<PAGE>
[Logo]M F S(R)
INVESTMENT MANAGEMENT
75 YEARS
We invented the mutual fund(R)
SEMIANNUAL REPORT
JULY 31, 1998
GRAPHIC OMITTED]
MFS(R) EMERGING MARKETS
DEBT FUND
MFS(R) SMALL CAP VALUE FUND
MFS(R) STRATEGIC VALUE FUND
<PAGE>
MFS(R) EMERGING MARKETS DEBT FUND
MFS(R) SMALL CAP VALUE FUND
MFS(R) STRATEGIC VALUE FUND
TRUSTEES CUSTODIAN
Richard B. Bailey* - Private State Street Bank and Trust Company
Investor; Former Chairman and
Director (until 1991), MFS INVESTOR INFORMATION
Investment Management(R) For MFS stock and bond market
outlooks, call toll free:
Peter G. Harwood - Private Investor 1-800-637-4458 anytime from a
touch-tone telephone.
J. Atwood Ives - Chairman and Chief
Executive Officer, Eastern For information on MFS mutual
Enterprises (diversified services funds, call your financial adviser
company) or, for an information kit, call
toll free: 1-800-637-2929 any
Lawrence T. Perera - Partner, business day from 9 a.m. to 5 p.m.
Hemenway & Barnes (attorneys) Eastern time (or leave a message
anytime).
William J. Poorvu - Adjunct
Professor, Harvard University INVESTOR SERVICE
Graduate School of Business MFS Service Center, Inc.
Administration P.O. Box 2281
Boston, MA 02107-9906
Charles W. Schmidt - Private
Investor For general information, call toll
free: 1-800-225-2606 any business
Arnold D. Scott* - Senior Executive day from 8 a.m. to 8 p.m. Eastern
Vice President, Director, and time.
Secretary, MFS Investment
Management For service to speech- or
hearing-impaired, call toll free:
Jeffrey L. Shames* - Chairman, 1-800-637-6576 any business day
Chief Executive Officer, and from 9 a.m. to 5 p.m. Eastern time.
Director, MFS Investment Management (To use this service, your phone
must be equipped with a
Elaine R. Smith - Independent Telecommunications Device for the
Consultant Deaf.) For share prices, account
balances, and exchanges, call toll
David B. Stone - Chairman and free: 1-800-MFS-TALK
Director, North American Management (1-800-637-8255) anytime from a
Corp. (investment advisers) touch-tone telephone.
INVESTMENT ADVISER WORLD WIDE WEB
Massachusetts Financial Services Company www.mfs.com
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
Kenneth J. Enright*
Alec C. Murray*
Matthew W. Ryan*
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>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
In 1999, MFS celebrates its 75th anniversary. The nation's first mutual fund --
our Massachusetts Investors Trust (MIT) -- was introduced to the public on March
21, 1924. Since then, MFS Investment Management(R), the company that grew out of
that original fund, has helped guide shareholders through many economic and
investment cycles, primarily by focusing on the long-term opportunities created
by an expanding global economy. As of January 31, 1999, MFS manages over $100
billion, and the firm's 2,000 people serve almost four million investors and
their financial advisers worldwide. Meanwhile, MIT's assets have grown to over
$12 billion, and 56 mutual funds are offered in the MFS Family of Funds(R).
One of the elements in the success of MIT did not exist before our founders
invented it in 1924. That is daily redemption. This innovation means that if you
want to sell your investment in any MFS mutual fund, you have the security of
knowing that you may do so immediately by exchanging into another MFS fund. Or,
if you need your money for other purposes, it can quickly be wired or mailed to
you. This daily redemption feature, through which new shares were created when
people invested in MIT and were redeemed when people sold, brought another
important change to the industry. Now, the price of a mutual fund's shares
wasn't determined by supply and demand, but by the value of the securities owned
by each portfolio.
Another factor in our growth was the development of one of the industry's first
in-house research departments in 1932. Unlike companies that rely on Wall Street
research reports, which can be used by many investors at the same time, MIT's
managers built its long-term track record by visiting companies, talking to
managers and competitors, and "kicking the tires" so they could judge the
quality and potential of each company's products and services for themselves.
Today, MFS has more than 100 full-time portfolio managers, stock analysts, and
credit analysts who track the equity and bond markets.
While MIT introduced the daily redemption feature, that was not our only
invention. We also established the nation's first global bond fund, first
high-yield municipal bond fund, and first high-yield municipal closed-end bond
fund.
We are proud of the record of MIT and of the funds in the MFS Family of Funds,
but we are also proud of our long-standing relationship with financial advisers.
Not only do we believe investors can benefit from the advice of these experts
but, as was shown during the market volatility of 1998, people who work with
financial advisers are less likely to abandon their carefully designed,
long-term investment strategies.
Our ability to service your investment and information needs is also extremely
important to us. The MFS Service Center handles millions of transactions and
phone calls every year. Supporting the work of financial advisers, promptly
sending out statements and confirmations, and answering hundreds of investors'
questions every day are crucial elements in maintaining long-term relationships
with our fund shareholders. That link to our investors has also been enhanced by
our site on the World Wide Web: www.mfs.com. Since 1996, this site has given
investors and the general public access to up-to-date information about MFS
products and services, as well as market outlooks and retirement information.
The site has rapidly become one of our primary vehicles for communicating with
our investors and educating the public about mutual funds in general and MFS in
particular.
If there is a common thread running through these milestones, it is our
always-increasing commitment to provide you with the best possible investment
management and shareholder service, just as we have done for the past 75 years.
As we celebrate this anniversary, it is also a time for MFS to look ahead and
build on our 75 years of innovation and experience to help meet your investment
needs in the next century. We appreciate your confidence and welcome any
questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
February 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
MFS EMERGING MARKETS DEBT FUND
Dear Shareholders,
For the six months ended January 31, 1999, both the Fund's Class A and Class I
shares provided a total return of -15.62%. These returns include the
reinvestment of distributions but exclude the effects of any sales charges and
compare to a -17.20% return for the J.P. Morgan Emerging Markets Bond Index Plus
(the EMBI+), an unmanaged index comprised of Brady bonds (restructured bank
loans) and other dollar-denominated bonds.
Emerging markets debt experienced substantial volatility in the second half of
1998. From August to early September, the EMBI+ declined 32% before recovering
by some 29% through November. Financial and economic collapse in Russia was the
primary cause of the market downdraft, driving Russian assets downward and
precipitating a sell-off of emerging markets debt generally. Leveraged investors
with large positions in Russia were forced to liquidate portfolios in order to
meet margin calls. A vicious cycle of forced and panic selling ensued, fueled by
continued Asian economic weakness, low commodity prices, and the perceived
vulnerability of other economies, such as Brazil's. Some stability and recovery
began to take hold in October following actions by the Fed and other central
bankers to lower interest rates. Other factors contributing to the market's
rebound included: establishment of an IMF loan program for Brazil; increased
funding of the International Monetary Fund's capital base; and the appearance of
Japanese actions to correct economic and banking system weakness. The recovery
in equity markets provided a supportive underpinning to credit markets
generally. The market experienced renewed volatility in December and January
1999, primarily due to flare-ups in the Brazilian fiscal adjustment process.
The Fund generally benefited from being underweighted in Latin America and
overweighted in Eastern Europe (excluding Russia) and Asia. The Fund has
emphasized what we view as markets with stable and/or improving economic
fundamentals and manageable debt service obligations, such as Mexico, Panama,
and Bulgaria. Consistent with our global focus, we have also sought to diversify
by investing in markets such as Poland, South Korea, and Morocco that we believe
appear less susceptible to commodity price downturns as well as contagion
effects from Latin America and/or Russia. Exposure to Russia this past summer
hurt Fund performance. Although the Fund had no ruble exposure, it was adversely
affected by the sell-off in dollar-denominated global bonds.
