<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) INTERNATIONAL
GROWTH AND INCOME FUND
ANNUAL REPORT o MAY 31, 1999
----------------------------------------------------
DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 31)
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<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 .............................................. 28
MFS' Year 2000 Readiness Disclosure ....................................... 30
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
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<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 Frederick J. Simmons]
Frederick J. Simmons
For the 12 months ended May 31, 1999, Class A shares of the Fund provided a
total return of -3.45%, Class B shares -3.89%, Class C shares -3.87%, and Class
I shares -2.88%. 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 index of international stocks. 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 FACTORS HURT THE FUND'S PERFORMANCE OVER THE PAST YEAR?
A. The Fund's underweighting in Japan relative to the MSCI EAFE Index and our
holdings in Europe hurt performance. We were underweighted in Japan because
we could not find many companies that we thought had good earnings growth
outlooks. However, for the past several months the Japanese stock market has
performed very well, thanks in part to the Japanese government's dramatic
cuts in short-term interest rates that have helped stimulate consumer and
business demand.
As for Europe, the establishment of European monetary union (EMU) and the
common euro currency has not stimulated growth as quickly as we had hoped.
The deficit-cutting measures that European countries took to meet the
criteria for joining EMU, including major reductions in government spending,
have slowed their economies more than investors had expected.
Q. HAVE YOUR OUTLOOKS FOR JAPAN AND EUROPE CHANGED?
A. Not really. We will continue to be cautious on Japan until we see more
concrete signs of its recovery. Lower interest rates have helped, but we
feel fundamental reforms of the financial system are still needed. We are,
however, maintaining positions in some Japanese companies, particularly
those with global franchises, such as Canon, an electronic and photographic
equipment manufacturer, and Takeda Chemical, a pharmaceutical company. These
companies have production and distribution facilities around the world, so
we feel they do not need a vibrant Japanese economy to be profitable.
Meanwhile, we still like Europe. Because of this year's economic slowdown,
the benefits of EMU are taking longer to develop than we expected. However,
we believe the common currency will in time make European companies more
competitive and profitable because they will have to cut costs and be more
efficient if they want to gain market share across borders. We think some
European companies in the portfolio already seem to be well on their way to
achieving this goal, including Compass, a British food services company;
Pinault-Printemps, a major French department store chain; and Mannesmann, a
German metal-fabricating company that has become an increasingly prominent
cellular phone company throughout Europe.
Q. DO YOU HAVE ANY EMERGING MARKET HOLDINGS?
A. We have very little exposure to emerging markets. This Fund emphasizes
high-quality companies producing steady earnings, and emerging market stocks
tend to be quite volatile. We do own Korea Electric Power, a utility that
has benefited from the rebound of the South Korean economy, and Panamerican
Beverages, a Mexican bottling company with plants throughout Latin America.
We think Panamerican should be able to capitalize on the region's emergence
from recession.
Q. HAVE ANY STOCKS PARTICULARLY HELPED PERFORMANCE?
A. Tyco International has performed well. The company has made several good
acquisitions and, through consolidation and cost cutting, has gotten
excellent value out of those acquisitions. We also like American
International Group (AIG), a large multiline insurance company that we think
will be one of the first U.S. financial services firms to benefit from the
rebound of Asian markets. Other American financial services companies are
just getting their feet wet in the Far East, but AIG has been involved in
that region for several decades.
Q. WHAT IS YOUR OUTLOOK FOR INTERNATIONAL MARKETS FOR THE REST OF THE YEAR?
A. We think there will be some economic slowing in the second half of the year.
Because of continued economic growth in the United States and renewed growth
in emerging markets, bond investors have put upward pressure on interest
rates to help compensate for the potential effects of inflation. We think
higher interest rates could mean slower economic growth as well as reduced
revenues for some companies in the portfolio. But, whatever happens, we will
continue to select stocks based on companies' individual merits and
long-term business outlooks; macroeconomic considerations will be secondary.
