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INVESTMENT MANAGEMENT
MFS(R)/
FOREIGN &
COLONIAL
INTERNATIONAL
FUNDS
[Graphic Omitted]
MFS(R)/ Semiannual Report
Foreign & Colonial November 30, 1996
Emerging Markets
Equity Fund
MFS(R)/
Foreign & Colonial
International Growth
and Income Fund
MFS(R)/
Foreign & Colonial
International
Growth Fund
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TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
MFS/Foreign & Colonial International Funds Overview ....................... 2
Investment Strategies ..................................................... 4
Objectives and Policies ................................................... 12
EMERGING MARKETS EQUITY FUND
PERFORMANCE SUMMARY ................................................... 13
PORTFOLIO CONCENTRATION ............................................... 14
FUND FACTS ............................................................ 14
PORTFOLIO OF INVESTMENTS .............................................. 15
INTERNATIONAL GROWTH AND INCOME FUND
PERFORMANCE SUMMARY ................................................... 18
PORTFOLIO CONCENTRATION ............................................... 19
FUND FACTS ............................................................ 19
PORTFOLIO OF INVESTMENTS .............................................. 20
INTERNATIONAL GROWTH FUND
PERFORMANCE SUMMARY ................................................... 23
PORTFOLIO CONCENTRATION ............................................... 24
FUND FACTS ............................................................ 24
PORTFOLIO OF INVESTMENTS .............................................. 25
Financial Statements ...................................................... 31
Notes to Financial Statements ............................................. 37
Report of Independent Auditors ............................................ 44
Trustees and Officers ..................................................... 45
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HIGHLIGHTS
o THE SIX MONTHS ENDED NOVEMBER 30, 1996 WERE A FAVORABLE PERIOD FOR WORLD
FINANCIAL MARKETS, AS IT BECAME CLEAR THAT THE OUTLOOK FOR GLOBAL INFLATION
AND INTEREST RATES REMAINED BENIGN.
o WHILE EMERGING MARKETS GENERALLY MADE LITTLE PROGRESS OVER THE PERIOD AS
INTERNATIONAL INVESTORS FOCUSED ON MORE DEVELOPED MARKETS, WE BELIEVE
EMERGING MARKETS WILL PERFORM BETTER IN 1997, SUPPORTED BY POSITIVE GLOBAL
LIQUIDITY AND ATTRACTIVE VALUATIONS.
o THE EUROPEAN MARKETS HAVE PERFORMED EXTREMELY WELL IN LOCAL CURRENCY TERMS,
ALTHOUGH THE STRENGTH OF THE DOLLAR TOOK AWAY SOME OF THESE GAINS. IN
GERMANY, AND INDEED THROUGHOUT EUROPE, AN IMPORTANT THEME HAS BEEN THE
INCREASING FOCUS ON SHAREHOLDER VALUE.
o ALTHOUGH EXPECTATIONS OF AN ECONOMIC RECOVERY IN JAPAN WERE DAMPENED DURING
THE SUMMER MONTHS, LEADING TO DISAPPOINTING RETURNS IN JAPANESE EQUITIES, ITS
ECONOMY APPEARS TO BE RECOVERING SLOWLY AND THERE ARE EARLY SIGNS OF A PICKUP
IN CONSUMER DEMAND.
o AS OF NOVEMBER 30, 1996, ASSETS IN THE THREE MFS/F&C FUNDS, WHICH COMMENCED
OPERATIONS IN OCTOBER 1995, EXCEEDED $185 MILLION.
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LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
We are pleased to report that, after just over a year of operation, the
MFS/Foreign & Colonial (F&C) International Funds are seeing a steady growth of
assets, while benefiting from a renewed interest among investors in
international securities markets.
From the commencement of operations on October 24, 1995 through November 30,
1996, assets in the three Funds have reached over $185 million. We believe this
growth is partly a reflection of a larger trend among investors toward
international funds. According to Strategic Insight, an independent firm that
monitors flows of money into mutual funds, 20% of total equity sales were
captured by international funds in the first nine months of 1996 -- in spite of
lower relative returns on international stock markets. Thus, it appears that
while U.S. stock markets have enjoyed very impressive growth over the past
couple of years, more U.S. investors are looking for opportunities to bring
international diversification to their portfolios, giving themselves some
measure of protection against a downturn in one part of the world while
providing exposure to a variety of other dynamic and growing markets.
Since our last report to shareholders, Foreign & Colonial has acquired the
investment management arm of ESN Pension Management Group Ltd., which manages a
substantial portion of the assets of the British Electricity Supply Scheme. The
newly combined group will have assets under management of approximately $45
billion with over 350 employees, including 96 investment professionals. This
will more than double F&C's funds under management, make F&C one of Britain's
largest pension fund managers, and provide more investment expertise and
analysis to the MFS/F&C Funds.
Also, for people using annuities for their long-term, tax-deferred
retirement investing, 3 series of the MFS/Sun Life Series Trust, MFS/F&C
Emerging Markets Equity Series, MFS/F&C International Growth Series, and MFS/F&C
Growth and Income Series are now available through the MFS Regatta Gold annuity.
This semiannual report to shareholders covers the three MFS/F&C Mutual Funds
mentioned above. Each of these Funds has varying objectives, which are outlined
on page 12 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
December 12, 1996
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MFS/FOREIGN & COLONIAL INTERNATIONAL FUNDS OVERVIEW
[Photo of Tony Thomson]
Tony Thomson
The period from June 1, 1996 to November 30, 1996 was favorable for financial
markets, as it became clear that the outlook for global inflation and hence for
interest rates remained benign. Many bullish commentators proclaimed that the
business cycle in the United States had ended and that, led by the United
States, the world was in a new deflationary era in which demographics,
technological revolution, and intense global competition would permit a
prolonged period of gentle, positive growth and easy liquidity. Implicitly, this
would cause further declines in real (inflation-adjusted) interest rates and
thus boost equities.
Other commentators continued to believe that the good times would end,
though several of the most prominent bears have had to push the day of reckoning
further into the future.
Our view remains: The business cycle is not over. The United Kingdom, for
example, has always been a good lead indicator of global inflationary trends.
United Kingdom house prices are starting to increase, and there are signs of
both a surge in consumer confidence and above-trend economic growth. Globally,
we believe monetary conditions are likely to tighten somewhat as 1997
progresses, and this may result in stock and bond markets moving sideways.
However, in our view, the United States in particular is overdue for a stock
market correction.
The past six months were a reasonably good time to be an international
investor, although dollar strength took away some of the local currency gains.
Bond markets continued to support equity markets, with the J.P. Morgan World
Government Index rising 7.6% in U.S. dollar terms. Among equity markets, the
United Kingdom performed strongly, with the Financial Times Stock Exchange Index
(FTSE 100, an unmanaged index of the 100 most highly capitalized companies
traded on the London Stock Exchange) rising 17.4% in U.S. dollar terms. This was
due mostly to the strength of the British pound, which gained 7.8% versus the
dollar. (The dollar in turn appreciated 5.3% versus the Japanese yen and 1%
against the German mark.) In dollar terms, the Japanese Nikkei Index actually
fell 9.1%, but the German DAX rose 11.2% and the French CAC rose 8.8%. The above
indices are all unmanaged and offer no guarantees of how an individual's future
investments will fare and while investing in foreign and emerging market
securities may provide greater returns, it also involves greater risk than
investing in the United States.
The MFS/F&C International Growth Fund underperformed during this period. It
was hurt partially by the strength of the dollar and partially by being somewhat
overweighted in Japan, in particular in smaller companies. The Japanese recovery
is in place but is not proceeding in a straight line. This has had a negative
impact on smaller companies, which are chiefly exposed to the domestic economy
and do not benefit from yen weakness. While this has not been the best of years
for emerging markets, we remain committed to emerging market investing and will
retain our position in these markets.
The MFS/F&C International Growth and Income Fund also lagged, although we
point out that we believe this Fund, with its significant bond component, could
offer some protection should equity markets correct.
Respectfully,
/s/ Tony Thomson
Tony Thomson
Chief Investment Officer
Foreign & Colonial Management Ltd.
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INVESTMENT STRATEGIES
MFS/F&C EMERGING MARKETS EQUITY FUND
[Photo of Arnab Kumar Banerji]
Arnab Kumar Banerji
For the period June 1, 1996 through November 30, 1996, Class A shares of the
Fund provided a total return of -3.57%, while Class B and Class C shares
returned -3.83% and -4.06%, respectively. These returns assume the reinvestment
of distributions but exclude the effects of any sales charges, and they compare
to a -1.93% return for the Lipper Emerging Markets Funds Index (the Lipper
Index) and a -2.96% 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 gain
distributions and income dividends, while the MSCI EMF Index is a broad,
unmanaged, market-capitalization-weighted index of equities in 26 emerging
markets. It is not possible to invest in an index. Emerging markets have
generally made little progress over the period as international investors have
preferred to concentrate their attention on more developed markets, which have
continued to perform well. The Fund slightly underperformed the MSCI EMF Index,
due to above-index weightings in India, Pakistan, Colombia, Peru, and China and
lower weightings in Hong Kong and the Philippines.
The Fund remains very well diversified at the country level, with major
industry weightings in telecommunications, banking, electric utilities, food and
beverages, and oil and gas. The largest country weightings are Brazil, Mexico,
India, Malaysia, and Hong Kong. Within Asia, we have continued to build
positions in China and Hong Kong, which we believe will be re- rated upward as
the handover approaches in mid-1997. We also remain positive on India (which has
been a disappointing performer over the past six months) due to improving
liquidity and falling real interest rates. The small position we currently have
in Pakistan has not, as yet, performed well due to political instability in the
country, but we are hopeful of an improvement in the situation in the next 12
months in what remains, in our view, the cheapest market in Asia.
Our largest position in Latin America remains Brazil. Interest rates have
been steadily easing and reforms continue, while the stock market has continued
to perform well. We also remain positive on the smaller Latin American markets
of Colombia and Peru. In Colombia, political worries have continued to
overshadow exceptional valuation levels. In Peru, the medium-term outlook
remains positive despite short-term political concerns and economic weakness.
In other emerging markets, Poland and Russia remain attractive. The Polish
economy is growing strongly, led by exporters. Even though it has been one of
the best-performing markets in the world in 1996, shares of single-digit
price-earnings multiples are still available. In Russia, despite the apparent
political risks, economic liberalization is expected to continue and valuations
remain compelling in comparison with Western companies. Exposure to Hungary has
been eliminated, while the South Africa weighting has been reduced
significantly. In the former, valuations are no longer attractive following a
near doubling of the market in 1996, while in the latter, a poor economic
outlook and political instability are likely to continue. Two markets where we
have increased positions are Morocco and Egypt. In the former, we believe a
healthy economy, continued liberalization, and better stock market liquidity are
likely to lead to a further upward re- rating of the market. In the latter, the
privatization program has accelerated and dividend yields on many companies are
now higher than inflation.
Overall, we believe that, after three mediocre years, emerging markets will
perform much better in 1997. Global liquidity remains positive, valuations are
attractive, and institutions are likely to re-direct cash flow to areas of the
world which continue to offer exceptional medium-term opportunities.
Respectfully,
/s/ Arnab Kumar Banerji
Arnab Kumar Banerji
Portfolio Manager
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PORTFOLIO MANAGER'S PROFILE
ARNAB KUMAR BANERJI IS CHIEF INVESTMENT OFFICER OF FOREIGN & COLONIAL EMERGING
MARKETS 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. HE JOINED CITIBANK INITIALLY AS HEAD OF
EQUITY RESEARCH AT CITIBANK SCRIMGEOUR VICKERS BEFORE MOVING TO CITIBANK
GLOBAL ASSET MANAGEMENT TO SET UP THEIR EMERGING MARKETS OPERATION, WHICH HE
HEADED UNTIL 1993, WHEN HE JOINED FOREIGN & COLONIAL.
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INVESTMENT STRATEGIES - continued
MFS/F&C INTERNATIONAL GROWTH AND INCOME FUND
[Photo of Atul Patel]
Atul Patel
[Photo of Richard O. Hawkins]
Richard O. Hawkins
For the period June 1, 1996 through November 30, 1996, Class A shares of the
Fund provided a total return of 1.56%, while Class B and Class C shares returned
1.32% and 1.31%, respectively. These returns assume the reinvestment of
distributions but exclude the effects of any sales charges, and they compare to
a 5.31% return for the Lipper International Funds Index, and a 3.98% return for
a blend (70% and 30%) of the unmanaged MSCI EAFE Index and the J.P. Morgan
Global Bond 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.
With the exception of Japanese equities, all international bond and equity
markets posted healthy positive returns over the period. Evidence of a
moderation in economic growth in seven of the largest industrial countries (the
G7), excluding the United Kingdom, has provided support for declining bond
yields as inflationary fears have subsided. However, we have held about 20% of
the Fund in international bonds and plan to maintain this exposure going
forward.
Hopes for a robust economic recovery in Japan were severely dampened in the
summer months, and this led to disappointing performance for Japanese equities.
The economy is recovering, albeit modestly, and there are signs of a pickup in
consumer demand in the automobile and housing sectors. Japan remains our most
favored equity market as we believe it is at an early stage of its business
cycle and that earnings are likely to rebound strongly in the next year.
Hong Kong was one of the best-performing equity markets over the period and
the exposure to the property sector, namely Wharf, Cheung Kong, and New World
Developments, helped performance. Although there were concerns over economic
growth for the Far East region, we believe that growth will still remain high in
relative terms and that the region will benefit from improving fundamentals in
both Japan and China. We will maintain our exposure to the Far East.
The United Kingdom has also performed well, up over 17% in dollar terms,
largely as a result of sterling strength in the past two months. In local
currency terms, the equity market was up over 5%. We were underweighted in
financial services, pharmaceuticals, and oils, which led the market, but were
overweighted in gas distributions with British Gas, which recovered strongly
during the period as many regulatory concerns were dissipated. The economy is
growing strongly and the United Kingdom is the only G7 economy where interest
rates have risen recently. Interest rates are expected to rise further, although
we do not believe this should prevent the equity market from making further
progress because we believe higher rates are reflected in the earnings. However,
with an election required in the first half of 1997, the market is likely to
experience increased volatility.