Large swings in returns are not unprecedented for this asset class. Returns on
Brady bonds experienced similar declines in the first quarter of 1995 but
rebounded and provided over 30% returns for the year. Average annual Brady bond
returns were just over 19% between 1991 and 1998 according to J.P. Morgan.
With emerging market yields at the high end of historical levels, we believe
this market offers some tremendous opportunities. The challenge, in our view, is
to identify credits with sound or improving fundamentals and manageable debt
profiles that can survive and thrive in an increasingly discriminating market.
Clearly, risks remain. The Brazilian situation remains unsettled. Low commodity
prices continue to pressure fiscal and current accounts in a number of
countries, particularly in Latin America. Concerns persist that China may
devalue its currency.
We believe certain credits are better insulated from these risks than others,
however, and may still offer investors a substantial risk premium in the form of
high yields. Among major Latin American economies, for example, Mexico has
benefited from extensive links to the strong U.S. economy, reduced dependence on
oil, and improved external debt levels. Beyond Latin America, which comprises
over 80% of the EMBI+ index, we have begun to see improvements in a number of
countries -- South Korea being a notable example -- that have made favorable
contributions to the Fund's performance. Signs of turnaround are evident in
other developing Asian economies as well. Select Eastern European countries,
particularly Poland and Bulgaria, are candidates for upgrades by credit rating
agencies. Bulgaria, for example, has been an impressive turnaround story that
has secured financing commitments from official and multilateral creditors
sufficient to cover its debt service needs over the next few years.
It is important to note that while the balance of risk in emerging markets has
shifted to Latin America, bond yields have generally adjusted to reflect this
risk. So while the Fund has benefited from underweighting the region, we are
comfortable with existing Latin positions. Recent rallies in Asian credits may
offer opportunities to take profits and re-allocate to cheaper credits with more
favorable risk-reward profiles. More than ever, we believe the Fund's global
approach to building a diversified portfolio should serve both to reduce
volatility and enhance returns.
Respectfully,
/s/ Matthew W. Ryan
Matthew W. Ryan
Portfolio Manager
MFS SMALL CAP VALUE FUND
Dear Shareholders,
For the six months ended January 31, 1999, both Class A and Class I shares
provided a total return of 3.23%, including the reinvestment of distributions
but excluding the effects of any sales charges. This compares to a 2.40% return
for the Russell 2000 Total Return Index, an unmanaged index comprised of 2,000
of the smallest U.S.-domiciled company common stocks that are traded on the New
York Stock Exchange, the American Stock Exchange, and NASDAQ.
The Fund focuses on finding the best ideas in stocks of companies in the
small-capitalization arena. Because the Fund's objective emphasizes value, these
stocks not only must have solid long-term growth prospects but also must be
available at attractive prices.
Over the past six months we have seen good performance from stocks in the health
care, leisure and retail, consumer staples, and utilities and communications
sectors. In health care, Amerisource, a small drug distributor that has been
able to gain market share in niche markets thanks to a better customer service
model than some of the major names, has performed well. Certain media stocks
also did well, including Gemstar International, which is building a platform
from which customers will be able to use their televisions to access the
Internet to buy and sell products and view advertising specific to their needs
and interests. The company has formed partnerships with industry leaders
Microsoft and Sony, and we feel it will be one of the leading franchises in the
age of prevalent Internet access.
Computer retailer CompUSA, on the other hand, did not perform particularly well
over this period. The company is digesting its acquisition of Computer City, a
former competitor, more slowly than we had anticipated and has yet to generate
economies of scale and broader market penetration. The company is also faced
with declining prices for personal computers, which has impacted revenue growth.
We plan to hold on to the stock because we feel the company should begin to reap
the benefits of its acquisition sometime this year and because we feel PC prices
should begin to rise again soon.
Concentra Managed Care also underperformed over the past six months because, as
can happen with fast-growing small companies, it failed to scale its
infrastructure to accommodate growth. As a result, the company was forced to
lower its earnings estimates while it made internal investments to accommodate
its growth. We added to the stock based on this weakness because it is a market
leader in the growing worker's compensation cost-containment field. The company
also is a potential takeover candidate, which could boost its share price.
Over the period we have seen a continuation of the broad market's lack of
interest in small-cap stocks in favor of a narrow range of large-cap stocks. We
believe that we have found solid companies that are selling at good prices and
offer excellent growth prospects. At the same time, we expect to see additional
consolidation in the small-cap arena as large companies seek to grow in new
markets. This trend could have a positive impact on some of the Fund's holdings.
Looking ahead, we believe the economy is still growing, albeit at a more
moderate pace, and this bodes well for the Fund's stocks. We feel confident in
our research analysts' abilities to find attractively valued companies with
strong growth prospects that match the Fund's objectives.
Respectfully,
/s/ Alec C. Murray
Alec C. Murray
Associate Director of Equity Research
The committee of MFS research analysts is responsible for the day-to-day
management of the Fund under the general supervision of Mr. Murray.
MFS STRATEGIC VALUE FUND
Dear Shareholders,
For the six months ended January 31, 1999, Class A shares of the Fund provided a
total return of 7.23% and Class I shares 7.34%, including the reinvestment of
distributions but excluding the effects of any sales charges. These returns
compare to a 5.79% return for the Russell 1000 Value Index, which measures the
performance of companies with lower price-to-book ratios and lower forecasted
growth. The Russell 1000 companies are the 1,000 largest companies in the
Russell 3000 Index, which is made up of the 3,000 largest U.S. companies based
on total market capitalization.
The Fund invests in attractively valued stocks of companies that may be
currently out of favor for a variety of reasons but that we believe represent
strong franchises with the potential to return to favor over the long term. We
look for fundamentally sound stocks that are experiencing transitory issues
causing them to be neglected by the market. Companies can fall from favor for
reasons as varied as geographical exposure to troubled economies (such as those
in Latin America and Asia), regulatory changes, or unfavorable short-term
business or economic cycles.
Though the Fund is focused on the financial services, utilities and
telecommunications, and energy sectors, these weightings are a function of
individual stock selection and individual valuations, rather than predictions on
broad sectors. Strong performances from many of these stocks enabled the Fund to
beat its benchmark over the period. For example, Cigna and Chubb, insurance
companies in the financial services sector, have modest valuations and performed
well due to continued consolidation in that industry. Consolidations should help
these companies as they look to gain economies of scale in their ability to
gather financial assets from customers.
Mergers and acquisitions played a key role in the Fund's performance, spurring
higher stock prices for Fund holdings. Energy companies Mobil Corp. and Exxon
merged, as did GTE and Bell Atlantic in the telecommunications market, while
industrial products manufacturer Elsag Bailey was acquired by ABB.
AT&T has performed well and, here too, we have been impressed with the company's
new management and its ability to refocus from its traditional low- growth,
long-distance market to aggressively compete in the more lucrative local
residential market. The company's planned acquisition of Telecommunications,
Inc. is being perceived as a positive step in that direction. Also in
telecommunications, the combination of GTE and Bell Atlantic was seen by
investors as a positive move because it should allow these companies to gain a
better competitive position in local phone markets while expanding offerings
like Internet access and other telecommunications services to homes and
businesses.
