<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) INTERNATIONAL
GROWTH FUND
ANNUAL REPORT o MAY 31, 1999
<PAGE>
TABLE OF CONTENTS
LETTER FROM THE CHAIRMAN .................................................. 1
MANAGEMENT REVIEW AND OUTLOOK ............................................. 3
PERFORMANCE SUMMARY ....................................................... 7
PORTFOLIO OF INVESTMENTS .................................................. 11
FINANCIAL STATEMENTS ...................................................... 15
NOTES TO FINANCIAL STATEMENTS ............................................. 22
INDEPENDENT AUDITORS' REPORT .............................................. 29
MFS' YEAR 2000 READINESS DISCLOSURE ....................................... 31
TRUSTEES AND OFFICERS ..................................................... 33
MFS(R) ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
It has been almost two years since financial turmoil began to rock markets in
Asia, Russia, and Latin America. Even developed markets such as Europe and the
United States were not immune. In the U.S. equity market, for example,
investors focused on a narrow group of 50 of the largest-company growth stocks
because they seemed to offer less volatility in uncertain times. Fixed-income
investors also became more concerned about risk, moving money into U.S.
Treasury securities and out of corporate and municipal bonds and mortgage-
backed securities.
The narrowness of the market was just one of three broad issues that dominated
the U.S. equity market until recently. The other two were a slowdown in
corporate earnings growth and high valuations, with stocks of many companies
selling at extremely high prices relative to their earnings.
Although these have been challenging issues, we now see signs that we feel
demonstrate each one is changing for the better. Today, we believe the markets
are presenting more opportunities for investors to diversify, for our
portfolio managers to find good values, and for us to show the benefits of
staying with our long-term objectives and strategies. Investors seem to be
regaining confidence in a wider range of companies. Stocks of some small and
mid-sized companies, as well as some large industrial companies, have begun to
perform better in the past few months than they had for the previous year or
so. These companies appear to have benefited from early signs of stability in
emerging markets and a continuation of economic growth in the United States.
U.S. companies also have produced better earnings. Corporate earnings were, on
average, relatively flat in 1998. However, we expect earnings to grow 12% to
14% this year because more companies have benefited from the strong economy
and from aggressive consolidation and cost-cutting measures they have taken
over the past several years.
Based on their earnings projections, our analysts estimate that the U.S. stock
market is still about 30% overvalued. While there has been some shift to a
wider group of stocks, many investors are still focusing on the large-company
stocks. As a result, most of the overvaluation is in the 50 largest stocks in
the Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged
index of common stock total return performance. That means about 450 stocks
are selling at more attractive prices, particularly given what we see as the
improved earnings outlooks for these and many small and mid-sized companies
not in the S&P 500. These companies also benefit from consolidation, cost
cutting, and global growth. Because they are smaller, they may be able to
respond to changes more quickly, and thus they have the potential to grow
faster than the big companies.
The fixed-income markets, meanwhile, seem to be approaching the level of
relative stability they enjoyed before the Asian turmoil. Some credit for this
stability goes to the Federal Reserve Board (the Fed), which has reassured
investors that it will act to prevent rapid economic growth from causing
higher inflation and reduced purchasing power. Also, once investors saw that
the overseas turmoil had little, if any, effect on the financial strength of
most domestic bond issuers, the major non-Treasury markets -- corporate,
municipal, and mortgage -- began to rebound. Our portfolio managers are now
finding more opportunities to buy bonds with relatively stable prices and
attractive yields.
The past two years have challenged investors. However, we believe we are well
positioned for the current environment because our analysts and portfolio
managers continue to rely on MFS(R) Original Research(SM) to help evaluate the
long-term investment potential of each holding being considered for our
portfolios. Also, we believe our discipline of maintaining diversified
portfolios and of staying with our funds' clearly defined investment
strategies can help us offer investment products with the potential to sustain
returns over a variety of market cycles.
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)
June 17, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of David R. Mannheim]
David R. Mannheim
For the 12 months ended May 31, 1999, Class A shares of the Fund provided a
total return of -12.30%, Class B shares -12.80%, Class C shares -12.87%, and
Class I shares -11.94%. These returns assume the reinvestment of distributions
but exclude the effects of any sales charges.
During the same period, the average international fund tracked by Lipper
Analytical Services, Inc., an independent firm that reports mutual fund
performance, returned -1.23%. The Fund's returns also compare to returns of
- -1.58% for the Lipper International Funds Index (the Lipper Index) and 4.66% for
the Morgan Stanley Capital International (MSCI) Europe, Australia, Far East
(EAFE) Index, an unmanaged, market-capitalization-weighted total return index of
developed-country global stock markets, excluding the United States, Canada, and
the South African mining component. 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.
Q. WHAT HAS CHANGED OVER THE PAST YEAR?
A. Prior to September 1998, the Fund had 15% to 20% of its assets dedicated to
emerging markets. At that time, most of its emerging market stocks were
sold because we were finding better growth opportunities in developed
markets. The Fund can still invest in emerging markets, but we will do so
only when we feel individual stocks can add value to the portfolio.