/s/ Frederick J. Simmons
Frederick J. Simmons
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>
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PORTFOLIO MANAGER'S PROFILE
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FREDERICK J. SIMMONS IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF MFS(R) GLOBAL TOTAL RETURN FUND,
MFS(R) INTERNATIONAL GROWTH AND INCOME FUND, AND THE GLOBAL TOTAL RETURN
SERIES AND INTERNATIONAL GROWTH AND INCOME SERIES OFFERED THROUGH
MFS(R)/SUN LIFE ANNUITY PRODUCTS. HE ALSO MANAGES THE NOMURA GLOBAL
BALANCED OPEN FUND AND THE NOMURA GN GLOBAL TOTAL RETURN FUND UNDER
SUBADVISORY AGREEMENTS WITH NOMURA ASSET MANAGEMENT CO. OF JAPAN.
MR. SIMMONS JOINED MFS IN 1971 AS INVESTMENT OFFICER IN THE RESEARCH
DEPARTMENT AND WAS NAMED ASSISTANT VICE PRESIDENT IN 1974, VICE
PRESIDENT IN 1975, AND SENIOR VICE PRESIDENT IN 1983. MR. SIMMONS
GRADUATED WITH HONORS FROM THE AMOS TUCK SCHOOL OF BUSINESS
ADMINISTRATION OF DARTMOUTH COLLEGE. HE IS A CHARTERED FINANCIAL
ANALYST, A MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY, INC., AND
PAST PRESIDENT OF THE ELECTRONIC ANALYSTS OF BOSTON.
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
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OBJECTIVE: SEEKS BOTH CAPITAL APPRECIATION AND CURRENT INCOME BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF ISSUERS
WHOSE PRINCIPAL ACTIVITIES ARE OUTSIDE THE UNITED
STATES.
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: $48.4 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
Growth and Lipper
Income Fund MSCI EAFE International
-- Class A Index Funds Index
----------------------------------------------------------
11/95 $ 9,525 $10,000 $10,000
5/97 10,457 12,006 12,936
5/98 12,733 13,376 14,908
5/99 12,293 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*
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Cumulative Total Return -3.45% +20.97% +29.07%
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Average Annual Total Return -3.45% + 6.55% + 7.34%
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SEC Results -8.04% + 4.83% + 5.90%
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CLASS B
1 Year 3 Years 10 Years/Life*
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Cumulative Total Return -3.89% +19.27% +26.87%
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Average Annual Total Return -3.89% + 6.05% + 6.83%
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SEC Results -7.66% + 5.15% + 6.12%
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CLASS C
1 Year 3 Years 10 Years/Life*
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Cumulative Total Return -3.87% +19.51% +27.13%
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Average Annual Total Return -3.87% + 6.12% + 6.89%
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SEC Results -4.81% + 6.12% + 6.89%
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CLASS I
1 Year 3 Years 10 Years/Life*
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Cumulative Total Return -2.88% +21.99% +30.16%
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Average Annual Total Return -2.88% + 6.85% + 7.59%
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COMPARATIVE INDICES
1 Year 3 Years 10 Years/Life*
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Average international fund** -1.23% + 7.92% + 9.57%
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Lipper International Funds Index** -1.58% + 9.43% +11.29%
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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.
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 17.9%
CONSUMER STAPLES 14.3%
TECHNOLOGY 11.2%
UTILITIES & COMMUNICATIONS 10.4%
HEALTH CARE 8.0%
TOP 10 STOCK HOLDINGS
CANON, INC. 3.5% TAKEDA CHEMICAL INDUSTRIES 2.3%
Japanese office equipment and Japanese pharmaceutical company
imaging company
TF1 - SOCIETE TELEVISION FRANCAISE 1 2.3%
MANNESMANN AG 3.5% French television company
German industrial and
telecommunications company BP AMOCO PLC 2.2%
British oil and petrochemical company
PINAULT-PRINTEMPS-REDOUTE S.A. 3.4%
French department store chain WOLTERS KLUWER NV 2.2%
Dutch publishing company
SEITA SA 2.9%
French tobacco company CANADIAN NATIONAL RAILWAY 2.1%
Railway/transportation company
QBE INSURANCE GROUP 2.5%
Australian commercial insurance company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- May 31, 1999
Stocks - 95.2%
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ISSUER SHARES VALUE
- ------------------------------------------------------------------------------
Foreign Stocks - 77.8%
Australia - 3.3%
Australia & New Zealand Banking Group Ltd.