Though the Fund outperformed its benchmark, we did have a few stocks that
disappointed over the past six months. Bank America has performed poorly because
its merger with NationsBank is playing out more slowly than investors had
anticipated. At the same time, the flat yield curve, a measure of the difference
between the interest rate at which a bank loans money and its costs to fund
those loans, put pressure on its net interest profit margin. We currently plan
to stick with the stock, because we anticipate cost savings from the merger will
ultimately pay off for shareholders, and a return to a more favorable yield
curve should also aid these stocks. Computer Associates also performed poorly
during the period, as some of its multinational customers are delaying software
purchases due to fallout from the troubles in Asian economies. We have long-term
confidence in the company's management and products and feel that the stock has
been unjustifiably sold off by investors. TRW, a U.S. auto parts manufacturer,
has lagged as investors contemplate its proposed acquisition of LucasVarity, a
European auto parts manufacturer. We feel that the prospects for cost savings
and restructuring from the combined entity are quite favorable.
The market is currently highly polarized, which has resulted in the creation of
distinct camps of "have" and "have not" stocks. In this environment, stocks that
fall out of favor tend to correct to levels that are not always reflective of
their long-term fundamental outlooks. In general, our outlook for corporate
profits is mixed, and we've struck a cautious tone in our investment decisions.
This also represents the opportunity to buy what we feel are strong companies at
attractive valuations.
Respectfully,
/s/ Kenneth J. Enright
Kenneth J. Enright
Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
Associate Director of Equity Research and are only through the end of the period
of the reports as stated on the cover. The managers' and director's views are
subject to change at any time based on market and other conditions, and no
forecasts can be guaranteed.
These portfolios are actively managed, and holdings are subject to change.
It is not possible to invest directly in an index.
<PAGE>
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results for the applicable time periods. Investment results
reflect the percentage change in net asset value, including reinvestment of
dividends.
CUMULATIVE TOTAL RATES OF RETURN AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
EMERGING MARKETS DEBT FUND(1)
CLASS A INVESTMENT RESULTS CLASS I INVESTMENT RESULTS
6 Months Life of Fund* 6 Months Life of Fund*
- ---------------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return -15.62% -19.16% Cumulative Total Return -15.62% -19.17%
- ---------------------------------------------------------- ------------------------------------------------
SEC Results -- -23.81%
- ----------------------------------------------------------
<CAPTION>
SMALL CAP VALUE FUND(2)
CLASS A INVESTMENT RESULTS CLASS I INVESTMENT RESULTS
6 Months Life of Fund* 6 Months Life of Fund*
- ---------------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return + 3.23% + 3.33% Cumulative Total Return + 3.23% + 3.34%
- ---------------------------------------------------------- ------------------------------------------------
SEC Results -- - 2.61%
- ----------------------------------------------------------
<CAPTION>
STRATEGIC VALUE FUND
CLASS A INVESTMENT RESULTS CLASS I INVESTMENT RESULTS
6 Months Life of Fund* 6 Months Life of Fund*
- ---------------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return + 7.23% +14.42% Cumulative Total Return + 7.34% +14.32%
- ---------------------------------------------------------- ------------------------------------------------
SEC Results -- + 7.84%
- ----------------------------------------------------------
* For the period from the commencement of each Fund's investment operations, March 17, 1998, through January 31, 1999.
(1) 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.
Please see the prospectus for details.
(2) Investing in small or emerging growth companies involves greater risk than is customarily associated with more-established
companies. These risks may increase share price volatility.
</TABLE>
All results represent past performance and are not necessarily an indication of
future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
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.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - JANUARY 31, 1999
MFS EMERGING MARKETS DEBT FUND
<TABLE>
<CAPTION>
Bonds - 87.3%
- ----------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Argentina - 9.3%
Republic of Argentina, 6.063s, 2023 $ 85 $ 58,335
Republic of Argentina, 11s, 2005 20 18,100
--------
$ 76,435
- ----------------------------------------------------------------------------------------
Brazil - 13.2%
Banco Nacional De Desenvolvime, 15.224s, 2008
(Banks and Credit Cos.)## $ 50 $ 33,750
Federal Republic of Brazil, 6.125s, 2024 60 32,328
Federal Republic of Brazil, 10.125s, 2027 70 42,266
--------
$108,344
- ----------------------------------------------------------------------------------------
Bulgaria - 7.4%
National Republic of Bulgaria, 6.688s, 2011 $ 90 $ 60,913
- ----------------------------------------------------------------------------------------
Colombia - 3.6%
Republic of Colombia, 7.625s, 2007 $ 15 $ 12,300
Republic of Colombia, 8.375s, 2027 25 17,600
--------
$ 29,900
- ----------------------------------------------------------------------------------------
Croatia - 3.6%
Republic of Croatia, 6.563s, 2006 $ 35 $ 29,562
- ----------------------------------------------------------------------------------------
Greece - 2.5%
Hellenic Republic, 8.6s, 2008 GRD 5,000 $ 20,742
- ----------------------------------------------------------------------------------------
Mexico - 18.5%
Petroleos Mexicanos, 9.574s, 2005 (Oil)## $ 50 $ 44,500
United Mexican States, 9.875s, 2007 40 39,600
United Mexican States, 11.5s, 2026 65 68,575
--------
$152,675
- ----------------------------------------------------------------------------------------
Morocco - 4.4%
Morocco Reconstruction and Consolidation, 6.063s, 2009 $ 48 $ 36,667
- ----------------------------------------------------------------------------------------
Panama - 3.8%
Republic of Panama, 8.875s, 2027 $ 35 $ 31,500
- ----------------------------------------------------------------------------------------
Peru - 3.5%
Republic of Peru, 4s, 2017 $ 50 $ 28,690
- ----------------------------------------------------------------------------------------
Philippines - 4.4%
Republic of Philippines, 9.875s, 2019 $ 35 $ 35,875
- ----------------------------------------------------------------------------------------
Poland - 5.1%
PTC International Finance BV, 0s to 2002, 10.75s, 2007
(Telecommunications) $ 60 $ 41,775
- ----------------------------------------------------------------------------------------
Russia - 3.1%
Russian Federation, 8.75s, 2005## $ 100 $ 25,500
- ----------------------------------------------------------------------------------------
South Korea - 3.9%
Republic of Korea, 8.875s, 2008 $ 30 $ 31,988
- ----------------------------------------------------------------------------------------
Venezuela - 1.0%
Republic of Venezuela, 9.25s, 2027 $ 15 $ 8,550
- ----------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $771,795) $719,116
- ----------------------------------------------------------------------------------------
Portfolio of Investments (Unaudited) - continued
Short-Term Obligation - 9.7%
- ----------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 2/01/99, at
Amortized Cost $ 80 $ 80,000
- ----------------------------------------------------------------------------------------
Total Investments (Identified Cost, $851,795) $799,116
Other Assets, Less Liabilities - 3.0% 24,294
- ----------------------------------------------------------------------------------------
Net Assets - 100.0% $823,410
- ----------------------------------------------------------------------------------------
##SEC Rule 144A restriction.
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the
U.S. dollar. A list of abbreviations is shown below.
