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[Logo] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) INTERNATIONAL
GROWTH FUND
(formerly MFS(R)/Foreign & Colonial
International Growth Fund)
ANNUAL REPORT o MAY 31, 1998
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Now two MFS(R) IRA choices (see page 36)
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IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS(R) INVESTMENT MANAGEMENT(SM)
- --------------------------- On February 2, 1998, Keith Brodkin, a friend
and leader to everyone at MFS, died
[Photo of A. Keith Brodkin] unexpectedly at age 62. His thoughtful
letters to shareholders on the markets and
- --------------------------- economy have been an integral part of
MFS shareholder reports like this one for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager,
managing the bond portion of MFS(R) Total Return Fund. He went on to
manage our first pure bond fund, MFS(R) Bond Fund, when it was introduced
in 1974, and he was considered a pioneer in the art of active bond
management.
Keith was named President and Chief Investment Officer of MFS in 1987 and
four years later became Chairman and Chief Executive Officer. During his
stewardship, MFS has achieved significant growth in total assets under
management, rising from some $25 billion in 1991 to the over $80 billion
today entrusted to us by three million individual and institutional
investors worldwide. Under Keith's leadership, MFS has carefully but
steadily built its domestic and international investment capabilities
through the introduction of a range of new products and a still-growing
staff that now numbers over 100 equity and fixed-income professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
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TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 20
Notes to Financial Statements ............................................. 27
Independent Auditors' Report .............................................. 34
Trustees and Officers ..................................................... 37
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HIGHLIGHTS
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o FOR THE 12 MONTHS ENDED MAY 31, 1998, CLASS A SHARES OF THE FUND PROVIDED A
TOTAL RETURN AT NET ASSET VALUE OF 7.08%, CLASS B SHARES 6.59%, CLASS C
SHARES 6.62%, AND CLASS I SHARES 7.65%. (SEE PERFORMANCE SUMMARY FOR MORE
INFORMATION.)
o WE ARE EXTREMELY POSITIVE ABOUT THE PROSPECTS FOR A HEALTHY AND GROWING
EUROPEAN ECONOMY AND FEEL THAT EUROPEAN ECONOMIC EXPANSION WILL CONTINUE
FOR AN ADDITIONAL YEAR OR TWO AFTER THE AMERICAN ECONOMY COOLS.
o WE ARE AVOIDING SIGNIFICANT EXPOSURE TO ASIAN STOCKS THAT WE DO NOT THINK
HAVE A SIGNIFICANT GLOBAL BUSINESS PROFILE. WE ARE MOST HEAVILY INVESTED IN
THE MOST PROMISING COMPANIES IN THE EMERGING MARKETS OF SOUTH AFRICA,
MEXICO, AND BRAZIL.
o IN SEPTEMBER 1997, THE FUND CHANGED ITS NAME FROM MFS(R)/ FOREIGN &
COLONIAL INTERNATIONAL GROWTH FUND TO MFS(R) INTERNATIONAL GROWTH FUND.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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LETTER FROM THE CHAIRMAN
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[Photo of Jeffrey L. Shames]
- ----------------------------
Jeffrey L. Shames
Dear Shareholders:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly accepted
measures, equity valuations appear to have risen to a point at which the stock
market has become more vulnerable to changes in the investment environment such
as rising inflation and interest rates or a slowing economy. As a result, while
we continue to hold a favorable long-term outlook for the equity markets, we
also believe that a market correction is possible in the near term. In such a
correction, equity prices would remain relatively flat or decline, possibly for
an extended period.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive
than most fixed-income investments, while low inflation helps control
companies' costs, such as for raw materials, wages, and benefits. The near-
term outlook for a continuation of this environment appears relatively
favorable. However, this year has seen a marked slowdown in corporate
earnings. This means that as equity prices continue to rise, price-to-earnings
(P/E) ratios, or the amount an investor pays for a stock in relation to the
company's earnings per share, also go up. A year ago, the average P/E ratio
for stocks in the unmanaged Standard & Poor's 500 Composite Index stood at
approximately 21; this spring, the average P/E was 33% higher, at about 28. In
some cases, such as with some of the newer companies associated with the
Internet, P/Es have soared to levels that are unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 8% to 10% this year. However, just as no one can predict
market cycles, so too no one can predict economic cycles -- except to say that
these cycles do exist and that an economic slowdown at some point is
inevitable.
Given this reality, we believe it is prudent to remind investors of the need
to take a long-term view and to diversify their investments across a range of
asset classes, including mutual funds that focus on bonds and international
investments as well as on the U.S. stock market. The likelihood of an eventual
market correction also makes it important for us to use original, bottom-up
research to find companies that we think can keep growing or gain market share
in the face of the occasional downturn. To help achieve this, and to provide
the broadest possible coverage of industry sectors and individual companies,
MFS continues to increase its number of full-time research analysts. These
analysts thoroughly investigate each company's earnings potential and position
in its industry as well as the overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation.
Every year, both fixed-income and equity managers meet with thousands of
credit issuers and companies. They also attend many presentations, closely
follow sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research
to both the equity and fixed-income markets is the best way to provide
favorable long-term performance for our shareholders -- regardless of changes
in the overall market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
June 12, 1998
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JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED
MFS IN 1983. AFTER FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO
MANAGER, HE WAS NAMED CHIEF EQUITY OFFICER IN 1987 AND PRESIDENT AND A
MEMBER OF THE BOARD OF DIRECTORS IN 1993. MR. SHAMES WAS APPOINTED
CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY 1998.
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MANAGEMENT REVIEW AND OUTLOOK
- ----------------------------
[Photo of David R. Mannheim]
- ----------------------------
David R. Mannheim
For the 12 months ended May 31, 1998, Class A shares of the Fund provided a
total return of 7.08%, Class B shares 6.59%, Class C shares 6.62%, and Class I
shares 7.65%. These returns, which assume the reinvestment of distributions but
exclude the effects of any sales charges, compare to an 11.44% return for the
Morgan Stanley Capital International (MSCI) Europe, Australia, Far East (EAFE)
Index, an unmanaged, market- capitalization-weighted total return index of
developed-country global stock markets, excluding the United States, Canada, and
the South African mining component.
Q. COULD YOU TALK ABOUT THE FUND'S INVESTMENTS IN DEVELOPED AND EMERGING MARKETS
AND SOME OF THE MAJOR TRENDS AND THEMES OF INTERNATIONAL INVESTING IN THE
PAST YEAR?
A. Approximately 85% of the Fund is invested in stocks of companies in developed
markets and approximately 15% in those of emerging markets. Investments in
foreign and emerging markets may provide superior returns but also involve
greater risk than U.S. investments. Generally, the investment picture in the
developed markets improved during the year thanks in large part to the
strength of European economies. Emerging markets, which had been doing well
prior to the Asian crisis, took a big hit in the wake of that crisis. Our
emerging market weightings had been heaviest in India and China, both of
which experienced severe difficulties. Currently, our emerging market
allocation is most heavily weighted toward South Africa, Mexico, and Brazil.