Q. WHAT WERE SOME OF THE FACTORS THAT HINDERED PERFORMANCE?
A. Our emerging market holdings were hurt by the global market crisis of 1998.
Second, developed-country stock markets, like the U.S. market, have been
very narrow, with the largest-company stocks providing
the strongest performance over the past year or so. However, the
Fund is diversified among companies representing a variety of
market capitalizations.
Lastly, our European aerospace and defense holdings underperformed because
the consolidation investors expected in this industry did not develop as
planned. Last year, British Aerospace, one of our holdings, made an
acquisition that investors thought was too costly. As a result, stocks in the
entire sector fell. We still own British Aerospace, as well as Saab AB,
because we think these companies have good product lines and good long-range
prospects; we expect their stocks to rebound as their sales increase.
Q. WHAT IS YOUR OUTLOOK FOR EUROPE, AND WHAT EUROPEAN COMPANIES
HELPED PERFORMANCE?
A. Generally, our outlook for Europe is positive. Although the establishment
of European monetary union (EMU) and the euro has not stimulated growth in
the short term, we believe the common currency eventually will aid European
companies in their efforts to cut costs and be more efficient if they want
to gain market share across borders. Among holdings, European broadcasters
have been good stocks, with companies such as TF1 in France and Mediaset in
Italy benefiting from advertising growth. As European governments privatize
companies and as new companies are created, more money is being spent on
advertising to gain market share. We believe that, in turn, helps media
stocks. In the energy sector, companies have benefited from both an
increase in oil prices and consolidation. An example is TOTAL in France,
which acquired the Belgian company PetroFina last year. The Fund also has
been helped by some of its European consumer stocks, such as NEXT, a British
fashion retailer.
Q. WHAT INVESTMENTS DO YOU HAVE IN JAPAN?
A. We are underweighted in Japan relative to the MSCI EAFE Index (15.1% of
assets versus 23.1%). Even though the Japanese stock market has rebounded
this year thanks to interest-rate cuts that investors hope will spur
consumer spending, our opinion of Japan is similar to our view on emerging
markets. That is, we can't find many companies with earnings growth
outlooks that are attractive to us. However, an example of a Japanese
company that we do find attractive is NTT Mobile Communications, a cellular
phone company. Cellular communications has been one of the few domestic
Japanese industries that has done fairly well. Also, NTT Mobile
Communications' stock has participated in this year's advance of the
Japanese equity market, so it has contributed positively to performance.
Q. YOUR LARGEST SECTOR IS FINANCIAL SERVICES. WHAT COMPANIES DO YOU LIKE
THERE?
A. Two of the largest companies we own in this sector are QBE Insurance Group
and ING Groep. QBE is a large financial services company in Australia,
while ING is a Dutch company that has aggressively acquired other financial
services companies. The Fund is more heavily invested in insurance
companies than in banks because of ongoing merger and acquisition activity
in the insurance industry, which could lead to cost savings and more
efficiency.
Q. YOU HAVE INCREASED YOUR HOLDINGS IN UTILITIES AND COMMUNICATIONS. WHY?
A. That's been the biggest change over the past year. The increase has been in
telecommunications because we believe the Internet and the growth of
cellular communications has created more opportunities for us to find
companies with the growth profiles we are looking for. We primarily have
focused on the cellular companies, such as Mannesmann in Germany, which has
transformed itself from an engineering firm to a telecommunications company
with a substantial share of the European wireless market.
/s/ David R. Mannheim
David R. Mannheim
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
- --------------------------------------------------------------------------------
DAVID R. MANNHEIM IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND DIRECTOR OF INTERNATIONAL PORTFOLIO MANAGEMENT. HE IS
PORTFOLIO MANAGER OF MFS(R) GLOBAL EQUITY FUND, MFS(R) INTERNATIONAL
GROWTH FUND, MFS(R) INSTITUTIONAL INTERNATIONAL EQUITY FUND, AND THE
INTERNATIONAL GROWTH SERIES OFFERED THROUGH MFS(R)/SUN LIFE
ANNUITY PRODUCTS.
MR. MANNHEIM JOINED MFS IN 1988 AND WAS NAMED INVESTMENT OFFICER IN
1990, ASSISTANT VICE PRESIDENT IN 1991, VICE PRESIDENT AND PORTFOLIO
MANAGER IN 1992, SENIOR VICE PRESIDENT IN 1997, AND DIRECTOR OF
INTERNATIONAL PORTFOLIO MANAGEMENT IN 1999. HE IS A GRADUATE OF AMHERST
COLLEGE AND THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF
MANAGEMENT.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS(R)
ORIGINAL RESEARCH(SM), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF
SELECTING SECURITIES.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
- --------------------------------------------------------------------------------
OBJECTIVE: SEEKS TO PROVIDE CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN NON-U.S. STOCKS GROWING AT RATES EXPECTED
TO BE WELL ABOVE THE GROWTH RATE OF THE OVERALL
U.S. ECONOMY.