(Banks and Credit Cos.)* 47,600 $ 345,460
QBE Insurance Group Ltd. (Insurance)* 295,624 1,157,546
Seven Network Ltd. (Entertainment) 32,779 98,401
-----------
$ 1,601,407
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Austria - 0.8%
Austria Tabak AG (Tobacco) 5,833 $ 372,115
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Bermuda - 1.7%
Tyco International Ltd. (Manufacturing) 9,556 $ 834,956
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Canada - 2.0%
Canadian National Railway Co. (Railroads) 15,433 $ 987,712
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Finland - 0.8%
Helsingin Puhelin Oyj (Telecommunications) 8,595 $ 387,943
- ------------------------------------------------------------------------------
France - 13.1%
Castorama Dubois Investisse (Building Products) 2,400 $ 585,412
Pernod Ricard Co. (Beverages) 4,900 326,896
Pinault-Printemps-Redoute SA (Retail) 9,117 1,551,931
Seita SA (Tobacco) 21,712 1,316,085
Synthelabo (Pharmaceuticals)* 15,528 653,930
Television Francaise (Broadcasting) 4,352 1,043,400
Total SA, ADR (Oils)* 5,542 337,023
Union des Assurances Federales SA (Insurance) 4,319 517,744
-----------
$ 6,332,421
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Germany - 5.2%
Henkel KGAA (Consumer Products) 6,708 $ 457,304
Jefferson Smurfit Corp. (Containers) 165,700 431,491
Mannesmann AG (Machinery) 11,808 1,612,434
-----------
$ 2,501,229
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Greece - 1.2%
Hellenic Telecommunication Organization SA, GDR
(Telecommunications) 26,916 $ 583,027
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Hong Kong - 0.7%
Dairy Farm International (Retail) 286,000 $ 337,480
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Ireland - 0.6%
Allied Irish Bank PLC (Banks and Credit Cos.) 22,832 $ 303,771
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Italy - 1.7%
Sao Paolo Imi S.p.A. (Banks and Credit Cos.) 33,030 $ 445,875
Telecom Italia Mobile S.p.A. (Telecommunications)* 84,334 283,069
Unione Immobiliare S.p.A. (Real Estate) 239,469 112,829
-----------
$ 841,773
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Japan - 13.4%
Canon, Inc. (Office Equipment) 64,000 $ 1,615,627
Fujitsu Ltd. (Computer Hardware - Systems) 28,000 468,134
Hitachi Electronics Ltd. (Electronics) 29,000 217,704
NTT Mobile Communication Network, Inc.
(Telecommunications) 5 273,547
Olympus Optical Co. (Optical Equipment) 44,000 546,267
Rohm Co. (Electronics) 6,000 786,128
Secom Co. (Consumer Goods and Services) 6,000 571,098
Takeda Chemical Industries Co. (Pharmaceuticals) 24,000 1,066,711
Terumo Corp. (Medical Equipment) 34,000 802,020
Ushio, Inc. (Electronics) 13,000 129,978
-----------
$ 6,477,214
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Luxembourg - 1.0%
HypoVereinsbank (Banks and Credit Cos.) 8,700 $ 469,768
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Mexico - 0.4%
Panamerican Beverage (Beverages) 7,400 $ 171,588
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Netherlands - 10.1%
Akzo Nobel N.V. (Chemicals) 17,584 $ 729,516
Benckiser N.V., (Consumer Goods) 13,391 723,064
Equant N.V. Registered Shares (Computer Systems)* 1,800 149,288
Hunter Douglas N.V., ADR (Consumer Goods)* 16,168 524,987
IHC Caland N.V. (Marine Equipment)* 9,025 355,139
ING Groep N.V. (Financial Services)* 5,302 283,249
Koninklijke Ahold N.V., ADR (Food/Retail) 14,752 518,164
Royal Dutch Petroleum Co., N.V., ADR (Oils) 7,077 400,293
Unilever N.V. (Consumer Goods and Services)* 3,210 209,653
Wolters Kluwer N.V. (Printing and Publishing)* 24,912 1,001,076
-----------
$ 4,894,429
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Portugal - 0.6%
Electricidade de Portugal S.A.