However, the balance of the Fund's holdings favors developed markets.
The Asian crisis has been compounded recently by Japan's currency problems.
The impact has also been felt in Australia, which is closely tied to Asia and
has seen its own currency drop in value. As a result, the Fund is
underweighted in Asia and Japan compared to the MSCI EAFE Index. We are
slightly underweighted in Europe, but very overweighted in the Americas
thanks primarily to heavy investment in Canada and Mexico, neither of which
is included in the index.
Q. EUROPEAN MARKETS HAVE DONE BETTER THAN THE U.S. MARKET IN THE PAST YEAR. WHY
HAS EUROPE BEEN SO STRONG, AND WHAT IS YOUR OPINION ON ITS PROSPECTS FOR THE
FUTURE?
A. Europe is in the early stages of a growth cycle similar to what the United
States has experienced. In Europe earnings growth is accelerating, while
growth is slowing in the United States. In addition, European companies have
begun to restructure, outsource, and create greater corporate efficiencies,
which has added steam to corporate earnings growth. Europe looks like it is
headed toward a "virtuous circle" that would result in higher consumer
confidence, higher employment, and strong demand, just like the current U.S.
situation. Europe is earlier in the cycle than the United States is;
therefore, we think it may be able to sustain this growth rate for an
additional year or two, while U.S. growth slows.
Q. SPECIFICALLY, WHAT INDUSTRY SECTORS APPEAR MOST PROMISING AT THE MOMENT?
A. About 21% of the Fund is in financial services, which is made up mostly of
European banking and insurance concerns but includes no Japanese firms. As
interest rates have fallen, stock markets have been driven upward, with bank
stocks a prime beneficiary. The top holdings in this sector are not household
names necessarily but those that we feel have the best prospects for growth,
such as lesser-known entities like Anglo Irish Bank in Ireland. The consumer
staples sector is our second largest and is comprised of companies such as
Benckiser in the Netherlands and Henkel in Germany. Our third-largest,
technology, represents about 10% of the Fund's assets and is concentrated
mostly in Japanese companies that serve global markets, such as Sony and
Canon.
Q. ANY OTHER IMPORTANT SECTORS?
A. Slightly less than 10% of the Fund is invested in basic materials. Here we've
focused our investments on European specialty chemical companies in the midst
of a wave of consolidation and restructuring that is benefiting their stock
prices. Some of the biggest names include Henkel, Akzo Nobel, and Ciba
Specialty. A recent example of the consolidation going on in this market is
Akzo Nobel's proposed acquisition of Courtalds, a British chemical company.
Today, Akzo Nobel is trading at approximately 15 times earnings and growing
at a 20% annual rate, while many of its peers are trading at much higher
multiples and are only growing at 10%.
Q. WHAT'S YOUR LATEST THINKING ON THE CONTINUED TURMOIL IN ASIA?
A. We believe the situation in Asia will stabilize in two or three years.
Whether its economies stabilize at high or low levels, however, is too
difficult to call right now. We continue to invest in stocks of companies
that we think have good business models and that can survive political and
local economic shocks. For example, Japan is home to a great number of truly
global companies that are more keyed to what's happening in the world than to
their own economy. Unfortunately, most of the countries of Southeast Asia
don't have that many global companies and in areas where macroeconomic issues
are driving the situation we tend to stay clear. Indonesia is a perfect
example. Its market is depressed, its currency is unstable, and the cost to
hedge (to eliminate currency risk) is high. That said, we are finding some
stocks to nibble at, such as Overseas Union Bank in Singapore, which is
attractively priced, has good long-term growth prospects, and is
headquartered in a country where it costs nothing to hedge an investment.
/s/ David R. Mannheim
David R. Mannheim
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGER'S PROFILE
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DAVID R. MANNHEIM IS A SENIOR VICE PRESIDENT OF MFS(R) INVESTMENT
MANAGEMENT(SM) AND PORTFOLIO MANAGER OF MFS(R) WORLD EQUITY FUND, MFS(R)
INTERNATIONAL GROWTH FUND, MFS(R) WORLD ASSET ALLOCATION(SM) FUND, MFS(R)
MERIDIAN(SM) GLOBAL EQUITY FUND, MFS(R) WORLD GROWTH FUND, AND THE
INTERNATIONAL SERIES, THE WORLD GROWTH SERIES, AND THE WORLD ASSET
ALLOCATION(SM) SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS.
MR. MANNHEIM JOINED MFS IN 1988 AND WAS NAMED INVESTMENT OFFICER IN
1990, ASSISTANT VICE PRESIDENT IN 1991, VICE PRESIDENT AND PORTFOLIO
MANAGER OF MFS WORLD EQUITY FUND IN 1992, AND SENIOR VICE PRESIDENT IN
1997.
HE IS A GRADUATE OF AMHERST COLLEGE AND THE MASSACHUSETTS INSTITUTE OF
TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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NOTE: THE FUND CHANGED ITS NAME FROM MFS/FOREIGN & COLONIAL INTERNATIONAL
GROWTH FUND TO MFS INTERNATIONAL GROWTH FUND AS OF SEPTEMBER 8, 1997.
OBJECTIVE: SEEKS TO PROVIDE CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN NON-U.S. STOCKS GROWING AT RATES EXPECTED
TO BE WELL ABOVE THE GROWTH RATE OF THE OVERALL
U.S. ECONOMY.
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 24, 1995
CLASS INCEPTION: CLASS A OCTOBER 24, 1995
CLASS B OCTOBER 24, 1995
CLASS C JULY 1, 1996
CLASS I JANUARY 2, 1997
SIZE: $116.2 MILLION NET ASSETS AS OF MAY 31, 1998
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PERFORMANCE SUMMARY
The information below and on the following page illustrates the historical
performance of MFS International Growth Fund -- Class A shares in comparison
to various market indicators. Class A share performance results reflect the
deduction of the 4.75% maximum sales charge; benchmark comparisons are
unmanaged and do not reflect any fees or expenses. The performance of other
share classes will be greater than or less than the line shown, based on
differences in charges and fees paid by shareholders investing in different
classes. It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from November 1, 1995, through May 31, 1998)
MFS
INTERNATIONAL LIPPER CONSUMER
GROWTH FUND INTERNATIONAL MSCI PRICE INDEX
CLASS A FUND INDEX EAFE INDEX -- U.S.
