Industry Weightings (% of Net Assets)
Electronics and Electricals 12.8%
Banks, Retail 9.1%
Telecommunications 6.8%
Pharmaceuticals 5.5%
Engineering 4.7%
Top 10 Holdings
Canon Inc.
Japanese off ice equipment and imaging company
Pioneer Electronics Corp.
Japanese electronics company
Omron Corp.
Japanese electronic-control manufacturer
DDI Corp.
Japanese telecommunications company
HSBC Holdings
British banking and financial services company
Ricoh Company
Japanese off ice and business equipment company
Kyocera Corp.
Japanese component manufacturer
Roche Holdings
Swiss pharmaceutical company
Cheung Kong
Hong Kong property development and investment
company
Inchcape PLC
U.K. car distributor and trading company
Portfolio Structure (% of Net Assets)
Stocks 80.8%
Bonds 13.2%
Cash 6.0%
Tax Form Summary
In January 1998, shareholders will be mailed a tax form summary reporting the
federal tax status of all distributions paid during the calendar year 1997.
Foreign Tax Credit
The Fund is estimated to have derived approximately 87% of its ordinary income
from dividends paid by foreign companies, and to have paid foreign taxes
equivalent to approximately 6.3% of its ordinary income.
18
<PAGE>
Portfolio of Investments - May 31, 1997
MFS/Foreign & Colonial International Growth and Income Fund
Stocks - 80.8%
- -------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------
Australia - 2.0%
Capral Aluminum Ltd. (Metals) 81,700 $ 295,325
Western Mining (Holding Company) 47,400 306,247
------------
$ 601,572
- -------------------------------------------------------------------------
Austria - 0.9%
OMV AG (Oil and Gas) 2,100 $ 266,469
- -------------------------------------------------------------------------
Belgium - 0.9%
Generale de Banque (Finance) 690 $ 272,752
- -------------------------------------------------------------------------
France - 7.1%
Accor (Lodging) 1,720 $ 239,013
Compagnie de St. Gobain (Building Materials) 1,960 271,343
Dexia France (Finance) 2,930 274,322
Eaux (Cie Generale) (Utilities - Water) 1,430 176,359
Lafarge S.A., Bearer Shares (Building
Materials) 4,000 256,383
Legrand, Preference Shares (Electrical
Equipment) 1,400 159,528
Michelin, "B" (Tires) 3,700 202,642
Societe Nationale Elf Aquitaine (Oils) 2,700 270,610
TOTAL S.A., "B" (Oils)* 2,560 234,789
------------
$ 2,084,989
- -------------------------------------------------------------------------
Germany - 6.6%
Bayer AG (Chemicals) 9,100 $ 353,489
Deutsche Bank AG (Banks) 4,030 223,771
Deutsche Telekom AG (Utilities - Telephone) 14,960 332,444
Mannesmann AG (Diversified Machinery) 550 223,805
Siemens AG (Electrical Equipment) 4,800 271,114
VEBA AG (Oil and Gas) 4,700 266,209
Volkswagen AG (Automotive) 420 271,873
------------
$ 1,942,705
- -------------------------------------------------------------------------
Hong Kong - 6.4%
Cheung Kong Holdings Ltd. (Real Estate) 41,000 $ 419,366
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) 47,000 169,244
HSBC Holdings PLC (Finance) 15,600 473,154
New World Development Co. (Real Estate) 32,000 203,201
Swire Pacific Air Ltd., "A" (Transportation) 45,000 377,517
Wharf Holdings Ltd. (Real Estate) 51,000 228,407
------------
$ 1,870,889
- -------------------------------------------------------------------------
Italy - 1.5%
Telecom Italia Mobile S.p.A. (Cellular
Telecommunications) 89,580 $ 263,439
Telecom Italia S.p.A. (Telecommunications
Services) 60,750 167,692
------------
$ 431,131
- -------------------------------------------------------------------------
Stocks -continued
- -------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------
Japan - 21.7%
Canon, Inc. (Consumer Goods) 29,000 $ 735,914
DDI Corp. (Telecommunications) 79 590,546
Fujisawa Pharmaceuticals (Pharmaceuticals) 37,000 350,108
Hitachi (Electronics) 16,000 170,667
Hitachi Zosen (Engineering) 63,000 241,161
Ito-Yokado Co. Ltd. (Retail) 7,000 399,828
Kyocera Corp. (Electronics) 6,000 433,032
Marubeni Corp. (Distribution/Wholesale) 81,000 344,903
Matsushita Electric Industrial Co.
(Electrical Equipment) 18,000 339,097
Mitsubishi Heavy Industries Ltd.
(Aerospace/Defense) 38,000 273,927
NKK Corp. (Steel) 114,000 224,568
Oji Paper Co. Ltd. (Paper Products) 833 4,822
Omron Corp. (Electronics) 32,000 644,129
Pioneer Electronic Corp. (Electronics) 26,000 644,129
Ricoh Co. Ltd. (Office/Business Equipment) 34,000 447,484
TDK Corp. (Special Products and Services) 5,000 384,516
Tokyo Broadcasting System (Broadcasting) 9,000 164,129
------------
$ 6,392,960
- -------------------------------------------------------------------------
Malaysia - 2.0%
Genting Berhad (Entertainment) 11,000 $ 57,353
Malayan Banking Berhad (Finance) 9,000 94,925
Petronas Gas Berhad (Oil and Gas)*## 85,000 307,861
Sime Darby Berhad (Holding Company) 36,000 117,493
------------
$ 577,632
- -------------------------------------------------------------------------
Netherlands - 5.1%
ABN Amro Holdings N.V. (Finance) 17,200 $ 318,236
Akzo Nobel (Chemicals) 1,800 239,881
Philips Electronics N.V. (Manufacturing) 5,080 278,266
Royal Dutch Petroleum Co. (Oils) 400 77,365
Vendex International N.V. (Retail) 4,800 269,683
Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit (Publishing) 13,660 308,982
------------
$ 1,492,413
- -------------------------------------------------------------------------
Singapore - 1.6%
City Developments Ltd. (Real Estate) 22,000 $ 204,615
Development Bank of Singapore Ltd. (Banks) 8,000 100,140
Overseas-Chinese Banking Corp. Ltd. (Finance) 13,600 169,287
------------
$ 474,042
- -------------------------------------------------------------------------
Spain - 2.0%
Repsol S.A. (Oils) 6,050 $ 253,427
Telefonica de Espana (Utilities - Telephone) 11,450 330,586
------------
$ 584,013
- -------------------------------------------------------------------------
Sweden - 3.0%
Ericsson LM, "B" (Telecommunications) 8,760 $ 307,591
Sparbanken Sverige AB, "A" (Banks) 15,960 313,167
Swedish Match AB (Tobacco) 3,200 10,410
Volvo AB, "B" (Automobiles) 9,600 265,827
------------
$ 896,995
- -------------------------------------------------------------------------
19
<PAGE>
Portfolio of Investments - continued
Stocks - continued
- -----------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------
Switzerland - 5.2%
Ciba Specialty AG (Chemicals) 2,570 $ 243,809
Nestle AG, Registered Shares (Food and
Beverage Products) 230 286,584
Novartis AG (Pharmaceuticals) 210 285,451
Roche Holdings AG (Pharmaceuticals) 48 427,497
Winterthur (Insurance) 350 286,443
------------
$ 1,529,784
- -----------------------------------------------------------------------
United Kingdom - 14.8%
Allied Domecq PLC (Food and Beverage
Products) 32,850 $ 240,699
BAA PLC (Transportation) 33,560 291,561
British Petroleum PLC (Oil and Gas) 23,600 282,401
British Telecommunications PLC
(Telecommunications) 40,430 293,589
BTR PLC (Holding Company) 57,040 186,065
Caradon PLC (Holding Company) 7,449 11,844
Caradon PLC (Holding Company) 26,397 90,867
Carlton Communications PLC (Broadcasting) 31,620 273,152
General Accident PLC (Insurance) 13,180 194,658
Glaxo Wellcome PLC (Pharmaceuticals) 14,460 289,649
Granada Group PLC (Leisure) 10,960 155,942
Inchcape PLC (Commercial Services) 85,470 403,495
Land Securities PLC (Real Estate) 9,350 140,697
Lloyds TSB Group PLC (Banks and Credit Cos.) 29,620 298,480
National Westminster (Finance) 9,000 110,203
Sainsbury (J.) PLC (Retail) 30,550 175,772
Smith (W.H.) Group PLC (Retail) 38,200 264,245
Storehouse PLC (Retail) 50,400 179,689
Tesco PLC (Retail) 32,580 200,269
Unilever PLC (Consumer Goods) 10,200 273,369
------------
$ 4,356,646
- -----------------------------------------------------------------------
Total Stocks (Identified Cost, $20,959,241) $23,774,992
- -----------------------------------------------------------------------
Warrants
- -----------------------------------------------------------------------
France
Eaux (Cie General) (Utilities - Water) 1,150 $ 789
Sweden
Volvo AB, "B" (Automobiles) 9,600 2,565
- -----------------------------------------------------------------------
Total Warrants (Identified Cost, $0) $ 3,354
- -----------------------------------------------------------------------
Bonds - 13.2%
- -----------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------
Australia - 2.0%
Commonwealth of Australia,
8.75s, 2001 AUD 170 $ 138,620
Commonwealth of Australia,
9.75s, 2002 365 310,680
Commonwealth of Australia,
10s, 2002 165 142,516
-----------
$ 591,816
- -----------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------
Denmark - 1.1%
Kingdom of Denmark, 6s, 1999 DKK 518 $ 82,584
Kingdom of Denmark, 8s, 2001 482 82,436
Kingdom of Denmark, 7s, 2007 526 83,357
Nykredit, 8s, 2026 522 82,442
-----------
$ 330,819
- -----------------------------------------------------------------------
France - 0.8%
Government of France, 7s, 2000 FRF 1,286 $ 241,921
- -----------------------------------------------------------------------
Greece - 0.7%
Hellenic Republic, 12.6s, 2003 GRD 20,500 $ 79,306
Hellenic Republic, 13.4s, 2003 10,000 38,227
Hellenic Republic, 14.8s, 2003 20,000 76,528
-----------
$ 194,061
- -----------------------------------------------------------------------
Ireland - 1.2%
Republic of Ireland, 6.25s, 1999 IEP 60 $ 91,044
Republic of Ireland, 8s, 2000 50 80,012
Republic of Ireland, 6.5s, 2001 110 169,258
-----------
$ 340,314
- -----------------------------------------------------------------------
Italy - 2.6%
Republic of Italy, 9.5s, 1999 ITL 625,000 $ 385,503
Republic of Italy, 9.5s, 2001 605,000 387,880
-----------
$ 773,383
- -----------------------------------------------------------------------
New Zealand - 1.0%
Government of New Zealand,
8s, 2001 NZD 420 $ 296,411
- -----------------------------------------------------------------------
Spain - 2.0%
Government of Spain, 6.75s, 2000 ESP 19,700 $ 141,459
Government of Spain, 8.4s, 2001 17,330 131,820
Government of Spain, 10.5s, 2003 16,180 136,952
Government of Spain, 7.35s, 2007 25,380 183,809
-----------
$ 594,040
- -----------------------------------------------------------------------
Sweden - 0.6%
Kingdom of Sweden, 10.25s, 2000 SEK 1,100 $ 159,837
- -----------------------------------------------------------------------
United Kingdom - 1.2%
United Kingdom Treasury,
7s, 2001 GBP 210 $ 343,156
- -----------------------------------------------------------------------
Total Bonds (Identified Cost, $4,001,187) $3,865,758
- -----------------------------------------------------------------------
Short-Term Obligation - 5.9%
- -----------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 6/02/97, at Amortized Cost $1,720 $1,719,735
- -----------------------------------------------------------------------
20
<PAGE>
Portfolio of Investments - continued
Call Options Purchased
- ---------------------------------------------------------------------------
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
- ---------------------------------------------------------------------------
Canadian Dollars
June/1.365 CAD $ 524 $ 50
Deutsche Marks/British Pounds
July/2.7 DEM 538 910
Japanese Government Bonds
June/117.226 JPY 48,000 96
June/117.622 115,000 115
July/114.635 29,000 116
Swiss Francs
August/1.350 CHF 894 6,012
- ---------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $28,209) $7,299
- ---------------------------------------------------------------------------
Put Options Purchased
- ------------------------------------------------------------------------------
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
- ------------------------------------------------------------------------------
Deutsche Marks
June/1.72 (Premium Paid,
$2,736) DEM 1,034 $ 991
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $26,711,108) $ 29,372,129
- ------------------------------------------------------------------------------
Put Options Written - (0.1)%
- ------------------------------------------------------------------------------
British Pounds
July/1.65 GBP 371 $ (3,823)
Japanese Government Bonds
June/117.226 JPY 48,000 (5,472)
July/114.635 29,000 (6,989)
- ------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $6,589) $ (16,284)
- ------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.1% $ 54,211
- ------------------------------------------------------------------------------
Net Assets - 100.0% $ 29,410,056
- ------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
21
<PAGE>
Performance Summary
MFS/Foreign & Colonial International Growth Fund
The information below illustrates the historical performance of MFS/Foreign &
Colonial International Growth Fund - Class A shares in comparison to various
market indicators. Class A share performance results reflect the deduction of
the 4.75% maximum sales charge; benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown, based on the differences in loads and
fees paid by shareholders investing in the different classes. It is not
possible to invest directly in an index.
