<PAGE>
[LOGO] M F S(SM) Semiannual Report
INVESTMENT MANAGEMENT November 30, 1997
MFS(R)/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
[Graphic Omitted]
LEARNING FINANCIAL BASICS THE EASY WAY (see page 27)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Portfolio Managers' Overview .............................................. 2
Portfolio Managers' Profiles .............................................. 4
Fund Facts ................................................................ 5
Performance Summary ....................................................... 5
Portfolio Concentration ................................................... 7
Portfolio of Investments .................................................. 8
Financial Statements ...................................................... 13
Notes to Financial Statements ............................................. 20
The ABCs of Investing ..................................................... 27
The MFS Family of Funds(R) ................................................ 28
Trustees and Officers ..................................................... 29
HIGHLIGHTS
o FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF -7.59%, CLASS B SHARES -7.83%,
CLASS C SHARES -7.78%, AND CLASS I SHARES -7.37%. (SEE PERFORMANCE SUMMARY
FOR MORE INFORMATION.)
o EMERGING MARKETS HAVE EXPERIENCED A ROLLER-COASTER RIDE IN THE PAST SIX
MONTHS FOLLOWING A STRONG START IN 1997, PRIMARILY DUE TO VOLATILITY IN
SOUTHEAST ASIA.
o IN SPITE OF THE TURMOIL IN SOUTHEAST ASIA, THE FUND OUTPERFORMED ITS
BENCHMARK INDICES BY HAVING ABOVE-INDEX WEIGHTINGS IN MOST OF LATIN AMERICA
AND EASTERN EUROPE AND BELOW-INDEX WEIGHTINGS IN SOUTHEAST ASIA AND SOUTH
AFRICA.
o THE FUND'S HIGHER WEIGHTINGS IN BRAZIL, MEXICO, COLOMBIA, RUSSIA, EGYPT, AND
MOROCCO HELPED PERFORMANCE, AS DID ITS LOWER WEIGHTINGS IN SOUTH KOREA,
MALAYSIA, INDONESIA, THAILAND, AND THE PHILIPPINES.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still uncomfortably
high. The rapid pace of growth seen in the first quarter slowed to an annual
rate of 3.3% in the second quarter and 3.5% in the third. We believe economic
momentum will carry well into the first quarter of 1998, as the money supply is
increasing at a rapid rate. Because economic growth continues to be impressive,
markets are likely to continue to focus on the Federal Reserve Board's
willingness to raise interest rates.
The extreme volatility seen in the U.S. equity market in October was, we
believe, the consequence of overvaluations that had been evident for some
months. As a result, the stock market has been vulnerable to some type of
correction and has been impacted in the near term by chaotic market conditions
in emerging markets and in the Pacific Rim. In the face of all this, however,
the equity market continues to exhibit surprising strength, much of it the
result of continued gains in corporate earnings, a trend that could be an
important indicator of the market's future direction. Certainly the situation
throughout Asia bears close scrutiny because it appears to be clearly
deflationary and raises the prospect of trade wars developing throughout the
area. We are not convinced that U.S. markets have escaped totally from October's
volatility. Thus, while the near-term outlook for profits is generally
favorable, we believe equity valuations have risen to a point where a cautious
investment approach seems warranted, with a need for particular attention to be
paid to the effect of Pacific Rim volatility on the earnings of U.S. companies.
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 15, 1997
<PAGE>
PORTFOLIO MANAGERS' OVERVIEW
Dear Shareholders:
For the six months ended November 30, 1997, Class A shares of the Fund provided
a total return of -7.59%, Class B shares -7.83%, Class C shares -7.78%, and
Class I shares -7.37%. These returns assume the reinvestment of distributions
but exclude the effects of any sales charges, and they compare to a -20.84%
return for the Lipper Emerging Markets Funds Index (the Lipper Index) and a
- -22.76% return for the Morgan Stanley Capital International (MSCI) Emerging
Markets Free (EMF) Index. The Lipper mutual fund indices are unmanaged indices
of the largest qualifying mutual funds within their respective investment
objectives, adjusted for the reinvestment of capital gain distributions and
income dividends, while the MSCI EMF Index is a broad, unmanaged,
market-capitalization-weighted index of equities in emerging markets. It is not
possible to invest directly in an index.
Following a strong start in 1997, emerging markets have experienced a roller-
coaster ride in the past six months, primarily due to volatility in Southeast
Asia. The Fund has outperformed the MSCI EMF Index by having above-index
weightings in most of Latin America and Eastern Europe and below-index
weightings in Southeast Asia and South Africa. The Fund has outperformed the
Lipper Index primarily due to the Fund's higher weightings in Brazil, Mexico,
Colombia, Russia, Egypt, and Morocco and its lower weightings in South Korea,
Malaysia, Indonesia, Thailand, and the Philippines.
The Fund remains well diversified at the country level, with major industry
weightings in telecommunications, banking, electric utilities, and food and
beverages. The largest country weightings are in Brazil, Mexico, India, Hong
Kong, and Egypt. Within Asia, we have had virtually no investments with the
exception of Hong Kong/China, which we believe continues to show long-term
potential. We also remain positive on India due to its improving domestic
liquidity and falling interest rates. Elsewhere in Asia, we remain cautious due
to our concern that structural imbalances in the region's economies may continue
to have a negative impact on their stock markets.
We remain, on the whole, positive on other emerging market countries despite
recent volatility. Our largest position in Latin America remains Brazil, where
interest rates have been raised recently to protect the value of the Brazilian
real. The recent setback in the market has accelerated the reform process. Many
companies in Brazil are now selling on low single-digit price-to-earnings
multiples with what we regard as attractive medium-term outlooks.
