<PAGE>
[Logo] M F S (R) ANNUAL REPORT
INVESTMENT MANAGEMENT JULY 31, 2000
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) CONCENTRATED
GROWTH FUND
MFS(R) EUROPEAN
EQUITY FUND
MFS(R) HIGH YIELD FUND
MFS(R) INCOME FUND
<PAGE>
<TABLE>
<S> <C>
MFS(R) CONCENTRATED GROWTH FUND MFS(R) HIGH YIELD FUND
MFS(R) EUROPEAN EQUITY FUND MFS(R) INCOME FUND
TRUSTEES TREASURER
J. Atwood Ives+ - Chairman and Chief James O. Yost*
Executive Officer, Eastern Enterprises
(diversified services company) ASSISTANT TREASURERS
Mark E. Bradley*
Lawrence T. Perera+ - Partner, Hemenway Ellen Moynihan*
& Barnes (attorneys)
SECRETARY
William J. Poorvu+ - Adjunct Professor, Stephen E. Cavan*
Harvard University Graduate School of
Business Administration ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Charles W. Schmidt+ - Private Investor
CUSTODIAN
Arnold D. Scott* - Senior Executive Vice State Street Bank and Trust Company
President, Director, and Secretary,
MFS Investment Management AUDITORS
Deloitte & Touche, LLP
Jeffrey L. Shames* - Chairman and Chief
Executive Officer, MFS Investment Management INVESTOR INFORMATION
For information on MFS mutual funds, call your
Elaine R. Smith+ - Independent Consultant investment professional or, for an
information kit, call toll free: 1-800-637-2929 any
David B. Stone+ - Chairman, North American Management Corp. business day from 9 a.m. to 5 p.m.
(investment adviser) Eastern time (or leave a message anytime).
INVESTMENT ADVISER INVESTOR SERVICE
Massachusetts Financial Services Company MFS Service Center, Inc.
500 Boylston Street P.O. Box 2281
Boston, MA 02116-3741 Boston, MA 02107-9906
DISTRIBUTOR For general information, call toll free:
MFS Fund Distributors, Inc. 1-800-225-2606 any business day from
500 Boylston Street 8 a.m. to 8 p.m. Eastern time.
Boston, MA 02116-3741
For service to speech- or hearing-impaired, call toll
CHAIRMAN AND PRESIDENT free: 1-800-637-6576 any business day from 9 a.m. to 5
Jeffrey L. Shames* p.m. Eastern time. (To use this service, your phone
must be equipped with a Telecommunications Device for
PORTFOLIO MANAGERS the Deaf.)
John Addeo*
Robert J. Manning* For share prices, account balances, exchanges, or stock
Paul M. McMahon* and bond outlooks, call toll free:
Bernard Scozzafava* 1-800-MFS-TALK (1-800-637-8255) anytime from a touch-
tone telephone.
DIRECTOR OF INTERNATIONAL
EQUITY RESEARCH WORLD WIDE WEB
David A. Antonelli* www.mfs.com
+Independent Trustee
*MFS Investment Management
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<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
I'm sure you've noticed that whenever financial markets suffer a large decline,
as they did very dramatically this past spring, there's a flurry of information
on "how to deal with market volatility" -- both in the popular press and from
those of us in the investment business. Our own thinking on this is that, first,
for long-term investors volatility is not necessarily something to be feared;
occasional volatility may in fact be healthy for the markets.
Second, our experience has been that when markets begin to fall, it's often too
late to act. The best response may be to do nothing -- if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market volatility
in stride, here are some points you may want to consider the next time you talk
with your investment professional.
1. VOLATILITY CAN BE A GOOD THING
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with very
high prices, relative to their earnings, or with business concepts that looked
great in the euphoria of a booming market but in the end appeared to have no
fundamental backing. It has always been our view that one of the best
protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask how
they fared in previous periods of volatility, as well as in the good times.
2. INVEST FOR THE LONG TERM
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over
nearly all long-term periods -- 5, 10, 20 years, and more -- stock and bond
returns, as represented by most common indices, have been positive and have
considerably outpaced inflation. Investing is the best way we know of to make
your money work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading.
In our view, traders who buy securities with the intention of selling them at
a profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. INVEST REGULARLY
Waiting for the "right time" to invest is almost always a poor strategy,
because only in retrospect do we know when that right time really was. Periods
of volatility are probably the worst times to make an investment decision. Faced
with turmoil in the markets, many investors have opted to simply stay on the
sidelines.
On the other hand, we think one of the best techniques for investing is
through automatic monthly or quarterly deductions from a checking or savings
account. This approach has at least three major benefits. First, you can
formulate a long-term plan -- how much to invest, how often, and into what
portfolios -- in a calm, rational manner, working with your investment
professional. Second, with this approach you invest regularly without
agonizing over the decision each time you buy shares.
And, third, if you invest equal amounts of money at regular intervals, you'll
be taking advantage of a strategy called dollar-cost averaging: by investing a
fixed amount while the share cost fluctuates, you end up with an average share
cost to you that is lower than the average share price over your investment
period.(1) If all this sounds familiar, it's probably because you're already
taking advantage of dollar-cost averaging by investing regularly for
retirement through a 401(k) or similar account at work.
4. DIVERSIFY
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, i.e., move money into whatever asset class appears
to be outperforming at the moment -- small, mid, or large cap; growth or value;
United States or international; stocks or bonds. The problem with this approach
is that by the time a particular area is generally recognized as "hot," you may
have already missed some of the best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in 7 out
of 10 years.(2) For the decade, the MSCI EAFE's average annual performance was
23%, compared to 18% for the S&P 500. Going into the 1990s, then, an investor
looking only at recent performance might have favored international
investments over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in 7 out of 10 years, with
the S&P 500 returning an average of 18% annually for the decade and the MSCI
EAFE returning a 7% annual average. Looking ahead, however, we are optimistic
about international markets because we feel that many of the same forces that
propelled the current U.S. economic boom -- deregulation, restructuring, and
increased adoption of technology -- have taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We would
suggest that one way to potentially profit from swings in the market -- to
potentially be invested in various asset classes before the market shifts in
their favor -- is with a diversified portfolio covering several asset classes.
If you haven't already done so, we encourage you to discuss these thoughts with
your investment professional and factor them into your long-range financial
planning. Hopefully, the next time the markets appear to be going wild, you'll
feel confident enough in your plan to view periods of volatility as a time of
potential opportunity -- or perhaps just a time to sit back and do nothing.
As always, we appreciate your confidence in MFS 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)
August 15, 2000
------------
(1) The use of a systematic investing program does not guarantee a profit or
protect against a loss in declining markets. You should consider your
financial ability to continue to invest through periods of low prices.
(2) Sources: Lipper Inc. Decade performance: '80s -- 12/31/79-12/31/89, '90s --
12/31/89-12/31/99. The MSCI EAFE Index is an unmanaged, market-
capitalization-weighted total return index that measures the performance of
the same developed-country global stock markets included in the MSCI World
Index but excludes the United States, Canada, and the South African mining
component. The S&P 500 is a popular, unmanaged index of common stock total
return performance. It is not possible to invest directly in an index. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
A prospectus containing more complete information on any MFS product,
including all charges and expenses, can be obtained from your investment
professional. Please read it carefully before you invest or send money.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
MFS CONCENTRATED GROWTH FUND
Dear Shareholders,
The fund, which commenced investment operations on May 1, 2000, seeks to
provide capital appreciation by investing in a concentrated group of common
stocks and related securities that we believe have above-average growth
potential. The fund generally focuses on companies with large market
capitalizations (above $5 billion), although the fund may invest in securities
of companies of any size. The fund is nondiversified, which means that it may
invest a relatively high percentage of its assets in a small number of
holdings; we expect that the fund will normally concentrate its investments in
a core group of 20 to 30 common stocks. In selecting investments for the
portfolio, we use a bottom-up approach to look for companies that possess
strong management teams with clearly defined strategies, strong franchises
with substantial barriers to new entrants, strong cash flows, recurring
revenue streams, potential for high profit margins, and/or a catalyst that may
accelerate growth.
Respectfully,
/s/ Paul M. McMahon
Paul M. McMahon
Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK -- continued
MFS EUROPEAN EQUITY FUND
Dear Shareholders,
The fund commenced investment operations on August 3, 1999. From that date
through July 31, 2000, the fund's Class A shares provided a total return of
33.15% and Class I shares 34.18%. These returns include the reinvestment of
any dividends but exclude the effects of any sales charges and compare to a
12.52% return over the same period for the Morgan Stanley Capital
International (MSCI) Europe Index. The MSCI Index is an unmanaged, market-
capitalization-weighted total return index of European stock funds. During the
same period, the average international fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance, returned 16.85%.