[TABULAR REPRESENTATION OF LINE CHART]
Growth of a Hypothetical $10,000 Investment
(For the period from November 1, 1995, through May 31, 1997)
<TABLE>
<CAPTION>
MFS/F&C International
Lipper International Growth Fund -- Consumer Price MSCI
Funds Index Class A Index -- U.S. EAFE
-------------------- --------------------- -------------- ----
<S> <C> <C> <C> <C>
11/1/95 10000 9524 10000 10000
5/31/96 11067 10613 10214 10836
5/31/97 12940 10838 10465 11687
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of May 31, 1997 1 Year Life of Fund*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS/F&C International Growth Fund (Class A) including 4.75% sales charge
(SEC results) - 2.70% + 5.15%
- ---------------------------------------------------------------------------------------------------------
MFS/F&C International Growth Fund (Class A) at net asset value + 2.13% + 8.40%
- ---------------------------------------------------------------------------------------------------------
MFS/F&C International Growth Fund (Class B) with CDSC (SEC results) - 2.44% + 5.40%
- ---------------------------------------------------------------------------------------------------------
MFS/F&C International Growth Fund (Class B) at net asset value + 1.56% + 7.80%
- ---------------------------------------------------------------------------------------------------------
MFS/F&C International Growth Fund (Class C) with CDSC (SEC results) + 0.82% + 7.98%
- ---------------------------------------------------------------------------------------------------------
MFS/F&C International Growth Fund (Class C) at net asset value + 1.82% + 7.98%
- ---------------------------------------------------------------------------------------------------------
MFS/F&C International Growth Fund (Class I) at net asset value + 2.31% + 8.52%
- ---------------------------------------------------------------------------------------------------------
MSCI EAFE+ + 7.88% +10.23%
- ---------------------------------------------------------------------------------------------------------
Lipper International Funds Index++ +15.56% +17.68%
- ---------------------------------------------------------------------------------------------------------
Consumer Price Index**+ + 2.47% + 2.88%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
October 24, 1995, through May 31, 1997.
+Source: CDA/Wiesenberger.
++Source: Lipper Analytical Services.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
22
<PAGE>
Performance Summary - continued
Class A share SEC results include the maximum 4.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares,
which became available on January 2, 1997, have no sales charge or Rule 12b-1
fees and are only available to certain institutional investors.
Class C share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
commencement of offering of Class C shares. Operating expenses attributable to
Class C shares are not significantly different than those of Class B shares.
The Class B share performance included in the Class C share SEC performance has
been adjusted to reflect the CDSC generally applicable to Class C shares rather
than the CDSC generally applicable to Class B shares.
Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the
commencement of offering of Class I shares. Because operating expenses
attributable to Class A shares are greater than those of Class I shares, Class
I share performance generally would have been higher than Class A share
performance. The Class A share performance included in the Class I share
performance has been adjusted to reflect the fact that Class I shares have no
initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.
23
<PAGE>
Portfolio Concentration as of May 31, 1997
MFS/Foreign & Colonial International Growth Fund
Country Weightings (% of Net Assets)
[TABULAR REPRESENTATION OF PIE CHART]
Other 24.6%
Japan 23.1%
UK 14.0%
Germany 6.4%
France 5.9%
Netherlands 5.5%
Switzerland 5.3%
Hong Kong 5.0%
Brazil 3.9%
Sweden 3.5%
Australia 2.8%
For a more complete breakdown, refer to the Portfolio of Investments.
Top 5 Industry Weightings (% of Net Assets)
Electronics and Electricals 11.9%
Telecommunications 8.9%
Banks, Retail 8.2%
Engineering 6.4%
Diversified Industries 6.3%
Top 10 Holdings
TDK Corp.
Japanese manufacturer of audio and
video products
Telecomunicacoes Brasileiras
Leading Brazilian telecommunications company
Capral Aluminum
Australian aluminum company
Taipei Fund
Closed-end Taiwan country fund
Volkswagen AG
German automobile and truck manufacturer
Cheung Kong
Hong Kong property development and investment
company
Pioneer Electronics Corp.
Japanese electronics company
Omron Corp.
Japanese electronic-control manufacturer
Kyocera Corp.
Japanese component manufacturer
Stork NV
Dutch machinery and tool manufacturer
Portfolio Structure (% of Net Assets)
Stocks 98.2%
Cash 1.8%
Tax Form Summary
In January 1998, shareholders will be mailed a tax form summary reporting the
federal tax status of all distributions paid during the calendar year 1997.
Foreign Tax Credit
The Fund is estimated to have derived approximately 82% of its ordinary income
from dividends paid by foreign companies, and to have paid foreign taxes
equivalent to approximately 10.3% of its ordinary income.
24
<PAGE>
Portfolio of Investments - May 31, 1997
MFS/Foreign & Colonial International Growth Fund
Stocks - 98.2%
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
Argentina - 0.7%
Banco de Galicia y Buenos Aires S.A. de
C.V., ADR (Banks and Credit Cos.) 3,287 $ 86,284
Perez Companc S.A. (Oils) 23,159 177,255
Siderar S.A.I.C., ADR (Steel)*## 2,900 97,875
Telecom Argentina Stet - France Telecom
S.A. (Telecommunications) 1,800 96,075
Telefonica de Argentina, ADR
(Uitlities - Telephone) 2,600 94,250
Transportadora de Gas del Sur, S.A. (TGS)
(Pipelines) 7,500 94,687
YPF Sociedad Anonima, ADR (Oils) 8,150 244,500
-------------
$ 890,926
- -------------------------------------------------------------------------------
Australia - 2.8%
Capral Aluminum Ltd. (Metals) 406,269 $ 1,468,561
Futuris Corp. Ltd. (Commercial Services) 695,738 1,090,681
Western Mining (Holding Company) 134,478 868,848
-------------
$ 3,428,090
- -------------------------------------------------------------------------------
Austria - 0.4%
OMV AG (Oil and Gas) 3,440 $ 436,502
- -------------------------------------------------------------------------------
Belgium - 0.5%
Generale de Banque (Finance) 1,560 $ 616,658
- -------------------------------------------------------------------------------
Brazil - 3.9%
Centrais Eletricas Brasile, ADR
(Utilities - Electric) 38,980 $ 916,030
Companhia Energetica S.A., ADR
(Utilities - Electric) 4,650 206,344
Companhia Paranaense de Energia -
COPEL, "B", Preferred (Electrical) 13,900 205,195
Itausa Investimentos Itau S.A. (Conglomerate) 200,000 166,308
Lojas Americanas S.A., ADR (Retail) 7,800 105,300
Petroleo Brasileiro S.A., Preferred (Oils) 4,110,000 983,051
Telecomunicacoes Braileiras S.A.
(Utilities - Telephone) 1,500,000 195,492
Telecomunicacoes Brasileiras S.A., ADR
(Utilities - Telephone) 12,900 1,767,300
Usinas Siderurgicas de Minas Gerais S.A.,
ADR, Preferred (Iron/Steel) 18,300 201,300
-------------
$ 4,746,320
- -------------------------------------------------------------------------------
Canada - 0.1%
Super Sol Ltd. (Supermarkets) 32,500 $ 107,605
- -------------------------------------------------------------------------------
China - 0.4%
Huaneng Power International, Inc., ADR
(Utilities - Electric) 10,200 $ 244,800
Qingling Motors Co. "H" (Automotive) 308,000 170,935
Yizheng Chemical Fibre Co., Ltd. (Textiles) 452,000 88,673
-------------
$ 504,408
- -------------------------------------------------------------------------------
Colombia - 0.5%
Banco Ganadero S.A., ADR (Banks and
Credit Cos.) 5,900 $ 225,675
Banco Industrial Colombiano, ADR
(Banks and Credit Cos.) 11,500 202,687
Stocks - continued
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
Colombia - continued
Cementos Diamante S.A., ADR
(Construction)## 11,100 $ 174,825
-------------
$ 603,187
- -------------------------------------------------------------------------------
Egypt - 0.3%
Commercial International Bank (Banks and
Credit Cos.)## 10,500 $ 204,750
South Cairo Flour Mills (Food Products) 3,250 63,285
Torah For Cement (Construction) 3,500 88,805
-------------
$ 356,840
- -------------------------------------------------------------------------------
Finland - 0.2%
Oy Tamro AB (Pharmaceuticals)## 34,660 $ 230,438
- -------------------------------------------------------------------------------
France - 5.9%
Accor (Lodging) 5,620 $ 780,962
Compagnie de St. Gobain (Building Materials) 5,800 802,953
Dexia France (Finance) 6,980 653,503
Filipacchi Medias (Publishing) 1,600 346,292
Guilbert S.A. (Distributing) 2,895 430,956
Lafarge S.A., Bearer Shares (Building Materials) 2,200 141,011
Lafarge S.A., Bearer Shares (Building Materials) 4,700 301,251
Michelin, "B" (Tires) 15,800 865,336
Seb S.A. (Household Goods) 2,800 479,555
Societe Nationale Elf Aquitaine (Oils) 8,060 807,820
Strafor-Facom S.A. (Office Equipment) 3,600 248,880
TOTAL S.A., "B" (Oils)* 10,350 949,244
Union des Assurances Federales S.A.