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 24, 1995
CLASS INCEPTION: CLASS A OCTOBER 24, 1995
CLASS B OCTOBER 24, 1995
CLASS C JULY 1, 1996
CLASS I JANUARY 2, 1997
SIZE: $89.4 MILLION NET ASSETS AS OF MAY 31, 1999
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary for more information.)
It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from November 1, 1995, through May 31, 1999)
MFS International MSCI Lipper
Growth Fund EAFE International Funds
Class A Index Index
----------------------------------------------------------------
11/95 $ 9,525 $10,000 $10,000
6/97 10,840 12,006 12,936
6/98 11,607 13,376 14,908
5/99 10,180 13,999 14,672
Average Annual and Cumulative Total Rates of Return through
May 31, 1999
CLASS A
1 Year 3 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Cumulative Total Return -12.30% -4.08% + 6.86%
- -------------------------------------------------------------------------------
Average Annual Total Return -12.30% -1.38% + 1.86%
- -------------------------------------------------------------------------------
SEC Results -16.46% -2.97% + 0.50%
- -------------------------------------------------------------------------------
CLASS B
1 Year 3 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Cumulative Total Return -12.80% -5.62% + 4.84%
- -------------------------------------------------------------------------------
Average Annual Total Return -12.80% -1.91% + 1.32%
- -------------------------------------------------------------------------------
SEC Results -16.19% -2.85% + 0.51%
- -------------------------------------------------------------------------------
CLASS C
1 Year 3 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Cumulative Total Return -12.87% -5.42% + 5.06%
- -------------------------------------------------------------------------------
Average Annual Total Return -12.87% -1.84% + 1.38%
- -------------------------------------------------------------------------------
SEC Results -13.72% -1.84% + 1.38%
- -------------------------------------------------------------------------------
CLASS I
1 Year 3 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Cumulative Total Return -11.94% -3.00% + 8.08%
- -------------------------------------------------------------------------------
Average Annual Total Return -11.94% -1.01% + 2.18%
- -------------------------------------------------------------------------------
COMPARATIVE INDICES
1 Year 3 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Average international fund** - 1.23% +7.92% + 9.57%
- -------------------------------------------------------------------------------
Lipper International Funds Index** - 1.58% +9.43% +11.29%
- -------------------------------------------------------------------------------
MSCI EAFE Index+ + 4.66% +7.94% + 9.84%
- -------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
October 24, 1995, through May 31, 1999. Index results are from November 1,
1995.
** Source: Lipper Analytical Services, Inc.
+ Source: Standard & Poor's Micropal, Inc.
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
C results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of C. Operating expenses of C
are not significantly different than those of B. The B performance included in
the C SEC performance has been adjusted to reflect the CDSC generally
applicable to C rather than the CDSC generally applicable to B.
I results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of I. Because operating
expenses of A are greater than those of I, I performance generally would have
been higher than A performance. The A performance included in the
I performance has been adjusted to reflect the fact that I 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. All
results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility. See the
prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF MAY 31, 1999
FIVE LARGEST STOCK SECTORS
FINANCIAL SERVICES 20.9%
UTILITIES & COMMUNICATIONS 13.9%
CONSUMER STAPLES 12.4%
TECHNOLOGY 8.7%
HEALTH CARE 8.0%
TOP 10 STOCK HOLDINGS
GALILEO INTERNATIONAL, INC. 4.1% CABLE & WIRELESS COMMUNICATIONS
U.S. airline reservation systems PLC 3.0%
company British telecommunications company
BENCKISER N.V. 3.8% NTT MOBILE COMMUNICATIONS NETWORK,
Dutch consumer products company INC. 2.8%
Japanese cellular telephone company
MANNESMANN AG 3.1%
German industrial and ANGLO IRISH BANK PLC 2.7%
telecommunications company Irish bank
TF1 - SOCIETE TELEVISION UBS AG 2.6%
FRANCAISE 1 3.1% Swiss banking and financial services
French television company company
SAAB AB 3.0% BRITISH AEROSPACE PLC 2.6%
Swedish aircraft manufacturer British defense and aircraft company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- May 31, 1999
<CAPTION>
Stocks - 97.1%
- --------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - 91.6%
Argentina - 0.3%
Quilmes Industrial S.A., ADR (Beverages) 19,300 $ 218,331
- --------------------------------------------------------------------------------------------------------
Australia - 3.0%
QBE Insurance Group Ltd. (Insurance)* 495,483 $ 1,940,113
Seven Network Ltd. (Entertainment) 236,100 708,763
-----------
$ 2,648,876
- --------------------------------------------------------------------------------------------------------
Canada - 2.0%
Canadian National Railway Co. (Railroads) 28,500 $ 1,824,000
- --------------------------------------------------------------------------------------------------------
Finland - 3.9%
Telephone Cooperative HPY (Telecommunications) 175 $ 457,144
Helsingin Puhelin Oyj (Telecommunications) 33,200 1,498,512