GRD = Greek Drachma HKD = Hong Kong Dollars
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - JANUARY 31, 1999
MFS SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
Stocks - 95.0%
- --------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 87.5%
Automotive - 1.4%
Dura Automotive Systems, Inc.* 225 $ 7,228
Tower Automotive, Inc.* 229 5,782
--------
$ 13,010
- --------------------------------------------------------------------------------------------
Banks and Credit Companies - 2.7%
First Midwest Bancorp, Inc. 247 $ 8,985
Provident Bankshares Corp. 301 8,127
St. Paul Bancorp, Inc. 370 8,556
--------
$ 25,668
- --------------------------------------------------------------------------------------------
Business Services - 4.8%
Diamond Technology Partners, Inc., "A"* 275 $ 8,216
Learning Tree International, Inc.* 454 4,157
Modis Professional Services, Inc.* 1,103 16,062
Policy Management Systems Corp.* 255 13,690
Technology Solutions Co.* 376 3,149
--------
$ 45,274
- --------------------------------------------------------------------------------------------
Chemicals - 0.8%
Cambrex Corp. 307 $ 7,579
- --------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.3%
Activision, Inc.* 969 $ 12,113
- --------------------------------------------------------------------------------------------
Computer Software - Systems - 4.5%
Aspen Technology, Inc.* 337 $ 5,960
Rational Software Corp.* 318 10,514
Summit Design, Inc.* 926 6,598
Synopsys, Inc.* 336 19,509
--------
$ 42,581
- --------------------------------------------------------------------------------------------
Conglomerates - 1.3%
Eastern Enterprises 300 $ 12,075
- --------------------------------------------------------------------------------------------
Consumer Goods and Services - 3.5%
LoJack Corp.* 2,872 $ 32,759
- --------------------------------------------------------------------------------------------
Containers - 1.6%
Gaylord Container Corp.* 1,202 $ 7,888
Smurfit Stone Container Corp.* 431 6,950
--------
$ 14,838
- --------------------------------------------------------------------------------------------
Electronics - 5.0%
Burr-Brown Corp.* 1,007 $ 24,105
Lattice Semiconductor Corp.* 414 22,667
--------
$ 46,772
- --------------------------------------------------------------------------------------------
Entertainment - 3.7%
Gemstar International Group Ltd.* 272 $ 15,742
Hearst-Argyle Television, Inc.* 300 8,250
Primadonna Resorts, Inc.* 1,100 10,587
--------
$ 34,579
- --------------------------------------------------------------------------------------------
Financial Institutions - 6.7%
Imperial Bancorp* 335 $ 6,156
Keystone Financial, Inc. 414 14,645
Legg Mason, Inc. 300 8,925
Peoples Heritage Financial Group 414 7,452
U.S. Trust Corp. 130 9,490
UMB Financial Corp. 162 7,209
Webster Financial Corp. 308 9,201
--------
$ 63,078
- --------------------------------------------------------------------------------------------
Food and Beverage Products - 4.3%
Golden State Vinters, Inc.* 573 $ 8,559
Keebler Foods Co.* 500 18,125
Suiza Foods Corp.* 400 14,225
--------
$ 40,909
- --------------------------------------------------------------------------------------------
Forest and Paper Products - 0.2%
Bowater, Inc. 55 $ 2,148
- --------------------------------------------------------------------------------------------
Insurance - 4.2%
Annuity & Life Re Holdings Ltd. 130 $ 2,949
Financial Security Assured Holdings Ltd. 100 5,494
FPIC Insurance Group, Inc.* 359 17,254
Nationwide Financial Services, Inc., "A" 280 13,423
--------
$ 39,120
- --------------------------------------------------------------------------------------------
Machinery - 0.6%
Federal Signal Corp. 200 $ 5,313
- --------------------------------------------------------------------------------------------
Medical and Health Products - 3.9%
AmeriSource Health Corp., "A"* 107 $ 8,292
King Pharmaceuticals, Inc.* 263 6,345
Mentor Corp. 326 5,990
PSS World Medical, Inc.* 1,030 16,094
--------
$ 36,721
- --------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 5.2%
Concentra Managed Care, Inc.* 994 $ 11,431
Cytyc Corp.* 900 17,213
Mid Atlantic Medical Services, Inc.* 1,030 10,493
Renal Care Group, Inc.* 322 9,982
--------
$ 49,119
- --------------------------------------------------------------------------------------------
Metals and Minerals - 1.0%
Kaiser Aluminum Corp.* 758 $ 3,885
Minerals Technologies, Inc. 149 5,895
--------
$ 9,780
- --------------------------------------------------------------------------------------------
Oil Services - 0.3%
Global Industries, Inc.* 466 $ 2,811
- --------------------------------------------------------------------------------------------
Oils - 0.3%
Newfield Exploration Co.* 161 $ 2,999
- --------------------------------------------------------------------------------------------
U.S. Stocks - continued
Pollution Control - 1.6%
Superior Services, Inc.* 406 $ 6,623
Waste Industries, Inc.* 460 8,682
--------
$ 15,305
- --------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 3.0%
Beacon Capital Partners, Inc.*## 413 $ 6,556
Highwoods Properties, Inc. 346 8,347
Prentiss Properties Trust* 328 6,950
Prime Group Realty Trust 413 6,066
--------
$ 27,919
- --------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.0%
Extended Stay America, Inc.* 1,000 $ 9,313
- --------------------------------------------------------------------------------------------
Special Products and Services - 3.4%
MCN Energy Group, Inc. 389 $ 6,905
Rayovac Corp.* 453 11,636
SPX Corp.* 86 6,085
USEC, Inc. 487 7,061
--------
$ 31,687
- --------------------------------------------------------------------------------------------
Stores - 8.7%
BJ's Wholesale Club, Inc.* 361 $ 16,064
CompUSA, Inc.* 743 9,380
CSK Auto Corp.* 587 19,811
Elder-Beerman Stores Corp.* 596 5,327
Micro Warehouse, Inc.* 537 20,943
Petco Animal Supplies, Inc.* 972 7,837
The Sports Authority, Inc.* 698 2,836
--------
$ 82,198
- --------------------------------------------------------------------------------------------
Technology - 0.1%
Tundra Semiconductor 100 $ 610
- --------------------------------------------------------------------------------------------
Telecommunications - 10.4%
Amdocs Ltd.* 886 $ 19,270
American Tower Corp., "A"* 500 12,875
Aspect Telecommunications Corp.* 821 7,389
Global TeleSystems Group, Inc.* 300 18,788
Hyperion Telecommunications, Inc., "A"* 1,415 18,749
IXC Communications, Inc.* 150 5,325
L-3 Communications Holding, Inc.* 378 15,238
--------
$ 97,634
- --------------------------------------------------------------------------------------------
Transportation - 0.2%
Dynamex, Inc.* 572 $ 2,288
- --------------------------------------------------------------------------------------------
Utilities - Electric - 1.8%
CalEnergy Co., Inc.* 534 $ 17,021
- --------------------------------------------------------------------------------------------
Total U.S. Stocks $823,221
- --------------------------------------------------------------------------------------------
Foreign Stocks - 7.5%
Bermuda - 2.1%
Mutual Risk Management Ltd. (Insurance) 341 $ 12,532
Stirling Cooke Brown Holdings Ltd. (Insurance) 481 7,455
--------
$ 19,987
- --------------------------------------------------------------------------------------------
Greece - 0.5%
Stet Hellas Telecommunications S.A. (Telecommunications)* 100 $ 4,713
- --------------------------------------------------------------------------------------------
Ireland - 0.7%
Anglo Irish Bank PLC (Banks and Credit Cos.)* 2,137 $ 6,152
- --------------------------------------------------------------------------------------------
Italy - 0.8%
Industrie Natuzzi S.p.A., ADR (Consumer Goods and Services) 343 $ 7,289
- --------------------------------------------------------------------------------------------
Japan - 1.2%
Fujimi, Inc. (Electronics) 100 $ 4,044
Meitec Corp. (Computer Software - Systems) 300 7,357
--------
$ 11,401
- --------------------------------------------------------------------------------------------
Netherlands - 0.2%
Fugro N.V. (Engineering)* 117 $ 2,320