(Insurance) 3,500 425,569
- -------------------------------------------------------------------------------
$ 7,233,332
- -------------------------------------------------------------------------------
Germany - 6.4%
Bayer AG (Chemicals) 12,500 $ 485,562
Buderus AG (Manufacturing) 1,403 715,690
Deutsche Bank AG (Banks) 11,140 618,562
Deutsche Telekom AG
(Utilities - Telephone) 44,545 989,889
Fresenius AG (Medical Supplies) 311 67,652
Fresenius AG (Medical Supplies) 2,800 620,581
Mannesmann AG (Diversified Machinery) 2,000 813,838
Moebel Walther AG (Furniture) 10,500 560,246
Siemens AG (Electrical Equipment) 15,580 879,989
VEBA AG (Oil and Gas) 14,400 815,620
Volkswagen AG (Automotive) 1,900 1,229,903
-------------
$ 7,797,532
- -------------------------------------------------------------------------------
Greece - 0.5%
Ergo Bank (Banks and Credit Cos.) 2,100 $ 148,376
Hellenic Telecommunication Organization
S.A. (Telecommunications) 6,500 162,232
Intracom (Telecommunications) 2,300 112,109
Titan Cement Co (Building Materials) 1,350 134,826
-------------
$ 557,543
- -------------------------------------------------------------------------------
25
<PAGE>
Portfolio of Investments - continued
Stocks - continued
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
Hong Kong - 5.0%
Associated International Hotels (Lodging) 747,000 $ 501,342
Bank of East Asia Ltd. (Banks and Credit
Cos.) 42,000 152,865
Chen Hsong Holdings (Machines) 1,034,000 607,215
Cheung Kong Holdings Ltd. (Real Estate) 118,000 1,206,957
Citic Pacific Ltd. (Conglomerates) 19,000 108,635
HSBC Holdings PLC (Finance) 34,200 1,037,300
Li & Fung Ltd. (Wholesale) 1,120,000 1,113,061
New World Development Co. (Real Estate) 40,000 254,001
Swire Pacific Air Ltd., "A" (Transportation) 61,500 515,940
Wharf Holdings Ltd. (Real Estate) 136,000 609,086
-------------
$ 6,106,402
- --------------------------------------------------------------------------------
India - 1.8%
Bajaj Auto Ltd. (Automotive) 250 $ 6,033
Eih Ltd. (Consumer Goods and Services) 18,000 207,741
Hindustan Lever Ltd. (Consumer Goods
and Services) 11,500 358,892
Hindustan Petroleum Corp. Ltd.
(Oil and Gas) 20,000 238,522
Industrial Development Bank of India Ltd.
(Banks and Credit Cos.) 109,000 279,976
Mahanagar Telephone Nigam Ltd.
(Telecommunications) 41,000 327,701
State Bank of India (Banks and Credit Cos.) 47,000 403,618
Tata Engineering and Locomotive Co. Ltd.
(Automotive) 800 8,847
Videsh Sanchar Nigam Ltd., GDR
(Telecommunications)## 19,910 410,146
-------------
$ 2,241,476
- --------------------------------------------------------------------------------
Israel - 0.5%
Israel Chemicals Ltd. (Chemicals) 90,000 $ 110,391
Makhteshim Chemical Works Ltd.
(Chemicals)* 17,000 110,066
NICE Systems Ltd., ADR
(Telecommunications) 2,100 64,050
Tadiran Telecommunications Ltd.
(Telecommunications) 5,000 90,625
Teva Pharmaceutical Industries Ltd., ADR
(Pharmaceuticals) 3,800 228,000
-------------
$ 603,132
- --------------------------------------------------------------------------------
Italy - 2.0%
Telecom Italia Mobile S.p.A. (Cellular
Telecommunications) 179,480 $ 527,820
Industrie Natuzzi S.p.A., ADR (Consumer
Goods and Services) 42,620 1,076,155
Telecom Italia S.p.A. (Telecommunications
Services) 287,000 792,222
-------------
$ 2,396,197
- --------------------------------------------------------------------------------
Japan - 23.1%
Aeon Credit Service Co. Ltd. (Financial Services) 10,800 $ 667,045
Aiphone Co. Ltd. (Telecommunications) 30,000 467,097
ALBIS Co. Ltd. (Food) 36,000 359,226
Stocks - continued
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
Japan - continued
Ariake Japan Co. Ltd. (Food) 13,200 $ 433,755
Canon, Inc. (Consumer Goods) 40,000 1,015,054
Chofu Seisakusho Co. (Machines) 18,700 337,806
Daimei Telecom Engineer Corp.
(Telecommunications) 46,000 415,484
Daiwa Industries Co. Ltd. (Distributor) 41,000 352,335
DDI Corp. (Telecommunications) 93 695,200
Diamond Computer Service Co.
(Computers-Software) 23,000 387,785
Exedy Corp. (Automotive Parts) 23,700 285,419
Fuji Photo Film Co. (Photographic Products) 15,000 581,935
Fujisawa Pharmaceuticals (Pharmaceuticals) 100,000 946,237
Fukuda Denshi (Electronics) 24,000 466,581
Hitachi Zosen Tomioka (Automotive) 120,000 459,355
Homac Corp. (Retail) 21,300 324,310
Ito-Yokado Co. Ltd. (Retail) 20,000 1,142,366
Keyence Corp. (Electronics) 7,700 1,112,774
Kyocera Corp. (Electronics) 16,000 1,154,753
Mandom (Cosmetics) 40,700 483,148
Marubeni Corp. (Distribution/Wholesale) 216,000 919,742
Matsuda Sangyo Co. Ltd. (Food) 24,000 454,193
Matsushita Electric Industrial Co.
(Electrical Equipment) 56,000 1,054,968
Mitsubishi Heavy Industries Ltd.
(Aerospace/Defense) 130,000 937,118
Miura Co. (Machines) 24,000 334,452
NAC Co. Ltd. (Commercial Services) 30,240 395,396
NEC Corp. (Computers) 72,000 1,003,355
Nichiha (Building and Construction) 40,000 633,118
NKK Corp. (Steel) 392,000 772,198
Oi Electric Co. (Electronics) 31,000 274,667
Omron Corp. (Electronics) 58,000 1,167,484
Pioneer Electronic Corp. (Electronics) 48,000 1,189,161
Ricoh Co. Ltd. (Office/Business Equipment) 77,000 1,013,419
Ryohin Keikaku Co. Ltd. (Retail) 6,500 492,602
Sanshin Electronics Co. Ltd. (Electronics) 37,000 677,935
Sato Corp. (Machines) 19,536 329,381
Sawako Corp. (Engineering/Construction) 23,200 363,217
TDK Corp. (Special Products and Services) 38,000 2,922,323
TKC Corp. (Computer Software and Services) 23,600 560,310
Tokyo Broadcasting System (Broadcasting) 18,000 328,258
Yoshinoya D&C Co. Ltd. (Retail) 28 325,161
-------------
$ 28,236,123
- --------------------------------------------------------------------------------
Malaysia - 1.8%
Genting Berhad (Entertainment) 21,000 $ 109,492
Malayan Banking Berhad (Finance) 10,000 105,473
Malaysian Industrial Development Finance
Berhad (Finance) 229,000 331,765
Petronas Gas Berhad (Oil and Gas)*## 226,000 818,547
Resorts World Berhad (Entertainment) 27,000 90,269
Tenaga Nasional Berhad (Utilities - Electric) 104,000 476,020
United Engineers Berhad (Engineering) 33,000 266,627
-------------
$ 2,198,193
- --------------------------------------------------------------------------------
26
<PAGE>
Portfolio of Investments - continued
Stocks - continued
- ----------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------
Mexico - 2.1%
Cemex S.A., "B" (Construction) 66,000 $ 246,979
Corporacion GEO, S.A. de C.V., "B"
(Real Estate) 21,000 100,752
Empresas ICA Sociedad Controladora S.A.,
ADR (Special Products and Services) 13,000 188,500
Fomento Economico Mexicano S.A., "B"
(Beverage) 36,950 196,195
Gruma S.A. (Food Products) 73,666 349,238
Grupo Carso S.A. de C.V. (Conglomerates) 52,800 188,238
Grupo Carso, "A1" (Conglomerates) 52,800 299,712
Grupo Financiero Banamex, "B" (Finance) 58,000 125,532
Grupo Financiero Inbursa S.A. de C.V.
(Finance) 1,842 6,392
Kimberly-Clark de Mexico S.A. de C.V.
(Forest and Paper Products) 30,000 103,919
Telefonos de Mexico S.A.
(Utilities - Telephone) 201,000 446,723
Tubos de Acero de Mexico S.A.
(Iron/Steel)* 17,340 305,149
-------------
$ 2,557,329
- ----------------------------------------------------------------------------
Morocco - 0.4%
Banque Marocaine du Commerce (Banks
and Credit Co.)## 5,300 $ 105,735
Brasserica du Maroc (Consumer Goods
and Services) 530 92,612
Credit Eqdom (Financial Institutions) 750 75,845
ONA S.A. (Conglomerate) 1,500 121,415
Societe Nationale d'Investissement
(Conglomerate) 1,350 100,382
-------------
$ 495,989
- ----------------------------------------------------------------------------
Netherlands - 5.5%
ABN Amro Holdings N.V. (Finance) 52,000 $ 962,110
Ahrend Groep N.V. (Furniture and
Home Appliances) 13,248 838,918
Akzo Nobel (Chemicals) 6,200 826,257
Hagemeyer (Distributing) 18,020 885,644
Royal Dutch Petroleum Co. (Oils) 600 116,047
Stork NV (Machinery) 25,965 1,150,271
Vendex International N.V. (Retail) 19,000 1,067,494
Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit (Publishing) 41,300 934,185
-------------
$ 6,780,926
- ----------------------------------------------------------------------------
Pakistan - 0.6%
Hub Power Co. Ltd., GDR (Utilities - Electric)* 20,000 $ 462,000
Pakistan Telecommunications Corp., GDR
(Utilities - Telephone) 4,800 297,600
-------------
$ 759,600
- ----------------------------------------------------------------------------
Peru - 1.4%
Alicorp S.A. (Consumer Goods and Services) 136,000 $ 236,966
Compania de Minas Buenaventura S.A.