The portfolio is constructed by our European equity analysts, whose objective
is to find the best stocks within their respective industries. Our team of
analysts then meets to decide the industry weightings based on the
attractiveness of each stock selection. The fund's country allocation is an
offshoot of the portfolio construction, with stock picking being the main
driver. We are not driven by any particular investment style, but our bias is
towards companies that are in growth industries, have strong management, and
are trading at what we think are attractive valuations. This philosophy has
led us to some interesting growth stocks, but also helped us reduce downside
risk to the portfolio during a very volatile period for equities.
During the second quarter of this year, the strong performance we saw in
telecommunications, media and technology (TMT) stocks came to an abrupt end due
to a number of factors. Our research found that fears of higher interest rates
in the United States, concerns about the costs of third generation mobile
license fees in the UK, and concerns about the European mobile handset market
would put pressure on much of the group. Fortunately, the fund was underweighted
in TMT stocks going into the second quarter, and our strong relative performance
benefited from our decision to reduce our exposure to these stocks. In addition,
our expectation that investors would become more conscious of valuations, while
market strength would broaden into different sectors, also provided a boost to
the fund's performance.
Our top holdings reflect companies that we expect will have accelerating
earnings growth, yet remain overlooked by the narrow market of the past year.
Vodafone AirTouch became the fund's largest holding as we tendered our
Mannesmann shares to them. While shares of Vodafone have lagged recently, we
believe the company will benefit from the exceptionally strong growth in
German mobile phone users this year, as we expect 25% of the population to
purchase mobile phones. In our view, fears of high third-generation mobile
license fees are overdone. Therefore, we have increased our weighting in
the stock.
The funds second largest holding is HSBC, a leading European banking and
insurance company. ING Groep, our third largest holding, also has a fast
growing insurance business, which has been strengthened by the recent purchase
of ReliaStar in the United States. ING has been a successful consolidator of
European and US banks and they are taking advantage of the low prices to
expand their business. In response, the stock price appreciated significantly
during the period. KPN also experienced some weakness during the second
quarter, but we believe it will benefit from strong growth in German mobile
subscribers through the number three mobile operator in Germany, E-Plus, which
KPN purchased in December 1999.
Other large holdings in the fund include Royal Dutch Petroleum, TotalFina, and
BP Amoco. Our significant exposure to these stocks reflects our positive
stance on oil companies whose earnings we believe will benefit from the
recovery of oil prices during the past year. While the Organization of
Petroleum Exporting Countries (OPEC) always represents a wildcard for oil
prices, our expectation is that strong demand and firm oil prices are likely
to prevail in the near term.
Despite the market volatility we've seen recently, we remain positive on the
European market for the remainder of the year. We remain bullish on the
fundamental prospects for the European region, as economic growth throughout
much of the region continues to accelerate. While continued volatility may cast
a pall over investors' views in the short term, we believe investors will
continue to diversify their portfolios. As a result, astute company selection
with a focus on picking stocks that meet or exceed their earnings expectations
will be key to outperforming our benchmarks. Given the depth and talent of our
European equity research team, we believe this is an environment for which the
fund is well positioned.
Respectfully,
/s/ David A. Antonelli
David A. Antonelli
Director of International Equity Research
The committee of MFS international equity analysts is responsible for the day-
to-day management of the fund under the general supervision of Mr. Antonelli.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK -- continued
MFS HIGH YIELD FUND
Dear Shareholders,
The fund commenced operations on August 3, 1999. From that date through July
31, 2000, the fund's Class A shares provided a total return of 11.99% and
Class I shares 11.96%. These returns assume the reinvestment of distributions
but exclude the effects of any sales charges and compare to a -0.60% return
for the fund's benchmark, the Salomon Brothers High Yield Index (the Salomon
Index), an unmanaged index of below investment-grade debt issued by
corporations domiciled in the United States or Canada. The fund's returns also
compare to a -0.62% return for the average high current yield fund tracked by
Lipper Inc., an independent firm that reports mutual fund performance.
In a market where most high-yield bonds traded lower, the portfolio's
performance compared to its benchmark benefited from a number of factors.
First, favorable security selection and industry diversification were positive
contributors. Second, our successful avoidance of the credit problems, rating
downgrades, and bankruptcies that hurt a variety of industries really aided
the fund's relative results. Third, we weren't afraid to lock in profits on a
number of subscription warrants -- securities issued with a bond or preferred
stock that entitles the holder to buy a proportionate amount of common stock
at a specified price. Some of these warrants and their underlying securities,
such as Versatel Telecom, spiked up dramatically early in the period. We could
have been tempted to hold on to these positions given the strong fundamental
outlook for these companies, but because we weren't comfortable with the
additional risk, we decided to reduce our exposure. Many of these
telecommunications and technology stock prices have subsequently come down
quite a bit following the selloff in the equity market during the second
quarter. Finally, the fund exercised its flexibility to maintain a portion of
its assets in equities. At the end of the period, roughly 29% of our
investments were in stocks. They generally proved to be strong contributors to
performance during the period.
The number of defaults has picked up recently; however, we don't see the
default rate increasing to 8.4% by June of 2001, as a recent Moody's report
suggested. In fact, we think that the total number of defaults will trend
downward during this period for a couple of reasons. First, we feel many of
the anticipated defaults are a result of a loose issuance period in 1998,
during which the high-yield market issued a record amount of debt. As it
turned out, many of these companies possessed weak business plans. Today, we
find that the supply of bonds is much lower, and underwriters are conducting
more stringent credit analysis of issuers. It's also important to point out
that Moody's calculates default rates differently than other companies; they
include emerging market debt, convertible securities, and even investment-
grade debt. While we feel the potential for high-visibility defaults adds
"headline" risk to the market -- meaning the overall high-yield market may
react negatively to a particular default -- we see this as a short-term
phenomenon. We strive to avoid such problems by using our Original Research
(SM) process, which focuses on company fundamentals.
Looking ahead, we believe it's difficult to rule out further volatility given
the uncertain interest-rate environment. However, the high-income market has
been weak for quite some time now, and yield spreads -- the yield difference
between noninvestment grade debt and Treasuries -- have widened significantly
during the past year, making the yields on high-income bonds very attractive
relative to other fixed-income securities. In addition, we believe the economy
will remain healthy and corporate earnings will remain strong, which could
bode well for high-yield bond prices. Historically, we have found that the
high-yield market has closely tracked corporate earnings.
Given this environment, we continue to view the telecom and media industries as
defensive positions that also offer compelling growth opportunities. Despite
what happens to the economy, we don't believe that people are likely to turn off
their cable or mobile phones. In addition, we're pretty comfortable that the
Federal Reserve Board is either done raising interest rates or is near the end
of its tightening cycle.
Respectfully,
/s/ John Addeo /s/ Robert J. Manning
John Addeo Robert J. Manning
Portfolio Manager Portfolio Manager
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK -- continued
MFS INCOME FUND
Dear Shareholders,
The fund commenced investment operations on August 3, 1999. From that date
through July 31, 2000, Class A shares of the fund provided a total return of
4.81% and Class I shares 5.31%. These returns, which include the reinvestment
of any distributions but exclude the effects of any sales charges, compare to
a -0.60% over the same period for the fund's benchmark, the Salomon Brothers
High Yield Index, an unmanaged index consisting of complete universes of
government bonds with remaining maturities of at least five years. During the
same period, the average high current yield fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance, returned -0.62%.
The high-yield market remained plagued by a number of difficulties during most
of the period. First, high-yield portfolios experienced approximately $6.5
billion in outflows this year, which hurt demand for high-yield securities.
Second, while default rates have recently come down a bit, they remained
relatively high during the period. Finally, concerns about inflation and
unsustainable economic growth kept investors nervous about future interest- rate
hikes. While we are starting to see signs that the economy is slowing and the
Federal Reserve Board (the Fed) may be nearing the end of its rate hikes, we
think the possibility of one or two more increases is not out of the question.
On a more positive note, we've recently started to see money flowing back into
the high-yield market as the interest-rate environment has improved and
investors are being drawn to some extremely attractive yields relative to U.S.
Treasury and investment-grade bonds. (The principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to maturity.)
In a market where most high-yield bonds traded lower, the portfolio's
performance compared to its benchmark benefited from favorable security
selection and industry diversification. During the second quarter of 2000,
many telecommunications and media securities experienced a dramatic selloff
along with the equity market. However, our holdings in these sectors, as well
as holdings in industries such as gaming and industrial manufacturing, held up
well during the period. We maintained our positions in telecommunications
bonds including Nextel, which provided steady gains due to persistent strength
in wireless subscriber growth.