We also remain positive on the smaller Latin American markets of Colombia and
Peru. In Colombia, political worries have overshadowed what we believe to be an
improving inflation environment and very attractive valuations. In Peru,
economic growth is among the best in the region, while valuations remain among
the lowest.
In other emerging markets, Russia, Egypt, Portugal, Greece, and South Africa
deserve special mention. Russia was among the best-performing markets in the
world in 1996 and, until recently, was another star performer in 1997. Investors
have taken profits in the past two months and, in our view, this has made the
market very attractive again given that Russian companies are severely
undervalued compared to similar ones in the West.
The Egyptian economy is the strongest in the Middle East region as a result of
efforts by the current administration to introduce large-scale privatization of
state-run companies. Its stock market has also been very resilient to volatility
elsewhere due to low levels of foreign ownership and strong macroeconomic and
corporate fundamentals.
Portugal has demonstrated over the past two years that its management of its
economy is among the best in Western Europe. This has been vindicated by Morgan
Stanley, which recently announced that the Portugese stock market will be in its
developed, rather than emerging, market index series beginning in December 1997.
The Portuguese market has been resilient to the falls in security prices
elsewhere, as investors have taken the view that companies in this market are
undervalued compared to competitors in the rest of Europe.
Greece is another country that has decided on an accelerated reform program
following the landslide victory by Prime Minister Simitis in September of 1996,
which has led to falling inflation and lower interest rates. The stock market
performed exceptionally well for most of 1997, but we believe it will likely do
less well in the next 12 months due to measures announced recently by the
central bank to protect Greek currency. We are now largely out of this market.
Having been cautious on the South African stock market for most of the past
year, we are now seeing some value there following the sharp fall of the rand
and the likely peaking in inflation and interest rates. A gradual rebuilding of
positions has taken place over the past few months.
Looking forward, we believe the general climate for emerging market assets,
notwithstanding recent volatility, remains supportive, with valuations in many
markets back to 1994 levels. The situation in Southeast Asia remains difficult
and we intend to stay out of those markets for the foreseeable future, with the
notable exception of Hong Kong/China and India, both of which we feel offer good
value at current levels. We remain committed to Latin America, given that
economies in the region have fewer structural imbalances than Asia's. We believe
that, on a selective basis, other emerging markets such as Russia, Poland,
Hungary, Egypt, Morocco, and South Africa should also do well in the next 12
months.
Respectfully,
/s/ Arnab Kumar Banerji /s/ Jeffrey Chowdhry
Arnab Kumar Banerji Jeffrey Chowdhry
Portfolio Manager Portfolio Manager
PORTFOLIO MANAGERS' PROFILES
ARNAB KUMAR BANERJI IS CHIEF INVESTMENT OFFICER OF FOREIGN & COLONIAL MANAGEMENT
LTD. DR. BANERJI EARNED DEGREES IN PHYSIOLOGY AND MEDICINE FROM OXFORD
UNIVERSITY BEFORE ENTERING THE INVESTMENT MANAGEMENT BUSINESS WITH J. HENRY
SCHRODER WAGG IN LONDON. HE LEFT THAT FIRM TO BECOME A RESEARCH ANALYST AND
LATER DIRECTOR OF NOMURA SECURITIES. 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.
JEFFREY CHOWDHRY IS A DIRECTOR AND GLOBAL FUNDS MANAGER OF FOREIGN & COLONIAL
EMERGING MARKETS LTD. MR. CHOWDHRY JOINED FOREIGN & COLONIAL IN 1994 FROM BZW
INVESTMENT MANAGEMENT IN LONDON, WHERE HE WAS A DIRECTOR IN THE EMERGING MARKETS
DIVISION. PRIOR TO BZW, HE WAS A FUND MANAGER WITH ROYAL INSURANCE. MR. CHOWDHRY
IS A GRADUATE OF BRUNEL UNIVERSITY AND HAS A MASTER OF BUSINESS ADMINISTRATION
DEGREE FROM KINGSTON BUSINESS SCHOOL, LONDON.
<PAGE>
FUND FACTS
OBJECTIVE: THE INVESTMENT OBJECTIVE OF THE FUND IS
CAPITAL APPRECIATION.
COMMENCEMENT OF INVESTMENT OPERATIONS: OCTOBER 24, 1995
CLASS INCEPTION: CLASS A OCTOBER 24, 1995
CLASS B OCTOBER 24, 1995
CLASS C JUNE 27, 1996
CLASS I JANUARY 2, 1997
SIZE: $98.2 MILLION NET ASSETS AS OF NOVEMBER 30, 1997
PERFORMANCE SUMMARY
Because mutual funds like MFS(R)/Foreign & Colonial 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, Class
C, and Class I shares for the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN AS OF NOVEMBER 30, 1997
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN -7.59% +11.57% +18.59%
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- +11.57% + 8.44%
- -------------------------------------------------------------------------------
SEC RESULTS -- + 6.30% + 5.96%
- -------------------------------------------------------------------------------
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN -7.83% +11.04% +17.30%
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- +11.04% + 7.88%
- -------------------------------------------------------------------------------
SEC RESULTS -- + 7.04% + 6.56%
- -------------------------------------------------------------------------------
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN -7.78% +11.12% +17.46%
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- +11.12% + 7.95%
- -------------------------------------------------------------------------------
SEC RESULTS -- +10.12% + 7.95%
- -------------------------------------------------------------------------------
CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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CUMULATIVE TOTAL RETURN -7.37% +12.08% +19.14%
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -- +12.08% + 8.68%
- -------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations,
October 24, 1995, through November 30, 1997.
All results represent past performance and are not 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. Past performance
is no guarantee of future results.