(Mining) 33,507 308,269
Stocks - continued
- ----------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------
Peru - continued
CPT Telefonica del Peru S.A., "B"
(Utilities - Telephone) 238,080 $ 609,728
Credicorp Ltd. Holding Co. (Banks and
Credit Cos.) 23,328 527,796
-------------
$ 1,682,759
- ----------------------------------------------------------------------------
Poland - 0.6%
Elektrim Spolka Akcyjna S.A.
(Electrical Equipment) 56,500 $ 504,969
Stomil Olsztyn S.A. (Tires and Rubber) 22,500 281,250
-------------
$ 786,219
- ----------------------------------------------------------------------------
Portugal - 1.0%
Cimentos de Portugal S.A. (Building Materials) 7,326 $ 161,155
Inparsa - Industria e Participacoes, SGPS,
S.A. (Building Materials) 3,500 29,771
Jeronimo Martins & Filho S.A. (Retail) 1,866 126,849
Portugal Telecom S.A. (Utilities - Telephone) 7,400 284,131
Sonae Investimentos-Sociedade Gestora de
Participacoes Sociais, S.A. (Finance) 7,000 262,814
Telecel - Comunicacaoes Pessoais S.A.
(Cellular Telephones) 5,418 416,468
-------------
$ 1,281,188
- ----------------------------------------------------------------------------
Russia - 1.2%
Lukoil Oil Co., ADR (Oils) 13,800 $ 822,825
Mosenergo, ADR (Utilities - Electric)## 9,900 374,220
Rostelecom (Telecommunications)## 8 303,200
-------------
$ 1,500,245
- ----------------------------------------------------------------------------
Singapore - 1.9%
City Developments Ltd. (Real Estate) 44,000 $ 409,231
Development Bank of Singapore Ltd. (Banks) 59,000 738,531
Overseas-Chinese Banking Corp. Ltd. (Finance) 21,400 266,378
Wing Tai Holdings Ltd. (Holding Company) 300,000 893,706
-------------
$ 2,307,846
- ----------------------------------------------------------------------------
South Africa - 1.0%
Anglo American Corp. of South Africa
Ltd. (Mining) 2,400 $ 140,529
De Beers Centenary AG (Diamonds -
Precious Stones) 5,500 192,734
Liberty Life Association of Africa Ltd.
(Insurance) 7,250 202,922
Nedcor Ltd. (Financial Services) 10,539 205,305
Sappi (Paper Products) 7,000 64,263
Sasol Ltd. (Oils) 18,500 226,797
South African Breweries Ltd. (Brewery) 7,350 206,544
-------------
$ 1,239,094
- ----------------------------------------------------------------------------
Spain - 1.4%
BCO Intercont (Banks) 2,200 $ 372,277
Cristaleria Espanola S.A. (Glass Products) 3,700 295,119
Repsol S.A. (Oils) 10,600 444,021
Telefonica de Espana (Utilities - Telephone) 21,100 609,202
-------------
$ 1,720,619
- ----------------------------------------------------------------------------
27
<PAGE>
Portfolio of Investments - continued
Stocks - continued
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
Sweden - 3.5%
Autoliv AB (Automotive) 9,280 $ 351,606
Enator AB (Computer Services) 9,600 187,132
Ericsson LM, "B" (Telecommunications) 25,500 895,384
Munksjo AB (Forest and Paper Products) 59,700 578,010
Nobel Biocare AB (Medical and Health Products) 26,280 305,329
PLM AB (Packaging and Containers) 11,400 207,503
Sparbanken Sverige AB, "A" (Banks) 43,680 857,090
Volvo AB, "B" (Automobiles) 31,160 862,829
-------------
$ 4,244,883
- -------------------------------------------------------------------------------
Switzerland - 5.3%
Ciba Specialty AG (Chemicals) 6,720 $ 637,508
Fotolabo S.A. (Leisure) 1,300 423,363
Kuoni Reisen Holdings AG (Transportation) 300 998,230
Lindt & Spruengli AG (Food) 40 795,752
Logitech International (Electrical Equipment) 5,220 901,720
Nestle AG, Registered Shares (Food and
Beverage Products) 750 934,513
Novartis AG (Pharmaceuticals) 560 761,204
Roche Holdings AG (Pharmaceuticals) 112 997,494
-------------
$ 6,449,784
- -------------------------------------------------------------------------------
Taiwan - 1.1%
Taipei Fund (Finance) 125 $ 1,362,500
- -------------------------------------------------------------------------------
Turkey - 0.1%
Adana Cimento Sanayii (Building
Materials) 1,363,600 $ 89,869
- -------------------------------------------------------------------------------
United Kingdom - 14.0%
ASDA Property Holdings PLC (Real Estate) 157,600 $ 392,674
BAA PLC (Transportation) 121,780 1,057,995
Blick PLC (Electrical) 51,200 234,996
British Petroleum PLC (Oil and Gas) 65,540 784,262
British Telecommunications PLC
(Telecommunications) 108,940 791,084
BTR PLC (Holding Company) 169,520 552,975
Bullough PLC (Manufacturing) 275,900 547,229
Carlton Communications PLC (Broadcasting) 104,640 903,941
Close Brothers Group PLC (Banks) 71,800 556,695
David Brown Group PLC
(Engineering/Construction) 88,400 315,893
Devro International PLC (Food) 96,300 513,028
Fine Art Developments PLC (Retail) 66,600 324,237
Forth Ports PLC (Harbor Transportation
Services) 21,000 206,539
Glaxo Wellcome PLC (Pharmaceuticals) 45,880 919,023
Hazlewood Foods PLC (Food) 280,800 464,890
Inchcape PLC (Commercial Services) 54,150 255,636
Independent Insurance Group PLC (Insurance) 46,300 610,954
Lloyds TSB Group PLC (Banks and Credit Cos.) 105,800 1,066,144
Marley PLC (Building Materials) 193,900 400,479
Midland Independent Newspapers PLC
(Publishing) 138,000 334,790
National Westminster (Finance) 20,900 255,917
Roxboro Group PLC (Manufacturing) 89,700 313,187
Stocks - continued
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
United Kingdom - continued
Sainsbury (J.) PLC (Retail) 36,800 $ 211,732
Serco Group PLC (Commercial Services) 24,500 284,135
Seton Healthcare Group PLC (Medical Supplies) 39,000 303,662
SIG PLC (Building Materials) 105,940 541,531
Storehouse PLC (Retail) 170,460 607,734
T & S Stores PLC (Retail) 119,400 346,425
Tesco PLC (Retail) 114,000 700,758
Triplex Lloyd PLC (Hardware) 121,600 324,902
Unilever PLC (Consumer Goods) 33,580 899,974
Vardon PLC (Entertainment) 197,050 361,765
VCI PLC (Leisure) 58,000 239,585
Walker Greenbank PLC (Maufacturing) 247,300 235,117
Wardle Storeys PLC (Chemicals) 32,500 223,751
-------------
$ 17,083,639
- -------------------------------------------------------------------------------
Venezuela - 0.3%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications)* 10,000 $ 371,250
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $107,428,950) $120,004,643
- -------------------------------------------------------------------------------
Warrants
- -------------------------------------------------------------------------------
Sweden
Volvo AB, "B" (Automobiles)
(Identified Cost, $0) $ 31,160 $ 8,327
- -------------------------------------------------------------------------------
Short-Term Obligations - 0.5%
- -------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 6/23/97 $ 450 $ 448,493
General Electric Capital Corp., due
6/02/97 205 204,968
- -------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 653,461
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $108,082,411) $120,666,431
Other Assets, Less Liabilities - 1.3% 1,583,470
- -------------------------------------------------------------------------------
Net Assets - 100.0% $122,249,901
- -------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
*Non-income producing security.
##SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars GBP = British Pounds
BEF = Belgian Francs GRD = Greek Drachmas
CAD = Canadian Dollars IEP = Irish Punts
CHF = Swiss Francs ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NLG = Netherlands Guilders
ESP = Spanish Pesetas NZD = New Zealand Dollars
FRF = French Francs SEK = Swedish Kronor
28
<PAGE>
Financial Statements
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging International
Markets Growth International
May 31, 1997 Equity and Income Growth
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost, $76,343,323, $26,711,108, and
$108,082,411,respectively) $89,854,857 $29,372,129 $120,666,431
Cash -- -- 44,183
Foreign currency, at value (identified cost, $651,563, $13,658, and $482,608,
respectively) 651,681 13,586 483,169
Net receivable for forward foreign currency exchange contract sold -- 283,017 958,593
Net receivable for master netting agreements and closed foreign currency exchange
contracts purchased -- 74,704 --
Net receivable for forward foreign currency exchange contracts purchased -- 111,737 131,216
Receivable for Fund shares sold 1,133,639 286,428 774,640
Receivable for investments sold -- 280,112 --
Interest and dividends receivable 319,469 226,451 498,231
Deferred organization expenses 20,691 18,385 19,115
----------- ----------- ------------
Total assets $91,980,337 $30,666,549 $123,575,578
----------- ----------- ------------
Liabilities:
Cash overdraft $ 2,136 $ 555,757 $ --
Payable for Fund shares reacquired 50,712 39,749 237,117
Payable for investments purchased 229,460 563,801 892,412
Written options outstanding, at value (premiums received $0, $6,589, and $0,
respectively) -- 16,284 --
Payable to affiliates -
Management fee 6,191 1,579 6,554
Administrative fee 74 24 101
Shareholder servicing agent fee 644 211 874
Distribution fee 42,423 14,110 58,398
Accrued expenses and other liabilities 131,058 64,978 130,221
----------- ----------- ------------
Total liabilities $ 462,698 $ 1,256,493 $ 1,325,677
----------- ----------- ------------
Net assets $91,517,639 $29,410,056 $122,249,901
=========== =========== ============
Net assets consist of:
Paid-in capital $80,593,249 $27,843,519 $114,182,502
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies 13,408,306 3,116,858 13,675,208
Accumulated net realized loss on investments and foreign currency transactions (2,016,103) (1,182,827) (4,780,289)
Accumulated net investment loss (467,813) (367,494) (827,520)
----------- ----------- ------------
Total $91,517,639 $29,410,056 $122,249,901
=========== =========== ============
Shares of beneficial interest outstanding 4,838,654 1,805,209 7,251,124
=========== =========== ============
Class A shares:
Net asset value per share
(net assets of $37,539,578, $13,425,340, and $56,810,289 [divided by] 1,979,873,
822,833, and 3,361,154 shares of beneficial interest outstanding, respectively) $18.96 $16.32 $16.90
====== ====== ======
Offering price per share (100 - 95.25 of net asset value per share) $19.91 $17.13 $17.74
====== ====== ======
Class B shares:
Net asset value and offering price per share
(net assets of $51,019,984, $15,748,793, and $62,958,124 [divided by] 2,701,302,
967,802, and 3,741,995 shares of beneficial interest outstanding, respectively) $18.89 $16.27 $16.82
====== ====== ======
Class C shares:
Net asset value and offering price per share
(net assets of $2,658,810, $235,453, and $2,397,128 [divided by] 141,725, 14,545,
and 142,994 shares of beneficial interest outstanding, respectively) $18.76 $16.19 $16.76
====== ====== ======
Class I shares:
Net asset value, offering price and redemption price per share
(net assets of $299,267, $470.34, and $84,360 [divided by] 15,754, 28.825, and
4,981 shares of beneficial interest outstanding, respectively) $19.00 $16.32 $16.94
====== ====== ======
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, and Class C shares.