The European markets have performed extremely well in local currency terms,
with much of the returns, however, diluted by dollar strength. The portfolio has
benefited from chemical companies such as Bayer, and engineering stocks such as
Mannesmann. The small European markets, such as Sweden and the Netherlands,
which are dominated by large international companies, were both up over 17% in
local currency terms and were among the best performers. This emphasized the
attraction of global companies with international earnings which are well placed
in an increasingly competitive world environment. Domestic demand in Europe has
not picked up because the economies are adjusting to the Maastricht criteria for
convergence, which will ensure that interest rates remain low and supportive for
equities. We will maintain an underweighted exposure because we believe the
markets have been overly optimistic about the EMU (European Monetary Union) and
convergence.
The fixed-income portion of the Fund reflects our expectations of stronger
growth in Europe and Japan in 1997, as well as a continuation of the current
U.S. expansion, which implies some upward pressure on interest rates next year.
Conversely, low inflation and excess industrial capacity probably suggest that
any rise in rates may be muted. Meanwhile, the bond market recovery of the
second half of 1996 has reduced the cushion, or risk premium, in bond valuations
from their mid-year levels. In Japan, for example, the market is no longer
pricing in any rise in official rates over the next couple of years. While we
see little chance of a rate rise over the next several months, the optimistic
scenario held by market participants leaves little room for error. Likewise, the
U.S. bond market reflects a positive scenario of moderate growth, low inflation,
and possible budget reform. Any further price gains would appear to require a
significant slowdown in U.S. economic growth, which we deem unlikely given the
strong income growth of households. Our strategy, therefore, emphasizes markets
like Australia and Canada, where fundamental trends remain more favorable.
Within Europe, we remain optimistic about currency union, which favors markets
like Ireland. Less likely participants in monetary union, such as Spain and
Italy, still offer opportunities for further gains, but a degree of caution
seems appropriate.
Respectfully,
/s/ Tony Thomson /s/ Atul Patel /s/ Richard O. Hawkins
Tony Thomson Atul Patel Richard O. Hawkins
Portfolio Manager Portfolio Manager Portfolio Manager
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INVESTMENT STRATEGIES - continued
MFS/F&C INTERNATIONAL GROWTH AND INCOME FUND
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PORTFOLIO MANAGERS' PROFILES
TONY THOMSON IS CHIEF INVESTMENT OFFICER OF FOREIGN & COLONIAL MANAGEMENT
LTD. HE JOINED FOREIGN & COLONIAL IN 1994 FROM BANKERS TRUST INVESTMENT
MANAGEMENT IN LONDON, WHERE HE HAD BEEN CHIEF INTERNATIONAL OFFICER. PRIOR TO
BANKERS TRUST, HE HAD BEEN INTERNATIONAL DIRECTOR WITH GARTMORE INVESTMENT
MANAGEMENT, DIRECTOR OF EQUITIES WITH POSTHORN ASSET MANAGEMENT, AND VICE
PRESIDENT/ PORTFOLIO MANAGER WITH MORGAN GUARANTY. MR. THOMSON IS A GRADUATE OF
YALE UNIVERSITY AND HAS A MASTER'S DEGREE FROM OXFORD UNIVERSITY. HE IS ALSO A
GRADUATE OF THE STANFORD UNIVERSITY GRADUATE SCHOOL OF BUSINESS ADMINISTRATION
AND IS A CHARTERED FINANCIAL ANALYST.
ATUL PATEL IS DIRECTOR AND GLOBAL FUNDS MANAGER OF FOREIGN & COLONIAL
MANAGEMENT LTD. MR. PATEL JOINED FOREIGN & COLONIAL IN 1994 FROM BANKERS TRUST
INVESTMENT MANAGEMENT IN LONDON, WHERE HE HAD BEEN INVESTMENT MANAGER FOR
INTERNATIONAL EQUITIES. PRIOR TO BANKERS TRUST, HE HAD BEEN GLOBAL FUND MANAGER
WITH GARTMORE INVESTMENT MANAGEMENT. MR. PATEL IS A GRADUATE OF BRUNEL
UNIVERSITY AND HAS A MASTERS OF BUSINESS ADMINISTRATION FROM THE WARWICK
BUSINESS SCHOOL.
RICHARD 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.
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INVESTMENT STRATEGIES - continued
MFS/F&C INTERNATIONAL GROWTH FUND
[Photo of Ian K. Wright]
Ian K. Wright
[Photo of June Scott]
June Scott
For the period June 1, 1996 through November 30, 1996, Class A shares of the
Fund provided a total return of -3.35%, while Class B and Class C shares
returned -3.66% and -3.77%, respectively. These returns assume the reinvestment
of distributions but exclude the effects of any sales charges, and they compare
to a 5.31% return for the Lipper International Funds Index, and a 3.98% return
for the unmanaged MSCI EAFE Index.
Emerging markets made little progress during the period as international
investors preferred to focus on the more developed markets. We plan to maintain
the Fund's 20% exposure to emerging markets because performance is expected to
improve in 1997 as relative valuations become increasingly attractive. With the
exception of Japanese equities, international equity markets posted healthy
positive returns over the period. Evidence of a moderate deceleration in
economic growth in the G7 economies, excluding the United Kingdom, has caused
inflationary fears to subside. However, we believe the downward trend in
interest rates is nearing its end and that there is a risk interest rates could
rise in 1997 as economic growth gains momentum. After a good first quarter in
1996, smaller companies underperformed blue-chip companies in most markets. We
continue to believe that, with careful stock selection, this asset class
provides excellent opportunities for growth.
Expectations of a robust economic recovery in Japan were severely dampened
in the summer months, leading to disappointing returns in Japanese equities.
This poor performance was compounded by the weakening of the currency. However,
the economy is recovering slowly, and there are early signs of a pickup in
consumer demand. Looking forward, Japan remains our most favored equity market.
In our view, the economy is at an early stage in its business cycle, and
earnings are likely to rebound strongly in the next year as economic growth
accelerates.
Hong Kong was one of the best-performing equity markets over the period, and
the Fund's exposure to the property sector through stocks such as Wharf, Cheung
Kong, and New World Developments was particularly beneficial, with all three
outperforming the local market. Although there have been some concerns over
economic growth in the Far East, we believe that the region will benefit from
improving fundamentals in both Japan and China. Hong Kong could see a
considerable upward re-rating as concerns regarding the handover to China in
1997 subside.
The U.K. equity market has performed well, helped by recent sterling
strength, and is up over 17% in U.S. dollar terms and over 5% in local terms.
The U.K. economy is growing strongly, and this is the only G7 economy where
interest rates have risen recently. The equity market should make further
progress in the earnings-driven phase of the cycle, although the imminent
general election is likely to result in increased volatility. The Fund was
overweighted in the gas distribution sector, having bought into British Gas,
which recovered strongly as regulatory concerns faded. One of the Fund's recent
U.K. blue-chip stock purchases which we expect to outperform is W.H. Smith. This
company has a presence in most high-traffic streets and sells books, magazines,
cards, and general stationery. Following a long period of underperformance, the
company has installed a new management team, sold off the non- core office
supplies division, Nice Day, and the poorly performing do-it-yourself company,
Do it All, and is working to raise margins which are currently well below the
average for other comparable retailers.
The European markets have performed extremely well in local terms, with much
of the returns, however, diluted by dollar strength. In Germany, and indeed
throughout Europe, an important theme has been the increasing focus on
shareholder value. Shares in the German chemicals company Bayer have performed
well as the company has begun to focus on value added and improving shareholder
returns. Although Bayer is undertaking this task in a fairly low-key way
compared with other German companies such as Hoechst, the company has begun to
focus on core businesses, disposing of those that do not fit its overall
strategy. The smaller European markets of Sweden and the Netherlands were both
up over 17% in local terms and were among the best performers. These markets are
dominated by large international companies which are well placed to succeed in
an increasingly competitive global environment. Domestic demand in Europe has
been sluggish and its economies are still struggling to gain momentum. Tight
fiscal policies are being maintained to meet the Maastricht criteria for
convergence. This will help ensure that interest rates remain low, which will
continue to support equity prices. We will maintain a small underweighted
position in Europe because we believe these markets have been overly optimistic
regarding the EMU and convergence and that there is a significant risk of
disappointment.
In the small-cap section, the Fund's largest position is in Japan.
Continuing deregulation in the financial services sector has benefited stocks
such as Diamond Computer. This company provides data outsourcing services to its
parent, Mitsubishi Bank of Tokyo, formed from the merger of Mitsubishi Bank and
Bank of Tokyo. Diamond Computer has benefited from a cost-cutting drive and the
focus on core competencies following the merger. The company has invested in a
new data center, and earnings are expected to accelerate in the next fiscal year
as the benefits of this investment feed through.
In the U.K. small-companies portion of the Fund, the focus continues to be
on market leaders. Wardle Storeys is a world leader in the manufacture of
parachutes and ejection seats for the defense industry and is expected to bid
for the contract to produce the U.S. Army's new standard parachute. Serco is a
facilities management group that has expanded rapidly, with contracts that range
from prisons to airports and railways in Europe, Australia, and the Far East. We
believe the company is well positioned to benefit from the increasing trend
toward outsourcing as companies focus on core competencies and areas of their
business where they add the most value.
Guilbert, France's leading contract stationer, has performed well over the
past year. The company has benefited from rising margins following a fall in
paper prices. Longer-term earnings prospects have been enhanced by the success
of several acquisitions which the company has used to expand into additional
markets.
Respectfully,
/s/ Atul Patel /s/ June Scott /s/ Ian K. Wright
Atul Patel June Scott Ian K. Wright
Portfolio Manager Portfolio Manager Portfolio Manager
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INVESTMENT STRATEGIES - continued
MFS/F&C INTERNATIONAL GROWTH FUND
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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 MASTERS OF BUSINESS ADMINISTRATION (M.B.A.) AT THE
LONDON BUSINESS SCHOOL. BEFORE COMPLETING HER M.B.A., MS. SCOTT WORKED AS A
QUANTITATIVE PORTFOLIO ANALYST IN THE EQUITY RESEARCH GROUP AT J.P. MORGAN
INVESTMENT MANAGMENT IN LONDON.
IAN K. WRIGHT IS A DIRECTOR OF FOREIGN & COLONIAL MANAGEMENT LTD. MR. WRIGHT
JOINED FOREIGN & COLONIAL IN 1981 FROM STOCKBROKERS BUCKMASTER & MOORE, WHERE HE
WAS MANAGER OF PENSION FUNDS AND CHARITIES. MR. WRIGHT HEADS UP FOREIGN &
COLONIAL'S JAPANESE EQUITY INVESTMENT TEAM AND IS THE MANAGER OF FOREIGN &
COLONIAL PACIFIC INVESTMENT TRUST. HE IS A GRADUATE OF THE UNIVERSITY OF
SOUTHAMPTON AND IS AN ASSOCIATE OF THE INSTITUTE OF ACTUARIES.
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OBJECTIVES AND POLICIES
MFS/F&C Emerging Markets Equity Fund
The Fund seeks capital appreciation by investing primarily in companies whose
principal activities are located in emerging market countries. The Fund also has
the ability to invest up to 35% of assets in lower-rated or unrated fixed-income
securities. The Fund's exposure to emerging markets is highly diversified across
countries and regions in order to seek to capture the long-term returns from
emerging market equities without allowing specific countries to dominate the
portfolio. Markets are selected on a top-down basis using a core and satellite
approach, while stocks are selected after fundamental research and on a basis of
seeking growth at the right price.
MFS/F&C International Growth and Income Fund
The Fund seeks capital appreciation and current income by investing primarily in
companies and issuers whose principal activities are located outside the United
States. It seeks to capture this above-average growth potential by investing in
a combination of foreign blue- chip and growth stocks and foreign fixed-income
instruments. In addition, up to 10% of assets may be invested in emerging market
securities. The Fund defines foreign blue-chip stocks as companies having a
market capitalization of more than $1 billion. The Fund may allocate up to 50%
of net assets to foreign government and corporate fixed-income securities,
although no more than 25% of net assets will be invested in below-
investment-grade instruments. The Fund places emphasis on country allocation
based on relative economic, political, and market factors supplemented by
fundamental research on stocks. Characteristics such as strong management,
dominant market position, and above-average earnings growth are considered when
looking for valuations which may be depressed.
MFS/F&C International Growth Fund
The Fund seeks capital appreciation through investing, under normal market
conditions, at least 65% of its total assets in companies whose principal
activities are located outside the United States and which offer above-average
growth potential over the long term. The Fund seeks to capture this
above-average growth by investing in a combination of asset classes encompassing
foreign small-cap stocks, foreign blue-chip stocks, and emerging market
securities. The Fund places emphasis on country allocation based on relative
economic, political, and market factors supplemented by fundamental research on
stocks. Characteristics such as strong management, dominant market position, and
above-average earnings growth are considered when looking for valuations which
may be depressed.
PERFORMANCE SUMMARY
Because mutual funds like MFS/F&C Emerging Markets Equity Fund are designed for
investors with long-term goals, we have provided cumulative results as well as
the average annual total returns for Class A, Class B, and Class C shares for
the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- ------------------------------------------------------------------------------
Cumulative Total Return - 3.57% + 6.45% + 6.30%
- ------------------------------------------------------------------------------
Average Annual Total Return -- + 6.45% + 5.69%
- ------------------------------------------------------------------------------
SEC Results -- + 1.37% + 1.12%
- ------------------------------------------------------------------------------
Class B Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- ------------------------------------------------------------------------------
Cumulative Total Return - 3.83% + 5.86% + 5.65%
- ------------------------------------------------------------------------------
Average Annual Total Return -- + 5.86% + 5.10%
- ------------------------------------------------------------------------------
SEC Results -- + 1.86% + 1.49%
- ------------------------------------------------------------------------------
Class C Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- ------------------------------------------------------------------------------
Cumulative Total Return - 4.06% + 5.91% + 5.77%
- ------------------------------------------------------------------------------
Average Annual Total Return -- + 5.91% + 5.21%
- ------------------------------------------------------------------------------
SEC Results -- + 4.91% + 5.21%
- ------------------------------------------------------------------------------
*Commencement of investment operations, October 24, 1995.
All results represent past performance and are not necessarily an indication of
future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class A SEC results include the maximum 4.75% sales charge. Class B 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 shares are subject to a 1% CDSC if
redeemed within 12 months of purchase.