Class A share SEC results include the maximum 4.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares
have no initial sales charge or Rule 12b-1 fees and are only available to
certain institutional investors.
Class C share SEC results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
inception of Class C shares. Operating expenses attributable to Class C shares
are not significantly different from those of Class B shares. The Class B share
performance included within the Class C share SEC performance has been adjusted
to reflect the CDSC generally applicable to Class C shares rather than the CDSC
generally applicable to Class B shares.
Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the inception
of Class I shares. Because operating expenses attributable to Class A shares are
greater than those of Class I shares, Class I share performance generally would
have been higher than Class A share performance. The Class A share performance
included within the Class I share performance has been adjusted to reflect the
fact that Class I shares have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1997
TOP 10 HOLDINGS (BEGINNING WITH THE LARGEST POSITION IN THE PORTFOLIO)
TELECOMUNICACOES BRASILEIRAS S.A. RICHTER GEDEON
Brazilian telecommunications company Hungarian pharmaceutical company
PORTUGAL TELECOM S.A. SUEZ CEMENT CO.
Portuguese telecommunications company Egyptian construction company
TELEFONOS DE MEXICO S.A. COMPANIA DE TELECOM DE CHILE
Mexican telecommunications company Chilean telephone utility
PETROLEO BRASILEIRO S.A. UNIFIED ENERGY SYSTEMS
Brazilian petroleum and natural gas company Russian electric utility
LUKOIL OIL CO. CPT TELEFONICA DEL PERU S.A.
Russian oil company Peruvian telephone utility
LARGEST SECTORS
Miscellaneous
(Conglomerates, special products/services) 60.3%
Utilities and Communications 20.4%
Financial Services 8.0%
Other Sectors 4.5%
Energy 4.5%
Industrial Goods and Services 2.3%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - November 30, 1997
<TABLE>
<CAPTION>
Stocks - 98.0%
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ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina - 4.1%
Banco de Galicia y Buenos Aires S.A. de C.V., ADR
(Banks and Credit Cos.) 23,016 $ 540,876
Banco Rio de La Plata S.A., ADR (Banks and Credit Cos.)* 10,400 130,650
Perez Companc S.A. (Oils) 89,308 637,914
Siderar S.A.I.C., ADR (Steel)## 8,530 283,623
Telecom S.A., ADR (Telecommunications) 19,400 595,337
Telefonica de Argentina, ADR (Utilities - Telephone) 13,050 431,466
Transportadora de Gas del Sur S.A., ADR (Pipelines) 31,300 334,519
YPF Sociedad Anonima, ADR (Oils) 33,200 1,114,275
------------
$ 4,068,660
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Brazil - 13.6%
Companhia Vale do Rio Doce, Preferred (Mining) 24,000 $ 421,926
Telebras, ADR (Telecommunications)* 7,000,000 719,437
Aracruz Celulose S.A. (Paper Products) 288,000 410,242
Centrais Eletricas Brasileiras S.A. - Eletrobras, Preferred "B"
(Utilities - Electric)* 1,799,000 875,820
Centrais Eletricas Brasileiras, ADR (Utilities - Electric) 50,050 1,168,668
Companhia Cervejaria Brahma, Preferred (Beverages) 965,000 639,447
Companhia Energetica de Sao Paulo, Preferred (Utilities -
Electric)* 11,500,000 751,668
Companhia Energetica S.A., ADR (Utilities - Electric) 17,000 833,000
Companhia Paranaense de Energia - COPEL, Preferred "B"
(Electrical) 38,800 577,173
Itausa Investimentos Itau S.A. (Conglomerate) 965,000 626,397
Petroleo Brasileiro S.A., Preferred (Oils) 10,779,000 2,361,429
Telecomunicacoes Brasileiras S.A., ADR (Telecommunications) 34,176 3,567,120
Usinas Siderurgicas de Minas Gerais S.A. (Steel) 58,100 369,280
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$ 13,321,607
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Canada - 0.4%
Super Sol Ltd. (Supermarkets) 155,550 $ 439,244
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Chile - 5.2%
Banco Santander Chile, ADR, "A" (Banks and Credit Cos.) 55,560 $ 861,180
Chilgener S.A. (Utilities - Electric) 20,647 516,175
Compania de Telecom de Chile, ADR (Utilities - Telephone) 57,867 1,566,026
Distribucion y Servicio D & S S.A., ADR (Supermarkets)* 23,385 407,776
Enersis S.A., ADR (Utilities - Electric) 39,824 1,189,742
Laboratorio Chile S.A., ADR (Medical and Health Technology
Services) 20,739 443,296
Santa Isabel S.A., ADR (Stores)+ 5,172 94,712
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$ 5,078,907
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China - 1.3%
Huaneng Power International, Inc., ADR (Utilities -
Electric)* 40,850 $ 898,700
Qingling Motors Co., "H" (Automotive) 620,000 330,862
------------
$ 1,229,562
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Colombia - 2.6%
Banco Ganadero S.A., ADR, (Banks and Credit Cos.) 17,450 $ 665,281
Banco Industrial Colombiano, ADR (Banks and Credit Cos.) 65,950 956,275
Cementos Diamante S.A., ADR (Construction)## 72,485 978,548
------------
$ 2,600,104
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Egypt - 4.8%
Ahram Beverage Co., GDR ( Beverages)*## 14,996 $ 438,633
Commercial International Bank, GDR (Banks and Credit Cos.)## 46,770 935,400
Madinet Nasar City (Housing Development) 8,640 583,955
North Cairo Mills (Food Products) 16,360 552,865
South Cairo Flour Mills (Food Products) 8,990 153,224
Suez Cement Co., GDR (Construction)## 84,223 1,671,826
Torah for Cement (Construction) 14,830 375,217
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$ 4,711,120