See notes to financial statements
29
<PAGE>
kl.
Financial Statements - continued
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging International
Markets Growth International
Year Ended May 31, 1997 Equity and Income Growth
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income:
Income -
Interest $ 202,857 $ 459,577 $ 403,067
Dividends 1,028,372 475,670 2,092,771
Foreign taxes withheld (63,610) (59,180) (233,349)
------------ ------------ ------------
Total investment income $ 1,167,619 $ 876,067 $ 2,262,489
------------ ------------ ------------
Expenses -
Management fee $ 687,535 $ 277,086 $ 1,049,705
Trustees' compensation 6,458 6,892 11,015
Administrative fee 3,019 1,100 4,467
Shareholder servicing agent fee 37,906 15,593 62,315
Shareholder servicing agent fee (Class A) 18,926 11,517 42,410
Shareholder servicing agent fee (Class B) 28,770 19,201 68,426
Shareholder servicing agent fee (Class C) 223 24 525
Distribution and service fee (Class A) 128,054 66,872 252,648
Distribution and service fee (Class B) 284,900 149,349 559,606
Distribution and service fee (Class C) 8,454 1,034 11,524
Custodian fee 66,789 53,394 116,586
Registration fees 58,565 49,349 34,241
Printing 47,823 22,734 69,269
Postage 37,403 9,202 24,397
Auditing fees 32,111 26,826 38,272
Legal fees 9,916 10,794 10,649
Amortization of organization expenses 5,197 5,197 5,197
Miscellaneous 41,506 33,494 79,131
------------ ------------ ------------
Total expenses $ 1,503,555 $ 759,658 $ 2,440,383
Fees paid indirectly (4,573) (7,370) (7,957)
Refund of expenses to investment adviser 25,887 -- --
------------ ------------ ------------
Net expenses $ 1,524,869 $ 752,288 $ 2,432,426
------------ ------------ ------------
Net investment income (loss) $ (357,250) $ 123,779 $ (169,937)
------------ ------------ ------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(1,983,312) $ (1,254,793) $(4,497,196)
Written option transactions -- 7,796 --
Foreign currency transactions (83,420) (430,595) (441,519)
------------ ------------ ------------
Net realized loss on investments and foreign currency transactions $(2,066,732) $ (1,677,592) $(4,938,715)
------------ ------------ ------------
Change in unrealized appreciation (depreciation) -
Investments (net of applicable deferred foreign taxes of $103,099, $0, and $1,118,
respectively) $11,949,720 $ 1,748,881 $ 7,102,874
Written options -- (32,094) --
Translation of assets and liabilities in foreign currencies 2,504 589,842 1,120,254
------------ ------------ ------------
Net unrealized gain on investments and foreign currency translation $11,952,224 $ 2,306,629 $ 8,223,128
------------ ------------ ------------
Net realized and unrealized gain on investments and foreign currency $ 9,885,492 $ 629,037 $ 3,284,413
------------ ------------ ------------
Increase in net assets from operations $ 9,528,242 $ 752,816 $ 3,114,476
============ ============= ============
</TABLE>
See notes to financial statements
30
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Markets Equity International Growth and Income
------------------------------ --------------------------------
Year Ended Period Ended Year Ended Period Ended
May 31, 1997 May 31, 1996* May 31, 1997 May 31, 1996*
- --------------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (357,250) $ 13,002 $ 123,779 $ 81,065
Net realized gain (loss) on investments and foreign
currency transactions (2,066,732) 502,931 (1,677,592) 87,073
Net unrealized gain on investments and foreign
currency translation 11,952,224 1,456,082 2,306,629 810,229
-------------- ------------- -------------- -------------
Increase in net assets from operations $ 9,528,242 $ 1,972,015 $ 752,816 $ 978,367
-------------- ------------- -------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (8,868) $ (68,626) $ (12,226)
From net investment income (Class B) -- -- -- (7,299)
From net investment income (Class C) -- -- (575) --
From net realized gain on investments and foreign
currency transactions (Class A) (309,984) -- (35,996) --
From net realized gain on investments and foreign
currency transactions (Class B) (238,475) -- (39,731) --
From net realized gain on investments and foreign
currency transactions (Class C) (11,143) -- (193) --
In excess of net investment income (Class B) -- (3,354) -- --
-------------- ------------- -------------- -------------
Total distributions declared to shareholders $ (559,602) $ (12,222) $ (145,121) $ (19,525)
-------------- ------------- -------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 92,886,375 $ 46,419,714 $ 14,540,133 $ 27,711,754
Net asset value of shares issued to shareholders in
reinvestment of distributions 500,512 12,183 128,054 15,767
Cost of shares reacquired (50,719,552) (8,510,026) (11,456,699) (3,095,490)
-------------- ------------- -------------- -------------
Increase in net assets from Fund share
transactions $ 42,667,335 $ 37,921,871 $ 3,211,488 $ 24,632,031
-------------- ------------- -------------- -------------
Total increase in net assets $ 51,635,975 $ 39,881,664 $ 3,819,183 $ 25,590,873
Net assets:
At beginning of period 39,881,664 -- 25,590,873 --
-------------- ------------- -------------- -------------
At end of period (including accumulated
undistributed net investment income (loss) of
$(463,770) and $(23,100), $(367,494) and
$123,689, and $(775,180) and $(220,228),
respectively) $ 91,517,639 $ 39,881,664 $ 29,410,056 $ 25,590,873
============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
International Growth
--------------------------------
Year Ended Period Ended
May 31, 1997 May 31, 1996*
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (169,937) $ (4,270)
Net realized gain (loss) on investments and foreign
currency transactions (4,938,715) 334,764
Net unrealized gain on investments and foreign
currency translation 8,223,128 5,452,080
-------------- -------------
Increase in net assets from operations $ 3,114,476 $ 5,782,574
-------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (6,653)
From net investment income (Class B) -- --
From net investment income (Class C) -- --
From net realized gain on investments and foreign
currency transactions (Class A) (469,661) --
From net realized gain on investments and foreign
currency transactions (Class B) (305,586) --
From net realized gain on investments and foreign
currency transactions (Class C) (14,849) --
In excess of net investment income (Class B) -- --
-------------- -------------
Total distributions declared to shareholders $ (790,096) $ (6,653)
-------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 129,496,667 $ 84,291,229
Net asset value of shares issued to shareholders in
reinvestment of distributions 830,061 5,219
Cost of shares reacquired (95,147,991) (5,325,585)
-------------- -------------
Increase in net assets from Fund share
transactions $ 35,178,737 $ 78,970,863
-------------- -------------
Total increase in net assets $ 37,503,117 $ 84,746,784
Net assets:
At beginning of period 84,746,784 --
-------------- -------------
At end of period (including accumulated
undistributed net investment income (loss) of
$(463,770) and $(23,100), $(367,494) and
$123,689, and $(775,180) and $(220,228),
respectively) $ 122,249,901 $ 84,746,784
============== =============
</TABLE>
*For the period from the commencement of investment operations, October 24,
1995, to May 31, 1996
See notes to financial statements.
31
<PAGE>
Financial Statements - continued
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Markets Equity
----------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
May 31, 1997 May 31, 1996* May 31, 1997 May 31, 1996*
---------------- --------------- -------------- ---------------
Class A Class B
- -------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 16.52 $ 15.00 $ 16.47 $ 15.00
------- ------- ------- -------
Income from investment operations# -
Net investment income (loss) $ (0.07) $ 0.04 $ (0.15) $ (0.02)
Net realized and unrealized gain on
investments and foreign currency
transactions 2.74 1.50 2.73 1.50
------- ------- ------- -------
Total from investment operations $ 2.67 $ 1.54 $ 2.58 $ 1.48
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ -- $ (0.02) $ -- $ --
From net realized gain on investments and
foreign currency transactions (0.23) -- (0.16) --
In excess of net investment income -- -- -- (0.01)
------- ------- ------- -------
Total distributions declared to
shareholders $ (0.23) $ (0.02) $ (0.16) $ (0.01)
------- ------- ------- -------
Net asset value - end of period $ 18.96 $ 16.52 $ 18.89 $ 16.47
------- ------- ------- -------
Total return+++ 16.43% 10.24%++ 15.87% 9.85%++
Ratios (to average daily net assets)/Supplemental data ss.:
Expenses## 2.51% 2.48%+ 3.04% 3.06%+
Net investment income (loss) (0.42)% 0.35%+ (0.87)% (0.19)%+
Portfolio turnover 47% 22% 47% 22%
Average commission rate $0.0019 $0.0136 $0.0019 $0.0136
Net assets at end of period (000 omitted) $37,540 $19,861 $51,020 $20,021
</TABLE>
<TABLE>
<CAPTION>
Emerging Markets Equity
- ---------------------------------------------------------------------------------------------------
Period Ended Period Ended
May 31, 1997** May 31, 1997***
---------------- ----------------
Class C Class I
- ---------------------------------------------------------------------------------- ----------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 16.77 $ 16.47
------- -------
Income from investment operations# -
Net investment income (loss) $ (0.08) $ 0.10
Net realized and unrealized gain on
investments and foreign currency
transactions 2.36 2.43
------- -------
Total from investment operations $ 2.28 $ 2.53
------- -------
Less distributions declared to shareholders -
From net investment income $ -- $ --
From net realized gain on investments and
foreign currency transactions (0.29) --
In excess of net investment income -- --
------- -------
Total distributions declared to
shareholders $ (0.29) $ --
-------- -------
Net asset value - end of period $ 18.76 $ 19.00
-------- -------
Total return+++ 13.89%++ 15.36%++
Ratios (to average daily net assets)/Supplemental data ss.:
Expenses## 3.00%+ 2.01%+
Net investment income (loss) (0.48)%+ 1.14%+
Portfolio turnover 47% 47%
Average commission rate $0.0019 $0.0019
Net assets at end of period (000 omitted) $2,659 $299
</TABLE>
*For the period from the commencement of investment operations, October 24,
1995, to May 31, 1996.
**For the period from the commencement of offering of Class C shares, June 27,
1996, to May 31, 1997.