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11/95 $ 9,520 $10,100 $10,000 $10,000
5/96 10,610 11,200 11,130 10,180
5/97 10,840 12,940 12,010 10,420
5/98 11,606 14,907 13,376 10,592
AVERAGE ANNUAL TOTAL RETURNS THROUGH MAY 31, 1998
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
1 Year 10 Years/Life*
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Average Annual Total Return +7.08% +7.89%
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SEC Results +2.00% +5.89%
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CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
1 Year 10 Years/Life*
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Average Annual Total Return +6.59% +7.33%
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SEC Results +2.59% +6.30%
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CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
1 Year 10 Years/Life*
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Average Annual Total Return +6.62% +7.48%
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SEC Results +5.62% +7.48%
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CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
1 Year 10 Years/Life*
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Average Annual Total Return +7.65% +8.24%
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COMPARATIVE INDICES
1 Year 10 Years/Life*
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Lipper International Fund Index+ +15.24% +16.72%
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MSCI EAFE Index++ +11.44% +10.69%
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Consumer Price Index**++ + 1.70% + 2.37%
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* For the period from the commencement of the Fund's investment operations,
October 24, 1995, through May 31, 1998.
+ Source: Lipper Analytical Services, Inc.
++ Source: CDA/Wiesenberger.
** The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
C results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of C. Operating expenses of C
are not significantly different than those of B. The B performance included in
the C SEC performance has been adjusted to reflect the CDSC generally
applicable to C rather than the CDSC generally applicable to B.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of I. Because operating expenses
of B are greater than those of I, I performance generally would have been
higher than B performance. The B performance included in the I performance has
been adjusted to reflect the fact that I have no CDSC.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and
capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility.
PORTFOLIO CONCENTRATION AS OF MAY 31, 1998
FIVE LARGEST STOCK SECTORS
FINANCIAL SERVICES 21.4%
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CONSUMER STAPLES 11.2%
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TECHNOLOGY 9.9%
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BASIC MATERIALS 9.7%
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UTILITIES & COMMUNICATIONS 9.6%
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For a more complete breakdown, refer to the Portfolio of Investments.
TOP 10 STOCK HOLDINGS
AKZO NOBEL N.V. 3.5% ANGLO IRISH BANK CORP. PLC 2.3%
Diversified Dutch chemical company Irish bank
CANADIAN NATIONAL RAILWAY CO. 3.3% SONY CORP. 2.3%
Railway/transportation company Japanese electronics and
entertainment company
HENKEL KGAA 3.1%
German consumer products company ING GROEP N.V. 2.1%
Dutch financial services company
BENCKISER N.V. 2.5%
Dutch cleaning products manufacturer LUCAS VARITY PLC 2.1%
British automotive component maker
BRITISH AEROSPACE 2.4%
British defense and aircraft company BANCO TOTTA E ACORES 1.9%
Portuguese bank
<PAGE>
PORTFOLIO OF INVESTMENTS -- May 31, 1998
Stocks - 98.2%
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ISSUER SHARES VALUE
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Argentina - 0.5%
Banco de Galicia y Buenos Aires S.A. de C.V., ADR
(Banks and Credit Cos.) 2,483 $ 50,901
Perez Companc S.A. (Oils) 16,859 92,930
Siderca S.A. (Steel) 24,500 49,510
Telecom S.A., ADR (Telecommunications) 900 27,900
Telefonica de Argentina, ADR (Utilities - Telephone) 3,850 125,366
YPF Sociedad Anonima, ADR (Oils) 6,900 214,331
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$ 560,938
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Australia - 2.8%
QBE Insurance Group Ltd. (Insurance) 500,131 $ 2,049,378
Seven Network Ltd. (Entertainment) 342,000 1,166,056
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$ 3,215,434
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Brazil - 2.7%
Centrais Eletricas Brasileiras S.A., ADR
(Utilities - Electric) 11,765 $ 193,299
Companhia Electric est Rio de Janeiro
(Utilities - Electric)* 1,170,400 712,293
Companhia Energetica de Sao Paulo S.A., ADR
(Utilities - Electric) 1,774 57,690
Companhia Energetica de Sao Paulo, Preferred
(Utilities - Electric) 740,000 24,126
Companhia Paranaense de Energia, ADR
(Utilities - Electric) 71,000 705,562
Companhia Paranaense de Energia, Preferred, "B"
(Utilities - Electric)* 2,588 26,325
Companhia Vale do Rio Doce, Preferred (Mining) 4,200 87,272
Itausa Investimentos Itau S.A., Preferred
(Conglomerate) 43,100 31,851
Petroleo Brasileiro S.A., Preferred (Oils) 809,000 156,145
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 9,000 959,625
Telecomunicacoes do Rio de Janero, S.A
(Telecommunications) 703,000 58,675
Telerj Celular S.A., Preferred "B"
(Telecommunications)* 703,000 51,341
Unibanco (Banks and Credit Cos.) 606,000 38,198
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$ 3,102,402
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Canada - 3.5%
Canadian National Railway Co. (Railroads) 64,800 $ 3,831,300
Legacy Hotel Real Estate Investment Trust
(Real Estate Investment Trust)*## 38,800 239,784
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$ 4,071,084
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Chile - 1.3%
Chilectra S.A., ADR (Utilities - Electric) 62,000 $ 1,509,824
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China - 0.2%
Huaneng Power International, Inc., ADR
(Utilities - Electric)* 10,200 $ 177,225
Qingling Motors Co. (Automotive) 154,000 60,618
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$ 237,843
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Egypt - 0.7%
Ahram Beverage Co., GDR (Beverages)*## 4,353 $ 135,378
Commercial International Bank of Eqypt, GDR
(Banks and Credit Cos.)## 12,611 176,554
Egyptian International Pharmaceutical Industries Co.