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Greece - 0.1%
National Bank Of Greece (Banks and Credit Companies)* 1,140 $ 106,825
- ------------------------------------------------------------------------------------------------------
Hong Kong - 6.7%
Beijing Enterprise Holdings Ltd. (Diversified Operations) 82,000 $ 215,879
Cheung Kong Holdings Ltd. (Real Estate) 184,000 1,297,317
China Resources Enterprises (Real Estate Investment Trusts) 138,000 297,252
Citic Pacific Ltd. (Conglomerate) 128,000 510,026
Guangdong Kelon Elec Holdings 140,000 155,761
Hong Kong & China Gas Ltd. (Oil and Gas) 140,000 251,753
HSBC Holdings PLC (Finance)* 26,000 627,312
Hysan Development Co. (Real Estate) 126,000 252,659
New World Development Co. (Real Estate) 225,000 833,948
Swire Pacific Air Ltd., "A" (Transportation) 231,500 1,159,027
Wharf Holdings Ltd. (Real Estate) 316,000 643,872
Zhenhai Refining and Chemical Co., Ltd. (Oils) 817,000 322,369
------------
$ 6,567,175
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Hungary - 4.0%
BorsodChem Rt. (Chemicals) 5,525 $ 153,742
Graboplast Rt. (Apparel and Textiles) 6,057 300,496
Magyar Tavkozlesi Rt. (Telecommunications)* 44,000 891,000
Mol Magyar Olaj Es Gazipari Rt. (Oils)## 25,700 533,275
Pannonplast Rt. (Chemicals)* 8,421 348,324
Richter Gedeon Rt. (Pharmaceuticals) 18,540 1,752,214
------------
$ 3,979,051
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India - 8.3%
Bajaj Auto Ltd. (Automotive)* 450 $ 7,118
EIH Ltd. (Restaurants and Lodging) 60,000 630,000
Formula System (1985) Ltd. (Computer Software - Systems)* 15,756 521,914
Hindustan Lever Ltd. (Consumer Goods and Services) 39,000 1,409,065
Hindustan Petroleum Corp. Ltd. (Oil and Gas) 64,000 788,779
ICL Israel Chemical (Chemicals) 400,000 529,997
Industrial Development Bank of India Ltd. (Banks and Credit
Cos.) 330,000 720,000
Mahanagar Telephone Nigam Ltd. (Telecommunications)* 177,000 1,052,805
State Bank Of India (Banks and Credit Cos.) 151,000 862,857
Tata Engineering and Locomotive Co. Ltd. (Automotive) 270 2,202
Tata Steel Co. (Steel) 168,000 567,273
Videsh Sanchar Nigam Ltd., GDR (Telecommunications)## 82,620 1,074,060
------------
$ 8,166,070
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Israel - 1.8%
ECI Telecom Ltd. (Telecommunications) 10,447 $ 284,028
Makhteshim Chemical Works Ltd. (Chemicals) 81,442 575,266
Tadiran Telecommunications Ltd. (Telecommunications) 22,250 458,906
Teva Pharmaceutical Industries Ltd., ADR (Pharmaceuticals) 9,250 457,875
------------
$ 1,776,075
- ------------------------------------------------------------------------------------------------------
Mauritius - 2.6%
Mauritius Commercial Bank (Banks and Credit Cos.) 157,000 $ 692,227
New Mauritius Hotels Ltd. (Restraurants and Lodging) 208,000 403,709
Rogers & Co. Ltd. (Conglomerate) 115,000 575,000
State Bank of Mauritius Ltd. (Financial Instituition) 1,460,000 836,182
------------
$ 2,507,118
- ------------------------------------------------------------------------------------------------------
Mexico - 12.0%
Apasco S.A. (Building Materials) 67,000 $ 396,689
Cemex S.A. (Construction)* 248,000 1,073,659
Cifra S.A. de C.V., "A" (Retail) 264,700 516,488
Cifra S.A. de C.V., "B" (Retail) 44,772 96,096
Corporacion GEO S.A. de C.V. (Housing)*## 19,700 470,594
Desc S.A. de C.V., "B" (Conglomerate) 76,000 720,146
Fomento Economico Mexicano S.A., "B" (Beverages) 59,376 490,214
Gruma S.A. (Food Products) 112,494 458,893
Grupo Carso, "A1" (Conglomerate) 201,201 1,329,889
Grupo Financiero Banamex, "B" (Finance)* 221,000 485,122
Grupo Modelo S.A. de C.V. (Brewery) 58,800 491,195
Grupo Television S.A. de C.V., GDR (Entertainment)* 27,500 1,017,500
Hylsamex S.A. de C.V., "B" (Steel) 106,000 685,122
Organiz Soriana, "B" (Real Estate) 172,000 637,659
Sanluis Corporacion S.A. de C.V. (Diversified Operations) 60,600 458,195
Telefonos de Mexico S.A. (Utilities - Telephone) 974,000 2,446,878
------------
$ 11,774,339
- ------------------------------------------------------------------------------------------------------
Morocco - 2.6%
Banque Marocaine du Commerce (Banks and Credit Cos.) 12,500 $ 759,870
Brasserica du Maroc (Consumer Goods and Services) 2,100 451,849
Credit Eqdom (Financial Institutions) 2,182 259,816
Omnium Nord Africain, S.A. (Conglomerate) 6,600 585,962
Societe Nationale d'Investissement (Conglomerate) 5,600 491,331
------------
$ 2,548,828
- ------------------------------------------------------------------------------------------------------
Pakistan - 1.4%
Hub Power Co. Ltd., GDR (Utilities - Electric)* 40,200 $ 1,236,150
Pakistan Telecommunications Corp., GDR (Utilities -
Telephone) 1,310 98,250
------------
$ 1,334,400
- ------------------------------------------------------------------------------------------------------
Peru - 3.0%
Alicorp S.A. (Consumer Goods and Services)* 321,000 $ 245,471
Compania de Minas Buenaventura S.A. (Mining) 77,140 476,453
CPT Telefonica del Peru S.A., "B" (Utilities - Telephone) 685,370 1,426,174
Credicorp Ltd. Holdings Co. (Banks and Credit Cos.) 43,484 793,583
------------
$ 2,941,681
- ------------------------------------------------------------------------------------------------------
Poland - 4.2%
Agros Holdings S.A. (Consumer Goods and Services) 22,278 $ 397,034
Bank Handlowy Warszawie (Banks and Credit Cos.)*+ 12,780 150,034
Bank Handlowy Warszawie, GDR (Banks and Credit Cos.)*## 55,350 608,850
Bank Slaski S.A. w Katowicach (Banks and Credit Cos.) 5,670 288,713