Class C share performance includes the performance of the Fund's Class A shares
for periods prior to the commencement of offering of Class C shares on June 27,
1996. Sales charges and operating expenses for Class A and Class C shares
differ. The Class A share performance, which is included within the Class C
share SEC performance, has been adjusted to reflect the CDSC generally
applicable to Class C shares rather than the initial sales charge generally
applicable to Class A shares. Class C share performance has not been adjusted,
however, to reflect differences in operating expenses (e.g., Rule 12b-1 fees),
which generally are lower for Class A shares.
Fund results reflect any applicable expense subsidies and waivers, without which
the performance results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1996
MFS/F&C EMERGING MARKETS EQUITY FUND
MAJOR COUNTRY WEIGHTINGS (% OF NET ASSETS)
Cash 2.8%
Hong Kong 6.8%
Malaysia 7.8%
India 8.2%
Mexico 10.7%
Brazil 12.1%
Other* 51.6%
* For a more complete breakdown refer to Portfolio of Investments.
TOP 5 INDUSTRY WEIGHTINGS (% OF NET ASSETS)
Communications 18.5%
Electric, Gas or Sanitary 15.7%
Banking 11.3%
Building and Construction 8.0%
Food & Related Products 7.8%
TOP 10 EQUITY HOLDINGS (% OF NET ASSETS)
TELECOMUNICACOES BRASILEIRAS S.A. 5.0%
Brazilian telecommunications company
TAIPEI FUND 4.1%
Closed-end Taiwan country fund
GRUMA S.A., "B" 2.9%
Mexican food company
COMPANIA AMONIMA NACIONAL TELEFONOS
DE VENEZUELA 2.4%
Venezuelan telephone company
SIME DARBY BERHAD 2.2%
Largest Malaysian conglomerate
COMPANHIA ENERGETICA S.A. 2.2%
Brazilian electric company
MOSENERGO 2.2%
Russian electric utility company
USINAS SIDERURGICAS DE MINAS GERAIS S.A. 2.1%
Brazil iron & steel manufacturer
BANCO INDUSTRIAL COLOMBIANO 2.0%
Colombian bank
HINDUSTAN LEVER LTD. 1.9%
Indian cosmetics and toiletries company
PORTFOLIO STRUCTURE (% OF NET ASSETS)
Stocks 97.2%
Cash 2.8%
- ------------------------------------------------------------------------------
FUND FACTS
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 24, 1995
SIZE: $45.4 MILLION NET
ASSETS
AS OF NOVEMBER 30, 1996
- ------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - November 30, 1996
MFS/F&C EMERGING MARKETS EQUITY FUND
Stocks - 97.2%
--------------------------------------------------------------------------
Issuer Shares Value
--------------------------------------------------------------------------
Argentina - 3.4%
Banco de Galicia y Buenos Aires S.A., ADR
(Banks and Credit Cos.) 15,016 $ 332,229
Perez Companc S.A. (Oil and Gas) 40,080 274,257
Siderar S.A.I.C. (Steel) 7,700 165,550
Telefonica de Argentina, ADR (Utilities -
Telephone) 9,850 251,175
YPF Sociedad Anonima, ADR (Oil and Gas) 22,000 511,500
-----------
$ 1,534,711
-------------------------------------------------------------------------
Brazil - 12.1%
Centrais Eletricas Brasile, ADR (Utilities -
Electric) 50,050 $ 800,800
Companhia Energetica S.A., ADR (Utilities -
Electric) 32,100 991,087
Lojas Americanas S.A., ADR (Retail)* 33,830 465,163
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 29,650 2,242,281
Usinas Siderurgicas de Minas Gerais S.A., ADR,
Preferred (Iron/Steel) 96,600 970,830
-----------
$ 5,470,161
-------------------------------------------------------------------------
Chile - 2.6%
Banco Santander Chile, ADR (Banks and Credit
Cos.) 8,500 $ 121,125
Ciade Telecomunicaciones de Chile S.A., ADR
(Telecommunications) 5,810 552,676
Compania Cervecerias Unidas S.A., ADR (Brewery) 4,800 92,400
Enersis S.A., ADR (Utilities - Electric) 14,300 403,975
-----------
$ 1,170,176
-------------------------------------------------------------------------
China - 3.5%
Huaneng Power International, Inc., ADR
(Utilities - Electric)* 24,000 $ 438,000
Qingling Motors Co., "H" (Automotive) 938,000 400,362
Shanghai Petrochemical Co. Ltd.(Chemicals) 1,450,000 379,778
Yizheng Chemical Fibre Co. Ltd.(Textiles) 1,686,000 383,801
----------
$1,601,941
-------------------------------------------------------------------------
Colombia - 2.9%
Banco Industrial Colombiano, ADR (Banks
and Credit Cos.) 55,450 $ 894,131
Cementos Diamante S.A., ADR (Construction)## 30,900 413,288
-----------
$ 1,307,419
-------------------------------------------------------------------------
Egypt - 4.4%
Nasr City For Housing (Housing Development) 8,150 $ 564,388
North Cairo Mills (Food) 11,700 482,687
Suez Cement Co., GDR (Construction)* 50,000 802,500
Torra For Cement (Construction) 7,935 168,357
-----------
$ 2,017,932
-------------------------------------------------------------------------
Hong Kong - 6.8%
Bank of East Asia Ltd. (Banks and Credit Cos.) 72,000 $ 308,246
Cheung Kong Holdings Ltd.(Real Estate) 71,000 624,458
Citic Pacific Ltd. (Conglomerate) 52,000 271,047
New World Development Co. (Real Estate) 90,000 608,226
Swire Pacific Air Ltd., "A" (Transportation) 65,500 620,562
Wharf Holdings Ltd. (Real Estate) 97,000 501,843
Zhenhai Refining and Chemical Co.,
Ltd., "H" (Oil and Gas) 515,000 143,213
-----------
$ 3,077,595
-------------------------------------------------------------------------
India - 8.2%
Bajaj Auto Ltd. (Automotive) 20,400 $ 482,286
Hindustan Lever Ltd. (Consumer Goods
and Services) 39,000 873,676
Hindustan Petroleum Corp. Ltd. (Oil and Gas)* 55,000 493,382
Industrial Development Bank of India
Ltd. (Banks and Credit Cos.) 170,000 404,762
Mahanagar Telephone Nigam Ltd.
(Telecommunications) 114,000 688,151
State Bank of India (Banks and Credit Cos.) 91,000 556,324
Tata Engineering and Locomotive Co. Ltd.
(Automotive) 26,000 230,504
-----------
$ 3,729,085
-------------------------------------------------------------------------
Israel - 1.2%
Blue Square Israel Ltd. (Retail) 7,300 $ 105,850
Koors Industries Ltd., ADR
(Conglomerate) 3,900 67,763
NICE Systems Ltd., ADR
(Telecommunications)* 11,500 208,437
Teva Pharmaceutical Industries Ltd.,
ADR (Pharmaceuticals) 4,000 185,000
-----------
$ 567,050
-------------------------------------------------------------------------
Malaysia - 7.8%
Malayan Banking Berhad (Finance) 82,600 $ 817,336
Petronas Gas Berhad (Oil and Gas)## 150,000 611,518
Resorts World Berhad (Entertainment) 63,000 316,683
Sime Darby Berhad (Holding Company) 267,000 998,674
Tenaga Nasional Berhad (Utilities - Electric) 180,000 819,316
-----------
$ 3,563,527
-------------------------------------------------------------------------
Mexico - 10.7%
Cemex S.A., "B" (Construction) 115,000 $ 383,430
Corporacion GEO S.A. de C.V.
(Home Builders)## 12,000 243,000
Empresas ICA Sociedad Controladora
S.A., ADR (Engineering/Construction)* 26,400 379,500
Fomento Economico Mexicano S.A., "B" (Brewery) 84,376 288,278
Gruma S.A., "B" (Food)* 240,680 1,327,279
Grupo Carso S.A. de C.V.(Conglomerate)* 80,201 185,048
Grupo Carso, "A1" (Conglomerate) 80,201 408,224
Grupo Financiero Banamex, "B" (Finance) 127,000 250,522
Grupo Financiero Inbursa S.A. de C.V. (Finance) 2,798 9,152
Kimberly-Clark de Mexico S.A. de C.V.
(Forest and Paper Products) 14,000 270,842
Telefonos de Mexico S.A.
(Utilities - Telephone) 368,000 563,570
Tubos de Acero de Mexico S.A. (Iron/Steel)* 38,678 536,432
-----------
$ 4,845,277
-------------------------------------------------------------------------
Morocco - 1.3%
ONA S.A. (Conglomerate) 5,300 $ 289,863
Societe Nationale d'Investissement
(Conglomerate) 4,600 289,473
-----------
$ 579,336
-------------------------------------------------------------------------
Pakistan - 3.2%
Hub Power Co. Ltd., GDR (Utilities - Electric)* 40,200 $ 864,300
Pakistan Telecommunications Corp., GDR
(Utilities - Telephone)* 8,950 572,800
-----------
$ 1,437,100
-------------------------------------------------------------------------
Peru - 2.9%
Compania de Minas Buenaventura S.A. (Mining) 66,640 $ 479,467
CPT Telefonica del Peru S.A., "B"
(Utilities - Telephone) 287,100 563,967
Credicorp Ltd. (Holding Company)* 15,120 260,820
-----------
$ 1,304,254
-------------------------------------------------------------------------
Philippines - 0.9%
Philippine National Bank
(Banks and Credit Cos.) 12,500 $ 155,750
San Miguel Corp., "B" (Brewery) 65,000 259,664
-----------
$ 415,414
-------------------------------------------------------------------------
Poland - 4.2%
Bank Slaski S.A. w Katowicach
(Banks and Credit Cos.) 3,800 $ 369,333
Bydgoska Fabryka Kabli S.A.
(Electrical Equipment)* 46,375 284,759
Elektrim Spolka Akcyjna S.A.
(Electrical Equipment) 63,500 579,298
Mostostal Zabrze S.A. (Conglomerate) 88,900 374,316
Stomil Olsztyn S.A. (Tires and Rubber)* 26,500 291,965
-----------
$ 1,899,671
-------------------------------------------------------------------------
Portugal - 1.8%
Banco Totta e Acores (Finance)## 12,906 $ 226,873
Cimentos de Portugal S.A.
(Building Materials) 15,026 313,292
Portugal Telecom S.A.
(Telecommunications)* 11,000 292,530
-----------
$ 832,695
-------------------------------------------------------------------------
Russia - 4.9%
Lukoil Oil Co., ADR (Oil and Gas) 18,100 $ 760,200
Mosenergo, ADR (Utilities -
Electric)*## 34,000 990,250
Russian Depository Trust (Finance)## 20 474,000
-----------
$ 2,224,450
-------------------------------------------------------------------------
South Africa - 3.1%
Anglo American Corp. of South Africa
Ltd. (Mining) 3,750 $ 213,530
Iscor Ltd. (Steel) 363,125 265,452
Nedcor Ltd. (Financial Services) 18,894 274,598
Sasol Ltd. (Oils) 34,861 431,036
South African Breweries Ltd. (Brewery) 9,123 230,054
-----------
$ 1,414,670
-------------------------------------------------------------------------
South Korea - 1.0%
New Korea Trust (Finance) 24,000 $ 282,000
Samsung Display Devices Co.
(Electrical Equipment) 2,440 152,500
-----------
$ 434,500
-------------------------------------------------------------------------
Taiwan - 4.0%
Taipei Fund (Financial Services)* 207 $ 1,800,900
-------------------------------------------------------------------------
Thailand - 2.8%
Bank of Ayudhya Ltd. (Banks and Credit Cos.) 102,125 $ 321,890
Siam City Cement Co. Ltd, Foreign
Registered (Building Materials) 36,000 239,624
TelecomAsia Corp. Ltd., Foreign
Registered (Utilities - Telephone)* 348,000 722,161
-----------
$ 1,283,675
-------------------------------------------------------------------------
Turkey - 1.1%
Netas Telekomunik (Telecommunications) 819,000 $ 174,128
Trakya Cam Sanayil (Manufacturing) 6,088,393 327,333
-----------
$ 501,461
-------------------------------------------------------------------------
Venezuela - 2.4%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications)* 43,000 $ 1,091,125
-------------------------------------------------------------------------
Total Stocks (Identified Cost, $42,662,934) $44,104,125
-------------------------------------------------------------------------
Short-Term Obligations - 2.5%
-------------------------------------------------------------------------
Principal
Amount
(000 Omitted)
-------------------------------------------------------------------------
Student Loan Marketing Assn., due 12/02/96 $500 $ 499,921
Tennessee Valley Authority, due 12/04/96 650 649,719
-------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 1,149,640
-------------------------------------------------------------------------
Total Investments (Identified Cost, $43,812,574) $45,253,765
-------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.3% 142,204
-------------------------------------------------------------------------
Net Assets - 100.0% $45,395,969
-------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
<PAGE>
PERFORMANCE SUMMARY
Because mutual funds like MFS/F&C International Growth and Income Fund are
designed for investors with long-term goals, we have provided cumulative
results as well as the average annual total returns for Class A, Class B, and
Class C shares for the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
---------------------------------------------------------------------------
Cumulative Total Return + 1.56% + 7.09% + 8.38%
---------------------------------------------------------------------------
Average Annual Total Return -- + 7.09% + 7.56%
---------------------------------------------------------------------------
SEC Results -- + 1.98% + 2.91%
---------------------------------------------------------------------------
Class B Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
---------------------------------------------------------------------------
Cumulative Total Return + 1.32% + 6.49% + 7.77%
---------------------------------------------------------------------------
Average Annual Total Return -- + 6.49% + 7.01%
---------------------------------------------------------------------------
SEC Results -- + 2.49% + 3.41%
---------------------------------------------------------------------------
Class C Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
---------------------------------------------------------------------------
Cumulative Total Return + 1.31% + 6.83% + 8.11%
---------------------------------------------------------------------------
Average Annual Total Return -- + 6.83% + 7.32%
---------------------------------------------------------------------------
SEC Results -- + 5.82% + 7.32%
---------------------------------------------------------------------------
* Commencement of investment operations, October 24, 1995.
All results represent past performance and are not necessarily an indication of
future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class A SEC results include the maximum 4.75% sales charge. Class B 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. Effective July 1, 1996, Class C shares are
available. Class C shares are subject to a 1% CDSC if redeemed within 12 months
of purchase.