(Pharmaceuticals) 1,800 121,675
Madinet Nasar City (Housing) 2,050 114,927
Suez Cement Co., GDR (Construction)## 12,898 250,221
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$ 798,755
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Finland - 3.5%
Huhtamaki Oy Group (Conglomerate) 15,500 $ 854,364
Pohjola Insurance Group (Insurance) 28,000 1,533,045
Sponda Oyj (Real Estate)* 3,200 20,647
TT Tieto Oy (Computer Software - Systems) 7,500 1,645,313
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$ 4,053,369
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France - 5.4%
Television Francaise (Broadcasting) 13,500 $ 1,903,918
Thomson CSF (Electronics) 7,900 319,459
TOTAL S.A., "B" (Oils) 15,700 1,949,219
Union des Assurances Federales S.A. (Insurance) 14,300 2,066,923
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$ 6,239,519
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Germany - 6.5%
Adidas-Salomon AG (Apparel and Textiles) 7,300 $ 1,288,091
Henkel KGaA (Consumer Goods & Services) 40,000 3,585,032
SKW Trostberg AG (Consumer Goods and Services) 23,500 954,375
Wella AG (Cosmetics) 1,850 1,776,216
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$ 7,603,714
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Greece - 0.8%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 33,000 $ 968,361
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Hong Kong - 1.2%
Cheung Kong Holdings Ltd. (Real Estate) 34,000 $ 183,855
China Resources Enterprises (Real Estate Investment
Trust) 46,000 53,727
Citic Pacific Ltd. (Conglomerate) 44,000 107,040
Hong Kong Telecommunications (Telecommunications)* 91,800 165,272
Li & Fung Ltd. (Wholesale) 52,000 80,532
New World Development Co. (Real Estate) 44,000 103,917
Peregrine Investment Holdings (Finance)* 315,000 --
Wharf Holdings Ltd. (Real Estate) 62,000 79,215
Wing Hang Bank Ltd. (Banks and Credit Cos.) 336,000 633,103
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$ 1,406,661
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Hungary - 0.4%
Magyar Olaj Es Gazipari KT, GDR (Gas)## 6,000 $ 136,500
Magyar Tavkozlesi Rt. (Telecommunications)* 8,350 233,800
Otp Bank (Banks and Credit Cos.) 1,000 42,362
Richter Gedeon Rt. (Pharmaceuticals)* 944 79,276
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$ 491,938
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India - 1.2%
Bajaj Auto Ltd. (Automotive) 125 $ 1,856
EIH Ltd. (Restaurants and Lodging) 8,600 65,433
Formula System (1985) Ltd. (Computer Software -
Systems)* 2,288 96,508
Hindustan Lever Ltd. (Consumer Goods and Services) 5,750 220,717
Hindustan Petroleum Corp. Ltd. (Oil and Gas) 11,200 99,046
Industrial Development Bank of India Ltd.
(Banks and Credit Cos.) 71,400 129,724
ITC Ltd. (Conglomerate) 6,100 101,128
Larsen and Toubro (Conglomerate) 6,500 40,049
Larsen and Toubro, GDR (Conglomerate) 1,700 10,500
Mahanagar Telephone Nigam Ltd. (Telecommunications) 31,000 170,911
Reliance Industries Ltd. (Conglomerate) 22,700 90,581
Reliance Industries Ltd., GDR (Conglomerate) 4,300 17,304
State Bank of India (Banks and Credit Cos.) 39,550 230,629
Tata Engineering and Locomotive Co. Ltd. (Automotive) 340 1,996
Videsh Sanchar Nigam Ltd., GDR (Telecommunications)## 10,365 119,197
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$ 1,395,579
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Ireland - 2.2%
Anglo Irish Bank Corp. PLC (Banks and Credit Cos.)* 957,741 $ 2,627,024
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Israel - 0.5%
Bank Hapoalim (Banks and Credit Cos.) 54,825 $ 168,635
ECI Telecom Ltd. (Telecommunications) 4,151 133,351
ICL Israel Chemical (Chemicals) 56,298 71,394
Makhteshim-Agan Industries Ltd. (Conglomerate)* 39,275 145,116
Super Sol Ltd. (Supermarkets) 14,950 52,618
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$ 571,114
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Italy - 2.1%
Banca Carige S.p.A. (Banks and Credit Cos.)* 98,000 $ 946,699
ERG S.p.A. (Oils)* 162,000 690,419
Telecom Italia Mobile S.p.A. (Telecommunications) 137,180 810,311
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$ 2,447,429
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Japan - 12.7%
Canon, Inc. (Office Equipment) 73,000 $ 1,737,468
Eisai Co. Ltd. (Pharmaceuticals) 56,000 742,359
Kinki Coca-Cola Bottling Co. (Beverages) 35,000 398,846
Kirin Beverage Corp. (Beverages) 73,000 1,368,915
Nitto Denko Corp. (Industrial Goods and Services) 39,000 607,573
NTT Data Corp. (Telecommunications) 29 1,162,928
Osaka Sanso Kogyo Ltd. (Chemicals) 180,000 358,312
Rohm Co. (Electronics) 9,000 934,728
Sankyo Co. Ltd. (Pharmaceuticals) 28,000 674,504
Sony Corp. (Electronics) 30,600 2,582,185
Takeda Chemical Industries (Pharmaceuticals) 46,000 1,187,739
TDK Corp. (Special Products and Services) 12,000 941,652
Tokyo Broadcasting System, Inc. (Broadcasting) 66,000 820,180
Ushio, Inc. (Electronics) 156,000 1,305,157
------------
$ 14,822,546
- -------------------------------------------------------------------------------
Malaysia - 1.7%
Malaysian Bank Berhad (Banks and Credit Cos.)* 24,000 $ 33,925
Malaysian Bank Bonus Shares (Banks and Credit Cos.) 24,000 33,925
New Straits Times Press Berhad (Printing and
Publishing) 357,000 252,317
Perusahaan Otomobil Berhad (Automotive) 47,000 46,997
Petronas Gas Berhad (Oil and Gas)## 56,000 127,533
Resorts World Berhad (Entertainment) 40,000 62,300
Tanjong PLC (Entertainment) 733,000 1,218,405
Telekom Malaysia Berhad (Telecommunications) 50,000 115,177
Tenaga Nasional Berhad (Utilities - Electric) 39,000 64,826
------------
$ 1,955,405
- -------------------------------------------------------------------------------
Mexico - 1.1%
Apasco S.A. (Building Materials) 500 $ 3,057
Cemex S.A. (Construction)* 16,500 68,508
Cifra S.A. de C.V. (Retail)* 80,227 116,677
Corporacion GEO, S.A. de C.V., "B" (Real Estate)* 15,000 85,763
Desc S.A. de C.V., "B" (Conglomerate) 9,800 55,031
Fomento Economico Mexicano S.A. (Beverages)* 3,081 101,673
Gruma S.A. (Food Products) 15,927 30,896
Grupo Carso, "A1" (Conglomerate) 12,491 64,262
Grupo Financiero Banamex, "B" (Finance)* 23,000 57,402
Grupo Modelo S.A. de C.V. (Brewery) 5,226 48,733
Grupo Television S.A. de C.V., GDR (Entertainment)* 3,775 147,461
Hylsamex S.A. de C.V., "B" (Steel) 13,800 48,688
Kimberly-Clark de Mexico S.A. de C.V. (Forest and
Paper Products) 31,643 132,100
Organiz Soriana, "B" (Real Estate) 23,400 75,788
Telefonos de Mexico S.A. (Utilities - Telephone) 95,295 228,643
------------
$ 1,264,682
- -------------------------------------------------------------------------------
Morocco - 0.6%
Banque Marocaine de Commerce (Banks and Credit Cos.)# 5,300 $ 125,610
Brasseries Maroc (Consumer Goods and Services) 260 91,106
Ona Omnium Nord Africain S.A (Conglomerate) 1,750 200,015
Societe Nationale d'Investissement (Conglomerate)* 785 73,622