Bydgoska Fabryka Kabli S.A. (Electrical Equipment) 46,375 373,886
Elektrim Spolka Akcyjna S.A. (Electrical Equipment) 77,120 741,748
Exbud S.A. (Construction)* 74,700 633,946
KGHM Polska Miedz S.A., GDR (Metals and Minerals)*## 72,470 579,760
Zaklady Piwowarske w Zywcu (Beverages) 5,051 348,640
------------
$ 4,122,611
- ------------------------------------------------------------------------------------------------------
Portugal - 6.0%
Banco Espirito Santo e Comercial de Lisboa S.A.
(Banks and Credit Cos.) 45,289 $ 1,274,468
Cimentos de Portugal S.A. (Building Materials) 31,526 798,782
Mota e Companhia S.A. (Construction) 16,100 254,643
Portugal Telecom S.A. (Utilities - Telephone) 75,542 3,480,812
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais, S.A. (Finance) 3,000 112,169
------------
$ 5,920,874
- ------------------------------------------------------------------------------------------------------
Russia - 4.0%
Lukoil Oil Co., ADR (Oils) 24,585 $ 1,969,873
Rostelecom (Telecommunications)*## 20 525,000
Unified Energy Systems, GDR (Utilities - Electric)* 63,650 1,440,400
------------
$ 3,935,273
- ------------------------------------------------------------------------------------------------------
South Africa - 5.4%
Dimension Data Holdings Ltd. (Financial Institutions) 117,790 $ 508,969
JD Group Ltd. (Stores) 30,900 212,358
Liberty Life Association of Africa Ltd. (Insurance) 44,200 1,118,642
Nedcor Ltd. (Banks and Credit Cos.)* 52,764 1,194,247
Real Africa Holdings Ltd. (Conglomerate) 124,000 255,144
Sasol Ltd. (Oils) 55,900 563,026
South African Breweries Ltd. (Brewery) 58,100 1,422,613
------------
$ 5,274,999
- ------------------------------------------------------------------------------------------------------
Turkey - 3.1%
Yapi ve Kredi Bankasi (Banks and Credit Cos.) 25,816,300 $ 805,398
Ardem Pisirici ve Isitici Cihazlar Sanayii A.S.
(Conglomerate) 2,513,200 276,345
Cimsa Cimento Sanayi Ve Ticaret A.S. (Construction Services) 2,100,000 370,531
Haci Omer Sabanci Holdings A.S., ADR (Conglomerate)*## 71,300 980,375
Trakya Cam Sanayii (Housewares) 8,180,200 564,787
------------
$ 2,997,436
- ------------------------------------------------------------------------------------------------------
Venezuela - 0.8%
Compania Anonima Nacional Telefonos de Venezuela, ADR
(Telecommunications) 20,600 $ 813,700
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $96,600,684) $ 96,215,659
- ------------------------------------------------------------------------------------------------------
Bond
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Campanhia Vale do Rio Doce (Mining)(S)(S)
(Identified Cost, $0) $24 $ 0
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $96,600,684) $ 96,215,659
Other Assets, Less Liabilities - 2.0% 1,997,807
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 98,213,466
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
(S)(S) When-issued security. At November 30, 1997, the Fund had sufficient cash and/or securities
at least equal to the value of the when-issued security.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
NOVEMBER 30, 1997
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $96,600,684) $ 96,215,659
Cash 742,451
Foreign currency, at value (identified cost, $834,652) 830,366
Receivable for Fund shares sold 180,798
Receivable for investments sold 603,025
Interest and dividends receivable 112,663
Receivable from investment adviser 172,134
Deferred organization expenses 15,079
Other assets 413
------------
Total assets $ 98,872,588
------------
Liabilities:
Payable for Fund shares reacquired $ 155,430
Payable for investments purchased 346,970
Payable to affiliates -
Management fee 14,044
Administrative fee 168
Shareholder servicing agent fee 1,394
Distribution and service fee 59,412
Accrued expenses and other liabilities 81,704
------------
Total liabilities $ 659,122
------------
Net assets $ 98,213,466
============
Net assets consist of:
Paid-in capital $ 96,875,009
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (390,453)
Accumulated net realized gain on investments and foreign
currency transactions 2,645,280
Accumulated net investment loss (916,370)
------------
Total $ 98,213,466
============
Shares of beneficial interest outstanding 5,624,542
=========
Class A shares:
Net asset value and redemption price per share
(net assets of $41,598,206 / 2,373,043 shares of
beneficial interest outstanding) $17.53
======
Offering price per share (100 / 95.25 of net asset value
per share) $18.40
======
Class B shares:
Net asset value and offering price per share
(net assets of $51,895,431 / 2,979,325 shares of
beneficial interest outstanding) $17.42
======
Class C shares:
Net asset value and offering price per share
(net assets of $4,317,965 / 249,358 shares of beneficial
interest outstanding) $17.32
======
Class I shares:
Net asset value and offering and redemption price per share
(net assets of $401,864 / 22,816 shares of beneficial
interest outstanding) $17.61
======
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 (Unaudited)
- --------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1997
- --------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 124,527
Dividends 849,244
Foreign taxes withheld (35,797)
------------
Total investment income $ 937,974
------------
Expenses -
Management fee $ 676,740
Trustees' compensation 3,803
Shareholder servicing agent fee 70,380
Distribution and service fee (Class A) 112,047
Distribution and service fee (Class B) 292,405