Core media holdings included cable television and radio entities such as Charter
Communications, one of the fastest-growing companies in the field. Controlled by
Paul Allen, the co-founder of Microsoft, Charter's valuation rose following the
increased utilization of cable networks as a means of accessing the Internet. In
many ways, we view telecom and media as defensive industries that offer
attractive growth and income opportunities. Most people are not going to turn
off their cable or mobile phones if the economy slows down. On the other hand,
we feel some of the big-ticket capital items such as industrial machinery,
building materials, and autos may experience a slowdown in business and consumer
spending due to higher interest rates. Given the current economic environment,
we like the telecom and media sectors, and we've increased our exposure to these
industries since the beginning of the year. We've taken some money off the table
in some of the more cyclical industries such as steel and paper packaging, as
well as in general manufacturing. We increased holdings in gaming bonds, which
we also view as a somewhat defensive industry. These securities have gained
ground because it appears that there are fewer and fewer regions of the country
that permit gaming, and we believe these companies will continue to produce
exceptional earnings and cash flow growth.
Looking ahead, we're cautiously optimistic regarding a recovery in high-yield
securities. While it's difficult to rule out further volatility given the
uncertain interest-rate environment, the high-income market has been weak for
quite some time now. Yield spreads, the yield difference between
noninvestment-grade debt and Treasuries, have widened significantly during the
past year, making the yields on high-income bonds very attractive relative to
other fixed-income securities in our view. In addition, we believe the economy
will remain healthy and corporate earnings will remain strong. And,
ultimately, the high-yield market historically has tracked corporate earnings.
Respectfully,
/s/ Bernard Scozzafava
Bernard Scozzafava
Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
the Director of International Equity Research, and are current only through
the end of the period of the report as stated on the cover. These views are
subject to change at any time based on market and other conditions, and no
forecasts can be guaranteed.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
PERFORMANCE SUMMARY
Currently, each fund offers only Class A and Class I shares, which are
available for purchase at net asset value only by residents of the
Commonwealth of Massachusetts who are employees (or certain relatives of
employees) of MFS and its affiliates or members of the governing boards of the
various funds sponsored by MFS.
The following information illustrates the historical performance of each
fund's Class A shares in comparison to various market indicators. Performance
results 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.)
It is not possible to invest directly in an index.
MFS EUROPEAN EQUITY FUND(1)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
August 3, 1999, through July 31, 2000. Index information is from August 1,
1999.)
MFS European
Equity Fund - Class A MSCI Europe Index
--------------------- -----------------
August, 1999 $ 9,425 $10,000
July, 2000 12,549 11,252
TOTAL RATES OF RETURN THROUGH JULY 31, 2000
CLASS A
Life*
--------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +33.15%
--------------------------------------------------------------------------------
Cumulative Total Return Including Sales Charge +25.49%
--------------------------------------------------------------------------------
CLASS I
Life**
--------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +34.18%
--------------------------------------------------------------------------------
COMPARATIVE INDICES
Life*
--------------------------------------------------------------------------------
Average international fund+ +16.85%
--------------------------------------------------------------------------------
MSCI Europe Index# +12.52%
--------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
August 3, 1999, through July 31, 2000. Index information is from August 1,
1999.
** For the period from the inception of Class I, August 4, 1999, through July
31, 2000.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
<PAGE>
PERFORMANCE SUMMARY -- continued
MFS HIGH YIELD FUND(2)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
August 3, 1999, through July 31, 2000. Index information is from
August 1, 1999.)
MFS Salomon Brothers
High Yield Fund - Class A High Yield Index
------------------------- ----------------
August, 1999 $ 9,525 $10,000
July, 2000 10,667 9,940
TOTAL RATES OF RETURN THROUGH JULY 31, 2000
CLASS A
Life*
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +11.99%
------------------------------------------------------------------------------
Cumulative Total Return Including Sales Charge + 6.67%
------------------------------------------------------------------------------
CLASS I
Life**
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +11.96%
------------------------------------------------------------------------------
COMPARATIVE INDICES
Life*
------------------------------------------------------------------------------
Average high current yield fund+ -0.62%
------------------------------------------------------------------------------
Salomon Brothers High Yield Index# -0.60%
------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
August 3, 1999, through July 31, 2000. Index information is from August 1,
1999.
** For the period from the inception of Class I, August 4, 1999, through July
31, 2000.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
MFS INCOME FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
August 3, 1999, through July 31, 2000. Index information is from August 1,
1999.)
MFS Salomon Brothers
Income Fund - Class A High Yield Index
--------------------- ----------------
August, 1999 $ 9,525 $10,000
July, 2000 9,984 9,940
TOTAL RATES OF RETURN THROUGH JULY 31, 2000
CLASS A
Life*
-----------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +4.81%
-----------------------------------------------------------------------------
Cumulative Total Return Including Sales Charge -0.16%
-----------------------------------------------------------------------------
CLASS I
Life**
-----------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +5.31%
-----------------------------------------------------------------------------
COMPARATIVE INDICES
Life*
-----------------------------------------------------------------------------
Average high current yield fund+ -0.62%
-----------------------------------------------------------------------------
Salomon Brothers High Yield Index# -0.60%
-----------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
August 3, 1999, through July 31, 2000. Index information is from August 1,
1999.
** For the period from the inception of Class I, August 4, 1999, through July
31, 2000.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable 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 include 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. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
(1)Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries
where investments are made. These risks may increase share price
volatility. See the prospectus for details.
(2)Lower-rated securities may provide greater returns, but they are also
associated with greater-than-average risk. These risks may increase share
price volatility. See the prospectus for details.
<PAGE>
PORTFOLIO OF INVESTMENTS - July 31, 2000
MFS CONCENTRATED GROWTH FUND
Stocks - 75.8%
--------------------------------------------------------------------------
ISSUER SHARES VALUE
--------------------------------------------------------------------------
U.S. Stocks - 75.7%
Aerospace - 4.8%
Boeing Co. 340 $ 16,660
--------------------------------------------------------------------------
Cellular Telephones - 4.8%
Sprint Corp. (PCS Group)* 300 $ 16,575
--------------------------------------------------------------------------
Computer Software - Services - 3.7%
EMC Corp.* 150 $ 12,769
--------------------------------------------------------------------------
Electronics - 19.6%
Analog Devices, Inc.* 240 $ 16,050
Lam Research Corp.* 500 14,625
Micron Technology, Inc.* 230 18,745
Tektronix, Inc.* 300 18,450
-----------
$ 67,870
--------------------------------------------------------------------------
Insurance - 15.4%
Gallagher (Arthur J.) & Co. 400 $ 19,625
Hartford Financial Services Group, Inc. 260 16,705
Marsh & McLennan Cos., Inc. 140 17,080
-----------
$ 53,410
--------------------------------------------------------------------------
Oil Services - 8.3%
Baker Hughes, Inc. 450 $ 15,581
Noble Drilling Corp.* 300 13,069
-----------
$ 28,650
--------------------------------------------------------------------------
Telecommunications - 19.1%
Allegiance Telecom, Inc.* 200 $ 11,112
CIENA Corp.* 110 15,634
Cisco Systems, Inc.* 100 6,544
Metromedia Fiber Network, Inc., "A"* 300 10,538
Nextlink Communications, Inc., "A"* 300 9,919
Time Warner Telecom, Inc.* 200 12,386
-----------
$ 66,133
--------------------------------------------------------------------------
Total U.S. Stocks $ 262,067
--------------------------------------------------------------------------
Foreign Stocks - 0.1%
Brazil - 0.1%
Empresa Brasileira de Aeronautica S.A.,
ADR (Aerospace and Defense)* 10 $ 225
--------------------------------------------------------------------------
Total Stocks (Identified Cost, $248,772) $ 262,292
--------------------------------------------------------------------------
Short-Term Obligation - 8.7%
--------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------
Federal Home Loan Mortgage Assn.,
due 8/01/00 at Amortized Cost $ 30 $ 30,000
--------------------------------------------------------------------------
Total Investments (Identified Cost, $278,772) $292,292
Other Assets, Less Liabilities - 15.5% 53,641
--------------------------------------------------------------------------
Net Assets - 100.0% $345,933
--------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS - July 31, 2000
MFS EUROPEAN EQUITY FUND
Stocks - 95.7%
--------------------------------------------------------------------------
ISSUER SHARES VALUE
--------------------------------------------------------------------------
Foreign Stocks - 92.4%
Bermuda - 0.3%
FLAG Telecom Holdings Ltd.