- --------------------------------------------------------------------------------------------
Sweden - 0.6%
Celsius AB (Aerospace) 430 $ 5,726
- --------------------------------------------------------------------------------------------
Switzerland - 0.5%
Barry Callebaut AG (Food and Beverage Products) 21 $ 4,302
- --------------------------------------------------------------------------------------------
United Kingdom - 0.9%
Taylor Nelson Sofres PLC (Market Research) 4,574 $ 8,333
- --------------------------------------------------------------------------------------------
Total Foreign Stocks $ 70,223
- --------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $895,683) $ 893,44
Other Assets, Less Liabilities - 5.0% 47,076
- --------------------------------------------------------------------------------------------
Net Assets - 100.0% $940,520
- --------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - JANUARY 31, 1999
MFS STRATEGIC VALUE FUND
<TABLE>
<CAPTION>
Stocks - 94.0%
- ---------------------------------------------------------------------------------------------
Issuer Shares Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 86.8%
Aerospace - 3.5%
Allied Signal, Inc. 294 $ 11,466
Lockheed-Martin Corp. 125 4,406
United Technologies Corp. 100 11,944
--------
$ 27,816
- ---------------------------------------------------------------------------------------------
Automotive - 2.2%
Ford Motor Co. 133 $ 8,171
TRW, Inc. 200 9,613
--------
$ 17,784
- ---------------------------------------------------------------------------------------------
Banks and Credit Companies - 6.4%
BankAmerica Corp. 200 $ 13,375
Chase Manhattan Corp. 75 5,770
National City Corp. 220 15,634
US Bancorp 275 9,264
Wells Fargo Co.* 225 7,861
--------
$ 51,904
- ---------------------------------------------------------------------------------------------
Business Machines - 1.2%
Xerox Corp. 75 $ 9,300
- ---------------------------------------------------------------------------------------------
Cellular Telephones - 1.3%
Telephone & Data Systems, Inc. 200 $ 10,650
- ---------------------------------------------------------------------------------------------
Chemicals - 0.5%
Du Pont (E.I.) de Nemours & Co., Inc. 75 $ 3,839
- ---------------------------------------------------------------------------------------------
Computer Software - Systems - 1.6%
Computer Associates International, Inc. 250 $ 12,656
- ---------------------------------------------------------------------------------------------
Conglomerates - 1.0%
Eastern Enterprises 200 $ 8,050
- ---------------------------------------------------------------------------------------------
Consumer Goods and Services - 7.9%
Black & Decker Corp. 175 $ 9,275
Kimberly-Clark Corp. 170 8,468
Monsanto Co. 250 11,891
Philip Morris Cos., Inc. 185 8,695
Rubbermaid, Inc. 178 5,740
Tyco International Ltd. 250 19,266
--------
$ 63,335
- ---------------------------------------------------------------------------------------------
Electrical Equipment - 1.0%
Emerson Electric Co. 140 $ 8,146
- ---------------------------------------------------------------------------------------------
Entertainment - 3.1%
Harrah's Entertainment, Inc.* 490 $ 7,289
Jacor Communications, Inc.* 90 6,266
MediaOne Group, Inc.* 200 11,213
--------
$ 24,768
- ---------------------------------------------------------------------------------------------
Financial Institutions - 4.7%
Associates First Capital Corp., "A" 550 $ 22,309
Federal Home Loan Mortgage Corp. 250 15,500
--------
$ 37,809
- ---------------------------------------------------------------------------------------------
U.S. Stocks - continued
Food and Beverage Products - 3.9%
Anheuser Busch Cos., Inc. 165 $ 11,663
Archer-Daniels-Midland Co. 650 9,831
Hershey Foods Corp. 175 9,844
--------
$ 31,338
- ---------------------------------------------------------------------------------------------
Forest and Paper Products - 1.6%
Bowater, Inc. 150 $ 5,860
Champion International Corp. 100 3,506
Georgia-Pacific Corp. 50 3,225
--------
$ 12,591
- ---------------------------------------------------------------------------------------------
Insurance - 8.4%
Allstate Corp. 120 $ 4,508
Chubb Corp. 140 8,225
CIGNA Corp. 75 6,178
Equitable Cos., Inc. 143 9,974
Lincoln National Corp. 168 13,996
ReliaStar Financial Corp. 100 4,144
Torchmark Corp. 260 8,531
Transamerica Corp. 220 12,320
--------
$ 67,876
- ---------------------------------------------------------------------------------------------
Machinery - 2.0%
Eaton Corp. 120 $ 8,355
Lear Corp.* 200 7,875
--------
$ 16,230
- ---------------------------------------------------------------------------------------------
Medical and Health Products - 2.2%
American Home Products Corp. 300 $ 17,606
- ---------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 4.6%
Columbia/HCA Healthcare Corp. 250 $ 4,531
Genesis Health Ventures, Inc.* 900 7,425
HealthSouth Corp.* 600 8,138
United Healthcare Corp. 375 16,781
--------
$ 36,875
- ---------------------------------------------------------------------------------------------
Metals and Minerals - 0.9%
Alcoa, Inc. 90 $ 7,526
- ---------------------------------------------------------------------------------------------
Oil Services - 0.9%
Noble Drilling Corp.* 275 $ 3,678
Schlumberger Ltd. 80 3,810
--------
$ 7,488
- ---------------------------------------------------------------------------------------------
Oils - 5.1%
Exxon Corp. 135 $ 9,509
Mobil Corp. 170 14,907
Newfield Exploration Co.* 450 8,381
Occidental Petroleum Corp. 550 8,285
--------
$ 41,082
- ---------------------------------------------------------------------------------------------
U.S. Stocks - continued
Railroads - 2.2%
Burlington Northern Santa Fe Railway Co. 200 $ 6,925
Wisconsin Central Transportation Corp.* 650 10,400
--------
$ 17,325
- ---------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 1.6%
Arden Realty, Inc. 300 $ 6,750
TriNet Corporate Realty Trust, Inc. 230 6,124
--------
$ 12,874
- ---------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.7%
Promus Hotel Corp.* 200 $ 5,975
- ---------------------------------------------------------------------------------------------
Special Products and Services - 0.9%
USEC, Inc. 500 $ 7,250
- ---------------------------------------------------------------------------------------------
Stores - 2.4%
American Stores Co. 270 $ 9,788
Rite Aid Corp. 200 9,825
--------
$ 19,613
- ---------------------------------------------------------------------------------------------
Supermarkets - 2.3%
Meyer (Fred), Inc.* 300 $ 18,750
- ---------------------------------------------------------------------------------------------
Telecommunications - 4.2%
AT&T Corp. 100 $ 9,075
GTE Corp. 150 10,125
Intermedia Communications, Inc.* 600 8,325
SBC Communications, Inc. 115 6,210
--------
$ 33,735
- ---------------------------------------------------------------------------------------------
Transportation - 2.6%
FDX Corp.* 100 $ 8,169
Union Pacific Corp. 250 12,859
--------
$ 21,028
- ---------------------------------------------------------------------------------------------
Utilities - Electric - 1.8%
CalEnergy Co., Inc.* 200 $ 6,375
Carolina Power & Light Co. 200 8,325
--------
$ 14,700
- ---------------------------------------------------------------------------------------------
Utilities - Gas - 4.1%
Coastal Corp. 260 $ 7,751
Columbia Energy Group 170 8,797
Public Service Company, Inc. 350 8,116
Union Pacific Resources Group, Inc. 1,000 8,063
--------
$ 32,727
- ---------------------------------------------------------------------------------------------
Total U.S. Stocks $698,646
- ---------------------------------------------------------------------------------------------
Foreign Stocks - 7.2%
France - 0.9%
Alcatel, SA (Telecommunications) 325 $ 7,475
- ---------------------------------------------------------------------------------------------
Ireland - 0.9%
Jefferson Smurfit Group PLC, ADR (Containers) 450 $ 7,565