Wafabank (Banks and Credit Cos.) 1,700 199,557
------------
$ 689,910
- -------------------------------------------------------------------------------
Netherlands - 10.8%
Akzo Nobel N.V. (Chemicals) 19,300 $ 4,030,545
Benckiser N.V. (Consumer Goods and Services)* 50,500 2,866,209
IHC Caland N.V. (Marine Equipment)* 13,300 745,609
ING Groep N.V. (Financial Services)* 35,500 2,436,534
Koninklijke Ahrend Groep N.V. (Consumer Goods and
Services)* 35,000 1,123,702
Royal Dutch Petroleum Co. (Oils) 23,400 1,332,757
------------
$ 12,535,356
- -------------------------------------------------------------------------------
Peru - 1.4%
Alicorp S.A. (Consumer Goods and Services)* 157,791 $ 41,307
Compania de Minas Buenaventura S.A. (Mining) 22,057 139,810
CPT Telefonica del Peru S.A., "B" (Utilities -
Telephone) 155,580 333,967
Credicorp Ltd. Holdings Co. (Banks and Credit Cos.) 11,250 178,594
Luz del Sur S.A. (Utilities - Electric) 28,590 25,646
Telefonica del Peru S.A., ADR (Telecommunications) 42,000 908,250
------------
$ 1,627,574
- -------------------------------------------------------------------------------
Poland - 0.5%
Bank Handlowy w Warszawie (Banks and Credit Cos.)*+ 3,570 $ 61,446
Bank Handlowy w Warszawie, GDR (Banks and Credit
Cos.)*## 4,330 74,043
Bydgoska Fabryka Kabli S.A. (Electrical Equipment) 12,426 83,054
Elektrim Spolka Akcyjna S.A. (Electrical Equipment) 8,890 117,054
Exbud S.A. (Construction)* 7,400 78,543
KGHM Polska Miedz S.A., GDR (Metals and Minerals)*## 8,700 66,990
Polifarb Cieszyn (Consumer Goods and Services)* 19,000 57,229
------------
$ 538,359
- -------------------------------------------------------------------------------
Portugal - 4.0%
Banco Espirito Santo e Comercial de Lisboa S.A
(Banks and Credit Cos.)* 22,500 $ 792,183
Banco Totta E Acores (Banks and Credit Cos.) 60,300 2,232,355
Cimentos de Portugal S.A. (Building Materials) 953 36,507
Cseke Radiokomunikace S.A. (Entertainment)*## 5,300 99,375
Mota and Companhia S.A. (Construction) 939 16,456
Portugal Telecom S.A. (Utilities - Telephone) 26,554 1,396,048
Sonae Investimentos-Sociedade Gestora de
Participacoes Sociais, S.A. (Conglomerate) 631 36,284
------------
$ 4,609,208
- -------------------------------------------------------------------------------
Russia - 0.5%
Lukoil Oil Co., ADR (Oils) 9,650 $ 395,650
Rostelecom, ADR (Telecommunications)* 13,333 204,995
------------
$ 600,645
- -------------------------------------------------------------------------------
Singapore - 1.3%
Hong Leong Finance Ltd. (Finance)+ 320,000 $ 346,101
Overseas Union Bank (Finance) 368,000 1,121,482
------------
$ 1,467,583
- -------------------------------------------------------------------------------
South Africa - 2.0%
Anglo American Corp. of South Africa Ltd. (Mining) 9,525 $ 456,830
DeBeers Centenary AG (Diamonds - Precious Stones) 5,461 113,886
Dimension Data Holdings Ltd. (Financial Institutions) 36,616 245,292
Imperial Holdings Ltd. (Conglomerate)* 10,135 124,966
JD Group Ltd. (Stores)* 8,669 75,749
Liberty Life Association of Africa Ltd. (Insurance) 9,514 262,697
Nedcor Ltd. (Banks and Credit Cos.)* 14,787 396,234
Real Africa Holdings Ltd. (Conglomerate) 32,665 147,785
Sasol Ltd. (Oils) 11,630 92,588
South African Breweries Ltd. (Brewery) 15,923 449,554
------------
$ 2,365,581
- -------------------------------------------------------------------------------
South Korea - 0.4%
Pohang Iron & Steel Co. (Construction) 5,370 $ 218,131
Samsung Display Devices Co. (Electronics) 1,900 67,432
Samsung Electronic (Electronics)* 3,680 140,028
SK Telecommunications (Telecommunications) 50 22,671
------------
$ 448,262
- -------------------------------------------------------------------------------
Spain - 2.3%
Acerinox S.A. (Iron and Steel) 7,700 $ 1,146,408
Repsol S.A. (Oils) 28,000 1,556,583
------------
$ 2,702,991
- -------------------------------------------------------------------------------
Sweden - 4.9%
Astra AB (Pharmaceuticals) 86,000 $ 1,672,832
Mandamus AB (Real Estate)* 62,500 66,964
Skandia Forsakring AB (Insurance) 53,000 774,043
Sparbanken Sverige AB, "A" (Banks and Credit Cos.) 62,500 1,877,391
Volvo AB (Automobiles) 42,200 1,348,355
------------
$ 5,739,585
- -------------------------------------------------------------------------------
Switzerland - 4.1%
Ciba Specialty AG (Chemicals) 15,180 $ 2,160,963
Clariant AG (Chemicals)* 1,050 1,370,058
Novartis AG (Pharmaceuticals) 705 1,192,916
------------
$ 4,723,937
- -------------------------------------------------------------------------------
Taiwan - 0.3%
Taipei Fund (Finance)* 42 $ 378,000
- -------------------------------------------------------------------------------
Thailand - 0.1%
Thai Farmers Bank (Banks and Credit Cos.) 90,000 $ 137,209
- -------------------------------------------------------------------------------
Turkey - 0.5%
Akbank (Banks and Credit Cos.)* 1,651,680 $ 48,622
Akbank Bonus Shares (Banks and Credit Cos.)* 2,477,520 72,933
Arcelik A.S. (Consumer Goods and Services) 1,023,720 42,627
Ardem Pisirici ve Isitici Cihazlar Sanayii A.S
(Conglomerate) 486,537 41,931
Cimsa Cimento Sanayi ve Ticaret A.S. (Construction
Services) 1,167,095 67,810
Haci Omer Sabanci Holdings A.S., ADR
(Conglomerate)*## 4,013 58,188
Trakya Cam Sanayii (Housewares) 1,382,160 50,325
Vestel Electronic (Electronics) 554,354 75,154
Yapi ve Kredi Bankasi (Banks and Credit Cos.)* 6,884,348 133,330
------------
$ 590,920
- -------------------------------------------------------------------------------
United Kingdom - 12.9%
ASDA Group PLC (Supermarkets) 536,300 $ 1,593,624
Avis Europe PLC (Auto Rental)## 294,000 1,363,240
British Aerospace PLC (Aerospace and Defense)* 310,000 2,748,326
British Petroleum PLC (Oils)* 144,976 2,127,955
Carlton Communicatons PLC (Broadcasting) 89,640 720,800
Diageo PLC (Food and Beverage Products) 74,080 837,582
HSBC Holdings PLC (Financial Services)* 5,535 134,294
Lloyds TSB Group PLC (Banks and Credit Cos.)* 97,544 1,416,619
Lucas Varity PLC (Automotive) 539,000 2,376,070
Tecnomatix Technologies Ltd. (Computer Software)* 3,386 76,820
Tomkins PLC (Conglomerate) 284,700 1,643,174
------------
$ 15,038,504
- -------------------------------------------------------------------------------
Venezuela - 0.6%
Compania Anonima Nacional Telefonos de Venezuela, ADR
(Telecommunications) 22,300 $ 687,119
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $102,690,711) $114,224,364
- -------------------------------------------------------------------------------
Rights - 0.3%
- -------------------------------------------------------------------------------
Portugal
Banco Espirito Santo e Comercial de Lisboa S.A
(Banks and Credit Cos.)* 22,500 $ 22,303
Banco Espirito Santo e Comercial de Lisboa S.A. Bonus
Rights (Banks and Credit Cos.)* 22,500 155,873