(Telecommunications)* 110 $ 1,767
--------------------------------------------------------------------------
Finland - 1.0%
Sonera Oyj (Telecommunications) 105 $ 4,135
Tieto Corp. (Computer Software - Systems) 84 2,977
-----------
$ 7,112
--------------------------------------------------------------------------
France - 15.5%
Alcatel Co. (Telecommunications)* 180 $ 13,276
April Group (Insurance) 18 3,369
Axa (Insurance) 72 10,941
Banque Nationale de Paris
(Banks and Credit Cos.) 84 8,290
Business Objects S.A., ADR
(Computer Software - Systems)* 16 1,512
Castorama Dubois Investisse (Retail) 22 5,443
Integra S.A. (Computer Software -
Services) 195 2,439
Natexis Banques Populaires
(Banks and Credit Cos.)* 1 74
Natexis Co. (Financial Services)* 47 3,484
Sanofi-Synthelabo S.A. (Pharmaceuticals) 151 8,052
Societe Television Francaise 1
(Broadcasting)* 148 10,999
STMicroelectronics N.V. (Electronics) 111 6,315
Technip S.A. (Construction) 98 12,259
Total Fina S.A. (Oils) 100 14,816
Wavecom S.A. (Electronics)* 34 3,791
-----------
$ 105,060
--------------------------------------------------------------------------
Germany - 7.5%
Comdirect Bank AG (Financial Services)* 40 $ 1,238
Fielmann AG (Retail) 103 3,570
Fresenius AG (Medical Supplies) 30 6,613
Fresenius AG, Preferred (Medical Supplies) 55 2,548
GFT Technologies AG (Computer Software -
Systems) 45 2,685
Henkel KGaA (Chemicals) 136 8,626
Porsche AG (Automotive)* 1 2,956
Prosieben Media AG (Broadcasting) 85 12,011
SAP AG, Preferred (Computer Software -
Systems) 48 10,630
-----------
$ 50,877
--------------------------------------------------------------------------
Greece - 0.5%
Antenna TV S.A., ADR (Broadcasting)* 194 $ 3,177
--------------------------------------------------------------------------
Ireland - 0.3%
Trintech Group PLC, ADR
(Computer Software - Products)* 68 $ 1,768
--------------------------------------------------------------------------
Italy - 1.8%
Banca Intesa S.p.A. (Financial Services) 1,940 $ 8,557
Banca Monte dei Paschi di Siena (Banks
and Credit Cos.) 900 3,487
Beni Stabili (Real Estate) 720 354
-----------
$ 12,398
--------------------------------------------------------------------------
Netherlands - 18.9%
ABN Amro Holdings N.V. (Finance)* 357 $ 8,663
Akzo Nobel N.V. (Chemicals) 259 11,517
Completel Europe N.V. (Telecommunications)* 20 230
Fugro N.V. (Engineering)* 130 6,836
Hunter Douglas N.V., ADR (Consumer Goods
and Services)* 238 6,175
ING Groep N.V. (Financial Services)* 374 25,000
Jomed N.V. (Medical and Health Products)* 110 5,771
Koninklijke (Royal) Philips Electronics N.V.
(Electronics) 240 10,870
Koninklijke Ahrend Groep N.V. (Consumer
Goods and Services)* 416 5,204
KPN N.V. (Telecommunications)* 437 15,796
Libertel N.V. (Cellular Telecommunications)* 411 6,455
Royal Dutch Petroleum Co. ADR (Oils) 304 18,028
Versatel Telecom International N.V.
(Telecommunications)* 230 7,651
-----------
$ 128,196
--------------------------------------------------------------------------
Portugal - 0.4%
Portugal Telecom S.A. (Telecommunications) 260 $ 2,831
--------------------------------------------------------------------------
Spain - 3.8%
Altadis (Tobacco) 484 $ 7,176
Cortefiel S.A. (Retail) 290 6,610
Jazztel, ADR (Telecommunications)* 50 1,475
Telefonica de Espana S.A., ADR
(Telecommunications) 157 9,940
Telefonica S.A. (Telecommunications) 30 631
-----------
$ 25,832
--------------------------------------------------------------------------
Sweden - 3.9%
Saab AB, "B" (Aerospace) 1,857 $ 14,994
Scandinavia Online Co. (Internet)* 225 4,296
Skandia Forsakrings AB (Insurance) 262 5,846
Tele1 Europe Holdings AB
(Telecommunications)* 100 1,271
-----------
$ 26,407
--------------------------------------------------------------------------
Switzerland - 8.2%
Credit Suisse Group (Banks and Credit Cos.) 52 $ 11,177
Leica Geosystems AG (Electronics)* 13 3,897
Nestle S.A. (Food and Beverage Products) 6 12,509
Novartis AG (Pharmaceuticals) 11 16,997
Synthes-Stratec, Inc. (Medical and
Health Products)* 20 10,700
-----------
$ 55,280
--------------------------------------------------------------------------
United Kingdom - 30.3%
AstraZeneca Group PLC (Pharmaceuticals) 310 $ 13,394
BAE Systems PLC (Aerospace)* 2,217 14,946
Boots Co. PLC (Retail)* 620 4,783
BP Amoco PLC (Oils)* 1,563 13,675
British Telecommunications PLC
(Telecommunications)* 545 7,201
Cable & Wireless PLC (Telecommunications)* 509 8,861
Capital Radio PLC (Broadcasting) 232 5,995
Carlton Communications PLC (Broadcasting) 424 4,986
CGU PLC (Insurance)* 841 13,216
Diageo PLC (Food and Beverage Products)* 920 8,077
Energis PLC (Telecommunications)* 400 2,870
Granada Media PLC (Broadcasting)* 570 5,328
HSBC Holdings PLC (Banks and Credit Cos.)* 2,000 27,071
HSBC Holdings PLC, HK REG (Banks and
Credit Cos.)* 400 5,284
Matalan PLC (Retail) 850 7,551
Next PLC (Retail) 728 7,002
Reuters Group PLC (Business Services) 717 13,738
Royal Bank of Scotland PLC (Banks and
Credit Cos.)* 450 7,092
Telework Group PLC (Computer Software -
Systems)* 40 87
Vodafone AirTouch PLC (Telecommunications)* 7,722 34,127
-----------
$ 205,284
--------------------------------------------------------------------------
Total Foreign Stocks $ 625,989
--------------------------------------------------------------------------
U.S. Stocks - 3.3%
Internet - 0.3%
VIA Net.Works, Inc.* 130 $ 2,178
--------------------------------------------------------------------------
Medical and Health Products - 1.6%
Pharmacia Corp. 191 $ 10,457
--------------------------------------------------------------------------
Telecommunications - 0.9%
NTL, Inc.* 137 $ 6,174
--------------------------------------------------------------------------
Telecommunications and Cable - 0.5%
UnitedGlobalCom, Inc.* 70 $ 3,434
--------------------------------------------------------------------------
Total U.S. Stocks $ 22,243
--------------------------------------------------------------------------
Total Stocks (Identified Cost, $619,753) $ 648,232
--------------------------------------------------------------------------
Short-Term Obligation - 1.5%
--------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------
Federal Home Loan Mortgage Assn.,
due 8/01/00, at Amortized Cost $ 10 $ 10,000
--------------------------------------------------------------------------
Total Investments (Identified Cost, $629,753) $ 658,232
Other Assets, Less Liabilities - 2.8% 19,158
--------------------------------------------------------------------------
Net Assets - 100.0% $ 677,390
--------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS - July 31, 2000
MFS HIGH YIELD FUND
Bonds - 68.7%
--------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
--------------------------------------------------------------------------
U.S. Bonds - 61.5%
Aerospace - 1.6%
K & F Industries, Inc., 9.25s, 2007 $ 25 $ 23,937
--------------------------------------------------------------------------
Building - 2.7%
Building Materials Corp., 8.625s, 2006 $ 25 $ 20,750
Formica Corp., 10.875s, 2009 25 19,375
-----------
$ 40,125
--------------------------------------------------------------------------
Chemicals - 1.7%
Huntsman ICI Chemicals, Inc., 10.125s, 2009 $ 25 $ 25,437
--------------------------------------------------------------------------
Consumer Goods and Services - 1.5%
Polymer Group, Inc., 9s, 2007 $ 25 $ 21,063
--------------------------------------------------------------------------
Container, Forest and Paper Products - 4.6%
Applied Extrusion Technologies, Inc.,
11.5s, 2002 $ 25 $ 24,625
Gaylord Container Corp., 9.75s, 2007 25 20,500
Riverwood International Corp., 10.875s, 2008 25 22,750
-----------
$ 67,875