(Utilities - Electric) 16,765 $ 304,953
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South Korea - 0.4%
Korea Electric Power Corp. (Utilities - Electric) 6,240 $ 191,053
- ------------------------------------------------------------------------------
Spain - 3.2%
Banco Popular Espanol S.A. (Banks and Credit Cos.) 4,500 $ 328,825
Repsol SA (Oils)* 13,200 238,868
Telefonica de Espana SA (Utilities - Telephone)* 20,390 977,283
-----------
$ 1,544,976
- ------------------------------------------------------------------------------
Sweden - 2.7%
Ericsson LM, "B" (Telecommunication Equipment) 12,868 $ 343,668
Saab AB, "B" (Aerospace and Defense) 67,696 547,511
Skandia Forsakrings AB (Insurance) 24,282 416,794
-----------
$ 1,307,973
- ------------------------------------------------------------------------------
Switzerland - 3.2%
Clariant AG (Chemicals) 311 $ 140,846
Nestle AG, Registered Shares (Food and Beverage
Products) 388 697,029
UBS AG (Banks and Credit Cos.) 2,387 690,480
-----------
$ 1,528,355
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United Kingdom - 11.7%
Allied Zurich (Insurance) 22,312 $ 284,342
AstraZeneca Group PLC (Medical and Health Products) 6,541 257,280
Avis Europe PLC (Auto Rental)## 112,857 500,807
BP Amoco PLC, ADR (Oils) 9,657 1,034,506
British Aerospace PLC (Aerospace and Defense)* 71,701 473,244
Cable & Wireless Communications PLC
(Telecommunications) 28,793 273,529
Compass Group PLC (Food and Catering) 95,960 973,097
Lloyds TSB Group PLC (Banks and Credit Cos.) 37,233 496,862
Rentokil Initial (Office Services) 43,965 178,897
Reuters Group PLC (Business Services) 33,605 461,906
Williams PLC (Diversified Operations) 121,368 711,619
-----------
$ 5,646,089
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Total Foreign Stocks $37,620,232
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U.S. Stocks - 17.4%
Allstate Corp. (Insurance) 16,700 $ 608,506
American International Group, Inc. (Insurance) 6,616 756,291
Anheuser Busch Cos., Inc. (Food and Beverage) 11,605 847,890
Associates First Capital Corp., "A" (Financial
Services) 8,800 360,800
Cooper Industries, Inc. (Electrical Equipment) 7,701 381,681
Delphi Automotive Systems Corp. (Automotive)* 8,415 165,144
Galileo International, Inc. (Business Services) 5,400 243,000
Goldman Sachs Group, Inc. (Financial Institution)* 500 33,969
Hewlett-Packard Co. (Business Machines) 6,400 603,600
McDonalds Corp. (Restaurants) 21,030 809,655
Newell Rubbermaid, Inc. (Consumer Goods
and Services) 8,409 340,565
Pharmacia & Upjohn, Inc. (Pharmaceuticals) 6,392 354,356
Philip Morris Cos., Inc. (Tobacco) 15,879 612,334
Raytheon Co., "A" (Defense Electronics) 8,100 538,144
ReliaStar Financial Corp. (Insurance) 15,531 645,507
Rite Aid Corp. (Retail) 9,031 225,775
Xerox Corp. (Office Equipment) 13,073 734,539
Young & Rubicam, Inc. (Advertising) 4,700 179,775
- ------------------------------------------------------------------------------
Total U.S. Stocks $ 8,441,531
- ------------------------------------------------------------------------------
Total Stocks (Identified Cost, $44,096,621) $46,061,763
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Rights
- ------------------------------------------------------------------------------
Telefonica de Espana (Spain) (Utilities -
Telephone)* (Identified Cost, $15,510) 17,990 $ 16,503
- ------------------------------------------------------------------------------
Warrants*
- ------------------------------------------------------------------------------
Vivendi (France) (Utilities - Water)
(Identified Cost, $830) 1,450 $ 3,129
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Short-Term Obligations - 5.3%
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PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------
Federal Home Loan Bank Consolidated Discount
Note, due 6/01/99, at Amortized Cost $ 2,570 $ 2,570,000
- ------------------------------------------------------------------------------
Other Short-Term Obligations - 8.9%
- ------------------------------------------------------------------------------
SHARES
- ------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio
(Identified Cost, $4,280,901) 4,280,901 $ 4,280,901
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $50,963,862) $52,932,296
Other Assets, Less Liabilities - (9.4)% (4,559,095)
- ------------------------------------------------------------------------------
Net Assets - 100.0% $48,373,201
- ------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
MAY 31, 1999
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $50,963,862) $52,932,296
Foreign currency, at value (identified cost, $95,616) 93,622
Cash 6,762
Receivable for Fund shares sold 103,722
Receivable for investments sold 263,531
Interest and dividends receivable 159,238
Deferred organization expenses 8,042
------------
Total assets $53,567,213
------------
Liabilities:
Payable for Fund shares reacquired $ 60,955