Class C share performance includes the performance of the Fund's Class A shares
for periods prior to the commencement of offering of Class C shares on July 1,
1996. Sales charges and operating expenses for Class A and Class C shares
differ. The Class A share performance, which is included within the Class C
share SEC performance, has been adjusted to reflect the CDSC generally
applicable to Class C shares rather than the initial sales charge generally
applicable to Class A shares. Class C share performance has not been adjusted,
however, to reflect differences in operating expenses (e.g., Rule 12b-1 fees),
which generally are lower for Class A shares.
Fund results reflect any applicable expense subsidies and waivers, without which
the performance results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1996
MFS/F&C INTERNATIONAL GROWTH AND INCOME FUND
MAJOR COUNTRY WEIGHTINGS (% OF NET ASSETS)
Hong Kong 4.2%
France 6.1%
Germany 8.6%
United Kingdom 13.5%
Other* 32.2%
Japan 34.4%
*For a more complete breakdown refer to Portfolio of Investments.
TOP 5 INDUSTRY WEIGHTINGS (% OF NET ASSETS)
Banks Retail 11.1%
Electronic and Electrical 9.9%
Engineering 5.3%
Property 4.6%
Telecommunications 3.5%
TOP 10 EQUITY HOLDINGS (% OF NET ASSETS)
CANON, INC. 2.0%
Japanese office equipment and imaging company
OMRON CORP. 2.0%
Japanese electronic component manufacturer
DDI CORP. 1.9%
Japanese telecommunications company
PIONEER ELECTRONIC CORP. 1.9%
Japanese electronics company
DAI-ICHI KANGYO BANK LTD. 1.7%
Japanese bank
INCHCAPE PLC 1.3%
Singaporeon distributor of motors and agricultural
equipment
KYOCERA CORP. 1.3%
Japanese component manufacturer
NIPPON YUSEN KABUSHIKI KAISH 1.3%
Japanese marine transportation company
MITSUBISHI ESTATE CO. LTD. 1.2%
Japanese real estate company
MARUBENI CORP. 1.2%
Japanese distributor and wholesaler
PORTFOLIO STRUCTURE (% OF NET ASSETS)
Stocks 76.0%
Bonds 17.3%
Cash 6.7%
- ------------------------------------------------------------------------------
FUND FACTS
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 24, 1995
SIZE: $30.2 MILLION NET ASSETS
AS OF NOVEMBER 30, 1996
- ------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - November 30, 1996
MFS/F&C INTERNATIONAL GROWTH AND INCOME FUND
Stocks - 76.0%
--------------------------------------------------------------------------
Issuer Shares Value
--------------------------------------------------------------------------
Australia - 1.5%
Broken Hill Proprietary (Mining) 14,263 $ 209,521
Westpac Bank Corp. (Finance) 39,500 236,673
-----------
$ 446,194
-------------------------------------------------------------------------
Austria - 0.4%
OMV AG (Oil and Gas) 1,100 $ 119,117
-------------------------------------------------------------------------
Belgium - 0.7%
Generale de Banque (Finance) 450 $ 159,575
Solvay et Cie (Chemicals) 100 61,229
-----------
$ 220,804
-------------------------------------------------------------------------
France - 5.2%
Accor (Lodging) 1,720 $ 220,470
Compagnie de St. Gobain (Building Materials) 1,400 201,148
Credit Local de France (Finance) 1,000 90,473
Credit Local de France (Finance) 1,410 127,566
Eaux (Cie Generale) (Utilities - Water) 1,150 141,687
Lafarge-Coppee, Bearer Shares (Building Materials) 3,260 205,816
Legrand, Preference Shares (Electrical Equipment) 1,400 161,240
Michelin, "B" (Tires) 1,000 51,253
Societe Nationale Elf Aquitaine (Oils) 1,900 165,791
TOTAL S.A., "B" (Oils) 2,560 204,575
-----------
$ 1,570,019
-------------------------------------------------------------------------
Germany - 5.2%
Bayer AG (Chemicals) 9,100 $ 366,189
Deutsche Bank AG (Banks) 1,250 59,574
Deutsche Telekom AG (Utilities - Telephone) 1,340 29,144
Dresdner Bank AG (Banks) 5,300 157,312
Mannesmann AG (Diversified Machinery) 550 229,405
Preussag AG (Metals/Hardware) 300 70,416
Siemens AG (Electrical Equipment) 4,800 231,261
VEBA AG (Oil and Gas) 4,700 274,880
Volkswagen AG (Automobiles) 380 152,321
-----------
$ 1,570,502
-------------------------------------------------------------------------
Hong Kong - 4.2%
Cheung Kong Holdings Ltd. (Real Estate) 27,000 $ 237,470
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) 47,000 150,760
HSBC Holdings PLC (Finance) 9,600 199,909
New World Development Co. (Real Estate) 32,000 216,258
Swire Pacific Air Ltd., "A" (Transportation) 22,000 208,433
Wharf Holdings Ltd. (Real Estate) 51,000 263,856
-----------
$ 1,276,686
-------------------------------------------------------------------------
Italy - 0.7%
Fiat S.p.A. (Automobiles) 14,000 $ 40,923
Italgas (Utilities - Gas) 31,600 131,360
Telecom Italia S.p.A. (Telecommunications) 22,150 52,177
-----------
$ 224,460
-------------------------------------------------------------------------
Japan - 31.4%
Asahi Chemical Industry Co. Ltd. (Chemicals) 54,000 $ 354,939
Canon, Inc. (Consumer Goods) 29,000 611,599
Dai-Ichi Kangyo Bank Ltd. (Banks) 32,000 520,211
DDI Corp. (Telecommunications) 79 565,773
Fujisawa Pharmaceuticals (Pharmaceuticals) 37,000 328,383
Hitachi (Electronics) 16,000 149,033
Hitachi Zosen Tomioka (Automotive) 63,000 291,749
Industrial Bank of Japan (Finance) 17,280 341,652
Isetan Co. (Retail) 22,000 301,582
Ito-Yokado Co. Ltd. (Retail) 7,000 353,691
Kajima Corp. (Engineering/Construction) 36,000 287,873
Kyocera Corp. (Electronics) 6,000 385,940
Marubeni Corp. (Distribution/Wholesale) 81,000 366,564
Matsushita Electric Industrial Co.
(Electrical Equipment) 18,000 311,599
Mitsubishi Estate Co. Ltd. (Real Estate) 29,000 366,960
Mitsubishi Heavy Industries Ltd.
(Aerospace/Defense) 38,000 310,545
Mitsubishi Trust & Banking (Banks) 16,000 257,294
Nippon Yusen Kabushiki Kaish
(Transportation - Marine) 80,000 383,128
NKK Corp. (Steel)* 114,000 280,492
Nomura Securities Co. Ltd. (Finance) 18,000 303,691
Oji Paper Co. Ltd. (Paper Products) 35,833 256,625
Omron Corp. (Electronics) 32,000 610,193
Pioneer Electronic Corp. (Electronics) 26,000 559,754
Ricoh Co. Ltd. (Office/Business Equipment) 34,000 364,499
Sakura Bank Ltd. (Banks) 20,000 182,777
Tokyo Broadcasting System (Broadcasting) 9,000 146,309
Toyo Trust & Banking (Banks) 33,000 285,053
-----------
$ 9,477,908
-------------------------------------------------------------------------
Malaysia - 1.4%
Genting Berhad (Entertainment) 11,000 $ 78,369
Malayan Banking Berhad (Finance) 9,000 89,056
Petronas Gas Berhad (Oil and Gas)## 30,000 122,304
Sime Darby Berhad (Holding Company) 36,000 134,653
-----------
$ 424,382
-------------------------------------------------------------------------
Netherlands - 4.1%
ABN Amro Holdings N.V. (Finance) 4,300 $ 278,231
Akzo Nobel (Chemicals) 1,800 238,672
Philips Electronics N.V. (Manufacturing) 5,080 205,107
Royal Dutch Petroleum Co. (Oils) 400 67,381
Vendex International N.V. (Retail) 4,800 208,260
Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit (Publishing) 11,300 230,412
-----------
$ 1,228,063
-------------------------------------------------------------------------
Singapore - 1.8%
City Developments Ltd. (Real Estate) 22,000 $ 194,579
Development Bank of Singapore Ltd. (Banks) 8,000 103,281
Keppel Corp. Ltd. (Transportation - Marine) 9,000 69,972
Overseas-Chinese Banking Corp. Ltd. (Finance) 13,600 164,907
-----------
$ 532,739
-------------------------------------------------------------------------
Spain - 1.6%
Repsol S.A. (Oils) 6,050 $ 223,565
Telefonica de Espana (Utilities - Telephone) 11,450 250,601
-----------
$ 474,166
-------------------------------------------------------------------------
Sweden - 1.9%
Ericsson LM, "B" (Telecommunications) 7,320 $ 225,405
Sparbanken Sverige AB, "A" (Banks) 7,100 117,237
Swedish Match AB (Tobacco)* 3,200 10,472
Volvo AB, "B" (Automobiles) 9,600 210,642
-----------
$ 563,756
-------------------------------------------------------------------------
Switzerland - 2.9%
Nestle AG, Registered Shares
(Food and Beverage Products) 190 $ 206,015
Roche Holdings AG (Pharmaceuticals) 40 307,127
Sandoz AG (Pharmaceuticals) 130 151,019
Winterthur (Insurance) 350 215,364
-----------
$ 879,525
-------------------------------------------------------------------------
United Kingdom - 13.0%
Allied Domecq PLC (Food and Beverage Products) 32,850 $ 247,113
Bass PLC (Brewery) 8,200 107,999
BAT Industries PLC (Tobacco) 14,750 117,775
British Gas PLC (Utilities - Gas) 46,750 171,319
British Petroleum PLC (Oil and Gas) 11,200 129,484
British Telecommunications PLC
(Telecommunications) 26,650 168,667
BTR PLC (Holding Company) 32,840 131,938
Caradon PLC (Holding Company) 29,330 117,589
Carlton Communicatons PLC (Broadcasting) 22,500 190,247
Dalgety PLC (Food Products) 40,250 224,970
General Accident PLC (Insurance) 8,700 107,126
General Electric Co. PLC (Electronics) 16,300 102,066
Glaxo Wellcome PLC (Pharmaceuticals) 6,700 110,177
Granada Group PLC (Leisure) 10,960 159,550
Inchcape PLC (Commercial Services) 85,470 387,204
Johnson Matthey PLC (Metals) 10,700 97,848
Kingfisher PLC (Retail) 12,000 130,916
Land Securities PLC (Real Estate) 9,350 115,837
London Electricity PLC (Utilities - Electric) 7,900 85,788
National Westminster (Finance) 9,000 104,693
NFC PLC (Transportation) 36,800 115,989
Peninsular & Oriental Steam Navigation Co.
(Transportation - Marine) 15,020 149,346
Sainsbury (J.) PLC (Retail) 30,550 192,836
Shell Transport & Trading Co. PLC (Oil and Gas) 3,590 59,624
Smith (W.H.) Group PLC (Retail) 38,200 271,626
Wimpey (George) PLC (Construction) 53,600 113,078
-----------
$ 3,910,805
-------------------------------------------------------------------------
Total Stocks (Identified Cost, $21,733,958) $22,919,126
-------------------------------------------------------------------------
Bonds - 17.3%
-------------------------------------------------------------------------
Principal Amount
(000 Omitted)
-------------------------------------------------------------------------
Australia - 1.8%
Commonwealth of Australia, 9.75s, 2002 AUD 250 $ 228,562
Commonwealth of Australia, 9.5s, 2003 350 322,126
-----------
$ 550,688
-------------------------------------------------------------------------
Belgium - 0.9%
Kingdom of Belgium, 8.75s, 2002 BEF 6,427 $ 239,435
Kingdom of Belgium, 7.25s, 2004 610 21,308
-----------
$ 260,743
-------------------------------------------------------------------------
Canada - 2.3%
Government of Canada, 7.5s, 2003 CAD 450 $ 369,258
Government of Canada, 7s, 2006 400 318,387
-----------
$ 687,645
-------------------------------------------------------------------------
Denmark - 1.0%
Kingdom of Denmark, 6s, 1999 DKK 361 $ 63,453
Kingdom of Denmark, 8s, 2001 1,185 222,555
Kingdom of Denmark, 7s, 2007 175 30,224
-----------
$ 316,232
-------------------------------------------------------------------------
France - 0.9%
Government of France, 7s, 2000 FRF 1,241 $ 259,620
-------------------------------------------------------------------------
Germany - 3.4%
Federal Republic of Germany, 7.125s, 2002 DEM 176 $ 126,507
Federal Republic of Germany, 6.5s, 2005 659 453,973
Federal Republic of Germany, 7.375s, 2005 629 457,232
-----------
$ 1,037,712
-------------------------------------------------------------------------
Ireland - 0.6%
Republic of Ireland, 6.25s, 1999 IEP 60 $ 101,879
Republic of Ireland, 8s, 2000 50 90,298
-----------
$ 192,177
-------------------------------------------------------------------------
Italy - 1.4%
Republic of Italy, 9.5s, 1999 ITL 620,000 $ 433,521
-------------------------------------------------------------------------
Japan - 3.0%
Export Import Bank of Japan, 4.375s, 2003 JPY 30,000 $ 300,527
International Bank of Reconstruction &
Development, 4.5s, 2000 31,000 303,871
International Bank of Recontruction &
Developement, 5.25s, 2002 30,000 310,545
-----------
$ 914,943
-------------------------------------------------------------------------
Spain - 0.9%
Government of Spain, 8.4s, 2001 ESP 3,470 $ 28,959
Government of Spain, 10.1s, 2001 8,040 70,746
Government of Spain, 8s, 2004 18,600 153,662
-----------
$ 253,367
-------------------------------------------------------------------------
Sweden - 0.6%
Kingdom of Sweden, 10.25s, 2000 SEK 1,000 $ 169,749
-------------------------------------------------------------------------
United Kingdom - 0.5%
United Kingdom Treasury, 9.75s, 2002 GBP 85 $ 159,987
-------------------------------------------------------------------------
Total Bonds (Identified Cost, $5,177,427) $ 5,236,384
-------------------------------------------------------------------------
Short-Term Obligation - 5.7%
-------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due
12/02/96, at Amortized Cost $ 1,735 $ 1,734,725
-------------------------------------------------------------------------
Put Options Purchased - 0.2%
--------------------------------------------------------------------------
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
-------------------------------------------------------------------------
Deutsche Marks December/1.495 DEM 523 $ 3,197
Deutsche Marks/British Pounds December/2.535 499 946
January/2.45 728 24,263
January/2.51 746 13,986
Swiss Francs/Deutsche Marks
January/0.829 CHF 285 4,940
February/0.84 289 2,707
February/0.84 484 4,549
-------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $17,796) $ 54,588
-------------------------------------------------------------------------
Total Investments (Identified Cost, $28,663,906) $29,944,823
-------------------------------------------------------------------------
Call Options Written
-------------------------------------------------------------------------
Deutsche Marks/British Pounds January/2.3682 DEM 704 $ (8)
Swiss Francs/Deutsche Marks February/0.8265 CHF 477 (332)
-------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $4,143) $ (340)
-------------------------------------------------------------------------
Put Options Written - (0.1)%
-------------------------------------------------------------------------
Deutsche Marks/British Pounds January/2.45 DEM 728 $ (24,170)
Swiss Francs/Deutsche Marks January/0.829 CHF 285 (4,939)
-------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $12,590) $ (29,109)
-------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.9% $ 260,302
-------------------------------------------------------------------------
Net Assets - 100.0% $30,175,676
-------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
<PAGE>
PERFORMANCE SUMMARY
Because mutual funds like MFS/F&C International Growth Fund are designed for
investors with long-term goals, we have provided cumulative results as well as
the average annual total returns for Class A, Class B, and Class C shares for
the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
-------------------------------------------------------------------------
Cumulative Total Return - 3.35% + 7.84% + 7.70%
-------------------------------------------------------------------------
Average Annual Total Return -- + 7.84% + 6.95%
-------------------------------------------------------------------------
SEC Results -- + 2.70% + 2.32%
-------------------------------------------------------------------------
Class B Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
-------------------------------------------------------------------------
Cumulative Total Return - 3.66% + 7.21% + 7.00%
-------------------------------------------------------------------------
Average Annual Total Return -- + 7.21% + 6.32%
-------------------------------------------------------------------------
SEC Results -- + 3.21% + 2.71%
-------------------------------------------------------------------------
Class C Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
-------------------------------------------------------------------------
Cumulative Total Return - 3.77% + 7.37% + 7.23%
-------------------------------------------------------------------------
Average Annual Total Return -- + 7.37% + 6.53%
-------------------------------------------------------------------------
SEC Results -- + 6.37% + 6.53%
-------------------------------------------------------------------------
* Commencement of investment operations, October 24, 1995.