--------------------------------------------------------------------------
Energy - 3.7%
Cheasapeake Energy Corp., 9.625s, 2005 $ 15 $ 14,663
Gothic Production Corp., 11.125s, 2005 15 15,450
P&L Coal Holdings Corp., 9.625s, 2008 25 23,687
-----------
$ 53,800
--------------------------------------------------------------------------
Gaming and Hotels - 6.4%
Coast Hotels & Casinos, Inc., 9.5s, 2009 $ 25 $ 23,875
Hollywood Park, Inc., 9.25s, 2007 25 25,125
Horseshoe Gaming LLC, 8.625s, 2009 25 23,750
MGM Grand, Inc., 9.75s, 2007 20 20,550
-----------
$ 93,300
--------------------------------------------------------------------------
Industrial - 2.8%
Allied Waste North America, Inc.,
10s, 2009## $ 25 $ 21,750
Thermadyne Manufacturing/Capital Corp.,
9.875s, 2008 25 19,219
-----------
$ 40,969
--------------------------------------------------------------------------
Media - 7.6%
Adelphia Communications Corp., 8.375s, 2008 $ 25 $ 21,500
Charter Communications Holdings, 0s to 2004,
9.92s to 2011 40 23,000
Classic Cable, Inc., 10.5s, 2010 25 21,500
Granite Broadcasting Corp., 10.375s, 2005 23 21,620
NTL Communications Corp., 0s to 2003,
12.375s to 2008 35 23,100
-----------
$ 110,720
--------------------------------------------------------------------------
Metals and Minerals - 1.7%
Commonwealth Aluminum Corp., 10.75s, 2006 $ 25 $ 24,500
--------------------------------------------------------------------------
Retail - 3.0%
Duane Reade, Inc., 9.25s, 2008 $ 25 $ 22,500
J. Crew Group, Inc., 0s to 2002,
13.125s to 2008 40 21,700
-----------
$ 44,200
--------------------------------------------------------------------------
U.S. Bonds - continued
Special Products and Services - 1.0%
Blount, Inc., 13s, 2009 $ 15 $ 15,094
--------------------------------------------------------------------------
Supermarkets - 0.2%
Jitney-Jungle Stores of America, Inc.,
12s, 2006** $ 25 $ 3,250
--------------------------------------------------------------------------
Telecommunications - 23.0%
Centennial Cellular Operating Co.,
10.75s, 2008 $ 25 $ 24,062
Crown Castle International Corp.,
10.75s, 2011 25 25,562
Exodus Communications, Inc., 10.75s, 2009 25 24,250
Focal Communications Corp., 11.875s, 2010## 25 24,875
ITC Deltacom, Inc., 9.75s, 2008 25 22,750
Leap Wireless International, Inc.,
14.5s, 2010## 20 8,400
Level 3 Communications, Inc., 9.125s, 2008 25 21,688
McCaw International Ltd., 0s to 2002,
13s to 2007 35 26,950
Nextel Communications, Inc., 0s to 2003,
9.95s to 2008 35 25,462
Nextlink Communications, Inc., 10.75s, 2009 25 24,500
PSINET, Inc., 11s, 2009 25 20,000
Spectrasite Holdings, Inc., 0s to 2004,
11.25s to 2009 45 26,550
Time Warner Telecommunications LLC,
9.75s, 2008 25 23,938
Voicestream Wireless Corp., 10.375s, 2009 15 16,088
Worldwide Fiber, Inc., 12s, 2009 25 22,500
-----------
$ 337,575
--------------------------------------------------------------------------
Total U.S. Bonds $ 901,845
--------------------------------------------------------------------------
Foreign Bonds - 7.2%
Belgium - 1.3%
Hermes Europe Railtel B.V., 10.375s, 2009
(Telecommunications) $ 25 $ 19,250
--------------------------------------------------------------------------
Bermuda - 1.7%
Global Crossing Holdings Ltd., 9.625s, 2008
(Telecommunications) $ 25 $ 24,375
--------------------------------------------------------------------------
Canada - 0.9%
GT Group Telecom Inc., 0s to 2005,
13.25s to 2010 (Telecommunications) $ 25 $ 13,250
--------------------------------------------------------------------------
Germany - 1.6%
Callahan Nordrhein, 14s, 2010## (Media) $ 25 $ 24,500
--------------------------------------------------------------------------
Netherlands - 1.7%
Versatel Telecom B.V., 13.25s, 2008
(Telecommunications) $ 25 $ 25,625
--------------------------------------------------------------------------
Total Foreign Bonds $ 107,000
--------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,097,500) $ 1,008,845
--------------------------------------------------------------------------
Stocks - 28.8%
--------------------------------------------------------------------------
SHARES
--------------------------------------------------------------------------
U.S. Stocks - 28.3%
Agricultural Products - 0.7%
AGCO Corp. 800 $ 10,300
--------------------------------------------------------------------------
Automotive - 1.1%
Delphi Automotive Systems Corp. 1,100 $ 16,294
--------------------------------------------------------------------------
Business Machines - 1.1%
Seagate Technology, Inc.* 330 $ 16,727
--------------------------------------------------------------------------
Computer Hardware - Systems - 0.9%
Compaq Computer Corp. 500 $ 14,031
--------------------------------------------------------------------------
Containers - 6.2%
Ivex Packaging Corp.* 5,920 $ 61,420
Owens Illinois, Inc.* 2,200 29,287
-----------
$ 90,707
--------------------------------------------------------------------------
Electrical Equipment - 0.5%
Honeywell International, Inc. 200 $ 6,725
--------------------------------------------------------------------------
Energy - 1.5%
Devon Energy Corp. 480 $ 21,960
--------------------------------------------------------------------------
Financial Institutions - 1.1%
Freddie Mac Corp. 400 $ 15,775
--------------------------------------------------------------------------
Food and Beverage Products - 2.4%
Archer-Daniels-Midland Co. 1,425 $ 13,359
Flowers Industries, Inc. 1,000 21,313
-----------
$ 34,672
--------------------------------------------------------------------------
Industrial - 0.3%
Ingersoll Rand Co. 100 $ 3,925
--------------------------------------------------------------------------
Machinery - 1.7%
Deere & Co., Inc. 650 $ 25,066
--------------------------------------------------------------------------
Medical and Health Technology and Services - 2.3%
Cytyc Corp.* 710 $ 34,080
--------------------------------------------------------------------------
Oil Services - 2.3%
BJ Services Co.* 100 $ 5,838
Global Marine, Inc.* 600 16,987
Noble Drilling Corp.* 260 11,326
-----------
$ 34,151
--------------------------------------------------------------------------
Restaurants and Lodging - 2.4%
Hilton Hotels Corp. 1,750 $ 17,937
Starwood Hotels & Resorts Co. 500 17,063
-----------
$ 35,000
--------------------------------------------------------------------------
Retail - 1.7%
Office Depot, Inc.* 4,000 $ 25,000
--------------------------------------------------------------------------
Supermarkets - 2.1%
Kroger Co.* 1,500 $ 31,031
--------------------------------------------------------------------------
Total U.S. Stocks $ 415,444
--------------------------------------------------------------------------
Foreign Stock - 0.5%
Canada
Inco Ltd. (Metals) 500 $ 7,344
--------------------------------------------------------------------------
Total Stocks (Identified Cost, $360,926) $ 422,788
--------------------------------------------------------------------------
Warrant
--------------------------------------------------------------------------
Leap Wireless International, Inc.
(Identified Cost, $114) 20 $ 100
--------------------------------------------------------------------------
Short-Term Obligation - 1.0%
--------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 8/01/00, at Amortized Cost $ 15 $ 15,000
--------------------------------------------------------------------------
Total Investments (Identified Cost, $1,473,540) $ 1,446,733
Other Assets, Less Liabilities - 1.5% 22,222
--------------------------------------------------------------------------
Net Assets - 100.0% $ 1,468,955
--------------------------------------------------------------------------
* Non-income producing security.