Collateral for securities loaned, at value 4,280,901
Payable for investments purchased 759,792
Payable to affiliates -
Management fee 5,349
Shareholder servicing agent fee 549
Distribution and service fee 26,959
Administrative fee 89
Accrued expenses and other liabilities 59,418
------------
Total liabilities $ 5,194,012
-----------
Net assets $48,373,201
===========
Net assets consist of:
Paid-in capital $43,934,722
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 1,970,844
Accumulated net realized gain on investments and foreign
currency transactions 2,480,606
Accumulated net investment loss (12,971)
-----------
Total $48,373,201
===========
Shares of beneficial interest outstanding 2,695,313
=========
Class A shares:
Net asset value and redemption price per share
(net assets of $22,287,222 / 1,236,344 shares of
beneficial interest outstanding) $18.03
======
Offering price per share (100 / 95.25 of net asset value
per share) $18.93
======
Class B shares:
Net asset value and offering price per share
(net assets of $23,481,753 / 1,312,250 shares of
beneficial interest outstanding) $17.89
======
Class C shares:
Net asset value and offering price per share
(net assets of $2,545,105 / 143,449 shares of beneficial
interest outstanding) $17.74
======
Class I shares:
Net asset value and offering price per share
(net assets of $59,121 / 3,270 shares of beneficial
interest outstanding) $18.08
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Operations
- ---------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999
- ---------------------------------------------------------------------------------------
<S> <C>
Net investment loss:
Income -
Interest $ 149,186
Dividends 780,707
Foreign taxes withheld (78,333)
------------
Total investment income $ 851,560
------------
Expenses -
Management fee $ 400,986
Trustees' compensation 6,648
Shareholder servicing agent fee 45,252
Distribution and service fee (Class A) 88,435
Distribution and service fee (Class B) 216,260
Distribution and service fee (Class C) 17,781
Administrative fee 5,172
Custodian fee 47,034
Registration fees 36,071
Printing 26,764
Postage 14,440
Auditing fees 36,144
Legal fees 2,066
Amortization of organization expenses 5,145
Miscellaneous 34,732
------------
Total expenses $ 982,930
Fees paid indirectly (6,191)
------------
Net expenses $ 976,739
------------
Net investment loss $ (125,179)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 2,586,194
Foreign currency transactions (12,914)
------------
Net realized gain on investments and foreign currency transactions $ 2,573,280
------------
Change in unrealized appreciation (depreciation) -
Investments $ (3,721,834)
Translation of assets and liabilities in foreign currencies 4,568
------------
Net unrealized loss on investments and foreign currency translation $ (3,717,266)
------------
Net realized and unrealized loss on investments and foreign
currency $ (1,143,986)
------------
Decrease in net assets from operations $ (1,269,165)
============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment loss $ (125,179) $ (173,845)
Net realized gain on investments and foreign currency
transactions 2,573,280 3,556,834
Net unrealized gain (loss) on investments and foreign
currency translations (3,717,266) 2,571,252
------------ ------------
Increase (decrease) in net assets from operations $ (1,269,165) $ 5,954,241
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions (Class A) $ (301,721) $ (450,497)
From net realized gain on investments and foreign currency
transactions (Class B) (408,082) (568,428)
From net realized gain on investments and foreign currency
transactions (Class C) (29,382) (11,433)
From net realized gain on investments and foreign currency
transactions (Class I) (1,045) (67)
In excess of net investment income (Class A) -- (94,237)
In excess of net investment income (Class B) -- (45,813)
In excess of net investment income (Class C) -- (1,657)
In excess of net investment income (Class I) -- (24)
------------ ------------
Total distributions declared to shareholders $ (740,230) $ (1,172,156)
------------ ------------
Net increase in net assets from Fund share transactions $ 15,478,510 $ 711,945
------------ ------------
Total increase in net assets $ 13,469,115 $ 5,494,030
Net assets:
At beginning of period 34,904,086 29,410,056
------------ ------------
At end of period (including accumulated net investment loss
of $12,971 and $15,642, respectively) $ 48,373,201 $ 34,904,086
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999 1998 1997 1996*
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $19.01 $16.32 $15.98 $15.00
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $ -- $(0.05) $ 0.11 $ 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.64) 3.45 0.35 0.90
------ ------ ------ ------
Total from investment operations $(0.64) $ 3.40 $ 0.46 $ 1.01
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.08) $(0.03)