- ---------------------------------------------------------------------------------------------
Netherlands - 1.8%
ING Groep N.V., ADR (Financial Services) 244 $ 14,442
- ---------------------------------------------------------------------------------------------
United Kingdom - 3.6%
BP Amoco PLC, ADR (Oils) 100 $ 8,113
British Aerospace PLC (Aerospace and Defense)* 1,406 10,674
Glaxo Wellcome PLC, ADR (Medical and Health Products) 150 10,181
--------
$ 28,968
- ---------------------------------------------------------------------------------------------
Total Foreign Stocks $ 58,450
- ---------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $733,220) $757,096
- ---------------------------------------------------------------------------------------------
Convertible Preferred Stock - 0.7%
- ---------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.7%
Newell Financial Trust Co., 5.25%## (Identified Cost, $5,738) 100 $ 5,281
- ---------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $738,958) $762,377
Other Assets, Less Liabilities - 5.3% 42,799
- ---------------------------------------------------------------------------------------------
Net Assets - 100.0% $805,176
- ---------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------------------------------------
EMERGING
MARKETS SMALL CAP STRATEGIC
JANUARY 31, 1999 DEBT FUND VALUE FUND VALUE FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost, $851,795,
$895,683 and $738,958, respectively) $799,116 $893,444 $762,377
Cash 7,967 42,500 25,086
Foreign currency, at value (identified cost, $0, $185 --
and $108, respectively)
180 105
Net receivable for forward foreign currency exchange
contracts to purchase 558 -- --
Receivable for investments sold 50,614 20,320 24,244
Interest and dividends receivable 13,628 126 845
-------- -------- --------
Total assets $871,883 $956,570 $812,657
-------- -------- --------
Liabilities:
Payable for Fund shares reacquired $ -- $ 1,974 $ 2,149
Payable for investments purchased 43,310 13,975 5,250
Net payable for forward foreign currency exchange
contracts to sell 1,100 -- --
Net payable for forward foreign currency exchange
contracts subject to master netting agreements 3,879 -- --
Accrued expenses and other liabilities 184 101 82
-------- -------- --------
Total liabilities $ 48,473 $ 16,050 $ 7,481
-------- -------- --------
Net assets $823,410 $940,520 $805,176
======== ======== ========
Net assets consist of:
Paid-in capital $1,072,545 $966,492 $742,366
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in
foreign currencies (57,124) (2,248) 23,416
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions (201,182) (22,406) 38,206
Accumulated undistributed net investment income
(loss) 9,171 (1,318) 1,188
-------- -------- --------
Total $823,410 $940,520 $805,176
======== ======== ========
Shares of beneficial interest outstanding:
Class A 107,964 37,250 60,083
Class I 1,621 59,315 13,425
-------- -------- --------
Total shares of beneficial interest outstanding 109,585 96,565 73,508
======== ======== ========
Net assets
Class A $811,229 $362,895 $658,309
Class I 12,181 577,625 146,867
-------- -------- --------
Total net assets $823,410 $940,520 $805,176
======== ======== ========
Class A shares:
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial interest
outstanding) $ 7.51 $ 9.74 $ 10.96
======== ======== ========
Class I shares:
Net asset value and redemption price per share
(net assets / shares of beneficial interest
outstanding) $ 7.51 $ 9.74 $ 10.94
======== ======== ========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------------------------------------
EMERGING
MARKETS SMALL CAP STRATEGIC
SIX MONTHS ENDED JANUARY 31, 1999 DEBT FUND VALUE FUND VALUE FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss):
Income -
Interest $ 46,477 $ 1,252 $ 74
Dividends -- 2,945 6,005
Foreign taxes withheld -- (34) (17)
----------- ----------- -----------
Total investment income $ 46,477 $ 4,163 $ 6,062
----------- ----------- -----------
Expenses -
Management fees $ 3,410 $ 3,795 $ 2,839
Shareholder servicing agent fee 453 475 419
Distribution and service fee (Class A) 1,390 612 1,039
Administrative fee 39 43 38
Custodian fee 2,522 2,970 2,909
Printing 775 4,757 1,357
Postage 110 240 220
Auditing fees 7,891 6,612 3,612
Legal fees 1,827 1,540 1,232
Registration fee 2,700 1,990 2,000
Miscellaneous 97 109 249
----------- ----------- -----------
Total expenses $ 21,214 $ 23,143 $ 15,914
Fees paid indirectly (202) (131) (103)
Preliminary reduction of expenses by investment
adviser and distributor (14,380) (17,531) (11,076)
----------- ----------- -----------
Net expenses $ 6,632 $ 5,481 $ 4,735
----------- ----------- -----------
Net investment income (loss) $ 39,845 $ (1,318) $ 1,327
----------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (197,658) $ (22,188) $ 38,403
Foreign currency transactions 22 (44) 6
----------- ----------- -----------
Net realized gain (loss) on investments and
foreign currency transactions $ (197,636) $ (22,232) $ 38,409
----------- ----------- -----------
Change in unrealized appreciation (depreciation) -
Investments $ 12,787 $ 55,197 $ 23,615
Translation of assets and liabilities in foreign
currencies (5,258) 37 (3)
----------- ----------- -----------
Net unrealized gain on investments and foreign
currency translation $ 7,529 $ 55,234 $ 23,612
----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments and foreign currency $ (190,107) $ 33,002 $ 62,021
----------- ----------- -----------
Increase (decrease) in net assets from
operations $ (150,262) $ 31,684 $ 63,348
=========== =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 1999 JULY 31, 1998*
EMERGING MARKETS DEBT FUND (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 39,845 $ 24,606
Net realized loss on investments and foreign currency
transactions (197,636) (1,669)
Net unrealized gain (loss) on investments and foreign
currency translation 7,529 (64,653)
----------- -----------
Decrease in net assets from operations $ (150,262) $ (41,716)
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (56,343) $ --
From net investment income (Class I) (814) --
----------- -----------
Total distributions declared to shareholders $ (57,157) $ --
----------- -----------
Net increase in net assets from Fund share transactions $ 71,084 $ 1,001,461
----------- -----------
Total increase (decrease) in net assets $ (136,335) $ 959,745
Net assets:
At beginning of period 959,745 --
----------- -----------
At end of period (including accumulated undistributed
net investment income of $9,171 and $26,483,
respectively) $ 823,410 $ 959,745
=========== ===========
* For the period from the commencement of the Fund's investment operations, March 17, 1998, through July 31, 1998.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets - continued
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 1999 JULY 31, 1998*
SMALL CAP VALUE FUND (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (1,318) $ 354
Net realized gain (loss) on investments and foreign
currency transactions (22,232) 54,961
Net unrealized gain (loss) on investments and foreign
currency translation 55,234 (57,482)
----------- -----------
Increase (decrease) in net assets from operations $ 31,684 $ (2,167)
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (110) $ --
From net investment income (Class I) (167) --
From net realized gain on investments and foreign
currency transactions (Class A) (21,973) --
From net realized gain on investments and foreign
currency transactions (Class I) (33,239) --
----------- -----------
Total distributions declared to shareholders $ (55,489) $ --
----------- -----------
Net increase in net assets from Fund share transactions $ 60,262 $ 906,230
----------- -----------
Total increase in net assets $ 36,457 $ 904,063
Net assets:
At beginning of period 904,063 --
----------- -----------
At end of period (including accumulated net
investment loss of $1,318 and accumulated
undistributed net investment income of $277, respectively) $ 940,520 $ 904,063
=========== ===========