** Non-income producing security-in default.
## SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS - July 31, 2000
MFS INCOME FUND
Bonds - 91.6%
--------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
--------------------------------------------------------------------------
U.S. Bonds - 84.1%
Aerospace - 4.4%
BE Aerospace, Inc., 8s, 2008 $25 $ 21,813
K & F Industries, Inc., 9.25s, 2007 25 23,937
-----------
$ 45,750
--------------------------------------------------------------------------
Building - 6.3%
American Standard, Inc., 7.375s, 2008 $25 $ 23,000
Building Materials Corp., 8s, 2007 25 20,000
Nortek, Inc., 9.25s, 2007 25 23,562
-----------
$ 66,562
--------------------------------------------------------------------------
Business Services - 0.9%
Iron Mountain, Inc., 8.75s, 2009 $10 $ 9,000
--------------------------------------------------------------------------
Chemicals - 3.4%
Huntsman ICI Chemicals, 10.125s, 2009 $25 $ 25,438
Lyondell Chemical Co., 9.625s, 2007 10 10,000
-----------
$ 35,438
--------------------------------------------------------------------------
Consumer Goods and Services - 1.3%
Kindercare Learning Centers, Inc., 9.5s, 2009 $10 $ 9,150
Simmons Co., 10.25s, 2009 5 4,550
-----------
$ 13,700
--------------------------------------------------------------------------
Container, Forest and Paper Products - 7.0%
Ball Corp., 8.25s, 2008 $25 4 23,750
Buckeye Cellulose Corp., 8.5s, 2005 25 23,969
U.S. Can Corp., 10.125s, 2006 25 25,625
-----------
$ 73,344
--------------------------------------------------------------------------
Energy - 6.6%
Gulfmark Offshore, Inc., 8.75s, 2008 $10 $ 9,325
Ocean Energy, Inc., 8.875s, 2007 25 24,875
P&L Coal Holdings Corp., 8.875s, 2008 25 24,125
Pioneer Natural Resources Co., 9.625s, 2010 10 10,400
-----------
$ 68,725
--------------------------------------------------------------------------
Gaming and Hotels - 8.8%
Boyd Gaming Corp., 9.5s, 2007 $25 $ 24,000
Circus Circus Enterprises, Inc., 9.25s, 2005 25 24,125
MGM Grand, Inc., 9.75s, 2007 10 10,275
Park Place Entertainment Corp., 7.875s, 2005 25 23,750
Station Casinos, 9.875s, 2010## 10 10,000
-----------
$ 92,150
--------------------------------------------------------------------------
Industrial - 2.2%
Hayes Wheels International, Inc.,
9.125s, 2007 $25 $ 22,719
--------------------------------------------------------------------------
Media - 20.4%
Century Communications Corp., 9.5s, 2005 $25 $ 23,563
Chancellor Media Corp., 8s, 2008 25 25,250
Charter Communications Holdings, 8.25s, 2007 25 22,250
Classic Cable, Inc., 10.5s, 2010 25 21,500
CSC Holdings, Inc., 8.125s, 2009 25 24,511
Echostar DBS Corp., 9.375s, 2009 25 24,187
Hollinger International Publishing,
9.25s, 2007 $25 24,750
Insight Midwest, 9.75s, 2009 25 24,625
Primedia, Inc., 7.625s, 2008 25 23,000
-----------
$ 213,636
--------------------------------------------------------------------------
Medical and Health Products - 0.9%
Fresenius Med Care Capital Trust,
7.875s, 2008 $10 $ 9,200
--------------------------------------------------------------------------
Medical and Health Technology and Services - 2.2%
Tenet Healthcare Corp., 8.125s, 2008 $25 $ 23,563
--------------------------------------------------------------------------
Metals and Minerals - 0.9%
AK Steel Holdings Corp., 9.125s, 2006 $10 $ 9,900
--------------------------------------------------------------------------
Retail - 0.9%
Musicland Group, Inc., 9s, 2003 $10 $ 9,300
--------------------------------------------------------------------------
Telecommunications - 17.9%
Crown Castle International Corp., 10.75s, 2011 $10 $ 10,225
Focal Communications Corp., 11.875s, 2010## 25 24,875
ITC Deltacom, Inc., 8.875s, 2008 25 21,750
Level 3 Communications, Inc., 9.125s, 2008 25 21,687
Nextel Communications, Inc., 0s to 2003,
9.95s to 2008 20 14,550
Nextlink Communications, Inc., 10.75s, 2009 25 24,500
PSINET, Inc., 11s, 2009 25 20,000
Telecorp PCS, Inc., 10.625s, 2010 10 10,175
Time Warner Telecommunications LLC,
9.75s, 2008 25 23,937
Voicestream Wireless Corp., 10.375s, 2009 15 16,088
-----------
$ 187,787
--------------------------------------------------------------------------
Total U.S. Bonds $ 880,774
--------------------------------------------------------------------------
Foreign Bonds - 7.5%
Bermuda - 0.9%
Global Crossing Holdings Ltd., 9.625s, 2008
(Telecommunications) $10 $ 9,750
--------------------------------------------------------------------------
Netherlands - 4.2%
Kpnqwest BV, 8.125s, 2009 (Telecommunications) $25 $ 23,000
United Pan-Europe Commerce NV, 11.25s, 2010
(Media) 25 21,375
-----------
$ 44,375
--------------------------------------------------------------------------
United Kingdom - 2.4%
Energis PLC, 9.75s, 2009 (Telecommunications) $25 $ 24,625
--------------------------------------------------------------------------
Total Foreign Bonds $ 78,750
--------------------------------------------------------------------------
Total Bonds (Identified Cost, $997,203) $ 959,524
--------------------------------------------------------------------------
Short-Term Obligation - 5.7%
--------------------------------------------------------------------------
Federal Home Loan Mortgage Assn.,
due 8/01/00, at Amortized Cost $60 $ 60,000
--------------------------------------------------------------------------
Total Investments (Identified Cost, $1,057,203) $ 1,019,524
Other Assets, Less Liabilities - 2.7% 28,709
--------------------------------------------------------------------------
Net Assets - 100.0% $ 1,048,233
--------------------------------------------------------------------------
## SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------------------------------------------------
CONCENTRATED EUROPEAN HIGH YIELD INCOME
JULY 31, 2000 GROWTH FUND EQUITY FUND FUND FUND
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $ 278,772 $ 629,753 $ 1,473,540 $ 1,057,203
Unrealized appreciation
(depreciation) 13,520 28,479 (26,807) (37,679)
----------- ----------- ----------- -----------
Total investments, at value $ 292,292 $ 658,232 $ 1,446,733 $ 1,019,524
Cash 1,033 3,688 2,778 3,858
Foreign currency, at value -- --
(identified cost, $3,046)
-- 2,966
Receivable for investments sold 128,231 18,001 15,431 10,287
Interest and dividends receivable 75 1,377 22,945 24,567
Receivable from investment adviser 2,641 -- -- --
----------- ----------- ----------- -----------
Total assets $ 424,272 $ 684,264 $ 1,487,887 $ 1,058,236
----------- ----------- ----------- -----------
Liabilities:
Payable for investments purchased $ 78,311 $ 6,819 $ 18,932 $ 10,000
Payable to affiliates -
Management fee 21 41 -- --
Reimbursement fee 7 14 -- --
Accrued expenses and other
liabilities
-- -- -- 3
----------- ----------- ----------- -----------
Total liabilities $ 78,339 $ 6,874 $ 18,932 $ 10,003
----------- ----------- ----------- -----------
Net assets $ 345,933 $ 677,390 $ 1,468,955 $ 1,048,233
=========== =========== =========== ===========
Net assets consist of:
Paid-in capital $ 307,082 $ 509,312 $ 1,450,175 $ 1,095,028
Unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign currencies 13,520 28,379 (26,807) (37,679)
Accumulated undistributed net
realized gain (loss) on investments
and foreign currency transactions 25,331 135,624 47,000 (9,431)
Accumulated undistributed
(distributions in excess of) net
investment income -- 4,075 (1,413) 315
----------- ----------- ----------- -----------
Total $ 345,933 $ 677,390 $ 1,468,955 $ 1,048,233
=========== =========== =========== ===========
Shares of beneficial interest outstanding:
Class A 30,714 51,257 144,946 109,773
Class I -- 20 20 20
----------- ----------- ----------- -----------
Total shares of beneficial
interest outstanding 30,714 51,277 144,966 109,793
=========== =========== =========== ===========
Net assets:
Class A $ 345,933 $ 677,126 $ 1,468,752 $ 1,048,043
Class I -- 264.33 202.96 190.30
----------- ----------- ----------- -----------
Total net assets $ 345,933 $ 677,390 $ 1,468,955 $ 1,048,233
=========== =========== =========== ===========
Class A shares:
Net asset value per share
(net assets / shares of beneficial
interest outstanding) $ 11.26 $ 13.21 $ 10.13 $ 9.55
=========== =========== =========== ===========
Offering price per share for
Concentrated Growth Fund and
European Equity Fund (100 / 94.25
of net asset value per share) and
for High Yield Fund and Income
Fund (100 / 95.25 of net asset
value per share) $ 11.95 $ 14.02 $ 10.64 $ 10.02
=========== =========== =========== ===========
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets / shares of beneficial
interest outstanding) $ -- $ 13.22 $ 10.15 $ 9.52
=========== =========== =========== ===========
On sales of $50,000, $50,000, $100,000, and $100,000, respectively, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A shares.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations
---------------------------------------------------------------------------------------------------------------------------
CONCENTRATED EUROPEAN HIGH YIELD INCOME
PERIOD ENDED JULY 31, 2000 GROWTH FUND* EQUITY FUND** FUND** FUND**
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Income -
Interest $ 367 $ 1,183 $ 102,445 $ 92,871
Dividends 246 11,561 3,178 --
Foreign taxes withheld (2) (1,335) (29) --
----------------------------------------------------------------- ----------- ----------- ----------- -----------
Total investment income $ 611 $ 11,409 $ 105,594 $ 92,871
----------- ----------- ----------- -----------
Expenses -
Management fee $ 622 $ 4,689 $ 8,026 $ 6,109
Shareholder servicing agent fee 83 626 1,335 1,013
Administrative fee 15 87 184 160
Custodian fee 7,493 12,204 7,452 7,479
Printing 2,000 13,455 10,061 5,185
Postage 50 172 70 51
Auditing fees 9,000 9,000 9,500 9,500
Legal fees 204 1,483 1,258 1,508
Registration fees 4,000 4,000 4,000 4,028
Miscellaneous 230 1,274 2,455 947
----------- ----------- ----------- -----------
Total expenses $ 23,697 $ 46,990 $ 44,341 $ 35,980
Fees paid indirectly (25) -- (429) (326)
Reduction of expenses by investment
adviser (22,843) (40,738) (43,912) (35,654)
----------- ----------- ----------- -----------
Net expenses $ 829 $ 6,252 $ -- $ --
----------- ----------- ----------- -----------
Net investment income (loss) $ (218) $ 5,157 $ 105,594 $ 92,871
----------- ----------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 25,549 $ 139,871 $ 74,870 $ (7,323)
Foreign currency transactions -- (228) 2 --
----------- ----------- ----------- -----------
Net realized gain (loss) on
investments and foreign currency
transactions $ 25,549 $ 139,643 $ 74,872 $ (7,323)
----------- ----------- ----------- -----------
Change in unrealized appreciation (depreciation) -
Investments $ 13,520 $ 28,479 $ (26,807) $ (37,679)
Translation of assets and liabilities
in foreign currencies -- (100) -- --
----------- ----------- ----------- -----------
Net unrealized gain (loss) on
investments and foreign currency
translation $ 13,520 $ 28,379 $ (26,807) $ (37,679)
----------- ----------- ----------- -----------
Net realized and unrealized gain
(loss) on investments and
foreign currency $ 39,069 $ 168,022 $ 48,065 $ (45,002)
----------- ----------- ----------- -----------
Increase in net assets from
operations $ 38,851 $ 173,179 $ 153,659 $ 47,869
=========== =========== =========== ===========
* For the period from the commencement of the fund's investment operations, May 1, 2000, through July 31, 2000.