From net realized gain on investments and foreign
currency transactions (0.34) (0.59) (0.04) --
In excess of net investment income and foreign
currency transactions -- (0.12) -- --
------ ------ ------ ------
Total distributions declared to shareholders $(0.34) $(0.71) $(0.12) $(0.03)
------ ------ ------ ------
Net asset value - end of period $18.03 $19.01 $16.32 $15.98
====== ====== ====== ======
Total return(+) (3.45)% 21.77% 2.88% 6.71%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.11% 2.22% 2.39% 2.52%+
Net investment income (loss) 0.02% (0.28)% 0.72% 1.04%+
Portfolio turnover 89% 158% 89% 29%
Net assets at end of period (000 omitted) $22,287 $15,087 $13,425 $11,950
* For the period from the commencement of investment operations, October 24, 1995, through May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund had 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 sales charge had been included, the
results would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999 1998 1997 1996*
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.96 $16.27 $15.94 $15.00
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.10) $(0.14) $ 0.03 $ 0.05
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.63) 3.47 0.34 0.90
------ ------ ------ ------
Total from investment operations $(0.73) $ 3.33 $ 0.37 $ 0.95
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.01)
From net realized gain on investments and foreign
currency transactions (0.34) (0.59) (0.04) --
In excess of net investment income and foreign
currency transactions -- (0.05) -- --
------ ------ ------ ------
Total distributions declared to shareholders $(0.34) $(0.64) $(0.04) $(0.01)
------ ------ ------ ------
Net asset value - end of period $17.89 $18.96 $16.27 $15.94
====== ====== ====== ======
Total return (3.89)% 21.26% 2.33% 6.37%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.61% 2.72% 2.94% 3.11%+
Net investment income (loss) (0.55)% (0.79)% 0.18% 0.49%+
Portfolio turnover 89% 158% 89% 29%
Net assets at end of period (000 omitted) $23,482 $18,987 $15,749 $13,641
* For the period from the commencement of investment operations, October 24, 1995, through May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund had 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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999 1998 1997*
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.80 $16.19 $16.02
------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.09) $(0.10) $ 0.12
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.63) 3.39 0.21
------ ------ ------
Total from investment operations $(0.72) $ 3.29 $ 0.33
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.12)
From net realized gain on investments and foreign currency
transactions (0.34) (0.59) (0.04)
In excess of net investment income and foreign currency
transactions -- (0.09) --
------ ------ ------
Total distributions declared to shareholders $(0.34) $(0.68) $(0.16)
------ ------ ------
Net asset value - end of period $17.74 $18.80 $16.19
====== ====== ======
Total return (3.87)% 21.15% 2.09%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.59% 2.71% 2.64%+
Net investment income (loss) (0.49)% (0.61)% 0.80%+
Portfolio turnover 89% 158% 89%
Net assets at end of period (000 omitted) $2,545 $824 $235
* 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 had 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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1999 1998 1997*
- ------------------------------------------------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.95 $16.32 $15.71
------ ------ ------
Income from investment operations# -
Net investment income $ 0.07 $ 0.06 $ 0.16
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.60) 3.37 0.45
------ ------ ------
Total from investment operations $(0.53) $ 3.43 $ 0.61
------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions $(0.34) $(0.59) $ --
In excess of net investment income and foreign currency
transactions -- (0.21) --
------ ------ ------
Total distributions declared to shareholders $(0.34) $(0.80) $ --
------ ------ ------
Net asset value - end of period $18.08 $18.95 $16.32
====== ====== ======
Total return (2.88)% 22.08% 3.88%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.59% 1.64% 1.89%+
Net investment income 0.40% 0.33% 2.33%+
Portfolio turnover 89% 158% 89%
Net assets at end of period (000 omitted) $59 $6 $ --
* 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 had 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.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS International Growth and Income Fund (the Fund) is a diversified series of
MFS Series Trust X (the Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the effects
of changes in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, forward contracts, and swap agreements,
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.