All results represent past performance and are not necessarily an indication of
future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Class A SEC results include the maximum 4.75% sales charge. Class B 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. Effective July 1, 1996, Class C shares were
available. Class C shares are subject to a 1% CDSC if redeemed within 12 months
of purchase.
Class C share performance includes the performance of the Fund's Class A shares
for periods prior to the commencement of offering of Class C shares on July 1,
1996. Sales charges and operating expenses for Class A and Class C shares
differ. The Class A share performance, which is included within the Class C
share SEC performance, has been adjusted to reflect the CDSC generally
applicable to Class C shares rather than the initial sales charge generally
applicable to Class A shares. Class C share performance has not been adjusted,
however, to reflect differences in operating expenses (e.g., Rule 12b-1 fees),
which generally are lower for Class A shares.
Fund results reflect any applicable expense subsidies and waivers, without which
the performance results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1996
MFS/F&C INTERNATIONAL GROWTH FUND
MAJOR COUNTRY WEIGHTINGS (% OF NET ASSETS)
France 4.6%
Germany 4.8%
Hong Kong 5.4%
United Kingdom 14.0%
Japan 26.9%
Other* 44.3%
* For a more complete breakdown refer to Portfolio of Investments.
TOP 5 INDUSTRY WEIGHTINGS (% OF NET ASSETS)
Engineering 8.2%
Electronic and Electrical 7.1%
Banks Retail 6.0%
Telecommunications 5.8%
Other Services and Business 5.5%
TOP 10 EQUITY HOLDINGS (% OF NET ASSETS)
TAIPEI FUND 1.0%
Closed-end Taiwan country fund
TELECOMUNICACOES BRASILEIRAS S.A. 0.9%
Brazilian telecommunications company
WING TAI HOLDINGS 0.9%
Singaporeon real estate development company
FUTURIS CORP. LIMITED 0.8%
Australian automobile air conditioning and heating equipment company
INDUSTRIE NATUZZI S.P.A., ADR 0.8%
Italian furniture manufacturer
CANON INC. 0.8%
Japanese office equipment and imaging company
STORK N.V. 0.8%
Dutch machinery and tool manufacturer
DAH SING FINANCIAL HOLDINGS 0.7%
Hong Kong banking and investment holding company
PETROLEO BRASILEIRO 0.7%
Brazilian petroleum company
LINDT & SPRUNGLIA AG 0.7%
Swiss chocolate manufacturer
PORTFOLIO STRUCTURE (% OF NET ASSETS)
Stocks 92.0%
Cash 8.0%
EQUITY ALLOCATION (ASSET CLASS % OF EQUITY)
Small Cap 47.6%
Blue Chip 32.4%
Emerging Markets 20.0%
-------------------------------------------------------------------------
FUND FACTS
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 24, 1995
SIZE: $112 MILLION NET ASSETS
AS OF NOVEMBER 30, 1996
-------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - November 30, 1996
MFS/F&C INTERNATIONAL GROWTH FUND
Stocks - 92.0%
--------------------------------------------------------------------------
Issuer Shares Value
--------------------------------------------------------------------------
Argentina - 0.6%
Banco de Galicia y Buenos Aires S.A.,
ADR (Banks and Credit Cos.) 7,287 $ 161,225
Perez Companc S.A. (Oil and Gas) 18,166 124,305
Siderar S.A.I.C. (Steel)* 2,900 62,350
Telefonica de Argentina, ADR
(Utilities - Telephone) 4,500 114,750
YPF Sociedad Anonima, ADR (Oil and Gas) 10,000 232,500
------------
$ 695,130
-------------------------------------------------------------------------
Australia - 1.9%
Broken Hill Proprietary (Mining) 24,300 $ 356,965
Capral Aluminum Ltd. (Metals) 100,500 303,132
Futuris Corp. Ltd. (Commercial Services) 684,987 943,698
Westpac Bank Corp. (Finance) 81,200 486,528
------------
$ 2,090,323
-------------------------------------------------------------------------
Austria - 0.1%
OMV AG (Oil and Gas) 1,495 $ 161,890
-------------------------------------------------------------------------
Belgium - 0.4%
Colruyt S.A. (Stores) 115 $ 51,292
Generale de Banque (Finance) 950 336,880
------------
$ 388,172
-------------------------------------------------------------------------
Brazil - 2.8%
Centrais Eletricas Brasile, ADR
(Utilities - Electric) 30,980 $ 495,680
Companhia Energetica S.A., ADR
(Utilities - Electric) 4,650 143,569
Lojas Americanas S.A., ADR (Retail)* 17,900 246,125
Petroleo Brasileiro S.A., Preferred (Oils) 5,800,000 797,598
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 12,900 975,562
Telecomunicacoes Brasileiras S.A., ADR
(Utilities - Telephone) 1,500,000 97,037
Usinas Siderurgicas de Minas Gerais
S.A., ADR, Preferred (Iron/Steel) 41,000 412,050
------------
$ 3,167,621
-------------------------------------------------------------------------
China - 0.4%
Huaneng Power International, Inc., ADR
(Utilities - Electric)* 5,500 $ 100,375
Qingling Motors Co., "H" (Automotive)* 308,000 131,462
Shanghai Petrochemical Co. Ltd. (Chemicals) 340,000 89,051
Yizheng Chemical Fibre Co. Ltd. (Textiles) 452,000 102,894
------------
$ 423,782
-------------------------------------------------------------------------
Colombia - 0.4%
Banco Industrial Colombiano, ADR
(Banks and Credit Cos.) 26,800 $ 432,150
-------------------------------------------------------------------------
Finland - 0.2%
Oy Tamro AB (Pharmaceuticals)## 34,660 $ 253,908
-------------------------------------------------------------------------
France - 4.6%
Accor (Lodging) 2,700 $ 346,088
Compagnie de St. Gobain
(Building Materials) 2,300 330,457
Credit Local de France (Finance) 2,800 253,323
Filipacchi Medias (Publishing) 1,600 336,101
Fromageries Bel S.A. (Food) 300 246,795
Guilbert S.A. (Distributing) 2,895 542,224
IMETAL (Building Materials) 1,500 236,178
Lafarge-Coppee, Bearer Shares (Building Materials) 4,700 296,728
Lapeyre S.A., Bearer Shares (Building Materials) 6,790 398,800
Legrand, Preference Shares (Electrical Equipment) 860 99,047
Michelin, "B" (Tires) 3,500 179,386
Primagaz Cie (Oil and Gas) 3,800 421,657
SEB S.A. (Household Goods) 2,800 556,036
Strafor-Facom S.A. (Office Equipment) 3,600 265,162
TOTAL S.A., "B" (Oils) 2,550 203,776
Union des Assurances Federales S.A. (Insurance) 3,500 431,892
------------
$ 5,143,650
-------------------------------------------------------------------------
Germany - 4.8%
Bayer AG (Chemicals) 12,500 $ 503,007
Berentzen Gruppe AG (Beverages) 18,300 654,421
Buderus AG (Manufacturing) 1,403 656,801
Deutsche Telekom AG
(Utilities - Telephone)* 1,685 36,647
Durr Beteil AG (Hand/Machine Tools) 8,000 247,074
Fresenius AG (Medical Supplies) 2,800 566,008
Jungheinrich AG (Machines) 500 52,016
Mannesmann AG (Diversified Machinery) 1,100 458,810
Moebel Walther AG (Furniture) 10,500 675,878
Preussag AG (Metals/Hardware) 300 70,416
Siemens AG (Electrical Equipment) 7,000 337,256
Tarkett AG (Home Builders)## 25,400 546,645
VEBA AG (Oil and Gas) 4,000 233,940
Volkswagen AG (Automobiles) 900 360,761
------------
$ 5,399,680
-------------------------------------------------------------------------
Hong Kong - 5.4%
Associated International Hotels (Lodging) 747,000 $ 599,030
Bank of East Asia Ltd.
(Banks and Credit Cos.) 35,000 149,842
Chen Hsong Holdings (Machines) 1,034,000 595,137
Cheung Kong Holdings Ltd. (Real Estate) 78,000 686,025
Citic Pacific Ltd. (Conglomerate) 19,000 99,036
Dah Sing Financial Group (Banks) 206,000 828,636
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) 71,000 227,744
HSBC Holdings PLC (Finance) 14,200 295,699
Li & Fung Ltd. (Toys) 620,000 577,378
New World Development Co. (Real Estate) 102,000 689,323
Swire Pacific Air Ltd., "A" (Transportation) 61,500 582,665
Wharf Holdings Ltd. (Real Estate) 136,000 703,615
------------
$ 6,034,130
-------------------------------------------------------------------------
India - 1.7%
Bajaj Auto Ltd. (Automotive) 9,000 $ 212,773
Hindustan Lever Ltd. (Consumer Goods
and Services) 14,500 324,829
Hindustan Petroleum Corp. Ltd.
(Oil and Gas) 33,000 296,029
Industrial Development Bank of India Ltd.
(Banks and Credit Cos.) 109,000 259,524
Mahanagar Telephone Nigam Ltd.
(Telecommunications) 54,000 325,966
State Bank of India (Banks and Credit Cos.) 47,000 287,332
Tata Engineering and Locomotive Co. Ltd.
(Automotive) 26,500 234,937
------------
$ 1,941,390
-------------------------------------------------------------------------
Israel - 0.2%
NICE Systems Ltd., ADR (Telecommunications)* 5,800 $ 105,125
Teva Pharmaceutical Industries Ltd.,
ADR (Pharmaceuticals) 3,000 138,750
------------
$ 243,875
-------------------------------------------------------------------------
Italy - 1.2%
Fiat S.p.A. (Automobiles) 25,000 $ 73,077
Industria Macchine Automatiche (Machines) 19,700 76,953
Industrie Natuzzi S.p.A., ADR (Furniture) 21,310 924,321
Italgas (Utilities - Gas) 59,600 247,755
Telecom Italia S.p.A. (Telecommunications) 30,500 71,846
------------
$ 1,393,952
-------------------------------------------------------------------------
Japan - 26.9%
Aeon Credit Service Co. Ltd.
(Financial Services) 9,000 $ 511,687
Aiphone Co. Ltd. (Telecommunications) 25,000 522,847
ALBIS Co. Ltd. (Food) 36,000 442,882
Ariake Japan Co. Ltd. (Food) 13,200 429,174
Asahi Chemical Industry Co. Ltd. (Chemicals) 99,000 650,721
Canon, Inc. (Consumer Goods) 40,000 843,585
Chofu Seisakusho Co. (Machines) 17,000 358,524
Dai-Ichi Kangyo Bank Ltd. (Banks) 41,000 666,520
Daimei Telecom Engineer Corp.
(Telecommunications) 46,000 367,838
Daimon Co. Ltd. (Food Retail) 5,000 86,995
Daiwa Industries Co. Ltd. (Distributor) 41,000 374,692
DDI Corp. (Telecommunications) 93 666,037
Diamond Computer Service Co.
(Computers - Software) 23,000 375,923
Exedy Corp. (Automotive Parts) 23,700 387,364
Fujisawa Pharmaceuticals (Pharmaceuticals) 68,000 603,515
Fukuda Denshi (Electronics) 24,000 525,132
Glory Ltd. (Manufacturing) 19,000 492,531
Hitachi Zosen Tomioka (Automotive)* 120,000 555,712
Homac Corp. (Retail) 28,300 574,455
Industrial Bank of Japan (Finance) 29,160 576,538
Itariyard Co. Ltd. (Textiles) 17,200 453,427
Ito-Yokado Co. Ltd. (Retail) 13,000 656,854
Japan Industrial Testing Co.
(Laboratory Services) 25,000 430,580
Japan Transcity Corp. (Storage) 66,000 345,079
Kajima Corp. (Engineering/Construction) 66,000 527,768
Kasumi Convenience Networks (Retail) 26,400 276,063
Kato Denki (Retail) 19,800 252,285
Kyocera Corp. (Electronics) 10,000 643,234
Mandom (Cosmetics) 37,000 552,724
Marubeni Corp. (Distribution/Wholesale) 139,000 629,042
Maruko Co. Ltd. (Textiles) 6,710 238,801
Matsuda Sangyo Co. Ltd. (Food) 16,000 441,476
Matsushita Electric Industrial Co.