Pohjola Group Insurance Corp. (Insurance) 19,400 889,792
Tieto Corp. (Computer Software - Systems) 17,400 607,615
-----------
$ 3,453,063
- --------------------------------------------------------------------------------------------------------
France - 10.9%
Castorama Dubois Investisse (Stores - Building
Products) 6,200 $ 1,512,313
Pernod Ricard Co. (Beverages) 16,300 1,087,431
Renault Regie Nationale (Automobiles) 16,000 621,270
Societe Television Francaise 1 (Entertainment) 11,050 2,649,259
TOTAL S.A., "B" (Oils) 17,800 2,161,624
Union des Assurances Federales S.A. (Insurance) 14,400 1,726,214
-----------
$ 9,758,111
- --------------------------------------------------------------------------------------------------------
Germany - 7.7%
Henkel KGaA (Chemicals) 21,900 $ 1,492,987
HypoVereinsbank (Banks and Credit Cos.) 17,500 944,935
Mannesmann AG (Conglomerate) 19,700 2,690,121
VEBA AG (Oil and Gas) 14,500 826,779
Wella AG (Consumer Goods and Services)* 1,247 916,410
-----------
$ 6,871,232
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Greece - 2.2%
Antenna TV S.A., ADR (Broadcasting)* 45,400 $ 635,600
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 47,900 1,037,562
STET Hellas Telecommunications S.A., ADR
(Telecommunications)* 14,200 323,050
-----------
$ 1,996,212
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India
Hindustan Lever Ltd. (Consumer Goods and Services) 100 $ 5,228
Larsen & Toubro Ltd. (Conglomerate) 270 1,426
Mahanagar Telephone Nigam Ltd. (Telecommunications) 400 1,600
-----------
$ 8,254
- --------------------------------------------------------------------------------------------------------
Ireland - 3.7%
Allied Irish Bank PLC (Banks and Credit Cos.) 76,400 $ 1,016,472
Anglo Irish Bank PLC (Banks and Credit Cos.)* 832,311 2,320,049
-----------
$ 3,336,521
- --------------------------------------------------------------------------------------------------------
Italy - 4.9%
Banca Carige S.p.A. (Banks and Credit Cos.) 117,000 $ 1,020,811
ERG S.p.A. (Oils) 218,000 656,733
Mediaset S.p.A. (Entertainment) 150,200 1,216,537
Telecom Italia Mobile S.p.A. (Telecommunications)* 210,280 1,236,264
Telecom Italia Mobile S.p.A., Saving Shares (Telecommunications)* 81,900 274,900
-----------
$ 4,405,245
- --------------------------------------------------------------------------------------------------------
Japan - 14.7%
Canon, Inc. (Special Products and Services) 59,000 $ 1,489,406
Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals) 160,000 1,806,324
Chukyo Coca-Cola Bottling Co., Ltd. (Food and Beverage
Products) 46,000 593,941
Fujitsu Ltd. (Computer Hardware - Systems) 58,000 969,707
Hitachi (Electronics) 45,000 337,817
Kita Kyushu Coca-Cola Bottling Co., Ltd. (Food and
Beverage Products) 12,000 585,996
Mikuni Coca-Cola Bottling Co., Ltd. (Food and Beverage
Products) 50,000 1,034,597
NTT Mobile Communications Network, Inc.
(Telecommunications) 44 2,407,217
Olympus Optical Co. (Conglomerate) 147,000 1,825,029
Osaka Sanso Kogyo Ltd. (Chemicals) 32,000 58,533
Sanyo Coca-Cola Bottling Co., Ltd. (Food and Beverage
Products) 23,000 531,121
Takeda Chemical Industries Co. (Pharmaceuticals) 33,000 1,466,727
-----------
$13,106,415
- --------------------------------------------------------------------------------------------------------
Netherlands - 8.0%
Akzo Nobel N.V. (Chemicals) 28,900 $ 1,198,989
Benckiser N.V., "B" (Consumer Goods and Services) 60,411 3,261,970
Equant N.V. (Computer Software - Services)* 3,500 290,281
IHC Caland N.V. (Marine Equipment)* 15,046 592,069
ING Groep N.V. (Financial Services)* 33,400 1,784,328
-----------
$ 7,127,637
- --------------------------------------------------------------------------------------------------------
Norway - 2.5%
Sparebanken NOR (Banks and Credit Cos.) 61,800 $ 1,169,240
Storebrand ASA (Insurance) 155,000 1,039,636
-----------
$ 2,208,876
- --------------------------------------------------------------------------------------------------------
Portugal - 2.2%
Banco Pinto & Sotto Mayor S.A. (Banks and Credit Cos.) 73,000 $ 1,445,808
Telecel - Comunicacoes Pessoais S.A. (Telecommunications) 4,300 541,016
-----------
$ 1,986,824
- --------------------------------------------------------------------------------------------------------
Singapore - 0.5%
Development Bank of Singapore Ltd. (Banks and Credit Cos.) 44,000 $ 454,688
- --------------------------------------------------------------------------------------------------------
Sweden - 5.3%
Ericsson LM, "B" (Telecommunication Equipment) 79,700 $ 2,128,561
Saab AB, "B" (Aerospace) 325,200 2,630,149
-----------
$ 4,758,710
- --------------------------------------------------------------------------------------------------------
Switzerland - 4.5%
Barry Callebaut AG (Food and Beverage Products) 7,000 $ 1,039,921
Novartis AG (Medical and Health Products) 430 623,613
UBS AG (Banks and Credit Cos.) 8,100 2,343,063
-----------
$ 4,006,597
- --------------------------------------------------------------------------------------------------------
United Kingdom - 15.3%
AstraZeneca Group PLC (Medical and Health Products) 44,266 $ 1,741,134
BP Amoco PLC (Oils)* 106,000 1,895,101
British Aerospace PLC (Aerospace and Defense)* 343,028 2,264,066
Cable & Wireless Communications PLC (Telecommunications) 273,100 2,594,411
Capital Radio PLC (Broadcasting) 27,700 389,172
Kwik-Fit Holdings PLC (Automotive Repair Centers) 75,100 659,300
NEXT PLC (Stores) 163,000 1,884,023
TeleWest Communications PLC (Entertainment)* 318,000 1,367,835
Tomkins PLC (Conglomerate) 253,000 908,898
-----------