***For the period from the commencement of offering of Class I shares, January
2, 1997, to May 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
+++Total returns for Class A shares do not include the applicable sales charge.
If the sales charge had been included, the results would have been lower.
ss.For the year ended May 31, 1997, the Adviser voluntarily agreed to bear,
subject to reimbursement by the Fund, expenses of each class of shares of the
Fund such that expenses, exclusive of management, distribution, service fees,
and certain other expenses, of the Fund's Class A shares, Class B shares,
Class C shares, and Class I shares do not exceed 0.75%, respectively, of the
Fund's average daily net assets on an annualized basis. For the period ended
May 31, 1996, the Adviser voluntarily agreed to maintain total expenses of
the Fund at not more than 2.50%, 3.07%, and 3.00% of average daily net assets
for Class A, Class B, and Class C shares, respectively. To the extent actual
expenses were over/under these limitations, the net investment income (loss)
per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $(0.06) $ 0.02 $ (0.14) $ (0.08) $ (0.07) $ 0.10
Ratios (to average net assets):
Expenses 2.45% 2.73%+ 2.98% 3.30%+ 2.97%+ 1.99%+
Net investment income (loss) (0.37)% 0.10%+ (0.82)% (0.44)%+ (0.39)%+ 1.14%+
</TABLE>
See notes to financial statements
32
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Growth and Income
--------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
May 31, 1997 May 31, 1996* May 31, 1997 May 31, 1996*
------------------------------ ------------------------------
Class A Class B
- ------------------------------------------------------------------------------------------------ ---------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 15.98 $ 15.00 $ 15.94 $ 15.00
------- ------- ------- -------
Income from investment operations# -
Net investment income $ 0.11 $ 0.11 $ 0.03 $ 0.05
Net realized and unrealized gain on
investments and foreign currency
transactions 0.35 0.90 0.34 0.90
------- ------- ------- -------
Total from investment operations $ 0.46 $ 1.01 $ 0.37 $ 0.95
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.03) $ -- $ (0.01)
From net realized gain on investments and
foreign currency transactions (0.04) -- (0.04) --
------- ------- ------- -------
Total distributions declared to
shareholders $ (0.12) $ (0.03) $ (0.04) $ (0.01)
------- ------- ------- -------
Net asset value - end of period $ 16.32 $ 15.98 $ 16.27 $ 15.94
======= ======= ======= =======
Total return[dbldag] 2.88% 6.71%++ 2.33% 6.37%++
Ratios (to average daily net assets)/Supplemental data:
Expenses## 2.39% 2.52%+ 2.94% 3.11%+
Net investment income 0.72% 1.04%+ 0.18% 0.49%+
Portfolio turnover 89% 29% 89% 29%
Average commission rate $0.0197 $0.0291 $0.0197 $0.0291
Net assets at end of period (000 omitted) $13,425 $11,950 $15,749 $13,641
</TABLE>
<TABLE>
<CAPTION>
International Growth and Income
- -------------------------------------------------------------------------------------------------
Period Ended Period Ended
May 31, 1997** May 31, 1997***
-------------------------------
Class C Class I
-------------- ---------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 16.02 $15.71
------- ------
Income from investment operations# -
Net investment income $ 0.12 $ 0.16
Net realized and unrealized gain on
investments and foreign currency
transactions 0.21 0.45
------- ------
Total from investment operations $ 0.33 $ 0.61
------- ------
Less distributions declared to shareholders -
From net investment income $ (0.12) $ --
From net realized gain on investments and
foreign currency transactions (0.04) --
------- ------
Total distributions declared to
shareholders $ (0.16) $ --
------- ------
Net asset value - end of period $ 16.19 $16.32
------- ------
Total return[dbldag] 2.09%++ 3.88%++
Ratios (to average daily net assets)/Supplemental data:
Expenses## 2.64%+ 1.89%+
Net investment income 0.80%+ 2.33%+
Portfolio turnover 89% 89%
Average commission rate $0.0197 $0.0197
Net assets at end of period (000 omitted) $235 $--
</TABLE>
*For the period from the commencement of investment operations, October 24,
1995, to May 31, 1996.
**For the period from the commencement of offering of Class C shares, July 1,
1996, to May 31, 1997.
***For the period from the commencement of offering of Class I shares,
January 2, 1997, to May 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales
charge. If the sales charge had been included, the results would have been
lower.
See notes to financial statements
33
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Growth
-------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
May 31, 1997 May 31, 1996* May 31, 1997 May 31, 1996*
-------------- ------------- ------------ --------------
Class A Class B
- ----------------------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.71 $ 15.00 $ 16.66 $ 15.00
------ ------- ------- -------
Income from investment operations# -
Net investment income (loss) $ 0.02 $ 0.03 $ (0.07) $ (0.03)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 0.32 1.69 0.31 1.69
------ ------- ------- -------
Total from investment operations $ 0.34 $ 1.72 $ 0.24 $ 1.66
------ ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ -- $ (0.01) $ -- $ --
From net realized gain on investments and
foreign currency transactions (0.15) -- (0.08) --
------ ------- ------- -------
Total distributions declared to
shareholders $(0.15) $ (0.01) $ (0.08) --
------ ------- ------- -------
Net asset value - end of period $16.90 $ 16.71 $ 16.82 $ 16.66
====== ======= ======= =======
Total return[dbldag] 2.13% 11.43%++ 1.56% 11.07%++
Ratios (to average daily net assets)/Supplemental data:
Expenses## 1.99% 2.24%+ 2.53% 2.85%+
Net investment income (loss) 0.13% 0.24%+ (0.42)% (0.31)%+
Portfolio turnover 53% 11% 53% 11%
Average commission rate $0.0069 $0.0107 $0.0069 $0.0107
Net assets at end of period (000 omitted) $56,810 $41,483 $62,958 $43,264
</TABLE>
<TABLE>
<CAPTION>
International Growth
---------------------------------
Period Ended Period Ended
May 31, 1997** May 31, 1997***
--------------- ----------------
Class C Class I
- -------------------------------------------------------------------------------- ----------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 16.83 $ 15.90
------- -------
Income from investment operations# -
Net investment income (loss) $ (0.04) $ 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 0.15 0.93
------- -------
Total from investment operations $ 0.11 $ 1.04
------- -------
Less distributions declared to shareholders -
From net investment income $ -- $ --
From net realized gain on investments and
foreign currency transactions (0.18) --
------- -------
Total distributions declared to
shareholders $ (0.18) $ --
------- -------
Net asset value - end of period $ 16.76 $ 16.94
======= =======
Total return[dbldag] 0.79%++ 6.54%++
Ratios (to average daily net assets)/Supplemental data:
Expenses## 2.50%+ 1.52%+
Net investment income (loss) (0.27)%+ 1.40%+
Portfolio turnover 53% 53%
Average commission rate $0.0069 $0.0069
Net assets at end of period (000 omitted) $2,397 $84
</TABLE>
*For the period from the commencement of investment operations, October 24,
1995, to May 31, 1996.
**For the period from the commencement of offering of Class C shares, July 1,
1996, to May 31, 1997.
***For the period from the commencement of offering of Class I shares, January
2, 1997, to May 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales
charge. If the sales charge had been included, the results would have been
lower.
See notes to financial statements
34
<PAGE>
Notes to Financial Statements
(1) Business and Organization
MFS/Foreign & Colonial Emerging Markets Equity Fund (Emerging Market Equity),
MFS/Foreign & Colonial International Growth and Income Fund (International
Growth and Income), and MFS/Foreign & Colonial International Growth Fund
(International Growth) (the Funds) are each a diversified series of MFS Series
Trust X (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 valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are
not available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed
issues and forward contracts, are valued on the basis of valuations furnished
by dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the base
currency and translated into U.S. dollars at the closing daily exchange rate.
Future contracts, options, and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices. Over-the-counter
options are valued by brokers through the use of a pricing model which takes
into account closing bond valuations, implied volatility, and short-term
repurchase rates. Securities for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Trustees.
Repurchase Agreements - The Funds may enter into repurchase agreements with
institutions that the Funds' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Funds require
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Funds to obtain those securities
in the event of a default under the repurchase agreement. The Funds monitor, on
a daily basis, the value of the securities transferred to ensure that the
value, including accrued interest, of the securities under each repurchase
agreement is greater than amounts owed to the Funds under each such repurchase
agreement.
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.
Deferred Organization Expenses - Costs incurred by the Funds in connection with
their organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of operations of the Funds.
Written Options - The Funds may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Funds. The Funds, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bear the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to
35
<PAGE>
Notes to Financial Statements - continued
the extent of the premium received. Written options may also be used as part of
an income-producing strategy reflecting the view of the Funds' management on
the direction of interest rates.
Forward Foreign Currency Exchange Contracts - The Funds may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Funds will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Funds may enter into contracts to deliver or receive foreign
currency they will receive from or require for their normal investment
activities. They may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Funds may enter into
contracts with the intent of changing the relative exposures of the Funds'
portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized until the
contract settlement date.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. 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 Funds' custodian bank calculates its fee based on
the Funds' average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Funds. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Funds' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Funds file a tax return annually using tax accounting methods required
under provisions of the Code which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. Accordingly, the amount of net investment income and net realized
gain reported on these financial statements may differ from that reported on
the Funds' tax return and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that reported
to shareholders on Form 1099-DIV. Foreign taxes have been provided for on
interest and dividend income earned on foreign investments in accordance with
the applicable country's tax rates and to the extent unrecoverable are recorded
as a reduction of investment income. Distributions to shareholders are recorded
on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended May 31, 1997, the following amounts were
reclassified due to differences between book and tax accounting for currency
transactions. These changes had no effect on the net assets or net asset value
per share.
Emerging International
Markets Growth and International
Equity Income Growth
------------- -------------- --------------
Increase (decrease):
Paid-in-capital ............ $ 4,043 $ -- $ 32,902
Accumulated undistributed net
realized gain on investments
and foreign currency
transactions ............... 83,420 545,761 404,453
Accumulated undistributed net
investment income ......... (87,463) (545,761) (437,355)
Multiple Classes of Shares of Beneficial Interest - The Funds offer Class A,
Class B, Class C, and Class I shares. The four classes of shares differ in
their respective distribution and service fees. All shareholders bear the
common expenses of each Fund pro rata based on average daily net assets of each
class, without distinction between share classes. Dividends are declared
separately for each class. No class has preferential dividend rights;
difference in per share dividend rates are generally due to differences in
separate class expenses.
36
<PAGE>
Notes to Financial Statements - continued
(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 an effective annual rate
of 0.975% of average daily net assets for the International Growth Fund and the
International Growth and Income Fund, and 1.25% of average daily net assets for
the Emerging Markets Equity Fund The advisory agreements permit the adviser to
engage one or more sub-advisers and the adviser, MFS, has engaged Foreign &
Colonial Management Ltd., an England and Wales Company, to assist in the
performance of its services.