** For the period from the commencement of the fund's investment operations, August 3, 1999, through July 31, 2000.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes to Net Assets
---------------------------------------------------------------------------------------------------------------------------
CONCENTRATED EUROPEAN HIGH YIELD INCOME
PERIOD ENDED JULY 31, 2000 GROWTH FUND* EQUITY FUND** FUND** FUND**
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase in net assets:
From operations -
Net investment income (loss) $ (218) $ 5,157 $ 105,594 $ 92,871
Net realized gain (loss) on investments and
foreign currency transactions 25,549 139,643 74,872 (7,323)
Net unrealized gain (loss) on investments
and foreign currency translation 13,520 28,379 (26,807) (37,679)
----------- ----------- ----------- -----------
Increase in net assets from operations $ 38,851 $ 173,179 $ 153,659 $ 47,869
----------- ----------- ----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (852) $ (105,578) $ (92,484)
From net investment income (Class I) -- (1) (16) (18)
From net realized gain on investments and
foreign currency transactions (Class A) -- (4,246) (27,868) --
From net realized gain on investments and
foreign currency transactions (Class I) -- (2) (4) --
In excess of net investment income (Class A) -- -- (1,413) --
In excess of net investment income (Class I) -- -- (0)+ --
In excess of net realized gain on investments (Class A) -- -- -- (2,161)
In excess of net realized gain on investments (Class I) -- -- -- (1)
----------- ----------- ----------- -----------
Total distributions declared to shareholders $ -- $ (5,101) $ (134,879) $ (94,664)
----------- ----------- ----------- -----------
Net increase in net assets from fund share transactions $ 307,082 $ 509,312 $ 1,450,175 $ 1,095,028
----------- ----------- ----------- -----------
Total increase in net assets $ 345,933 $ 677,390 $ 1,468,955 $ 1,048,233
Net assets:
At beginning of period -- -- -- --
----------- ----------- ----------- -----------
At end of period $ 345,933 $ 677,390 $ 1,468,955 $ 1,048,233
----------- ----------- ----------- -----------
Accumulated undistributed (distributions in
excess of) net investment income included
in net assets at end of period $ -- $ 4,075 $ (1,413) $ 315
=========== =========== =========== ===========
* For the period from the commencement of the fund's investment operations, May 1, 2000, through July 31, 2000.
** For the period from the commencement of the fund's investment operations, August 3, 1999 through July 31, 2000.
+ Amount was less than $1.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
------------------------------------------------------------------------------
CONCENTRATED GROWTH FUND
------------------------------------------------------------------------------
PERIOD
ENDED
JULY 31, 2000*
------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00
------
Income from investment operations# -
Net investment loss(S) $(0.01)
Net realized and unrealized gain on investments 1.27
------
Total from investment operations $ 1.26
------
Net asset value - end of period $11.26
======
Total return(+) 12.60%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.03%+
Net investment loss (0.26)%+
Portfolio turnover 124%
Net assets at end of period (000 Omitted) $346
(S) Subject to reimbursement by the fund, the investment adviser voluntarily
agreed, under a temporary expense reimbursement agreement, to pay all of the
fund's operating expenses, exclusive of management fees. In consideration,
the fund pays the investment adviser a reimbursement fee not greater than
0.25% of average daily net assets. To the extent actual expenses were over
this limitation, the net investment loss per share and the ratios would have
been:
Net investment loss $(0.75)
Ratios (to average net assets):
Expenses## 28.56%+
Net investment loss (27.79)%+
* For the period from the commencement of the fund's investment operations,
May 1, 2000, through July 31, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(+) 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.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
-------------------------------------------------------------------------------------------------------------
EUROPEAN EQUITY FUND
-------------------------------------------------------------------------------------------------------------
PERIOD PERIOD
ENDED ENDED
JULY 31, 2000* JULY 31, 2000**
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
-------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $ 10.00 $ 9.93
------- -------
Income from investment operations# -
Net investment income(S) $ 0.10 $ 0.07
Net realized and unrealized gain on investments and
foreign currency 3.20 3.31
------- -------
Total from investment operations $ 3.30 $ 3.38
------- -------
Less distributions declared to shareholders -
From net investment income $ (0.01) $ (0.01)
From net realized gain on investments and foreign
currency transactions (0.08) (0.08)
------- -------
Total distributions declared to shareholders $ (0.09) $ (0.09)
------- -------
Net asset value - end of period $ 13.21 $ 13.22
======= =======
Total return(+) 33.15%++ 34.18%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.00%+ 1.00%+
Net investment income 0.82%+ 0.58%+
Portfolio turnover 143% 143%
Net assets at end of period (000 Omitted) $ 677 $ 0+++
(S) Subject to reimbursement by the fund, the investment adviser voluntarily agreed, under a temporary expense
reimbursement agreement, to pay all of the fund's operating expenses, exclusive of management fees. In consideration,
the fund pays the investment adviser a reimbursement fee not greater than 0.25% of the average daily net assets. To
the extent actual expenses were over this limitation, the net investment loss per share and ratios would have been:
Net investment loss $ (0.68) $ (0.76)
Ratios (to average net assets):
Expenses## 7.51%+ 7.51%+
Net investment loss (5.69)%+ (5.93)%+
* For the period from the commencement of the fund's investment operations, August 3, 1999, through July 31, 2000.
** For the period from the inception of Class I, August 4, 1999, through July 31, 2000.
+ Annualized.
++ Not annualized.
+++ Class I net assets were less than $500.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
---------------------------------------------------------------------------------------------------------
HIGH YIELD FUND
---------------------------------------------------------------------------------------------------------
PERIOD PERIOD
ENDED ENDED
JULY 31, 2000* JULY 31, 2000**
---------------------------------------------------------------------------------------------------------
CLASS A CLASS I
---------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.81 $ 0.81
Net realized and unrealized gain on investments and
foreign currency 0.34 0.36
------ ------
Total from investment operations $ 1.15 $ 1.17
------ ------
Less distributions declared to shareholders -
From net investment income $(0.80) $(0.80)
In excess of net investment income (0.01) (0.01)
From net realized gain on investments and foreign
currency transactions (0.21) (0.21)
------ ------
Total distributions declared to shareholders $(1.02) $(1.02)
------ ------
Net asset value - end of period $10.13 $10.15
====== ======
Total return(+) 11.99%++ 11.96%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03%+
Net investment income 7.91%+ 7.91%+
Portfolio turnover 83% 83%
Net assets at end of period (000 Omitted) $1,469 $0+++
(S) The investment adviser has voluntarily agreed under a temporary expense agreement to pay all of the fund's
operating expenses in excess of 0.00%. In addition, the investment adviser voluntarily waived its fees for
the period indicated. To the extent actual expenses were over/under these limitations and the waivers had not
been in place, the net investment income per share and the ratios would have been:
Net investment income $ 0.47 $ 0.47
Ratios (to average net assets):
Expenses## 3.32%+ 3.32%+
Net investment income 4.62%+ 4.62%+
* For the period from the commencement of the fund's investment operations, August 3, 1999, through July 31, 2000.