$13,703,940
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Total Foreign Stocks $81,873,532
- --------------------------------------------------------------------------------------------------------
U.S. Stocks - 5.5%
Consumer Goods and Services - 4.0%
Galileo International, Inc. 78,700 $ 3,541,500
- --------------------------------------------------------------------------------------------------------
Telecommunications - 0.2%
Global TeleSystems Group, Inc.* 2,000 $ 152,000
- --------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.3%
Frontier Corp. 22,500 $ 1,184,063
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 4,877,563
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $80,361,925) $86,751,095
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 8.3%
- --------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
(Identified Cost, $7,447,163) 7,447,113 $ 7,447,163
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $87,809,088) $94,198,258
Other Assets, Less Liabilities - (5.4)% (4,825,040)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $89,373,218
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
MAY 31, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $87,809,088) $ 94,198,258
Foreign currency, at value (identified cost, $1,139,387) 1,224,791
Receivable for Fund shares sold 2,649,347
Receivable for investments sold 1,993,808
Interest and dividends receivable 280,718
Deferred organization expenses 7,288
Other assets 810
------------
Total assets $100,355,020
------------
Liabilities:
Collateral for securities loaned, at value $ 7,447,163
Payable for Fund shares reacquired 635,520
Payable for investments purchased 2,144,272
Payable to custodian 612,971
Payable to affiliates -
Management fee 10,826
Shareholder servicing agent fee 1,110
Distribution and service fee 52,126
Administrative fee 167
Accrued expenses and other liabilities 77,647
------------
Total liabilities $ 10,981,802
------------
Net assets $ 89,373,218
============
Net assets consist of:
Paid-in capital $ 90,564,541
Unrealized appreciation on investments 6,473,839
Accumulated undistributed net realized loss on
investments and foreign currency transactions (7,653,806)
Accumulated net investment loss (11,356)
------------
Total $ 89,373,218
============
Shares of beneficial interest outstanding 5,925,269
=========
Class A shares:
Net asset value per share
(net assets of $43,678,401 / 2,880,372 shares of
beneficial interest outstanding) $15.16
======
Offering price per share (100 / 95.25 of net asset value
per share) $15.92
======
Class B shares:
Net asset value and offering price per share
(net assets of $41,959,233 / 2,794,812 shares of
beneficial interest outstanding) $15.01
======
Class C shares:
Net asset value and offering price per share
(net assets of $3,607,594 / 241,695 shares of
beneficial interest outstanding) $14.93
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $127,990 / 8,390 shares of beneficial
interest outstanding) $15.26
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- -------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest (includes income on securities loaned of $7,258) $ 214,807
Dividends 2,093,853
Foreign taxes withheld (238,386)
------------
Total investment income $ 2,070,274
------------
Expenses -
Management fee $ 976,638
Trustees' compensation 21,121
Shareholder servicing agent fee 110,669
Distribution and service fee (Class A) 240,167
Distribution and service fee (Class B) 480,139
Distribution and service fee (Class C) 40,050
Administrative expense 12,589
Custodian fee 130,775
Interest expense 19,659
Printing 31,635
Postage 32,487
Auditing fees 17,137
Legal fees 1,809
Amortization of organization expenses 5,197
Miscellaneous 147,104
------------
Total expenses $ 2,267,176
Fees paid indirectly (19,228)
------------
Net expenses $ 2,247,948
------------
Net investment loss $ (177,674)
------------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $ (7,051,623)
Foreign currency transactions (400,703)
------------
Net realized loss on investments and foreign currency
transactions $ (7,452,326)
------------
Change in unrealized appreciation (depreciation) -
Investments $ (5,224,738)
Translation of assets and liabilities in foreign
currencies 273,849
------------
Net unrealized loss on investments and foreign currency
translation $ (4,950,889)
------------
Net realized and unrealized loss on investments and
foreign currency $(12,403,215)
------------
Decrease in net assets from operations $(12,580,889)
============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (177,674) $ (416,638)
Net realized gain (loss) on investments and foreign
currency transactions (7,452,326) 10,004,897
Net unrealized loss on invesments and foreign currency
translation (4,950,889) (2,250,480)
------------ ------------
Increase (decrease) in net assets from operations $(12,580,889) $ 7,337,779
------------ ------------
Distributions declared to shareholders -
In excess of net investment income (Class A) $ -- $ (716,456)
In excess of net investment income (Class B) -- (488,346)
In excess of net investment income (Class C) -- (29,115)
In excess of net investment income (Class I) -- (1,598)
From net realized gain on investments and foreign
currency transactions (Class A) (1,316,893) (220,153)
From net realized gain on investments and foreign
currency transactions (Class B) (1,304,683) (246,213)
From net realized gain on investments and foreign
currency transactions (Class C) (102,675) (12,170)
From net realized gain on investments and foreign
currency transactions (Class I) (3,104) (353)