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 $4,127,643. These loans were
collateralized by cash of $4,280,901. 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.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. 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, $28,598 and $99,252 were reclassified from
accumulated net realized gain on investments and foreign currency transactions
and paid-in capital, respectively to accumulated undistributed net investment
loss, due to differences between book and tax accounting for currency
transactions and the offset of net investment loss against short-term capital
gains. This change had no effect on the net assets or net asset value per share.
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% up
to $500 million in net assets, after which the rate is reduced to 0.90%.
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 $1,304 for the year ended May
31, 1999.
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%
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 $4,440 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 $3,608 and $221 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 each class' average daily net assets
attributable to Class B and Class C shares.
Certain Class A and Class C 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. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended May 31, 1999,
were $167, $72,691, and $1,672 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
$47,625,229 and $33,768,063, 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 $51,112,756
-----------
Gross unrealized appreciation $ 3,829,028
Gross unrealized depreciation (2,009,488)
-----------
Net unrealized appreciation $ 1,819,540
===========
(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 2,407,294 $ 44,428,290 464,915 $ 8,316,277
Shares issued to shareholders in
reinvestment of distributions 15,602 283,963 31,181 488,613
Shares reacquired (1,980,038) (36,681,341) (525,443) (9,254,269)
------------- ---------------- ----------- ---------------
Net increase (decrease) 442,858 $ 8,030,912 (29,347) $ (449,379)
============= ================ =========== ===============
<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 1,079,430 $ 19,996,186 382,384 $ 6,745,390
Shares issued to shareholders in
reinvestment of distributions 20,024 362,645 33,907 530,985
Shares reacquired (788,680) (14,733,069) (382,617) (6,634,549)
------------- ---------------- ----------- ---------------
Net increase 310,774 $ 5,625,762 33,674 $ 641,826
============= ================ =========== ===============
<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 761,163 $ 13,730,404 58,848 $ 1,059,923
Shares issued to shareholders in
reinvestment of distributions 1,506 27,057 789 12,254
Shares reacquired (663,041) (11,987,865) (30,361) (558,286)
------------- ---------------- ----------- ---------------
Net increase 99,628 $ 1,769,596 29,276 $ 513,891
============= ================ =========== ===============
<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 3,003 $ 54,006 358 $ 6,503
Shares issued to shareholders in
reinvestment of distributions 57 1,045 5 88
Shares reacquired (129) (2,811) (53) (984)
------------- ---------------- ----------- ---------------
Net increase 2,931 $ 52,240 310 $ 5,607
============= ================ =========== ===============
</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 $334. The Fund had no borrowings during the year.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange
contracts, swap agreements, and futures 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.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust X and Shareholders of
MFS International Growth & Income Fund:
We have audited the accompanying statement of assets and liabilities of MFS
International Growth & Income 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 & Income 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 from 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.
THE FUND HAS DESIGNATED $630,411 AS A CAPITAL GAIN DIVIDEND.
<PAGE>
<TABLE>
MFS(R) INTERNATIONAL GROWTH AND INCOME 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
Frederick J. Simmons*
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 ------------
AND INCOME FUND BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
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
MGI-3 7/99 10M 87/287/387/887