Distribution and service fee (Class C) 18,851
Administrative fee 8,121
Custodian fee 48,509
Postage 21,846
Auditing fees 11,230
Printing 9,822
Legal fees 775
Amortization of organization expenses 5,197
Miscellaneous 85,733
------------
Total expenses $ 1,365,459
Fees paid indirectly (17,000)
Refund of expenses to investment adviser 38,072
------------
Net expenses $ 1,386,531
------------
Net investment loss $ (448,557)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 4,710,194
Foreign currency transactions (48,811)
------------
Net realized gain on investments and foreign
currency transactions $ 4,661,383
------------
Change in unrealized appreciation (depreciation) -
Investments $(13,797,863)
Translation of assets and liabilities in foreign
currencies (896)
------------
Net unrealized loss on investments and foreign
currency translation $(13,798,759)
------------
Net realized and unrealized loss on investments
and foreign currency $ (9,137,376)
------------
Decrease in net assets from operations $ (9,585,933)
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MAY 31, 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (448,557) $ (357,250)
Net realized gain (loss) on investments and foreign
currency transactions 4,661,383 (2,066,732)
Net unrealized gain (loss) on investments and foreign
currency translations (13,798,759) 11,952,224
------------ ------------
Increase (decrease) in net assets from operations $ (9,585,933) $ 9,528,242
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions (Class A) $ -- $ (309,984)
From net realized gain on investments and foreign currency
transactions (Class B) -- (238,475)
From net realized gain on investments and foreign currency
transactions (Class C)
(11,143)
------------ ------------
Total distributions declared to shareholders $ -- $ (559,602)
------------ ------------
Fund share (principal) transactions -
Net increase in net assets from Fund share transactions $ 16,281,760 $ 42,667,335
------------ ------------
Total increase in net assets $ 6,695,827 $ 51,635,975
Net assets:
At beginning of period 91,517,639 39,881,664
------------ ------------
At end of period (including accumulated undistributed net
investment loss of $916,370 and $467,813, respectively) $ 98,213,466 $ 91,517,639
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1997 YEAR ENDED PERIOD ENDED
(UNAUDITED) MAY 31, 1997 MAY 31, 1996*
- ------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 18.96 $ 16.52 $ 15.00
------------ ------------ ------------
Income from investment operations# -
Net investment income (loss)(S) $ (0.05) $ (0.07) $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (1.38) 2.74 1.50
------------ ------------ ------------
Total from investment operations $ (1.43) $ 2.67 $ 1.54
------------ ------------ ------------
Less distributions declared to shareholders -
From net investment income
$ -- $ -- $ (0.02)
From net realized gain on investments and foreign
currency transactions -- (0.23) --
------------ ------------ ------------
Total distributions declared to shareholders
$ -- $ (0.23) $ (0.02)
------------ ------------ ------------
Net asset value - end of period $ 17.53 $ 18.96 $ 16.52
============ ============ ============
Total return(+) (7.59)%++ 16.43% 10.24%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.29%+ 2.51% 2.48%+
Net investment income (loss) (0.54)%+ (0.42)% 0.35%+
Portfolio turnover 31% 47% 22%
Average commission rate $ 0.0020 $ 0.0019 $ 0.0136
Net assets, end of period (000 omitted) $ 41,598 $ 37,540 $ 19,861
* 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.
(S) The Adviser voluntarily agreed to bear, subject to reimbursement by the Fund, expenses of Class A shares such that expenses,
exclusive of management, distribution, service fees, and certain other expenses do not exceed 0.75% of average daily net
assets on an annualized basis. For the period ended May 31, 1996, the Adviser voluntarily agreed to maintain total expenses
of the Fund at not more than 2.50% of average daily net assets for Class A shares. In the event that actual expenses were
over/under these limitations, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ (0.05) $ (0.06) $ 0.02
Ratios (to average net assets)
Expenses## 2.22% 2.45% 2.73%+
Net investment income (loss) (0.47)% (0.37)% 0.10%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1997 YEAR ENDED PERIOD ENDED
(UNAUDITED) MAY 31, 1997 MAY 31, 1996*
- ------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 18.89 $ 16.47 $ 15.00
------- ------- -------
Income from investment operations# -
Net investment income (loss)(S) $ (0.10) $ (0.15) $ (0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (1.37) 2.73 1.50
------- ------- -------
Total from investment operations $ (1.47) $ 2.58 $ 1.48
------- ------- -------
Less distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions $ -- $ (0.16) $ --
In excess of net investment income -- -- (0.01)
------- ------- -------
Total distributions declared to shareholders
$ -- $ (0.16) $ (0.01)
------- ------- -------
Net asset value - end of period $ 17.42 $ 18.89 $ 16.47
======= ======= =======
Total return (7.83)%++ 15.87% 9.85%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.79%+ 3.04% 3.06%+
Net investment loss (1.04)%+ (0.87)% (0.19)%+
Portfolio turnover 31% 47% 22%
Average commission rate $0.0020 $0.0019 $0.0136
Net assets at end of period (000 omitted) $51,895 $51,020 $20,021
* 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.