------------ ------------
Total distributions declared to shareholders $ (2,727,355) $ (1,714,404)
------------ ------------
Net decrease in net assets from Fund share transactions $(11,566,970) $(11,624,844)
------------ ------------
Total decrease in net assets $(26,875,214) $ (6,001,469)
Net assets:
At beginning of period 116,248,432 122,249,901
------------ ------------
At end of period (including accumulated net investment loss
of $11,356 and accumulated net investment
income of $116,221, respectively) $ 89,373,218 $116,248,432
============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
------------------------------------------------- PERIOD ENDED
1999 1998 1997 MAY 31, 1996*
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $17.78 $16.90 $16.71 $15.00
------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $ 0.01 $(0.01) $ 0.02 $ 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (2.20) 1.18 0.32 1.69
------ ------ ------ ------
Total from investment operations $(2.19) $ 1.17 $ 0.34 $ 1.72
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.22) $ -- $(0.01)
From net realized gain on investments and
foreign currency transactions (0.43) (0.07) (0.15) --
------ ------ ------ ------
Total distributions declared to
shareholders $(0.43) $(0.29) $(0.15) $(0.01)
------ ------ ------ ------
Net asset value - end of period $15.16 $17.78 $16.90 $16.71
====== ====== ====== ======
Total return(+) (12.30)% 7.08% 2.13% 11.43%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.01% 2.01% 1.99% 2.24%+
Net investment income (loss) 0.09% (0.08)% 0.13% 0.24%+
Portfolio turnover 100% 225% 53% 11%
Net assets at end of period (000 omitted) $43,678 $53,659 $56,810 $41,483
* For the period from the commencement of the Fund's investment operations, October 24, 1995, through May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund 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.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
------------------------------------------------- PERIOD ENDED
1999 1998 1997 MAY 31, 1996*
- -------------------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $17.71 $16.82 $16.66 $15.00
------ ------ ------ ------
Income (loss) from investment operations# -
Net investment loss $(0.07) $(0.10) $(0.07) $(0.03)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (2.20) 1.19 0.31 1.69
------ ------ ------ ------
Total from investment operations $(2.27) $ 1.09 $ 0.24 $ 1.66
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.13) $ -- $ --
From net realized gain on investments and
foreign currency transactions (0.43) (0.07) (0.08) --
------ ------ ------ ------
Total distributions declared to shareholders $(0.43) $(0.20) $(0.08) $ --
------ ------ ------ ------
Net asset value - end of period $15.01 $17.71 $16.82 $16.66
====== ====== ====== ======
Total return (12.80)% 6.59% 1.56% 11.07%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.51% 2.51% 2.53% 2.85%+
Net investment loss (0.42)% (0.57)% (0.42)% (0.31)%+
Portfolio turnover 100% 225% 53% 11%
Net assets at end of period (000 omitted) $41,959 $59,055 $62,958 $43,264
* For the period from the commencement of the Fund's investment operations, October 24, 1995, through May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund 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.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
--------------------------------- PERIOD ENDED
1999 1998 MAY 1, 1997*
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $17.62 $16.76 $16.83
------ ------ ------
Income (loss) from investment operations# -
Net investment loss $(0.07) $(0.10) $(0.04)
Net realized and unrealized gain (loss) on investments
and foreign currency (2.19) 1.19 0.15
------ ------ ------
Total from investment operations $(2.26) $(1.09) $ 0.11
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.16) $ --
From net realized gain on investments and foreign
currency transactions (0.43) (0.07) (0.18)
------ ------ ------
Total distributions declared to shareholders $(0.43) $(0.23) $(0.18)
------ ------ ------
Net asset value - end of period $14.93 $17.62 $16.76
====== ====== ======
Total return (12.87)% 6.62% 0.79%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.51% 2.52% 2.50%+
Net investment loss (0.43)% (0.56)% (0.27)%+
Portfolio turnover 100% 225% 53%
Net assets at end of period (000 omitted) $3,608 $3,380 $2,397
* For the period from the inception of Class C, July 1, 1996, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund 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.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
----------------------------------- PERIOD ENDED
1999 1998 MAY 1, 1997*
- -------------------------------------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $17.81 $16.94 $15.90
------ ------ ------
Income (loss) from investment operations# -
Net investment income $ 0.10 $ 0.10 $ 0.11
Net realized and unrealized gain (loss) on investments
and foreign currency (2.22) 1.15 0.93
------ ------ ------
Total from investment operations $(2.12) $ 1.25 $ 1.04
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.31) $ --
From net realized gain on investments and foreign
currency transactions (0.43) (0.07) --
------ ------ ------
Total distributions declared to shareholders $(0.43) $(0.38) $ --
------ ------ ------
Net asset value - end of period $15.26 $17.81 $16.94
====== ====== ======
Total return (11.94)% 7.65% 6.54%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.51% 1.52% 1.52%+
Net investment income 0.65% 0.59% 1.40%+
Portfolio turnover 100% 225% 53%