Under a temporary expense reimbursement agreement, MFS has voluntarily agreed
to pay all of the Emerging Markets Equity Fund's operating expenses, exclusive
of management, distribution, and service fees. The Emerging Markets Equity Fund
in turn will pay MFS an expense reimbursement fee not greater than 0.75% of
average daily net assets for Class A, Class B, and Class C shares. To the
extent that the expense reimbursement fee exceeds the Emerging Markets Equity
Fund's actual expenses, the excess will be applied to amounts paid by MFS in
prior years. At May 31, 1997, the aggregate unreimbursed expenses owed to MFS
by the Emerging Markets Equity Fund amounted to $38,092.
Administrator - Effective March 1, 1997, each Fund has an administrative
services agreement with MFS to provide each Fund with certain financial, legal,
compliance, shareholder communications, and other administrative services. As a
partial reimbursement for the cost of providing these services, each Fund pays
MFS an administrative fee up to 0.015% per annum of each Fund's average daily
net assets, provided that the administrative fee is not assessed on Fund assets
that exceed $3 billion.
The Funds pay no compensation directly to their 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 of the officers
and Trustees of the Funds are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC). Each of the
Funds has an unfunded defined benefit plan for all of its independent Trustees
and Mr. Bailey. Included in Trustees' compensation are net periodic pension
expenses of $1,701, $1,701, and $1,701 for the Emerging Markets Equity Fund,
International Growth and Income Fund, and International Growth Fund,
respectively, for the year ended May 31, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$44,930, $18,575, and $79,525 for the Emerging Markets Equity Fund,
International Growth and Income Fund, and International Growth Fund,
respectively, for the year ended May 31, 1997, as its portion of the sales
charge on sales of Class A shares of each Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares of each Fund 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 in order that
MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each
securities dealer that enters into a sales agreement with MFD of up to 0.25%
per annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer, a distribution fee to MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares, commissions to dealers, and payments to MFD wholesalers for
sales at or above a certain dollar level, and other such distribution-related
expenses that are approved by the Fund. MFD retains the service fee for
accounts not attributable to a securities dealer which amounted to $15,111,
$6,002, and $28,940 for the Emerging Markets Equity Fund, International Growth
and Income Fund, and International Growth Fund, respectively, for the year
ended May 31, 1997. Fees incurred under each Fund's distribution plan during
the year ended May 31, 1997, were 0.50% of average daily net assets
attributable to Class A shares on an annualized basis.
Each Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and Class
C shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD all or a portion of the service fee attributable to Class B and Class
C shares, and will pay to such securities dealers all of the distribution fee
attributable to Class C shares. The service fee is intended to be additional
consideration for services rendered by the dealer with respect to Class B and
Class C shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $1,469, $1,835, and $5,117 for Class B
shares of the Emerging Markets Equity Fund, International Growth and Income
Fund, and International Growth Fund, respectively, for the year ended May 31,
1997 and $2, $0, and $26 for Class C shares of the Emerging Markets Equity
Fund, International Growth and Income Fund, and Interna-
37
<PAGE>
Notes to Financial Statements - continued
tional Growth Fund, respectively, for the period ended May 31, 1997. Fees
incurred under each Fund's distribution plan during the year ended May 31,
1997, were 1.00% of the Fund's average daily net assets attributable to Class B
and Class C shares, respectively, on an annualized basis.
Purchases over $1 million into Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within twelve months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption with six years of purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
C shares in the event of a shareholder redemption within twelve months of
purchases made on or after April 1, 1996. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges for Class A shares imposed
during the year ended May 31, 1997, were $48, $11, and $1,254 for the Emerging
Markets Equity Fund, International Growth and Income Fund, and International
Growth Fund, respectively. Contingent deferred sales charges for Class B shares
imposed during the period ended May 31, 1997, were $43,118, $32,134, and
$103,091 for the Emerging Markets Equity Fund, International Growth and Income
Fund, and International Growth Fund, respectively. Contingent deferred sales
charges for Class C shares imposed during the period ended May 31, 1997, were
$1,252, $213, and $3,733 for the Emerging Markets Equity Fund, International
Growth and Income Fund, and International Growth Fund, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each Fund's average daily net assets at an effective annual rate
of 0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of
the average daily net assets of each class of shares of each Fund at an
effective annual rate of up to 0.15%, up to 0.22%, and up to 0.15% attributable
to Class A, Class B, and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations aggregated $62,033,984
and $24,482,588, $27,162,926 and $22,901,788, and $90,622,329 and $25,759,078
for the Emerging Markets Equity Fund, International Growth and Income Fund, and
International Growth Fund, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
<TABLE>
<CAPTION>
Emerging Markets International Growth International
Equity Fund and Income Fund Growth Fund
---------------- -------------------- -------------
<S> <C> <C> <C>
Aggregate cost $ 76,343,323 $ 26,735,821 $ 108,082,411
============= ============ =============
Gross unrealized appreciation $ 15,430,144 $ 3,339,321 $ 17,283,458
Gross unrealized depreciation (1,918,610) (703,013) (4,699,438)
------------- ------------ -------------
Net unrealized appreciation $ 13,511,534 $ 2,636,308 $ 12,584,020
============= ============ =============
</TABLE>
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Emerging Markets International Growth International
Equity Fund and Income Fund Growth Fund
Class A Shares ------------------------------- ------------------------------- -----------------------------
Year Ended May 31, 1997 Shares Amount Shares Amount Shares Amount
- ------------------------------------ -------------- ---------------- -------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,277,472 $ 39,713,990 365,309 $ 5,792,690 3,428,135 $ 55,431,605
Shares issued to shareholders
in reinvestment of distributions 17,927 287,543 5,771 90,897 36,196 576,007
Transfer to Class I (1,982) (32,637) -- -- (1,308) (20,795)
Shares reacquired (1,516,023) (26,385,091) (296,169) (4,680,979) (2,584,373) (41,727,368)
----------- -------------- ---------- -------------- ----------- --------------
Net increase 777,394 $ 13,583,805 74,911 $ 1,202,608 878,650 $ 14,259,449
=========== ============== ========== ============== =========== ==============
</TABLE>
38
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
Emerging Markets International Growth International
Equity Fund and Income Fund Growth Fund
Class A Shares - continued ------------------------------- ------------------------------ -----------------------------
Period Ended May 31, 1996* Shares Amount Shares Amount Shares Amount
- ------------------------------------------------- ---------------- ------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,490,414 $ 23,464,680 793,963 $ 12,142,184 2,712,981 $ 42,075,064
Shares issued to shareholders
in reinvestment of distributions 514 7,966 658 10,210 367 5,219
Shares reacquired (288,449) (4,694,661) (46,699) (723,607) (230,844) (3,729,818)
----------- -------------- --------- -------------- ----------- --------------
Net increase 1,202,479 $ 18,777,985 747,922 $ 11,428,787 2,482,504 $ 38,350,465
=========== ============== ========= ============== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Emerging Markets International Growth International
Class B Shares Equity Fund and Income Fund Growth Fund
------------------------------ ----------------------------- -----------------------------
Year Ended May 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------------------- -------------- --------- ----------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,844,356 $ 50,086,036 462,559 $ 7,367,431 4,424,042 $ 71,166,884
Shares issued to shareholders in
reinvestment of distributions 12,630 202,215 2,318 36,552 15,231 240,644
Shares reacquired (1,371,122) (23,955,353) (352,648) (5,601,722) (3,294,305) (52,883,159)
----------- -------------- --------- -------------- ----------- --------------
Net increase 1,485,864 $ 26,332,898 112,229 $ 1,802,261 1,144,968 $ 18,524,369
=========== ============== ========= ============== =========== ==============
Period Ended May 31, 1996* Shares Amount Shares Amount Shares Amount
- --------------------------------------------- -------------- --------- -------------- ----------- --------------
Shares sold 1,451,675 $ 22,955,034 1,009,636 $ 15,569,570 2,695,977 $ 42,216,165
Shares issued to shareholders in -- --
reinvestment of distributions 268 4,217 358 5,557
Shares reacquired (236,505) (3,815,365) (154,421) (2,371,883) (98,950) (1,595,767)
----------- -------------- --------- -------------- ----------- --------------
Net increase 1,215,438 $ 19,143,886 855,573 $ 13,203,244 2,597,027 $ 40,620,398
=========== ============== ========= ============== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Emerging Markets International Growth International
Class C Shares Equity Fund and Income Fund Growth Fund
------------------------------ ----------------------------- -----------------------------
Year Ended May 31, 1997** Shares Amount Shares Amount Shares Amount
- ----------------------------------------------- -------------- --------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 160,074 $ 2,796,205 89,056 $ 1,379,569 174,418 $ 2,818,920
Shares issued to shareholders in
reinvestment of distributions 676 10,754 39 605 852 13,410
Shares reacquired (19,025) (339,707) (74,550) (1,173,998) (32,276) (516,669)
----------- -------------- --------- -------------- ----------- --------------
Net increase 141,725 $ 2,467,252 14,545 $ 206,176 142,994 $ 2,315,661
=========== ============= ========= ============== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Emerging Markets International Growth International
Class I Shares Equity Fund and Income Fund Growth Fund
---------------------------- ----------------------------- ----------------------------
Period Ended May 31, 1997*** Shares Amount Shares Amount Shares Amount
- ----------------------------------------- -------------- --------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 14,138 $ 257,507 29 $ 443 3,673 $ 58,463
Transfer from Class A 1,982 32,637 -- -- 1,308 20,795
Shares reacquired (366) (6,764) -- -- -- --
----------- -------------- --------- -------------- ----------- -------------
Net increase 15,754 $ 283,380 29 $ 443 4,981 $ 79,258
=========== ============== ========= ============== =========== ==============
</TABLE>
*For the period from the commencement of investment operations, October 24,
1995, to May 31, 1996.
**For the period from the commencement of offering of Class C shares, June 27,
1996, to May 31, 1997, for the Emerging Markets Equity Fund. For the period
from the commencement of offering of Class C shares, July 1, 1996, to May 31,
1997, for the International Growth and Income Fund and the International
Growth Fund.
***For the period from the commencement of offering of Class I shares, January
2, 1997, to May 31, 1997.
(6) Line of Credit
The Funds entered into agreements which enable them to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $400 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fees allocated to the Funds for the year ended May 31,
1997, were $0, $283, and $1,198 for the Emerging Markets Equity Fund,
International Growth and Income Fund, and International Growth Fund,
respectively.