(S) The Adviser voluntarily agreed to bear, subject to reimbursement by the Fund, expenses of Class B shares such that expenses,
exclusive of management, distribution, service fees, and certain other expenses, of Class B shares do not exceed 0.75% of
the Fund's average daily net assets on an annualized basis. For the period ended May 31, 1996, the Adviser voluntarily
agreed to maintain total expenses of the Fund at not more than 3.07% of average daily net assets for Class B shares. In the
event that actual expenses were over/ under these limitations, the net investment loss per share and the ratios would have
been:
Net investment loss $ (0.10) $ (0.14) $ (0.08)
Ratios (to average net assets)
Expenses## 2.72%+ 2.98% 3.30%+
Net investment loss (0.97)%+ (0.82)% (0.44)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1997 PERIOD ENDED
(UNAUDITED) MAY 31, 1997**
- ----------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.76 $16.77
------ ------
Income from investment operations# -
Net investment loss(S) $(0.11) $(0.08)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (1.33) 2.36
------ ------
Total from investment operations $(1.44) $ 2.28
------ ------
Less distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions $ -- $(0.29)
------ ------
Net asset value - end of period $17.32 $18.76
====== ======
Total return (7.78)%++ 13.89%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.78%+ 3.00%+
Net investment loss (1.05)%+ (0.48)%+
Portfolio turnover 31% 47%
Average commission rate $0.0020 $0.0019
Net assets, end of period (000 omitted) $4,318 $2,659
** For the period from the inception of Class C shares, June 27, 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.
(S) The Adviser voluntarily agreed to bear, subject to reimbursement by the Fund, expenses of Class C shares such that expenses,
exclusive of management, distribution, service fees, and certain other expenses, of Class C shares do not exceed 0.75% of
the Fund's average daily net assets on an annualized basis. For the period ended May 31, 1996, the Adviser voluntarily
agreed to maintain total expenses of the Fund at not more than 3.00% of average daily net assets for Class C shares. In the
event that actual expenses were over/ under these limitations, the net investment loss per share and the ratios would have
been:
Net investment loss $(0.09) $(0.07)
Ratios (to average net assets)
Expenses## 2.71%+ 2.97%+
Net investment loss (0.98)%+ (0.39)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1997 PERIOD ENDED
(UNAUDITED) MAY 31, 1997***
- ----------------------------------------------------------------------------------------------------------------
CLASS I
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $19.00 $16.47
------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.01) $ 0.10
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (1.38) 2.43
------ ------
Total from investment operations $(1.39) $ 2.53
------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ --
From net realized gain on investments and foreign currency
transactions -- --
------ ------
Total distributions declared to shareholders $ -- $ --
------ ------
Net asset value - end of period $17.61 $19.00
====== ======
Total return (7.37)%++ 15.36%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.79%+ 2.01%+
Net investment income (loss) (0.06)% 1.14%+
Portfolio turnover 31% 47%
Average commission rate $0.0020 $0.0019
Net assets at end of period (000 omitted) $402 $299
*** For the period from the inception of Class I shares, 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.
(S)The Adviser voluntarily agreed to bear, subject to reimbursement by the Fund, expenses of Class I shares such that expenses,
exclusive of management, distribution, service fees, and certain other expenses, of Class I shares do not exceed 0.75% of
the Fund's average daily net assets on an annualized basis. In the event that actual expenses were over/ under these
limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.00 $ 0.10
Ratios (to average net assets)
Expenses## 1.72%+ 1.99%+
Net investment income 0.01%+ 1.14%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS/Foreign & Colonial Emerging Markets Equity 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. 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 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 result 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 average daily net assets. The fee is reduced according to an
arrangement which 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 net 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 accumulated net realized
gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of the Fund pro rata
based on the 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.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at the following annual rate
of 1.25% of average daily net assets.
The Fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the Fund's operating expenses, exclusive of
management, distribution and service fees. The Fund in turn will pay MFS an
expense reimbursement fee not greater than 0.75% of average net assets. To the
extent that the expense reimbursement fee exceeds the Fund's actual expenses,
the excess will be applied to amounts paid by MFS in prior years. At November
30, 1997, the Fund has paid MFS all of the unreimbursed expenses owed.
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal, 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, provided that the
administrative fee is not assessed on Fund assets that exceed $3 billion:
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 $ 2,406 for the six months
ended November 30, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$32,558 for the six months ended November 30, 1997, 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 to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to 0.25%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD retains the service fee for accounts not attributable
to a securities dealer which amounted to $12,619 for the six months ended
November 30, 1997. Fees incurred under the distribution plan during the six
months ended November 30, 1997, 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 additional consideration for
services rendered by the dealer with respect to Class B and Class C shares. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $1,159 and $125 for Class B and Class C shares, respectively,
for the six months ended November 30, 1997. Fees incurred under the distribution
plans during the six months ended November 30, 1997, were 1.00% and 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis, respectively.