Net assets at end of period (000 omitted) $128 $155 $84
* For the period from the inception of Class I, January 2, 1997, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund 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.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS International Growth Fund (the Fund) is a diversified series of MFS Series
Trust X (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. Non-U.S. dollar
denominated short-term obligations are valued at amortized cost as calculated
in the foreign currency and translated into U.S. dollars at the closing daily
exchange rate. Securities for which there are no such quotations or valuations
are valued at fair value as determined in good faith by or at the direction of
the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Fund
operations.
Security Loans - The Fund may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by
the Fund. The loans are collateralized at all times by cash and U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street provides the Fund with indemnification against Borrower
default. The Fund bears the risk of loss with respect to the investment of
cash collateral.
At May 31, 1999, the value of securities loaned was $7,098,098. These loans
were collateralized by cash of $7,447,163. Cash collateral is invested in
short-term securities, which are included in the Portfolio of Investments. A
portion of the income generated upon investment of the collateral is remitted
to the Borrowers, and the remainder is allocated between the Fund and State
Street in its capacity as lending agent. Income from securities lending is
included in interest income on the Statement of Operations. The dividend and
interest income earned on the securities loaned is accounted for in the same
manner as other dividend and interest income.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is amortized or accreted for financial statement and tax reporting purposes as
required by federal income tax regulations. Dividends received in cash are
recorded on the ex-dividend date. Dividend and interest payments received in
additional securities are recorded on the ex-dividend or ex-interest date in
an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Fund's tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on
Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
During the year ended May 31, 1999, $426,147 was reclassified from paid-in
capital to accumulated net investment loss and accumulated net realized loss
on investments and foreign currency transactions due to differences between
book and tax accounting for currency transactions. This change had no effect
on the net assets or net asset value per share.
At May 31, 1999, the Fund, for federal income tax purpose, had a capital loss
carryforward of $7,195,248 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on May 31, 2007.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.975%
of the Fund's average daily net assets up to $500 million in net assets, after
which the rate is reduced to 0.925%. The advisory agreement permits the
adviser to engage one or more sub-advisers; through November 30, 1998, the
adviser engaged Foreign & Colonial Management Ltd. ("FCM") and its subsidiary
Foreign & Colonial Emerging Markets Ltd. ("FCEM"), each an England and Wales
Company, to manage the assets of the Fund invested in foreign emerging market
securities. Effective December 1, 1998, MFS assumed all portfolio management
responsibilities for emerging market securities from FCM and FCEM for the
Fund, and the sub-investment advisory agreements pursuant to which FCM and
FCEM provided their services were terminated.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $4,343
for the year ended May 31, 1999.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$30,236 for the year ended May 31, 1999, as its portion of the sales charge on
sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.25% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $5,092 for
the year ended May 31, 1999. Fees incurred under the distribution plan during
the year ended May 31, 1999, were 0.50% of average daily net assets
attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $262 and $8 for Class B
and Class C shares, respectively, for the year ended May 31, 1999. Fees
incurred under the distribution plan during the year ended May 31, 1999, were
1.00% of average daily net assets attributable to both Class B and Class C
shares on an annualized basis.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class C shares in the event of a shareholder redemption within
twelve months of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended May 31, 1999,
were $544, $153,876, and $1,341 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 0.10%. Prior to April 1, 1999, the fee was calculated as a percentage
of the Fund's average daily net assets at an effective annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$96,076,463 and $111,631,235, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $88,267,312
-----------
Gross unrealized appreciation $10,605,329
Gross unrealized depreciation (4,674,383)
-----------
Net unrealized appreciation $ 5,930,946
===========
(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. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED MAY 31, 1999 YEAR ENDED MAY 31, 1998
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 19,265,541 $ 313,672,087 3,732,480 $ 64,834,019
Shares issued to shareholders
in reinvestment of distributions 80,466 1,204,607 53,340 858,950