- -------------------------------------------------------------------------------
South Korea
Samsung Electronic (Electronics)* 234 --
- -------------------------------------------------------------------------------
Sweden
Investor AB (Financial Services) 127,700 171,078
- -------------------------------------------------------------------------------
Total Rights (Identified Cost, $272,218) $ 349,254
- -------------------------------------------------------------------------------
Warrants
- -------------------------------------------------------------------------------
Hong Kong
Hong Kong and China Gas (Gas)* 1,800 $ --
Hysan Development (Real Estate)* 1,600 39
- -------------------------------------------------------------------------------
Total Warrants (Identified Cost, $0) $ 39
- -------------------------------------------------------------------------------
Short-Term Obligations - 1.9%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 6/01/98, at
Amortized Cost $ 2,165 $ 2,165,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $105,124,749) $116,738,657
Other Assets, Less Liabilities - (0.4)% (490,225)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $116,248,432
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
MAY 31, 1998
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $105,124,749) $116,738,657
Cash 52,564
Foreign currency, at value (identified cost, $277,051) 275,389
Receivable for Fund shares sold 567,576
Receivable for investments sold 1,603,100
Interest and dividends receivable 365,184
Deferred organization expenses 13,475
------------
Total assets $119,615,945
------------
Liabilities:
Payable for Fund shares reacquired $ 2,179,469
Payable for investments purchased 816,237
Net payable for forward foreign currency exchange
contracts subject to master netting agreements 178,279
Payable to affiliates -
Management fee 9,311
Shareholder servicing agent fee 1,074
Distribution fee 62,933
Accrued expenses and other liabilities 120,210
------------
Total liabilities $ 3,367,513
------------
Net assets $116,248,432
============
Net assets consist of:
Paid-in capital $102,557,658
Unrealized appreciation on investments of assets and
liabilities in foreign currencies 11,424,728
Accumulated undistributed net realized gain on
investments and foreign currency transactions 2,149,825
Accumulated net investment income 116,221
------------
Total $116,248,432
============
Shares of beneficial interest outstanding 6,553,317
=========
Class A shares:
Net asset value per share
(net assets of $53,658,649 / 3,017,836 shares of
beneficial interest outstanding) $17.78
======
Offering price per share (100 / 95.25 of net asset
value per share) $18.67
======
Class B shares:
Net asset value and offering price per share
(net assets of $59,054,732 / 3,334,903 shares of
beneficial interest outstanding) $17.71
======
Class C shares:
Net asset value and offering price per share
(net assets of $3,380,394 / 191,894 shares of
beneficial interest outstanding) $17.62
======
Class I shares:
Net asset value, offering price and redemption price per share
(net assets of $154,657 / 8,684 shares of beneficial
interest outstanding) $17.81
======
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
Statement of Operations
- -------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1998
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest $ 284,526
Dividends 2,326,883
Foreign taxes withheld (259,003)
-----------
Total investment income $ 2,352,406
-----------
Expenses -
Management fee $ 1,187,777
Trustees' compensation 22,376
Shareholder servicing agent fee 149,851
Distribution and service fee (Class A) 280,324
Distribution and service fee (Class B) 625,562
Distribution and service fee (Class C) 31,029
Administration expense 17,268
Custodian fee 122,744
Interest expense 7,787
Printing 84,395
Postage 29,961
Auditing fees 59,119
Legal fees 3,574
Amortization of organization expenses 5,197
Miscellaneous 151,865
-----------
Total expenses $ 2,778,829
Fees paid indirectly (9,785)
-----------
Net expenses $ 2,769,044
-----------
Net investment loss $ (416,638)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 8,369,050
Foreign currency transactions 1,635,847
-----------
Net realized gain on investments and foreign currency
transactions $10,004,897
-----------
Change in unrealized appreciation (depreciation) -
Investments $ (970,112)
Translation of assets and liabilities in foreign currencies (1,280,368)
-----------
Net unrealized loss on investments and foreign currency
translation $(2,250,480)
-----------
Net realized and unrealized gain on investments and
foreign currency $ 7,754,417
-----------
Increase in net assets from operations $ 7,337,779
===========
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (416,638) $ (169,937)
Net realized gain (loss) on investments and foreign
currency transactions 10,004,897 (4,938,715)
Net unrealized gain (loss) on invesments and foreign
currency translation (2,250,480) 8,223,128
------------ ------------
Increase in net assets from operations $ 7,337,779 $ 3,114,476
------------ ------------
Distributions declared to shareholders -
In excess of net investment income (Class A) $ (716,456) $ --
In excess of net investment income (Class B) (488,346) --
In excess of net investment income (Class C) (29,115) --
In excess of net investment income (Class I) (1,598) --
From net realized gain on investments and foreign
currency transactions (Class A) (220,153) (469,661)
From net realized gain on investments and foreign
currency transactions (Class B) (246,213) (305,586)
From net realized gain on investments and foreign
currency transactions (Class C) (12,170) (14,849)
From net realized gain on investments and foreign
currency transactions (Class I) (353) --
------------ ------------
Total distributions declared to shareholders $ (1,714,404) $ (790,096)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions $(11,624,844) $ 35,178,737
------------ ------------
Total increase (decrease) in net assets $ (6,001,469) $ 37,503,117
Net assets:
At beginning of period 122,249,901 84,746,784
------------ ------------
At end of period (including accumulated net investment
income of $116,221 and accumulated net investment
loss of $827,520, respectively) $116,248,432 $122,249,901
============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1998 1997 1996*
- ---------------------------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.90 $16.71 $15.00
------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $(0.01) $ 0.02 $ 0.03
Net realized and unrealized gain on investments and foreign
currency transactions 1.18 0.32 1.69
------ ------ ------
Total from investment operations $ 1.17 $ 0.34 $ 1.72
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.22) $ -- $(0.01)
From net realized gain on investments and foreign currency