*For the period from the commencement of the Fund's investment operations, March 17, 1998, through July 31, 1998.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets - continued
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 1999 JULY 31, 1998*
STRATEGIC VALUE FUND (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,327 $ 3,053
Net realized gain on investments and foreign currency
transactions 38,409 35,585
Net unrealized gain (loss) on investments and foreign
currency translation 23,612 (196)
----------- -----------
Increase in net assets from operations $ 63,348 $ 38,442
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (2,574) $ --
From net investment income (Class I) (615) --
From net realized gain on investments and foreign
currency transactions (Class A) (28,888) --
From net realized gain on investments and foreign
currency transactions (Class I) (6,903) --
----------- -----------
Total distributions declared to shareholders $ (38,980) $ --
----------- -----------
Net increase in net assets from Fund share transactions $ 29,920 $ 712,446
----------- -----------
Total increase in net assets $ 54,288 $ 750,888
Net assets:
At beginning of period 750,888 --
----------- -----------
At end of period (including accumulated undistributed
net investment income of $1,188 and $3,050,
respectively) $ 805,176 $ 750,888
=========== ===========
*For the period from the commencement of the Fund's investment operations, March 17, 1998, through July 31, 1998.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS DEBT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 1999 JULY 31, 1998* JANUARY 31, 1999 JULY 31, 1998*
(UNAUDITED) (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 9.58 $ 10.00 $ 9.58 $ 10.00
------- ------- ------- -------
Income from investment operations# -
Net investment income(S) $ 0.39 $ 0.25 $ 0.36 $ 0.25
Net realized and unrealized loss on
investments and foreign currency
transactions (1.90) (0.67) (1.87) (0.67)
------- ------- ------- -------
Total from investment operations $ (1.51) $ (0.42) $ (1.51) $ (0.42)
------- ------- ------- -------
Less distributions declared to shareholders
from net investment income $ (0.56) $ -- $ (0.56) $ --
------- ------- ------- -------
Net asset value - end of period $ 7.51 $ 9.58 $ 7.51 $ 9.58
======= ======= ======= =======
Total return (15.62)%++ (4.20)%++ (15.62)%++ (4.20)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.70%+ 1.70%+ 1.70%+ 1.70%+
Net investment income 9.93%+ 6.65%+ 9.83%+ 6.92%+
Portfolio turnover 181% 68% 181% 68%
Net assets at end of period (000 omitted) $ 811 $ 959 $ 12 $ 1
* For the period from the commencement of the Fund's investment operations, March 17, 1998, through July 31, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this
expense offset arrangement.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the other expenses of the Fund, exclusive of
management and distribution and service fees, at not more than 1.65% of average daily net assets. The investment adviser and
the distributor voluntarily waived their fees, respectively, for the periods indicated. To the extent actual expenses
were over this limitation, and the waivers had not been in place, the net investment income per share and the ratios would
have been:
Net investment income $ 0.25 $ 0.06 $ 0.24 $ 0.07
Ratios (to average net assets):
Expenses## 5.29%+ 6.89%+ 4.94%+ 6.54%+
Net investment income 6.34%+ 1.46%+ 6.59%+ 2.08%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 1999 JULY 31, 1998* JANUARY 31, 1999 JULY 31, 1998*
(UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 10.02 $ 10.00 $ 10.02 $ 10.00
------- ------- ------- -------
Income from investment operations# -
Net investment income (loss)(S) $ (0.01) $ 0.01 $ (0.01) $ 0.01
Net realized and unrealized gain on
investments and foreign currency
transactions 0.33 0.01 0.33 0.01
------- ------- ------- -------
Total from investment operations $ 0.32 $ 0.02 $ 0.32 $ 0.02
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ 0.00** $ -- $ 0.00** $ --
From net realized gain on investments and
foreign currency transactions (0.60) -- (0.60) --
------- ------- ------- -------
Total distributions declared to
shareholders $ (0.60) $ -- $ (0.60) $ --
------- ------- ------- -------
Net asset value - end of period $ 9.74 $ 10.02 $ 9.74 $ 10.02
======= ======= ======= =======
Total return 3.23%++ 0.10%++ 3.23%++ 0.10%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.33%+ 1.32%+ 1.33%+ 1.32%+
Net investment income (loss) (0.31)%+ 0.13%+ (0.32)%+ 0.10%+
Portfolio turnover 49% 67% 49% 67%
Net assets at end of period (000 omitted) $ 363 $ 418 $ 578 $ 486
* For the period from the commencement of the Fund's investment operations, March 17, 1998, through July 31, 1998.
** Per share amount was less than $0.01.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this
expense offset arrangement.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the other expenses of the Fund, exclusive
of management and distribution and service fees, at not more than 1.30% of average daily net assets. The investment adviser
and the distributor voluntarily waived their fees, respectively, for the periods indicated. To the extent actual expenses
were over this limitation, and the waivers had not been in place, the net investment loss per share and the ratios would
have been:
Net investment loss $ (0.20) $ (0.28) $ (0.19) $ (0.26)
Ratios (to average net assets):
Expenses## 5.71%+ 8.71%+ 5.36%+ 8.36%+
Net investment loss (4.69)%+ (7.26)%+ (4.35)%+ (6.94)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------------
STRATEGIC VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 1999 JULY 31, 1998* JANUARY 31, 1999 JULY 31, 1998*
(UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class I
- ------------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 10.66 $ 10.00 $ 10.65 $ 10.00
------- ------- ------- -------
Income from investment operations# -
Net investment income(S) $ 0.02 $ 0.05 $ 0.02 $ 0.05
Net realized and unrealized gain on
investments and foreign currency
transactions 0.82 0.61 0.81 0.60
------- ------- ------- -------
Total from investment operations $ 0.84 $ 0.66 $ 0.83 $ 0.65
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.04) $ -- $ (0.04) $ --
From net realized gain on investments and
foreign currency transactions (0.50) -- (0.50) --
------- ------- ------- -------
Total distributions declared to
shareholders $ (0.54) $ -- $ (0.54) $ --
------- ------- ------- -------
Net asset value - end of period $ 10.96 $ 10.66 $ 10.94 $ 10.65
======= ======= ======= =======
Total return 7.23%++ 6.70%++ 7.34%++ 6.50%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.27%+ 1.26%+ 1.27%+ 1.26%+
Net investment income 0.34%+ 1.22%+ 0.39%+ 1.19%+
Portfolio turnover 61% 48% 61% 48%
Net assets at end of period (000 omitted) $ 658 $ 585 $ 147 $ 166
* For the period from the commencement of the Fund's investment operations, March 17, 1998, through July 31, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this
expense offset arrangement.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the other expenses of the Fund, exclusive of
management and distribution and service fees, at not more than 1.25% of average daily net assets. The investment adviser and
the distributor voluntarily waived their fees, respectively, for the periods indicated. To the extent actual expenses
were over this limitation, and the waivers had not been in place, the net investment loss per share and the ratios would
have been:
Net investment loss $ (0.14) $ (0.23) $ (0.12) $ (0.25)
Ratios (to average net assets):
Expenses## 4.27%+ 8.58%+ 3.92%+ 8.23%+
Net investment loss (2.66)%+ (6.10)%+ (2.26)%+ (5.78)%+
</TABLE>
See notes to financial statements
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Small Cap Value Fund and MFS Strategic Value Fund are each a diversified
series of MFS Series Trust X (the Trust). The Emerging Markets Debt Fund is a
non-diversified series of 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. 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.