Shares reacquired (19,483,471) (318,825,781) (4,129,138) (71,589,658)
----------- ------------- ---------- -------------
Net decrease (137,464) $ (3,949,087) (343,318) $ (5,896,689)
=========== ============= ========== =============
<CAPTION>
Class B Shares
YEAR ENDED MAY 31, 1999 YEAR ENDED MAY 31, 1998
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,382,116 $ 22,299,934 3,351,436 $ 58,282,264
Shares issued to shareholders
in reinvestment of distributions 76,087 1,131,101 38,717 607,265
Shares reacquired (1,998,294) (31,687,051) (3,797,245) (65,584,251)
----------- ------------- ---------- -------------
Net decrease (540,091) $ (8,256,016) (407,092) $ (6,694,722)
=========== ============= ========== =============
<CAPTION>
Class C Shares
YEAR ENDED MAY 31, 1999 YEAR ENDED MAY 31, 1998
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,492,233 $ 56,401,138 302,639 $ 5,329,313
Shares issued to shareholders
in reinvestment of distributions 6,506 96,225 2,438 38,030
Shares reacquired (3,448,938) (55,848,685) (256,177) (4,467,910)
----------- ------------- ---------- -------------
Net increase 49,801 $ 648,678 48,900 $ 899,433
=========== ============= ========== =============
<CAPTION>
Class I Shares
YEAR ENDED MAY 31, 1999 YEAR ENDED MAY 31, 1998
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,259 $ 34,678 3,787 $ 68,751
Shares issued to shareholders
in reinvestment of distributions 206 3,103 124 1,949
Shares reacquired (2,759) (48,326) (208) (3,566)
----------- ------------- ---------- -------------
Net increase (decrease) (294) $ (10,545) 3,703 $ 67,134
=========== ============= ========== =============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $720 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended May 31, 1999, was $806.
The Fund and other affiliated funds also participate in a $20 million
uncommitted, unsecured line of credit provided by "the custodian" or "a
custodian bank" under a line of credit agreement. Borrowings may be made to
temporarily finance the purchase of securities, the redemption of shares, or
emergency expenses. During the period, the average dollar amount of borrowings
was $2,458,000. Interest expense incurred on the borrowings amounted to
$19,659 for the year ended, May 31, 1999, at a weighted average interest rate
on borrowings of 5.50%.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust X and Shareholders of MFS International
Growth Fund:
We have audited the accompanying statement of assets and liabilities of MFS
International Growth Fund, including the schedule of portfolio investments, as
of May 31, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years in
the period then ended and for the period from October 24, 1995 (commencement
of operations) to May 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of May 31, 1999, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
International Growth Fund at May 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years in
the period then ended and for the period October 24, 1995 (commencement of
operations) to May 31, 1996, in conformity with generally accepted accounting
principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
July 9, 1999
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR
1999.
FOR THE YEAR ENDED MAY 31, 1999, INCOME FROM FOREIGN SOURCES WAS
$1,962,534, AND FOREIGN TAXES WITHHELD WERE $238,386.
<PAGE>
<TABLE>
MFS(R) INTERNATIONAL GROWTH FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Peter G. Harwood - Private Investor
CUSTODIAN
J. Atwood Ives - Chairman and Chief Executive State Street Bank and Trust Company
Officer, Eastern Enterprises (diversified services
company) AUDITORS
Ernst & Young LLP
Lawrence T. Perera - Partner, Hemenway
& Barnes (attorneys) INVESTOR INFORMATION
For MFS stock and bond market outlooks,
William J. Poorvu - Adjunct Professor, Harvard call toll free: 1-800-637-4458 anytime from
University Graduate School of Business a touch-tone telephone.
Administration
For information on MFS mutual funds, call your
Charles W.Schmidt - Private Investor financial adviser or, for an information kit, call
toll free: 1-800-637-2929 any business day from 9
Arnold D. Scott* - Senior Executive a.m. to 5 p.m. Eastern time (or leave a message
Vice President, Director, and Secretary, anytime).
MFS Investment Management
INVESTOR SERVICE
Jeffrey L. Shames* - Chairman, Chief MFS Service Center, Inc.
Executive Officer, and Director, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Elaine R. Smith - Independent Consultant For general information, call toll free:
1-800-225-2606 any business day from
David B. Stone - Chairman and Director, 8 a.m. to 8 p.m. Eastern time.
North American Management Corp.
(investment advisers) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9
INVESTMENT ADVISER a.m. to 5 p.m. Eastern time. (To use this service,
Massachusetts Financial Services Company your phone must be equipped with a
500 Boylston Street Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, and exchanges,
DISTRIBUTOR call toll free: 1-800-MFS-TALK (1-800-637-8255)
MFS Fund Distributors, Inc. anytime from a touch-tone telephone.
500 Boylston Street
Boston, MA 02116-3741 WORLD WIDE WEB
www.mfs.com
PORTFOLIO MANAGER
David R. Mannheim*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) INTERNATIONAL GROWTH FUND ------------
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INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
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Boston, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MIF-2 7/99 21M 86/286/386/886