(Electrical Equipment) 29,000 502,021
Mitsubishi Estate Co. Ltd. (Real Estate) 47,000 594,728
Mitsubishi Heavy Industries Ltd.
(Aerospace/Defense) 72,000 588,401
Miura Co. (Machines) 24,000 352,197
NAC Co. Ltd. (Commercial Services)* 17,600 378,910
Nichiha (Building and Construction) 19,200 361,054
Nippon Yusen Kabushiki Kaish
(Transportation - Marine) 113,000 541,169
Nissha Printing Co. (Manufacturing) 35,000 418,278
NKK Corp. (Steel)* 214,000 526,538
Nomura Securities Co. Ltd. (Finance) 29,000 489,279
Oi Electric Co. (Electronics) 31,000 531,195
Oji Paper Co. Ltd. (Paper Products) 74,166 531,154
Omron Corp. (Electronics) 36,000 686,467
Pioneer Electronic Corp. (Electronics) 28,000 602,812
Ricoh Co. Ltd. (Office/Business Equipment) 61,000 653,954
Ryohin Keikaku Co. Ltd. (Retail) 6,500 491,213
Sanshin Electronics Co. Ltd. (Electronics) 37,000 539,719
Sato Corp. (Machines) 17,600 355,712
Sawai Pharmaceutical Co. Ltd.
(Pharmaceuticals) 19,000 267,135
Sawako Corp. (Engineering/Construction) 23,200 438,313
Seiyo Food Systems (Restaurants) 51,000 466,081
Sodick Co. (Electrical Equipment)* 51,000 470,562
Sundrug Co. Ltd. (Retail) 12,000 440,773
Taihei Dengyo (Engineering/Construction) 27,500 294,815
TKC Corp. (Computer Software and Services) 17,600 417,575
Tokyo Broadcasting System (Broadcasting) 18,000 292,619
Tokyu Store Chain (Retail) 53,000 400,993
Toyo Trust & Banking (Banks) 64,000 552,829
Tsukishima Kikai (Machines) 20,000 384,886
Tsutsunaka Plastic Industry (Chemicals) 43,000 343,093
Yaoko Co. (Retail) 25,000 415,202
Yoshinoya D&C Co. Ltd. (Retail) 28 346,924
------------
$ 30,136,606
-------------------------------------------------------------------------
Malaysia - 2.5%
Genting Berhad (Entertainment) 21,000 $ 149,614
Malayan Banking Berhad (Finance) 48,000 474,965
Malaysian Industrial Development
Finance Berhad (Finance) 229,000 471,324
Nylex (Malaysia) Berhard (Chemicals) 192,500 438,106
Petronas Gas Berhad (Oil and Gas)## 43,000 175,302
Resorts World Berhad (Entertainment) 27,000 135,721
Sime Darby Berhad
(Holding Company) 170,500 637,730
Tenaga Nasional Berhad
(Utilities - Electric) 82,000 373,244
------------
$ 2,856,006
-------------------------------------------------------------------------
Mexico - 2.0%
Cemex S.A., "B" (Construction) 66,000 $ 220,056
Corporacion GEO, S.A. de C.V., "B"
(Real Estate)* 21,000 106,358
Empresas ICA Sociedad Controladora
S.A., ADR (Engineering/Construction)* 13,000 186,875
Fomento Economico Mexicano S.A., "B" (Brewery) 36,950 126,243
Gruma S.A.,"B" (Food)* 72,222 398,283
Grupo Carso S.A. de C.V.(Conglomerate) 52,800 121,826
Grupo Carso, "A1" (Conglomerate)* 52,800 268,752
Grupo Financiero Banamex, "B" (Finance) 58,000 114,412
Grupo Financiero Inbursa S.A. de C.V.
(Finance) 1,842 6,025
Kimberly-Clark de Mexico S.A. de C.V.
(Forest and Paper Products) 6,000 116,075
Telefonos de Mexico S.A.
(Utilities - Telephone) 201,000 307,819
Tubos de Acero de Mexico S.A. (Iron/Steel)* 17,340 240,491
------------
$ 2,213,215
-------------------------------------------------------------------------
Netherlands - 4.4%
ABN Amro Holdings N.V. (Finance) 6,400 $ 414,111
Ahrend Groep N.V. (Furniture) 13,248 683,005
Akzo Nobel (Chemicals) 3,100 411,047
Grolsch N.V. (Brewery) 18,730 721,511
Hagemeyer N.V. (Distributing) 9,010 714,516
Philips Electronics N.V. (Manufacturing) 6,700 270,515
Royal Dutch Petroleum Co. (Oils) 600 101,072
Stork N.V. (Machinery) 25,300 839,767
Vendex International N.V. (Retail) 9,200 399,166
Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit (Publishing) 16,900 344,598
------------
$ 4,899,308
-------------------------------------------------------------------------
Pakistan - 0.7%
Hub Power Co. Ltd., GDR (Utilities - Electric)* 20,000 $ 430,000
Pakistan Telecommunications Corp., GDR
(Utilities - Telephone)* 4,800 307,200
------------
$ 737,200
-------------------------------------------------------------------------
Peru - 1.1%
Compania de Minas Buenaventura S.A.
(Mining) 33,507 $ 241,079
CPT Telefonica del Peru S.A., "B"
(Utilities - Telephone) 318,080 624,822
Credicorp Ltd. (Holding Company)* 19,440 335,340
------------
$ 1,201,241
-------------------------------------------------------------------------
Philippines - 0.4%
Ayala Land, Inc., "B" (Real Estate) 67,500 $ 73,191
Manila Electric Co., "B"
(Utilities - Electric) 13,000 96,446
Philippine Long Distance Telephone
Co., ADR (Utilities - Telephone) 1,300 75,921
Philippine National Bank
(Banks and Credit Cos.) 6,000 74,760
Pilipino Telegraph & Telephone Corp.
(Telecommunications) 50,700 44,365
San Miguel Corp., "B" (Brewery) 31,000 123,840
------------
$ 488,523
-------------------------------------------------------------------------
Poland - 0.7%
Elektrim Spolka Akcyjna S.A.
(Electrical Equipment) 56,500 $ 515,438
Stomil Olsztyn S.A. (Tires and Rubber)* 22,500 247,895
------------
$ 763,333
-------------------------------------------------------------------------
Portugal - 0.6%
Cimentos de Portugal S.A. (Building Materials) 7,326 $ 152,747
Jeronimo Martins & Filho S.A. (Retail) 1,400 128,642
Portugal Telecom S.A. (Telecommunications) 7,400 196,793
Sonae Investimentos-Sociedade Gestora
de Participacoes Sociais, S.A. (Retail) 7,000 210,000
------------
$ 688,182
-------------------------------------------------------------------------
Russia - 1.1%
Lukoil Oil Co., ADR (Oil and Gas) 13,800 $ 579,600
Mosenergo, ADR (Utilities - Electric)## 17,000 495,125
Rostelecom (Telecommunications)## 8 189,600
------------
$ 1,264,325
-------------------------------------------------------------------------
Singapore - 1.7%
City Developments Ltd. (Real Estate) 44,000 $ 389,158
Development Bank of Singapore Ltd. (Banks) 12,000 154,922
Keppel Corp. Ltd. (Transportation - Marine) 21,000 163,267
Overseas-Chinese Banking Corp. Ltd. (Finance) 21,400 259,486
Wing Tai Holdings Ltd.(Holding Company) 351,000 961,370
------------
$ 1,928,203
-------------------------------------------------------------------------
South Africa - 1.0%
Iscor Ltd. (Steel) 344,000 $ 251,471
Nedcor Ltd. (Financial Services) 17,576 255,443
Sasol Ltd. (Oils) 32,975 407,717
South African Breweries Ltd. (Brewery) 9,235 232,878
------------
$ 1,147,509
-------------------------------------------------------------------------
South Korea - 0.5%
Korea Electric Power Corp., ADR
(Utilities - Electric) 8,000 $ 141,000
Korea International Trust (Finance)*+ 10 395,000
Samsung Display Devices Co.
(Electrical Equipment) 1,210 75,625
------------
$ 611,625
-------------------------------------------------------------------------
Spain - 1.6%
BCO Intercont (Banks) 2,200 $ 288,224
Cristaleria Espanola S.A. (Glass Products) 3,700 240,945
Europistas Concesinaria Espanola S.A.
(Engineering/Construction) 21,600 193,095
Hidroel Cantabrico (Utilities - Electric) 7,500 252,293
Repsol S.A. (Oils) 10,600 391,700
Telefonica de Espana (Utilities - Telephone) 19,700 431,165
------------
$ 1,797,422
-------------------------------------------------------------------------
Sweden - 2.6%
Enator AB (Computer Services)* 8,000 $ 195,171
Ericsson LM, "B" (Telecommunications) 11,300 347,961
Munksjo AB (Forest and Paper Products) 59,700 550,615
Nobel Biocare AB (Medical Supplies) 33,500 573,093
PLM AB (Packaging and Containers) 11,400 179,760
Securitas AB, "B" (Commercial Services) 23,970 688,189
Swedish Match AB (Tobacco)* 6,300 20,618
Volvo AB, "B" (Automobiles) 14,900 326,934
------------
$ 2,882,341
-------------------------------------------------------------------------
Switzerland - 3.4%
Fotolabo S.A. (Leisure) 1,300 $ 508,046
Kuoni Reisen Holdings AG (Travel Services) 300 666,667
Lindt & Spruengli AG (Food) 40 784,674
Nestle AG, Registered Shares
(Food and Beverage Products) 350 379,502
Roche Holdings AG (Pharmaceuticals) 42 322,483
Sandoz AG (Pharmaceuticals) 200 232,337
Sika Finanz AG (Building Materials) 2,400 573,793
Winterthur (Insurance) 630 387,655
------------
$ 3,855,157
-------------------------------------------------------------------------
Taiwan - 1.0%
Taipei Fund (Financial Services)* 125 $ 1,087,500
-------------------------------------------------------------------------
Thailand - 0.5%
Bank of Ayudhya Ltd. (Banks and Credit Cos.) 38,125 $ 120,167
Siam City Cement Co. Ltd. Foreign
Registered (Building Materials) 21,000 139,781
TelecomAsia Corp. Ltd., Foreign
Registered (Utilities - Telephone)* 168,500 349,667
------------
$ 609,615
-------------------------------------------------------------------------
Turkey - 0.4%
Netas Telekomunik (Telecommunications) 695,400 $ 147,849
Trakya Cam Sanayil (Manufacturing) 5,090,514 273,684
------------
$ 421,533
-------------------------------------------------------------------------
United Kingdom - 14.0%
Allied Domecq PLC
(Food and Beverage Products) 24,120 $ 181,442
Anglian Group PLC (Building Materials) 152,896 552,589
Asda Property Holdings PLC (Real Estate) 157,600 435,803
BAT Industries PLC (Tobacco) 22,250 177,661
Blick PLC (Electrical) 51,200 301,235
British Gas PLC (Utilities - Gas) 81,600 299,030
British Petroleum PLC (Oil and Gas) 19,400 224,285
British Telecommunications PLC
(Telecommunications) 44,700 282,905
BTR PLC (Holding Company) 59,560 239,288
Bullough PLC (Manufacturing) 275,900 322,333
Caradon PLC (Holding Company) 49,450 198,254
Carlton Communicatons PLC (Broadcasting) 39,700 335,680
City Centre Restaurants PLC (Restaurants) 133,100 288,626
Close Brothers Group PLC (Banks) 71,800 389,244
Courtaulds Textiles PLC (Textiles) 20,900 87,832
Dalgety PLC (Food Products) 31,830 177,908
David Brown Group PLC
(Engineering/Construction) 88,400 355,898
Devro International PLC (Food) 96,300 411,176
Fairey Group PLC (Manufacturing) 21,100 222,391
General Accident PLC (Insurance) 16,350 201,323
General Electric Co. PLC (Electronics) 21,750 136,192
Glaxo Wellcome PLC (Pharmaceuticals) 8,500 139,777
Graham Group PLC (Distributing) 103,700 224,001
Granada Group PLC (Leisure) 16,300 237,287
Hazlewood Foods PLC (Food) 280,800 429,542
Hunting PLC (Holding Company) 104,200 282,008
Inchcape PLC (Commercial Services) 54,150 245,315
Independent Insurance Group PLC
(Insurance) 46,300 472,819
Johnson Matthey PLC (Metals) 22,400 204,840
Laird Group PLC (Automotive Parts) 28,500 200,737
Land Securities PLC (Real Estate) 20,850 258,310
London Electricity PLC (Utilities - Electric) 11,800 128,139
Marley PLC (Building Materials) 193,900 425,359
Mayflower Corp. PLC (Automotive Parts) 145,705 344,127
Meggitt Holdings PLC (Engineering) 218,000 370,123
Midland Independent Newspapers PLC
(Publishing) 93,000 205,578
National Westminster (Finance) 20,900 243,120
Nelson Hurst PLC (Insurance) 104,200 264,492
NFC PLC (Transportation) 66,500 209,600
OGC International PLC (Oil and Gas) 56,800 71,611
Peninsular & Oriental Steam Navigation Co.