Forward Foreign Currency Exchange Contracts - Each 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. Each Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, each Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. Each 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, each Fund may
enter into contracts with the intent of changing the relative exposure of each
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 discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
The Emerging Markets Debt Fund can invest up to 100% of its portfolio in high-
yield securities rated below investment grade. Investments in high-yield
securities involve greater degrees of credit and market risk than investments in
higher-rated securities and tend to be more sensitive to economic conditions.
Fees Paid Indirectly - Each 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 each Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - Each 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. Each 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 each 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. Each 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.
At July 31, 1998, Emerging Markets Debt Fund had a capital loss carryforward of
$577 for federal income tax purposes which may be applied against any net
taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on July 31, 2006.
Multiple Classes of Shares of Beneficial Interest - Each Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of each 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.
(3) Transactions with Affiliates
Investment Adviser - Each Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.85%,
0.90%, and 0.75% of average daily net assets of the Emerging Market Debt Fund,
the Small Cap Value Fund, and the Strategic Value Fund, respectively. The
investment adviser has voluntarily agreed to waive its fee, which is reflected
as a preliminary reduction of expenses in the Statement of Operations.
Each Fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of each Fund's operating expenses, exclusive of
management, distribution, and service fees. Each Fund in turn will pay MFS an
expense reimbursement fee not greater than 1.65%, 1.30%, and 1.25% of average
daily net assets of the Emerging Markets Debt Fund, the Small Cap Value Fund,
and the Strategic Value Fund, respectively. To the extent that the expense
reimbursement fee exceeds a Fund's actual expenses, the excess will be applied
to amounts paid by MFS in prior years. At January 31, 1999, the aggregate
unreimbursed expenses owed to MFS by each Fund amounted to:
EMERGING MARKETS SMALL CAP STRATEGIC
DEBT FUND VALUE FUND VALUE FUND
---------------------------------------------------------------
$24,340 $31,526 $22,833
Each Fund pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of each Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of each Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trustees currently are
not receiving any payments for their services to each Fund.
Administrator - Each Fund has an administrative services agreement with MFS to
provide each Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Fund pays MFS an administrative fee
at the following annual percentages of each 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%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charge on sales of Class A shares of each Fund for the six
months ended January 31, 1999.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's distribution plan provides that each Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of each 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 each Fund's average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.10% per annum of each Fund's average daily net assets
attributable to Class A shares. Distribution and service fees under the Class A
distribution plan are currently being waived.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase.
There were no contingent deferred sales charges imposed during the six months
ended January 31, 1999.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of each Fund's average daily net assets at an effective annual
rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
<TABLE>
<CAPTION>
EMERGING MARKETS SMALL CAP STRATEGIC
DEBT FUND VALUE FUND VALUE FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases
Investments (non-U.S. government securities) $1,370,773 $498,437 $450,014
---------- -------- --------
Sales
Investments (non-U.S. government securities) $1,280,493 $383,157 $498,594
---------- -------- --------
The cost and unrealized appreciation or depreciation in value of the investments owned by each Fund, as
computed on a federal income tax basis, are as follows:
<CAPTION>
EMERGING MARKETS SMALL CAP STRATEGIC
DEBT FUND VALUE FUND VALUE FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate cost $ 851,795 $ 895,683 $ 738,958
--------- --------- ---------
Gross unrealized appreciation $ 21,770 $ 132,020 $ 69,467
Gross unrealized depreciation (74,449) (134,259) (46,048)
--------- --------- ---------
Net unrealized appreciation (depreciation) $ (52,679) $ (2,239) $ 23,419
========= ========= =========
</TABLE>
(5) Shares of Beneficial Interest
Each Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
Class A Shares
<TABLE>
<CAPTION>
SIX MONTHS ENDED JANUARY 31, 1999
--------------------------------------------------------------------------------------
EMERGING MARKETS SMALL CAP STRATEGIC
DEBT FUND VALUE FUND VALUE FUND
---------------------------- --------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 411 $ 3,289 2,159 $ 19,469 2,990 $ 33,056
Shares issued to
shareholders in
reinvestment of
distributions 7,532 56,340 2,461 22,074 2,982 31,459
Shares reacquired -- -- (9,130) (78,832) (777) (8,472)
----------- -------------- ----------- ------------- ---------- ------------
Net increase
(decrease) 7,943 $ 59,629 (4,510) $ (37,289) 5,195 $ 56,043
=========== ============== =========== ============= ========== ============
<CAPTION>
Class A Shares
PERIOD ENDED JULY 31, 1998*
--------------------------------------------------------------------------------------
EMERGING MARKETS SMALL CAP STRATEGIC
DEBT FUND VALUE FUND VALUE FUND
---------------------------- --------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 100,021 $ 1,000,210 54,402 $ 548,209 55,362 $ 557,894
Shares reacquired -- (2) (12,642) (131,214) (474) (4,991)
----------- -------------- ----------- ------------- ---------- ------------
Net increase 100,021 $ 1,000,208 41,760 $ 416,995 54,888 $ 552,903
=========== ============== =========== ============= ========== ============
<CAPTION>
Class I Shares
SIX MONTHS ENDED JANUARY 31, 1999
--------------------------------------------------------------------------------------
EMERGING MARKETS SMALL CAP STRATEGIC
DEBT FUND VALUE FUND VALUE FUND
---------------------------- --------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,387 $ 10,644 9,138 $ 83,218 2,328 $ 22,518
Shares issued to
shareholders in
reinvestment of
distributions 108 811 3,728 33,403 713 7,516
Shares reacquired -- -- (2,040) (19,070) (5,163) (56,157)
----------- -------------- ----------- ------------- ---------- ------------
Net increase
(decrease) 1,495 $ 11,455 10,826 $ 97,551 (2,122) $ (26,123)
=========== ============== =========== ============= ========== ============
<CAPTION>
Class I Shares
PERIOD ENDED JULY 31, 1998*
--------------------------------------------------------------------------------------
EMERGING MARKETS SMALL CAP STRATEGIC
DEBT FUND VALUE FUND VALUE FUND
---------------------------- --------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 212 $ 2,100 49,168 $ 496,434 15,558 $ 159,668
Shares reacquired (86) (847) (679) (7,199) (11) (125)
----------- -------------- ----------- ------------- ---------- ------------
Net increase 126 $ 1,253 48,489 $ 489,235 15,547 $ 159,543
=========== ============== =========== ============= ========== ============
*For the period from the commencement of each Fund's investment operations, March 17, 1998, through July 31, 1998.
</TABLE>
(6) Line of Credit
Each 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.
(7) Financial Instruments
Each 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 Exchange Contracts
EMERGING MARKETS DEBT FUND
<TABLE>
<CAPTION>
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 5/03/99 HKD 400,000 $50,327 $51,427 $(1,100)
Purchases 5/03/99 HKD 200,000 $25,156 $25,714 $ 558
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $3,879 with Bankers Trust at
January 31, 1999.
At January 31, 1999, the Emerging Markets Debt Fund had sufficient cash and/or
securities to cover any commitments under these contracts.
--------------------------------------------
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) EMERGING MARKETS DEBT FUND
MFS(R) SMALL CAP VALUE FUND
MFS(R) STRATEGIC VALUE FUND
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
INC-3 3/99 2.8M