Purchases over $1 million of Class A shares and certain purchases by 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 twelve months of purchase. MFD
receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the six months ended November 30, 1997, were $20,
$49,322, and $1,434 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
0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of the
average daily net assets of each class of shares 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 $49,233,513 and $30,882,550, 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 $96,600,684
-----------
Gross unrealized appreciation $11,712,841
Gross unrealized depreciation (12,097,866)
-----------
Net unrealized appreciation (depreciation) $ (385,025)
===========
(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
SIX MONTHS ENDED NOVEMBER 30, 1997 YEAR ENDED MAY 31, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,796,236 $ 35,767,029 2,277,472 $ 39,713,990
Shares issued to shareholders in
reinvestment of distributions -- -- 17,927 287,543
Shares transferred to Class I -- -- (1,982) (32,637)
Shares reacquired (1,403,066) (27,955,813) (1,516,023) (26,385,091)
---------- ------------- ---------- -------------
Net increase 393,170 $ 7,811,216 777,394 $ 13,583,805
========== ============= ========== =============
<CAPTION>
Class B Shares
SIX MONTHS ENDED NOVEMBER 30, 1997 YEAR ENDED MAY 31, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,643,975 $ 32,846,948 2,844,356 $ 50,086,036
Shares issued to shareholders in --
reinvestment of distributions
-- 12,630 202,215
Shares reacquired (1,365,952) (26,728,176) (1,371,122) (23,955,353)
---------- ------------- ---------- -------------
Net increase 278,023 $ 6,118,772 1,485,864 $ 26,332,898
========== ============= ========== =============
<CAPTION>
Class C Shares
SIX MONTHS ENDED NOVEMBER 30, 1997 YEAR ENDED MAY 31, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 172,815 $ 3,444,100 160,074 $ 2,796,205
Shares issued to shareholders in --
reinvestment of distributions
-- 676 10,754
Shares reacquired (65,182) (1,235,597) (19,025) (339,707)
---------- ------------- ---------- -------------
Net increase 107,633 $ 2,208,503 141,725 $ 2,467,252
========== ============= ========== =============
<CAPTION>
Class I Shares
SIX MONTHS ENDED NOVEMBER 30, 1997 PERIOD ENDED MAY 31, 1997*
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,944 $ 180,652 14,138 $ 257,507
Shares transferred from Class A --
-- 1,982 32,637
Shares reacquired (1,882) (37,383) (366) (6,764)
---------- ------------- ---------- -------------
Net increase 7,062 $ 143,269 15,754 $ 283,380
========== ============= ========== =============
* For the period from the inception of Class I shares, January 2, 1997, through May 31, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 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 six
months ended November 30, 1997, was $115.
(7) 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 November 30, 1997,
the Fund owned the following restricted securities (constituting 0.30% 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 supplied
by a pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF SHARE/PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Handlowy W Warszawie 7/03/97 12,780 $159,426 $150,034
Santa Isabel S.A. 10/02/97 5,172 $110,053 94,712
--------
$244,746
</TABLE>
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) International Growth and Income Fund
TRUSTEES
A. Keith Brodkin* - Chairman and CUSTODIAN
President; Chairman and Director, State Street Bank and Trust Company
Massachusetts Financial Services
Company INVESTOR INFORMATION
For MFS stock and bond market outlooks,
Richard B. Bailey* - Private call toll free: 1-800-637-4458 anytime
Investor; Former Chairman and from a touch-tone telephone.
Director (until 1991), Massachusetts
Financial Services Company For information on MFS mutual funds,
call your financial adviser or, for an
Peter G. Harwood - Private Investor information kit, call toll free:
1-800-637-2929 any business day from 9
J. Atwood Ives - Chairman and Chief a.m. to 5 p.m. Eastern time (or leave a
Executive Officer, Eastern message anytime).
Enterprises
INVESTOR SERVICE
Lawrence T. Perera - Partner, MFS Service Center, Inc.
Hemenway & Barnes P.O. Box 2281
Boston, MA 02107-9906
William J. Poorvu - Adjunct
Professor, Harvard University For general information, call toll free:
Graduate School of Business 1-800-225-2606 any business day from 8
Administration a.m. to 8 p.m. Eastern time.
Charles W. Schmidt - Private Investor For service to speech- or
hearing-impaired, call toll free:
Arnold D. Scott* - Senior Executive 1-800-637-6576 any business day from 9
Vice President, Director and a.m. to 5 p.m. Eastern time. (To use
Secretary, Massachusetts Financial this service, your phone must be
Services Company equipped with a Telecommunications
Device for the Deaf.)
Jeffrey L. Shames* - President and
Director, Massachusetts Financial For share prices, account balances, and
Services Company exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime
Elaine R. Smith - Independent from a touch-tone telephone.
Consultant
WORLD WIDE WEB
David B. Stone - Chairman, North www.mfs.com
American Management Corp.
(investment advisers) [Dalbar Logo] For the fourth year
in a row, MFS earned
INVESTMENT ADVISER a #1 ranking in the DALBAR, Inc.
Massachusetts Financial Services Broker/Dealer Survey, Main Office
Company Operations Service Quality Category. The
500 Boylston Street firm achieved a 3.42 overall score on a
Boston, MA 02116-3741 scale of 1 to 4 in the 1997 survey. A
total of 111 firms responded, offering
DISTRIBUTOR input on the quality of service they
MFS Fund Distributors, Inc. received from 29 mutual fund companies
500 Boylston Street nationwide. The survey contained
Boston, MA 02116-3741 questions about service quality in 11
categories, including "knowledge of
PORTFOLIO MANAGERS operations contact," "keeping you
Arnab Kumar Banerji* informed," and "ease of doing business"
Jeffrey Chowdhry* with the firm.
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
<PAGE>
----------------
Bulk Rate
MFS(R)/FOREIGN & COLONIAL EMERGING U.S. Postage
MARKETS EQUITY FUND Paid
MFS
----------------
500 Boylston Street
Boston, MA 02116-3741
[LOGO] MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[DALBAR
LOGO]
TOP-RATED SERVICE
(C)1998 MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116-3741
FEM-3 1/98 25M 85/285/385/885