transactions (0.07) (0.15) --
------ ------ ------
Total distributions declared to shareholders $(0.29) $(0.15) $(0.01)
------ ------ ------
Net asset value - end of period $17.78 $16.90 $16.71
====== ====== ======
Total return(+) 7.08% 2.13% 11.43%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.01% 1.99% 2.24%+
Net investment income (loss) (0.08)% 0.13% 0.24%+
Portfolio turnover 225% 53% 11%
Net assets at end of period (000 omitted) $53,659 $56,810 $41,483
* For the period from the commencement of the Fund's investment operations, October 24, 1995, through
May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1998 1997 1996*
- ---------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.82 $16.66 $15.00
------ ------ ------
Income (loss) from investment operations# -
Net investment loss $(0.10) $(0.07) $(0.03)
Net realized and unrealized gain on investments and foreign
currency transactions 1.19 0.31 1.69
------ ------ ------
Total from investment operations $ 1.09 $ 0.24 $ 1.66
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.13) $ -- $ --
From net realized gain on investments and foreign currency
transactions (0.07) (0.08) --
------ ------ ------
Total distributions declared to shareholders $(0.20) $(0.08) $
------ ------ ------
Net asset value - end of period $17.71 $16.82 $16.66
====== ====== ======
Total return 6.59% 1.56% 11.07%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.51% 2.53% 2.85%+
Net investment loss (0.57)% (0.42)% (0.31)%+
Portfolio turnover 225% 53% 11%
Net assets at end of period (000 omitted) $59,055 $62,958 $43,264
* For the period from the commencement of the Fund's investment operations, October 24, 1995, through
May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
MAY 31, 1998 MAY 31, 1997**
- --------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.76 $16.83
------ ------
Income (loss) from investment operations# -
Net investment loss $(0.10) $(0.04)
Net realized and unrealized gain on investments and foreign
currency transactions 1.19 0.15
------ ------
Total from investment operations $ 1.09 $ 0.11
------ ------
Less distributions declared to shareholders -
From net investment income $(0.16) $ --
From net realized gain on investments and foreign currency
transactions (0.07) (0.18)
------ ------
Total distributions declared to shareholders $(0.23) $(0.18)
------ ------
Net asset value - end of period $17.62 $16.76
====== ======
Total return 6.62% 0.79%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.52% 2.50%+
Net investment loss (0.56)% (0.27)%+
Portfolio turnover 225% 53%
Net assets at end of period (000 omitted) $3,380 $2,397
** For the period from the inception of Class C, July 1, 1996, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
MAY 31, 1998 MAY 31, 1997***
- --------------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.94 $15.90
------ ------
Income from investment operations# -
Net investment income $ 0.10 $ 0.11
Net realized and unrealized gain on investments and foreign
currency transactions 1.15 0.93
------ ------
Total from investment operations $ 1.25 $ 1.04
------ ------
Less distributions declared to shareholders -
From net investment income $(0.31) $ --
From net realized gain on investments and foreign currency
transactions (0.07) --
------ ------
Total distributions declared to shareholders $(0.38) $ --
------ ------
Net asset value - end of period $17.81 $16.94
====== ======
Total return 7.65% 6.54%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.52% 1.52%+
Net investment income 0.59% 1.40%+
Portfolio turnover 225% 53%
Net assets at end of period (000 omitted) $155 $84
*** For the period from the inception of Class I, January 2, 1997, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS International Growth Fund (the Fund) is 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 reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. Non-U.S. dollar
denominated short-term obligations are valued at amortized cost as calculated
in the foreign currency and translated into U.S. dollars at the closing daily
exchange rate. 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.
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 Fund in connection with
its 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 Fund
operations.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund will enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Fund may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. The Fund may also use contracts in a manner intended to
protect foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
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 is amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividends received in cash are recorded on the ex-dividend date. Dividend and
interest payments received in additional securities are recorded on the ex-
dividend or ex-interest date in an amount equal to the value of the security
on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files 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 Fund's 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. 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 net realized gains.
During the year ended May 31, 1998, $2,595,894 was reclassified from
accumulated net realized gain on investments to accumulated undistributed net
investment income due to differences between book and tax accounting for
passive foreign investment companies and currency transactions. This change
had no effect on the net assets or net asset value per share.
Capital gains taxes have been provided on unrealized and realized gains from
securities transactions in countries where such a capital gains tax is
applicable. Realized and unrealized gain is reported net of any capital gains
tax in the Statement of Operations.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on 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; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of .975%
of average daily net assets up to $500 million in net assets, after which the
rate is reduced to .925%. The advisory agreement permits 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.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has 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
$17,064 for the year ended May 31, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$36,124 for the year ended May 31, 1998, as its portion of the sales charge on
sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.25% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $25,640
for the year ended May 31, 1998. Fees incurred under the distribution plan
during the year ended May 31, 1998, were 0.50% of average daily net assets
attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $19,469 and $186 for
Class B and Class C shares, respectively, for the year ended May 31, 1998.