(Transportation - Marine) 25,400 252,555
RJB Mining PLC (Mining) 24,950 220,190
Roxboro Group PLC (Manufacturing) 89,700 256,336
Sainsbury (J.) PLC (Retail) 36,800 232,287
Scapa Group PLC (Building Materials) 102,000 413,223
Serco Group PLC (Commercial Services) 24,500 273,877
Seton Healthcare Group PLC
(Medical Supplies) 39,000 291,737
Shell Transport & Trading Co. PLC
(Oil and Gas) 7,600 126,223
SIG PLC (Building Materials) 105,940 432,747
Smith (W.H.) Group PLC (Retail) 21,600 153,590
T & S Stores PLC (Retail) 119,400 351,245
Triplex Lloyd PLC (Hardware) 121,600 425,172
Vardon PLC (Entertainment) 197,050 268,305
Wagon Industrial Holdings PLC
(Manufacturing) 70,300 353,932
Walker Greenbank PLC (Manufacturing) 247,300 243,191
Wardle Storeys PLC (Chemicals) 32,500 266,607
Wimpey (George) PLC (Construction) 146,800 309,697
------------
$ 15,648,794
-------------------------------------------------------------------------
Venezuela - 0.2%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications) 10,000 $ 253,750
-------------------------------------------------------------------------
Total Stocks (Identified Cost, $101,114,854) $103,261,041
-------------------------------------------------------------------------
Warrants
-------------------------------------------------------------------------
Issuer Shares Value
--------------------------------------------------------------------------
Sweden
Enator AB (Computer Services)*
(Identified Cost, $0) 8,000 $ 17,256
-------------------------------------------------------------------------
Short-Term Obligations - 6.3%
-------------------------------------------------------------------------
Principal Amount
(000 Omitted)
-------------------------------------------------------------------------
Federal Farm Credit Bank, due 12/31/96 $ 12 $ 11,948
Federal Home Loan Bank, due 12/30/96 287 285,796
Federal Home Loan Mortgage Corp., due 12/13/96 3,700 3,693,550
Federal National Mortgage Assn., due 12/09/96 1,550 1,548,205
Student Loan Marketing Assn., due 12/02/96 1,470 1,469,767
-------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 7,009,266
-------------------------------------------------------------------------
Total Investments (Identified Cost, $108,124,120) $110,287,563
Other Assets, Less Liabilities - 1.7% 1,904,495
-------------------------------------------------------------------------
Net Assets - 100.0% $112,192,058
-------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
* Non-income producing security.
+ Restricted 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 FRF = French Francs
BEF = Belgian Francs GBP = British Pounds
CAD = Canadian Dollars IEP = Irish Punts
CHF = Swiss Francs ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NLG = Netherlands Guilders
ECU = European Currency Units NOK = Norwegian Krones
ESP = Spanish Pesetas NZD = New Zealand Dollars
SEK = Swedish Kronor
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- -----------------------------------------------------------------------------------------------------
Emerging International
Markets Growth International
November 30, 1996 Equity and Income Growth
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost,
$43,812,574, $28,663,906, and $108,124,120,
respectively) $45,253,765 $29,944,823 $110,287,563
Cash 57,587 10,255 3,023
Foreign currency, at value (identified cost,
$19,033, $13,627, and $87,983, respectively) 19,020 13,632 89,570
Net receivable for forward foreign currency
exchange contracts sold -- 120,428 --
Receivable for Fund shares sold 19,295 41,978 2,077,271
Receivable for investments sold 1,479,155 -- --
Interest and dividends receivable 69,201 239,648 234,903
Deferred organization expenses 24,070 22,437 21,163
----------- ----------- ------------
Total assets $46,922,093 $30,393,201 $112,713,493
----------- ----------- ------------
Liabilities:
Payable for Fund shares reacquired $ 31,933 $ 2,910 $ 256,288
Payable for investments purchased 1,437,508 -- 98,295
Written options outstanding at value (premiums
received, $16,733) -- 29,449 --
Net payable for forward foreign currency exchange
contracts purchased -- 84,471 --
Net payable for forward foreign currency exchange
contracts -- 21,310 --
Payable to affiliates -
Management fee 4,691 2,428 8,885
Shareholder servicing agent fee 696 -- 1,701
Distribution fee 1,877 16,201 4,637
Accrued expenses and other liabilities 49,419 60,756 151,629
----------- ----------- ------------
Total liabilities $ 1,526,124 $ 217,525 $ 521,435
----------- ----------- ------------
Net assets $45,395,969 $30,175,676 $112,192,058
=========== =========== ============
Net assets consist of:
Paid-in capital $45,058,172 $28,760,201 $109,780,489
Unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies 1,431,841 1,281,410 2,165,638
Accumulated undistributed net realized gain (loss)
on investments and foreign currency transactions (809,660) (7,742) 641,249
Accumulated undistributed net investment
income (loss) (284,384) 141,807 (395,318)
----------- ----------- ------------
Total $45,395,969 $30,175,676 $112,192,058
=========== =========== ============
Shares of beneficial interest outstanding 2,857,562 1,863,902 6,970,410
========= ========= =========
Class A shares:
Net asset value per share
(net assets of $21,912,434, $14,146,323, and
$52,212,432 / 1,375,404, 871,547, and 3,233,786
shares of beneficial interest outstanding,
respectively) $15.93 $16.23 $16.15
====== ====== ======
Offering price per share (100 / 95.25 of net asset
value per share) $16.73 $17.04 $16.96
====== ====== ======
Class B shares:
Net asset value and offering price per share
(net assets of $22,960,877, $15,968,463, and
$58,892,953 / 1,449,186, 988,594, and 3,669,063
shares of beneficial interest outstanding,
respectively) $15.84 $16.15 $16.05
====== ====== ======
Class C shares:
Net asset value and offering price per share
(net assets of $522,658, $60,890, and
$1,086,673 / 32,972, 3,761, and 67,561
shares of beneficial interest outstanding,
respectively) $15.85 $16.19 $16.08
====== ====== ======
</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
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations
- ---------------------------------------------------------------------------------------------------
Emerging International
Markets Growth International
Six Months Ended November 30, 1996 Equity and Income Growth
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income:
Income -
Interest $ 65,961 $ 244,916 $ 218,247
Dividends 314,970 195,401 862,166
Foreign taxes withheld (30,126) (25,938) (108,546)
----------- ---------- -----------
Total investment income $ 350,805 $ 414,379 $ 971,867
----------- ---------- -----------
Expenses -
Management fee $ 274,171 $ 135,372 $ 490,508
Trustees' compensation 3,592 3,592 3,592
Shareholder servicing agent fee (Class A) 16,107 9,714 35,847
Shareholder servicing agent fee (Class B) 24,415 16,269 57,556
Shareholder servicing agent fee (Class C) 147 18 373
Distribution and service fee (Class A) 53,691 32,382 119,490
Distribution and service fee (Class B) 110,978 73,956 261,620
Distribution and service fee (Class C) 978 122 2,484
Custodian fee 33,311 19,262 54,248
Registration fees 43,294 48,305 --
Printing 21,765 12,476 33,882
Postage 14,112 4,087 9,939
Auditing fees 17,675 18,625 19,975
Legal fees 6,903 5,698 8,031
Amortization of organization expenses 2,606 2,606 2,606
Miscellaneous 16,815 14,823 50,011
----------- ---------- -----------
Total expenses $ 640,560 $ 397,307 $ 1,150,162
Fees paid indirectly (1,350) (1,046) (3,205)
Reduction of expenses by investment adviser (27,121) -- --
----------- ---------- -----------
Net expenses $ 612,089 $ 396,261 $ 1,146,957
----------- ---------- -----------
Net investment income (loss) $ (261,284) $ 18,118 $ (175,090)
----------- ---------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(1,319,172) $ 162,624 $ 252,799
Written option transactions -- 28,842 --
Foreign currency transactions (17,299) (224,132) (155,619)
----------- ---------- -----------
Net realized gain (loss) on investments and
foreign currency transactions $(1,336,471) $ (32,666) $ 97,180
----------- ---------- -----------
Change in unrealized appreciation (depreciation) -
Investments $ (17,733) $ 368,777 $(3,316,531)
Written options -- (35,115) --
Translation of assets and liabilities in foreign
currencies (6,508) 137,519 30,089
----------- ---------- -----------
Net unrealized gain (loss) on investments and
foreign currency translation $ (24,241) $ 471,181 $(3,286,442)
----------- ---------- -----------
Net realized and unrealized gain (loss) on
investments and foreign currency $(1,360,712) $ 438,515 $(3,189,262)
----------- ---------- -----------
Increase (decrease) in net assets from
operations $(1,621,996) $ 456,633 $(3,364,352)
=========== ========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
International
Emerging Markets Equity Growth and Income International Growth
--------------------------- --------------------------- ----------------------------
Six Months Six Months Six Months
Ended Period Ended Ended Period Ended Ended Period Ended
November 30, May 31, November 30, May 31, November 30, May 31,
1996 1996* 1996 1996* 1996 1996*
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
<S> <C> <C> <C> <C> <C> <C>
From operations -
Net investment income (loss) $ (261,284) $ 13,002 $ 18,118 $ 81,065 $ (175,090) $ (4,270)
Net realized gain (loss) on investments and
foreign currency transactions (1,336,471) 502,931 (32,666) 87,073 97,180 334,764
Net unrealized gain (loss) on investments and
foreign currency translation (24,241) 1,456,082 471,181 810,229 (3,286,442) 5,452,080
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets from
operations $ (1,621,996) $ 1,972,015 $ 456,633 $ 978,367 $ (3,364,352) $ 5,782,574
------------ ------------ ------------ ------------ ------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (8,868) $ -- $ (12,226) $ -- $ (6,653)
From net investment income (Class B) -- -- -- (7,299) -- --
In excess of net investment income (Class B) -- (3,354) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total distributions declared to
shareholders $ -- $ (12,222) $ -- $ (19,525) $ -- $ (6,653)
------------ ------------ ------------ ------------ ------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 20,983,256 $ 46,419,714 $ 7,390,399 $ 27,711,754 $ 64,106,311 $ 84,291,229
Net asset value of shares issued to
shareholders in reinvestment of
distributions -- 12,183 -- 15,767 -- 5,219
Cost of shares reacquired (13,846,955) (8,510,026) (3,262,229) (3,095,490) (33,296,685) (5,325,585)
------------ ------------ ------------ ------------ ------------ ------------
Increase in net assets from Fund share
transactions $ 7,136,301 $ 37,921,871 $ 4,128,170 $ 24,632,031 $ 30,809,626 $ 78,970,863
------------ ------------ ------------ ------------ ------------ ------------
Total increase in net assets $ 5,514,305 $ 39,881,664 $ 4,584,803 $ 25,590,873 $ 27,445,274 $ 84,746,784
Net assets:
At beginning of period 39,881,664 -- 25,590,873 -- 84,746,784 --
------------ ------------ ------------ ------------ ------------ ------------
At end of period (including accumulated
undistributed net investment income
(loss) of $(284,384), $(23,100),
$141,807, $123,689, $(395,318) and
$(220,228), respectively) $ 45,395,969 $ 39,881,664 $ 30,175,676 $ 25,590,873 $112,192,058 $ 84,746,784
============ ============ ============ ============ ============ ============
*For the period from the commencement of investment operations, October 24, 1995 to May 31, 1996.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period Ended Six Months Ended Period Ended Period Ended
November 30, 1996 May 31, 1996* November 30, 1996 May 31, 1996* November 30, 1996**
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <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 $16.77
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.08) $ 0.04 $(0.12) $(0.02) $(0.11)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.51) 1.50 (0.51) 1.50 (0.81)
------ ------ ------ ------ ------
Total from investment operations $(0.59) $ 1.54 $(0.63) $ 1.48 $(0.92)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.02) $ -- $ -- $ --
In excess of net investment income -- -- -- (0.01) --
------ ------ ------ ------ ------
Total distributions declared to shareholders $ -- $(0.02) $ -- $(0.01) $ --
------ ------ ------ ------ ------
Net asset value - end of period $15.93 $16.52 $15.84 $16.47 $15.85
====== ====== ====== ====== ======
Total return(+) (3.57)%++ 10.24%++ (3.83)%++ 9.85%++ (5.49)%++
Ratios (to average daily net assets)/Supplemental data(S):
Expenses## 2.50%+ 2.48%+ 3.06%+ 3.06%+ 3.00%+
Net investment income (loss) (0.91)%+ 0.35%+ (1.48)%+ (0.19)%+ (1.46)%+
Portfolio turnover 28% 22% 28% 22% 28%
Average commission rate### $0.0205 $0.0136 $0.0205 $0.0136 $0.0205
Net assets at end of period (000 omitted) $21,912 $19,861 $22,961 $20,021 $ 523
*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 November 30, 1996.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
(+)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.
(S)The Adviser voluntarily agreed to maintain expenses of the Emerging Markets Equity 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:
Net investment income(loss) $(0.08) $ 0.02 $(0.13) $(0.08) $(0.14)
Ratios (to average net assets):
Expenses 2.65%+ 2.73%+ 3.22%+ 3.30%+ 3.20%+
Net investment income (loss) (1.03)%+ 0.10%+ (1.60)%+ (0.44)%+ (1.59)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period Ended Six Months Ended Period Ended Period Ended
November 30, 1996 May 31, 1996* November 30, 1996 May 31, 1996* November 30, 1996**
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $15.98 $15.00 $15.94 $15.00 $16.02
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $ 0.03 $ 0.11 $(0.01) $ 0.05 $(0.07)
Net realized and unrealized gain on investments
and foreign currency transactions 0.22 0.90 0.22 0.90 0.24
------ ------ ------ ------ ------
Total from investment operations $ 0.25 $ 1.01 $ 0.21 $ 0.95 $ 0.17
------ ------ ------ ------ ------
Less distributions declared to shareholders from
net investment income $ -- $(0.03) $ -- $(0.01) $ --
------ ------ ------ ------ ------
Net asset value - end of period $16.23 $15.98 $16.15 $15.94 $16.19
====== ====== ====== ====== ======
Total return(+) 1.56%++ 6.71%++ 1.32%++ 6.37%++ 1.06%++
Ratios (to average daily net assets)/Supplemental data:
Expenses## 2.56%+ 2.52%+ 3.12%+ 3.11%+ 3.49%+
Net investment income (loss) 0.43%+ 1.04%+ (0.13)%+ 0.49%+ (0.94)%+
Portfolio turnover 32% 29% 32% 29% 32%
Average commission rate### $0.0315 $0.0291 $0.0315 $0.0291 $0.0315
Net assets at end of period (000 omitted) $14,146 $11,950 $15,968 $13,641 $ 61
*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 November 30, 1996.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
(+)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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period Ended Six Months Ended Period Ended Period Ended
November 30, 1996 May 31, 1996* November 30, 1996 May 31, 1996* November 30, 1996**
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.71 $15.00 $16.66 $15.00 $16.83
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $ -- $ 0.03 $(0.05) $(0.03) $(0.07)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.56) 1.69 (0.56) 1.69 (0.68)
------ ------ ------ ------ ------
Total from investment operations $(0.56) $ 1.72 $(0.61) $ 1.66 $(0.75)
------ ------ ------ ------ ------
Less distributions declared to shareholders from
net investment income $ -- $(0.01) $ -- $ -- $ --
------ ------ ------ ------ ------
Net asset value - end of period $16.15 $16.71 $16.05 $16.66 $16.08
====== ====== ====== ====== ======
Total return(+) (3.35)%++ 11.43%++ (3.66)%++ 11.07%++ (4.46)%++
Ratios (to average daily net assets)/Supplemental data:
Expenses## 2.00%+ 2.24%+ 2.57%+ 2.85%+ 2.51%+
Net investment income (loss) (0.04)%+ 0.24%+ (0.63)%+ (0.31)%+ (0.82)%+
Portfolio turnover 15% 11% 15% 11% 15%
Average commission rate### $0.0079 $0.0107 $0.0079 $0.0107 $0.0079
Net assets at end of period (000 omitted) $52,212 $41,483 $58,893 $43,264 $ 1,087
*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 November 30, 1996.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
(+)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.