39
<PAGE>
Notes to Financial Statements - continued
(7) Financial Instruments
The Funds trade financial instruments with off-balance sheet risk in the normal
course of their investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options and forward foreign currency
exchange contracts. The notional or contractual amounts of these instruments
represent the investment the Funds have in particular classes of financial
instruments and do not necessarily represent the amounts potentially subject to
risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
International Growth and Income Fund
Written Option Transactions
<TABLE>
<CAPTION>
1997 Calls 1997 Puts
---------------------------------- ---------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period -
Canadian Dollars -- $ -- 1,457 $ 3,828
Deutsche Marks 1,499 6,983 -- --
Deutsche Marks/British Pounds 1,386 4,209 -- --
Italian Lire/Deutsche Marks 2,817,989 20,484 -- --
Japanese Yen -- -- 122,808 7,290
Spanish Pesetas/Deutsche Marks -- -- 63,527 1,575
Options written -
Australian Dollars 147 993 -- --
British Pounds -- -- 371 2,800
Deutsche Marks 1,325 6,313 1,545 3,143
Deutsche Marks/British Pounds 1,819 7,202 728 9,382
Japanese Yen 219,563 19,049 282,000 17,466
Swiss Francs/Deutsche Marks 477 1,447 1,059 13,071
Options terminated in closing transactions -
Australian Dollars (147) (993) -- --
Deutsche Marks (2,824) (13,296) (1,545) (3,143)
Deutsche Marks/British Pounds (1,386) (4,209) (728) (9,382)
Italian Lire/Deutsche Marks (2,817,989) (20,484) -- --
Japanese Yen (219,563) (19,049) (205,000) (13,677)
Swiss Francs/Deutsche Marks -- -- (1,059) (13,071)
Options expired -
Canadian Dollars (1,457) (3,828)
Deutsche Marks/British Pounds (1,819) (7,202) -- --
Japanese Yen -- -- (122,808) (7,290)
Spanish Pesetas/Deutsche Marks -- -- (63,527) (1,575)
Swiss Francs/Deutsche Marks (477) (1,447) -- --
----------- --------- --------- ---------
Outstanding, end of period -- $ -- 77,371 $ 6,589
=========== ========= ========= =========
Options outstanding at end of period consist of:
British Pounds -- $ -- 371 $ 2,800
Japanese Yen -- -- 77,000 3,789
----------- --------- --------- ---------
Outstanding, end of period -- $ -- 77,371 $ 6,589
=========== ========= ========= =========
</TABLE>
At May 31, 1997, the Fund had sufficient cash and/or securities at least equal
to the value of the written options.
40
<PAGE>
Notes to Financial Statements - continued
Forward Foreign Currency Exchange Contracts
International Growth and Income Fund
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive In Exchange for at Value (Depreciation)
=================== ============================ ================= ============ ===============
<S> <C> <C> <C> <C> <C> <C>
Sales 8/26/97 AUD 400,387 $ 310,670 $ 304,877 $ 5,793
6/30/97 BEF 12,095,412 376,125 343,957 32,168
8/26/97 CHF 88,335 62,423 63,218 (795)
8/26/97-10/14/97 DEM 4,413,501 2,704,813 2,607,501 97,312
9/30/97 ESP 13,746,758 95,400 95,375 25
10/14/97 FRF 6,200,000 1,180,728 1,085,825 94,903
9/30/97 GBP 39,621 64,860 64,782 78
6/30/97 ITL 305,660,812 180,124 180,646 (522)
10/14/97 JPY 239,000,000 2,143,210 2,096,030 47,180
6/30/97 SEK 520,009 74,073 67,198 6,875
----------- ----------- --------
$7,192,426 $6,909,409 $283,017
=========== =========== ========
Purchases 9/30/97 CAD 433,166 $ 314,490 $ 316,682 $ 2,192
8/26/97 CHF 935,115 640,200 669,230 29,030
9/30/97 DEM 161,159 95,400 95,311 (89)
6/30/97-8/26/97 ESP 38,703,652 270,694 268,111 (2,583)
6/30/97-8/26/97 JPY 217,948,304 1,797,772 1,884,856 87,084
8/26/97 NLG 1,148,588 606,000 602,103 (3,897)
----------- ----------- --------
$3,724,556 $3,836,293 $111,737
=========== =========== ========
</TABLE>
At May 31, 1997, forward foreign currency exchange contract purchases and sales
under master netting arrangements and closed forward foreign currency exchange
contracts excluded above for the International Growth and Income Fund amounted
to a net receivable of $74,704. At May 31, 1997, the Fund had sufficient cash
and/or securities to cover any commitments under these contracts.
Forward Foreign Currency Exchange Contracts
International Growth Fund
<TABLE>
<CAPTION>
Contracts to Contracts Net Unrealized
Settlement Date Deliver/Receive In Exchange for at Value Appreciation
================= =============================== ================= ============= ===============
<S> <C> <C> <C> <C> <C> <C>
Sales 10/14/97 DEM 6,400,000 $ 4,114,618 $ 3,789,018 $325,600
10/14/97 FRF 20,500,000 3,904,018 3,590,227 313,791
10/14/97 JPY 1,617,000,000 14,500,292 14,181,090 319,202
------------ ------------ ---------
$22,518,928 $21,560,335 $958,593
============ ============ =========
Purchases 10/14/97 JPY 808,500,000 $ 6,959,329 $ 7,090,545 $131,216
============ ============ =========
</TABLE>
At May 31, 1997, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
41
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Trustees of MFS Series Trust X and Shareholders of MFS/Foreign &
Colonial International Funds:
We have audited the accompanying statements of assets and liabilities of
MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign & Colonial
International Growth and Income Fund, and MFS/Foreign & Colonial International
Growth Fund, ("the Funds") including the schedules of portfolio investments, as
of May 31, 1997, and the related statements of operations for the year then
ended, and the statements of changes in net assets and financial highlights for
the year then ended and for the period from October 24, 1995 (commencement of
operations) to May 31, 1996. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 May 31, 1997, by correspondence with the
custodian and brokers or 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/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign & Colonial
International Growth and Income Fund, and MFS/Foreign & Colonial International
Growth Fund at May 31, 1997, the results of their operations for the year then
ended, and the changes in their net assets and financial highlights for the
year then ended and for the period from October 24, 1995 (commencement of
operations) to May 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
July 1, 1997
--------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
42
<PAGE>
It's Easy to Contact Us
[PHONE GRAPHIC] MFS Automated Information
Account Information:
Call 1-800-MFS-TALK (1-800-637-8255)
anytime.
Investment Outlook:
Call 1-800-637-4458 anytime for the MFS outlook
on the bond and stock markets.
[QUESTION MARK GRAPHIC] MFS Personal Service
Account Service/Literature:
Call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
Product Information:
Call 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time.
IRA Service:
Call 1-800-637-1255 any business day
from 9 a.m. to 5 p.m. Eastern time.
Service for the Hearing-Impaired:
Call 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time (TDD required).
[LETTER GRAPHIC] MFS Addresses
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
World Wide Web:
www.mfs.com
43
<PAGE>
The MFS Family of Funds(R)
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-225-2606
any business day from 8 a.m. to 8 p.m. Eastern time. This material should be
read carefully before investing or sending money.
Stock
- ----------------------------------------------------------
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS(R) Capital Growth Fund
MFS(R) Emerging Growth Fund
MFS(R) Growth Opportunities Fund
MFS(R) Managed Sectors Fund
MFS(R) OTC Fund
MFS(R) Research Fund
MFS(R) Research Growth and Income Fund
MFS(R) Strategic Growth Fund
MFS(R) Value Fund
Stock and Bond
- ----------------------------------------------------------
MFS(R) Total Return Fund
MFS(R) Utilities Fund
Bond
- ----------------------------------------------------------
MFS(R) Bond Fund
MFS(R) Government Mortgage Fund
MFS(R) Government Securities Fund
MFS(R) High Income Fund
MFS(R) Intermediate Income Fund
MFS(R) Strategic Income Fund
Limited Maturity Bond
- ----------------------------------------------------------
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
World
- ----------------------------------------------------------
MFS(R)/Foreign & Colonial Emerging Markets Equity Fund
MFS(R)/Foreign & Colonial International Growth Fund
MFS(R)/Foreign & Colonial International
Growth and Income Fund
MFS(R) World Asset Allocation Fund(SM)
MFS(R) World Equity Fund
MFS(R) World Governments Fund
MFS(R) World Growth Fund
MFS(R) World Total Return Fund
National Tax-Free Bond
- ----------------------------------------------------------
MFS(R) Municipal Bond Fund
MFS(R) Municipal High Income Fund
MFS(R) Municipal Income Fund
State Tax-Free Bond
- ----------------------------------------------------------
Alabama, Arkansas, California, Florida, Georgia, Maryland,
Massachusetts, Mississippi, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Virginia, West
Virginia
Money Market
- ----------------------------------------------------------
MFS(R) Cash Reserve Fund
MFS(R) Government Money Market Fund
MFS(R) Money Market Fund
44
<PAGE>
MFS/Foreign & Colonial International Funds
Trustees
A. Keith Brodkin* - Chairman and President
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991),
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director,
Cambridge Trust Company
Peter G. Harwood - Private Investor
J. Atwood Ives - Chairman and Chief Executive Officer,
Eastern Enterprises
Lawrence T. Perera - Partner, Hemenway & Barnes
William J. Poorvu - Adjunct Professor, Harvard University
Graduate School of Business Administration
Charles W. Schmidt - Private Investor
Arnold D. Scott* - Senior Executive Vice President, Director
and Secretary, Massachusetts Financial Services Company
Jeffrey L. Shames* - President and Director,
Massachusetts Financial Services Company
Elaine R. Smith - Independent Consultant
David B. Stone - Chairman, North American Management
Corp. (investment advisers)
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Managers
Arnab Kumar Banerji
Jeff Chowdhry
Richard O. Hawkins*
June Scott
Ian K. Wright
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
*Affiliated with the Investment Adviser
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
State Street Bank and Trust Company
Auditors
Ernst & Young LLP
Investor Information
For MFS stock and bond market outlooks, call toll free:
1-800-637-4458 anytime from a touch-tone telephone.
For information on MFS mutual funds, call your financial
adviser or, for an information kit, call toll free:
1-800-637-2929 any business day from 9 a.m. to 5 p.m.
Eastern time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any
business day from 8 a.m to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free:
1-800-637-6576 any business day from 9 a.m. to 5 p.m.
Eastern time. (To use this service, your phone must be
equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances, and exchanges, call toll
free: 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
World Wide Web
www.mfs.com
[DALBAR GRAPHIC]
For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category. The
firm achieved a 3.48 overall score on a scale of 1 to 4 in the 1996 survey.
A total of 110 firms responded, offering input on the quality of service they
received from 29 mutual fund companies nationwide. The survey contained
questions about service quality in 15 categories, including "knowledge of
phone service contracts," "accuracy of transaction processing," and "overall
ease of doing business with the firm."
45
<PAGE>
MFS(R)/
FOREIGN &
COLONIAL
INTERNATIONAL
FUNDS
[DALBAR GRAPHIC]
500 Boylston Street
Boston, MA 02116-3741
[MFS LOGO]
Bulk Rate
U.S. Postage
Paid
MFS
(C) 1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
85/285/385/885
86/286/386/886
87/287/387/887
MFC-2 7/97 48M