Fees incurred under the distribution plan during the year ended May 31, 1998,
were 1.00% of average daily net assets attributable to both Class B and Class
C shares on an annualized basis.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class C shares in the event of a shareholder redemption within
twelve months of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended May 31, 1998,
were $1,732, $266,113, and $2,154 for Class A, Class B, and Class C shares,
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 Fund's average daily net assets at an effective annual
rate of 0.1125%. Prior to January 1, 1998, the fee was calculated as a
percentage of the average daily net assets at an effective annual rate of up
to 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$259,150,878 and $272,456,549, 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:
Aggregate cost $105,433,465
------------
Gross unrealized appreciation $ 19,747,826
Gross unrealized depreciation (8,442,634)
------------
Net unrealized appreciation (depreciation) $ 11,305,192
============
(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
YEAR ENDED MAY 31, 1998 YEAR ENDED MAY 31, 1997
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,732,480 $ 64,834,019 3,428,135 $ 55,431,605
Shares issued to shareholders in
reinvestment of distributions 53,340 858,950 36,196 576,007
Shares transferred to Class I -- -- (1,308) (20,795)
Shares reacquired (4,129,138) (71,589,658) (2,584,373) (41,727,368)
---------- ------------ ---------- ------------
Net increase (decrease) (343,318) $ (5,896,689) 878,650 $ 14,259,449
========== ============ ========== ============
<CAPTION>
Class B Shares
YEAR ENDED MAY 31, 1998 YEAR ENDED MAY 31, 1997
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,351,436 $ 58,282,264 4,424,042 $ 71,166,884
Shares issued to shareholders in
reinvestment of distributions 38,717 607,265 15,231 240,644
Shares reacquired (3,797,245) (65,584,251) (3,294,305) (52,883,159)
---------- ------------ ---------- ------------
Net increase (decrease) (407,092) $ (6,694,722) 1,144,968 $ 18,524,369
========== ============ ========== ============
<CAPTION>
Class C Shares
YEAR ENDED MAY 31, 1998 PERIOD ENDED MAY 31, 1997*
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 302,639 $ 5,329,313 174,418 $ 2,818,920
Shares issued to shareholders in
reinvestment of distributions 2,438 38,030 852 13,410
Shares reacquired (256,177) (4,467,910) (32,276) (516,669)
---------- ------------ ---------- ------------
Net increase 48,900 $ 899,433 142,994 $ 2,315,661
========== ============ ========== ============
<CAPTION>
Class I Shares
YEAR ENDED MAY 31, 1998 PERIOD ENDED MAY 31, 1997**
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,787 $ 68,751 3,673 $ 58,463
Shares transferred from Class A -- -- 1,308 20,795
Shares issued to shareholders in
reinvestment of distributions 124 1,949 -- --
Shares reacquired (208) (3,566) -- --
---------- ------------ ---------- ------------
Net increase 3,703 $ 67,134 4,981 $ 79,258
========== ============ ========== ============
*For the period from the inception of Class C, July 1, 1996, through May 31, 1997.
**For the period from the inception of Class I, January 2, 1997, through May 31, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. 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 fee allocated to
the Fund for the year ended May 31, 1998, was $667.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the Fund has in particular classes of financial instruments and does 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.
Forward foreign currency purchases under master netting agreements amounted to
a net payable of $161,019 with Deutsche Bank and $17,260 with Merrill Lynch at
May 31, 1998.
At May 31, 1998, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At May 31, 1998, the
Fund owned the following restricted securities (constituting 0.4% of net assets)
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 securities be
registered. The value of these securities is determined by valuations furnished
by dealers or by a pricing service, or if not available, are valued at fair
value as determined in good faith by or at the direction of the Trustees.
DESCRIPTION DATE OF ACQUISITION SHARE AMOUNT COST VALUE
- --------------------------------------------------------------------------------
Bank Handlowy w Warszawie 7/03/97 3,570 $ 44,424 $ 61,446
Hong Leong Finance Ltd. 9/11/97 320,000 654,445 346,101
--------
$407,547
========
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust X and Shareholders of MFS International
Growth Fund:
We have audited the accompanying statements of assets and liabilities of MFS
International Growth Fund, including the schedule of portfolio investments, as
of May 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the two years in
the 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 Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with 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 and financial highlights. Our procedures included
confirmation of securities owned as of May 31, 1998, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
International Growth Fund at May 31, 1998, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the two
years in the period then ended and for the period October 24, 1995
(commencement of operations) to May 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
July 7, 1998
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 1999, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR
1998.
THE FUND HAS DESIGNATED $303,789 AS A LONG-TERM CAPITAL GAIN.
FOR THE YEAR ENDED MAY 31, 1998, INCOME FROM FOREIGN SOURCES WAS
$2,330,690, AND FOREIGN TAXES WITHHELD WERE $259,003.
- --------------------------------------------------------------------------------
<PAGE>
MFS(R) International Growth Fund
<TABLE>
<S> <C>
Trustees Custodian
Richard B. Bailey* - Private Investor; State Street Bank and Trust Company
Former Chairman and Director (until 1991),
MFS Investment Management Auditors
Ernst & Young LLP
Peter G. Harwood - Private Investor
Investor Information
J. Atwood Ives - Chairman and Chief Executive For MFS stock and bond market outlooks,
Officer, Eastern Enterprises (diversified call toll free: 1-800-637-4458 anytime from
services company) a touch-tone telephone.
Lawrence T. Perera - Partner, Hemenway For information on MFS mutual funds, call your
& Barnes (attorneys) financial adviser or, for an information kit,
call toll free: 1-800-637-2929 any business
William J. Poorvu - Adjunct Professor, Harvard day from 9 a.m. to 5 p.m. Eastern time (or
University Graduate School of Business leave a message anytime).
Administration
Investor Service
Charles W.Schmidt - Private Investor MFSService Center, Inc.
P.O. Box 2281
Arnold D. Scott* - Senior Executive Boston, MA 02107-9906
Vice President, Director, and Secretary,
MFS Investment Management For general information, call toll free:
1-800-225-2606 any business day from
Jeffrey L. Shames* - Chairman, Chief 8 a.m. to 8 p.m. Eastern time.
Executive Officer, and Director,
MFS Investment Management For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
Elaine R. Smith - Independent Consultant day from 9 a.m. to 5 p.m. Eastern time. (To
use this service, your phone must be equipped
David B. Stone - Chairman and Director, with a Telecommunications Device for the
North American Management Corp. Deaf.)
(investment advisers)
For share prices, account balances, and
Investment Adviser exchanges, call toll free: 1-800-MFS-TALK
Massachusetts Financial Services Company (1-800-637-8255) anytime from a touch-tone
500 Boylston Street telephone.
Boston, MA 02116-3741
World Wide Web
Distributor www.mfs.com
MFS Fund Distributors, Inc.
500 Boylston Street For the fourth year in a row,
Boston, MA 02116-3741 MFS earned a #1 ranking in the
[Dalbar Logo] DALBAR, Inc. Broker/Dealer
Portfolio Manager Survey, Main Office Operations
David R. Mannheim* Service Quality Category. The
firm achieved a 3.42 overall score on a scale of
Treasurer 1 to 4 in the 1997 survey. A total of 111 firms
W. Thomas London* responded, offering input on the quality of
service they received from 29 mutual fund
Assistant Treasurers companies nationwide. The survey contained
Mark E. Bradley* questions about service quality in 11
Ellen Moynihan* categories, including "knowledge of operations
James O. Yost* contact," "keeping you informed," and "ease of
doing business" with the firm.
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
</TABLE>
*Affiliated with the Investment Adviser
<PAGE>
MFS(R) INTERNATIONAL GROWTH FUND -----------------
Bulk Rate
U.S. Postage
Paid
[Logo] M F S(SM) MFS
INVESTMENT MANAGEMENT -----------------
We invented the mutual fund(SM)
500 Boylston Street
Boston, MA 02116-3741
[DALBAR LOGO]
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MIF-2 7/98 25M 86/286/386/886