</TABLE>
See notes to financial statements
<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 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 the 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.
Multiple Classes of Shares of Beneficial Interest -- The Funds offer Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, 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.
(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 with MFS, 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
0.60% 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 November 30, 1996, the aggregate unreimbursed expenses owed
to MFS by the Emerging Markets Equity Fund amounted to $87,180.
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). The Funds have an
unfunded defined benefit plan for all of its independent Trustees and Mr.
Bailey. Included in Trustees' compensation is a net periodic pension expense of
$1,102, $1,102 and $1,102 for the Emerging Markets Equity Fund, International
Growth and Income Fund and International Growth Fund, respectively, for the
period ended November 30, 1996.
Distributor -- MFD, a wholly owned subsidiary of MFS, as distributor, received
$16,360, $10,643, and $55,901 for the Emerging Markets Equity Fund,
International Growth and Income Fund, and International Growth Fund,
respectively, for the period ended November 30, 1996 as its portion of the sales
charge on sales of Class A shares of each Fund.
The Trustees have adopted separate distribution plans 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 Class A 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 who 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 $7,431, $14,675, and $2,909 for the
Emerging Markets Equity Fund, International Growth and Income Fund, and
International Growth Fund, respectively, for the period ended November 30, 1996.
Fees incurred under each Class A distribution plan during the period ended
November 30, 1996 were 0.50% of average daily net assets attributable to Class A
shares on an annualized basis.
Each Class B and Class C 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 who 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 $248, $584, and $449 for Class B shares of
the Emerging Markets Equity Fund, International Growth and Income Fund, and
International Growth Fund, respectively, for the period ended November 30, 1996.
MFD did not retain any of the service fee for accounts not attributable to a
securities dealer for Class C shares for the period ended November 30, 1996.
Fees incurred under each Class B and Class C distribution plan during the period
ended November 30, 1996 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 12 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 within 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 12 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 period ended November 30, 1996 were $0, $0 and $1,707 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 November 30, 1996 were $19,944,
$42,898, and $11,251 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
November 30, 1996 were $45, $19, and $170 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 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 $17,488,621
and $11,477,969, $12,748,874 and $8,016,500, and $40,343,599 and $13,462,343 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 $43,812,574 $28,663,906 $108,124,120
=========== =========== ============
Gross unrealized appreciation $ 5,181,397 $ 2,263,557 $ 9,591,969
Gross unrealized depreciation (3,740,206) (982,640) (7,428,526)
----------- ----------- ------------
Net unrealized appreciation $ 1,441,191 $ 1,280,917 $ 2,163,443
=========== =========== ============
</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>
Class A Shares Emerging Markets International Growth International
Equity Fund and Income Fund Growth Fund
Six Months Ended ------------------------ -------------------------- ----------------------------
November 30, 1996 Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 639,264 $10,324,186 199,224 $ 3,160,535 1,562,482 $25,470,525
Shares reacquired (466,339) (7,519,471) (75,599) (1,195,886) (811,200) (13,195,165)
------- ----------- ------- ----------- --------- -----------
Net increase 172,925 $ 2,804,715 123,625 $ 1,964,649 751,282 $12,275,360
======= =========== ======= =========== ========= ===========
<CAPTION>
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
========= =========== ======= =========== ========= ===========
*For the period from the commencement of investment operations, October 24, 1995 to May 31, 1996.
<CAPTION>
Class B Shares Emerging Markets International Growth International
Equity Fund and Income Fund Growth Fund
Six Months Ended ------------------------ -------------------------- ----------------------------
November 30, 1996 Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 625,620 $10,113,556 263,882 $ 4,167,325 2,317,002 $37,507,004
Shares reacquired (391,872) (6,311,245) (130,861) (2,063,135) (1,244,966) (20,074,644)
------- ----------- ------- ----------- --------- -----------
Net increase 233,748 $ 3,802,311 133,021 $ 2,104,190 1,072,036 $17,432,360
======= =========== ======= =========== ========= ===========
<CAPTION>
Period Ended May 31, 1996* Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
========= =========== ========= =========== ========= ===========
<CAPTION>
Class C Shares Emerging Markets International Growth International
Equity Fund and Income Fund Growth Fund
Six Months Ended ------------------------ -------------------------- ----------------------------
November 30, 1996 Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 33,985 $ 545,514 3,966 $ 62,539 69,230 $ 1,128,782
Shares reacquired (1,013) (16,239) (205) (3,208) (1,669) (26,876)
------ ----------- ----- ---------- ------ -----------
Net increase 32,972 $ 529,275 3,761 $ 59,331 67,561 $ 1,101,906
====== =========== ===== ========== ====== ===========
*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 November 30, 1996 for the Emerging
Markets Equity Fund. For the period from the commencement of offering of Class C shares, July 1, 1996 to November 30,
1996 for the International Growth and Income Fund and the International Growth Fund.
</TABLE>
(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 $350 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 period ended
November 30, 1996 were $250, $83 and $565 for the Emerging Markets Equity Fund,
International Growth and Income Fund and International Growth Fund,
respectively.
(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.
<PAGE>
<TABLE>
Written Option Transactions
International Growth and Income Fund
<CAPTION>
1996 Calls 1996 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 -
Deutsche Marks 1,325 6,313 517 1,418
Deutsche Marks/British Pounds 1,820 7,202 728 9,382
Japanese Yen 37,740 3,054 -- --
Swiss Francs/Deutsche Marks 477 1,447 285 3,208
Options terminated in closing transactions -
Deutsche Marks (2,824) (13,296) (517) (1,418)
Deutsche Marks/British Pounds (1,386) (4,209) -- --
Italian Lire/Deutsche Marks (2,817,989) (20,484) -- --
Japanese Yen (37,740) (3,054) -- --
Options expired -
Canadian Dollars -- -- (1,457) (3,828)
Deutsche Marks/British Pounds (1,116) (4,506) -- --
Japanese Yen -- -- (122,808) (7,290)
Spanish Pesetas/Deutsche Marks -- -- (63,527) (1,575)
-------- ------- ------- -------
OUTSTANDING, END OF PERIOD 1,181 $ 4,143 1,013 $12,590
======== ======= ======= =======
OPTIONS OUTSTANDING AT END OF PERIOD CONSIST OF:
Deutsche Marks/British Pounds 704 2,696 728 9,382
Swiss Francs/Deutsche Marks 477 1,447 285 3,208
-------- ------- ------- -------
OUTSTANDING, END OF PERIOD 1,181 $ 4,143 1,013 $12,590
======== ======= ======= =======
At November 30, 1996, the Fund had sufficient cash and/or securities to cover any commitments under these contracts.
</TABLE>
<PAGE>
<TABLE>
Forward Foreign Currency Exchange Contracts
International Growth and Income Fund
<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 2/24/97 BEF 12,663,211 $ 416,609 $ 401,373 $ 15,236
2/20/97 CAD 1,099,324 826,084 819,433 6,651
2/07/97 CHF 329,857 270,772 254,340 16,432
12/12/96 - 4/28/97 DEM 7,604,397 5,047,113 4,961,120 85,993
2/03/97 DKK 953,751 167,202 162,490 4,712
5/09/97 ECU 208,255 265,140 262,705 2,435
2/07/97 FRF 2,789,243 542,695 535,624 7,071
2/24/97 GBP 390,374 638,797 654,979 (16,182)
2/24/97 IEP 275,484 441,817 462,431 (20,614)
12/12/96 ITL 1,488,580,281 980,170 982,463 (2,293)
1/29/97 - 2/28/97 JPY 61,681,490 562,371 547,480 14,891
2/03/97 NLG 188,968 115,407 109,935 5,472
12/13/96 NZD 296,742 205,155 210,809 (5,654)
12/03/97 - 2/07/97 SEK 2,585,078 391,621 385,343 6,278
----------- ----------- --------
$10,870,953 $10,750,525 $120,428
=========== =========== ========
Purchases 2/20/97 AUD 138,730 $ 109,319 $ 112,851 $ 3,532
2/24/97 BEF 4,266,286 136,740 135,224 (1,516)
2/20/97 CAD 723,549 541,351 539,331 (2,020)
2/07/97 CHF 446,555 356,748 344,321 (12,427)
12/12/96 - 2/07/97 DEM 7,790,649 5,159,102 5,072,556 (86,546)
12/12/96 - 4/21/97 ESP 72,102,814 562,205 554,691 (7,514)
2/07/97 FRF 2,607,423 516,322 500,709 (15,613)
12/13/96 - 2/24/97 GBP 510,557 843,688 856,855 13,167
2/24/97 IEP 159,288 262,331 267,383 5,052
2/07/97 - 4/28/97 ITL 1,561,660,681 990,091 1,025,275 35,184
1/21/97 - 2/28/97 JPY 65,644,946 592,289 581,189 (11,100)
2/03/97 NLG 199,633 117,271 116,140 (1,131)
5/09/97 NOK 1,680,882 265,140 263,317 (1,823)
12/13/96 NZD 298,452 206,757 212,024 5,267
2/03/97 SEK 2,546,501 386,554 379,571 (6,983)
----------- ----------- --------
$11,045,908 $10,961,437 $(84,471)
=========== =========== ========
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net payable of $21,310 at November 30, 1996.
At November 30, 1996, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) Restricted Security
The Funds may invest not more than 15% of their net assets in securities which
are subject to legal or contractual restrictions on resale. At November 30,
1996, the International Growth Fund owned the following restricted security
(constituting 0.35% of net assets for the International Growth Fund) which may
not be publicly sold without registration under the Securities Act of 1933.
The Fund does not have the right to demand that such security be registered.
The value of this security is determined by valuations supplied by a pricing
service or brokers or, if not available, in good faith by or at the direction
of the Trustees.
International Growth Fund
Date of
Description Acquisition Shares Cost Value
- ------------------------------------------------------------------------------
Korea International Trust 11/08/95 10 $586,626 $395,000
========
<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) (three of the portfolios constituting MFS Series Trust
X) including the schedules of portfolio investments, as of November 30, 1996,
the related statements of operations for the six month period then ended, and
the statements of changes in net assets and financial highlights for the six
month period 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 audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
November 30, 1996 by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign & Colonial
International Growth and Income Fund, and MFS/ Foreign & Colonial International
Growth Fund at November 30, 1996, the results of their operations for the six
month period then ended and the changes in their net assets and financial
highlights for the six month period 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
January 8, 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.
<PAGE>
MFS/FOREIGN & COLONIAL INTERNATIONAL FUNDS
<TABLE>
<C> <C>
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President State Street Bank and Trust Company
Richard B. Bailey* - Private Investor; AUDITORS
Former Chairman and Director (until 1991), Ernst & Young LLP
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, INVESTOR INFORMATION
Cambridge Trust Company For MFS stock and bond market outlooks, call toll free:
1-800-637-4458 anytime from a touch-tone telephone.
Peter G. Harwood - Private Investor
For information on MFS mutual funds, call your financial
J. Atwood Ives - Chairman and Chief Executive Officer, adviser or, for an information kit, call toll free:
Eastern Enterprises 1-800-637-2929 any business day from 9 a.m. to 5 p.m.
Eastern time (or leave a message anytime).
Lawrence T. Perera - Partner, Hemenway & Barnes
INVESTOR SERVICE
William J. Poorvu - Adjunct Professor, Harvard University MFS Service Center, Inc.
Graduate School of Business Administration P.O. Box 2281
Boston, MA 02107-9906
Charles W. Schmidt - Private Investor
For general information, call toll free: 1-800-225-2606 any
Arnold D. Scott* - Senior Executive Vice President, Director business day from 8 a.m. to 8 p.m. Eastern time.
and Secretary, Massachusetts Financial Services Company
For service to speech- or hearing-impaired, call toll free:
Jeffrey L. Shames* - President and Director, 1-800-637-6576 any business day from 9 a.m. to 5 p.m.
Massachusetts Financial Services Company Eastern time. (To use this service, your phone must be
equipped with a Telecommunications Device for the Deaf.)
Elaine R. Smith - Independent Consultant
For share prices, account balances and exchanges, call toll
David B. Stone - Chairman, North American Management free: 1-800-MFS-TALK (1-800-637-8255) anytime from a touch-
Corp. (investment advisers) tone telephone.
INVESTMENT ADVISER WORLD WIDE WEB
Massachusetts Financial Services Company www.mfs.com
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS*
Arnab K. Banerji
Richard O. Hawkins
Atul Patel
June Scott
Tony Thomson
Ian K. Wright [DALBAR For the third year in a row,
LOGO] MFS earned a #1 ranking in
TREASURER TOP RATED DALBAR, Inc. Broker/Dealer
W. Thomas London* SERVICE Survey, Main Office Operations
Service Quality Category. The
ASSISTANT TREASURER firm achieved a 3.48 overall score on a
James O. Yost* scale of 1 to 4 in the 1996 survey. A total
of 110 firms responded, offering input on the
SECRETARY quality of service they received from 29
Stephen E. Cavan* mutual fund companies nationwide. The survey
contained questions about service quality in
ASSISTANT SECRETARY 15 categories, including "knowledge of phone
James R. Bordewick, Jr.* service contacts," "accuracy of transaction
processing," and "overall ease of doing
*Affiliated with the Investment Adviser business with the firm."
</TABLE>
<PAGE>
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MFS(R)/ [DALBAR LOGO: #1 BULK RATE
FOREIGN & TOP RATED SERVICE] U.S. POSTAGE
COLONIAL PAID
INTERNATIONAL PERMIT #55638
FUNDS BOSTON, MA
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500 Boylston Street
Boston, MA 02116
[LOGO: M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)]
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MFC-2 1/97/38M 287
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116