** For the period from the inception of Class I, August 4, 1999, through July 31, 2000.
+ Annualized.
++ Not annualized.
+++ Class I net assets were less than $500.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
-----------------------------------------------------------------------------------------------------------
INCOME FUND
-----------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
JULY 31, 2000* JULY 31, 2000**
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS I
-----------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.89 $ 0.87
Net realized and unrealized loss on investments (0.43) (0.45)
------ ------
Total from investment operations $ 0.46 $ 0.42
------ ------
Less distributions declared to shareholders -
From net investment income $(0.89) $(0.88)
In excess of net realized gain on investments (0.02) (0.02)
------ ------
Total distributions declared to shareholders $(0.91) $(0.90)
------ ------
Net asset value - end of period $ 9.55 $ 9.52
====== ======
Total return(+) 4.81%++ 5.31%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03%+
Net investment income 9.17%+ 8.96%+
Portfolio turnover 83% 83%
Net assets at end of period (000 Omitted) $1,048 $0+++
(S) The investment adviser has voluntarily agreed under a temporary expense agreement to pay all of the fund's
operating expenses in excess of 0.00% of average daily net assets. In addition, the investment adviser voluntarily
waived its fees for the period indicated. To the extent actual expenses were over/under these limitations and the
waivers had not been in place, the net investment income per share and the ratios would have been:
Net investment income $ 0.55 $0.53
Ratios (to average net assets):
Expenses## 3.55%+ 3.55%+
Net investment income 5.65%+ 5.44%+
* For the period from the commencement of the fund's investment operations, August 3, 1999, through July 31, 2000.
** For the period from the inception of Class I, August 4, 1999, through July 31, 2000.
+ Annualized.
++ Not Annualized.
+++ Class I net assets were less than $500.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Concentrated Growth Fund is a non-diversified series of MFS Series Trust X
(the trust). MFS European Equity Fund, MFS High Yield Fund, and MFS Income Fund
(the funds) are each a diversified series of the trust. The trust is organized
as a Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The MFS High
Yield Fund and MFS Income Fund can invest up to 100% of its portfolio in
high-yield securities rated below investment grade. Investments in high-yield
securities involve greater degrees of credit and market risk than investments in
higher-rated securities and tend to be more sensitive to economic conditions.
The funds can invest in foreign securities. 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 - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, 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. 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 in
good faith, at fair value, by 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.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date. The funds use the effective
interest method for reporting interest income on payment-in-kind (PIK) bonds.
Legal fees and other related expenses incurred to preserve and protect the value
of a security owned are added to the cost of the security; other legal fees are
expensed. Capital infusions made directly to the security issuer, which are
generally non-recurring, incurred to protect or enhance the value of high-yield
debt securities, are reported as additions to the cost basis of the security.
Costs that are incurred to negotiate the terms or conditions of capital
infusions or that are expected to result in a plan of reorganization are
reported as realized losses. Ongoing costs incurred to protect or enhance an
investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - Each fund's custody 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 total expenses on the Statement of
Operations.
Tax Matters and Distributions - Each fund's policy is to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute to shareholders all of its net taxable income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The funds
distinguish between distributions on a tax basis and a financial reporting basis
and 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 period ended July 31, 2000,
the following amounts were reclassified due to permanent differences between
book and tax accounting for foreign currency transactions, the offset of net
investment loss against short-term capital gains:
<TABLE>
<CAPTION>
CONCENTRATED EUROPEAN HIGH
GROWTH FUND EQUITY FUND YIELD FUND INCOME FUND
------------------------------------------------------------------------------------------------------------
Increase (decrease):
<S> <C> <C> <C> <C>
Paid-in-capital $ -- $ -- $ -- $ --
Accumulated net realized
gain (loss) on investments (218) 229 -- 54
Accumulated undistributed
net investment income
(loss) 218 (229) -- (54)
</TABLE>
(3) Transactions with Affiliates
Investment Adviser - The funds have an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. For MFS
High Yield Fund and MFS Income Fund, the management fee is computed daily and
paid monthly at an annual rate of 0.60% of each fund's average daily net assets.
The investment adviser has voluntarily agreed to waive its fee, which is shown
as a reduction of total expenses in the Statement of Operations. For MFS
Concentrated Growth Fund and MFS European Equity Fund the management fee is
computed daily and paid monthly at an annual rate of 0.75% of each fund's
average daily net assets.
MFS Concentrated Growth Fund and MFS European Equity Fund have a temporary
expense reimbursement agreement whereby MFS has voluntarily agreed to pay all of
the funds' operating expenses, exclusive of management fee. The funds in turn
will pay MFS an expense reimbursement fee not greater than 0.25% of average
daily net assets. At July 31, 2000, aggregate unreimbursed expenses amounted to
$22,843 and $40,738, respectively.
The investment adviser has voluntarily agreed to pay the operating expenses of
MFS High Yield Fund and MFS Income Fund such that each funds' aggregate expenses
do not exceed 0.00% of their average daily net assets. This is reflected as a
reduction of total expenses in the Statement of Operations.
The funds pay no compensation directly to their 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
funds are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Trustees currently are not receiving any
payments for their services for the funds.
Administrator - The funds have an administrative services agreement with MFS to
provide the funds with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each fund incurs an administrative fee at
the following annual percentages of each fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales of Class A shares of the funds for the period
ended July 31, 2000.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each fund's distribution plan provides that the fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of 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 each fund's average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.10% per annum of each fund's average daily net assets
attributable to Class A shares. For the funds, payment of the 0.10% per annum
Class A distribution fee and the 0.25% per annum Class A service fee will
commence on such a date as the Trustees of the Trust may determine.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. MFD
receives all contingent deferred sales charges. There were no contingent
deferred sales charges imposed on Class A shares of the funds during the period
ended July 31, 2000.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
<TABLE>
<CAPTION>
CONCENTRATED EUROPEAN HIGH
GROWTH FUND EQUITY FUND YIELD FUND INCOME FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $ 555,414 $1,362,242 $2,457,997 $1,780,666
Sales $ 332,040 $ 882,162 $1,093,860 $ 778,769
</TABLE>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each fund, as computed on a federal income tax basis, are
as follows:
<TABLE>
<CAPTION>
CONCENTRATED EUROPEAN HIGH
GROWTH FUND EQUITY FUND YIELD FUND INCOME FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $ 278,772 $ 630,827 $1,475,589 $1,057,203
--------- ---------- ---------- ----------
Gross unrealized
appreciation $ 18,001 $ 85,576 $ 89,368 $ 4,961
Gross unrealized
depreciation (4,481) (58,171) (118,224) (42,640)
---------- ---------- ---------- ----------
Net unrealized
appreciation (depreciation) $ 13,520 $ 27,405 $ (28,856) $ (37,679)
========== ========== ========== ==========
</TABLE>
(5) Shares of Beneficial Interest
Each fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
<TABLE>
<CAPTION>
Class A shares
CONCENTRATED EUROPEAN HIGH
GROWTH FUND* EQUITY FUND** YIELD FUND** INCOME FUND**
---------------------- ---------------------- ---------------------- ---------------------
PERIOD ENDED JULY 31, 2000 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 30,969 $ 309,673 58,525 $ 599,003 131,921 $1,317,652 100,020 $1,000,200
Shares issued to
shareholders in
reinvestment of
distributions -- -- 428 5,003 13,266 134,755 9,753 94,628
Shares reacquired (255) (2,591) (7,696) (94,892) (241) (2,432) -- --
------ ---------- ------ ---------- ------- ---------- ------- ----------
Net increase 30,714 $ 307,082 51,257 $ 509,114 144,946 $1,449,975 109,773 $1,094,828
====== ========== ====== ========== ======= ========== ======= ==========
* For the period from the commencement of the fund's investment operations, May 1, 2000, through July 31, 2000.
** For the period from the commencement of the funds' investment operations, August 3, 1999, through July 31, 2000.
<CAPTION>
Class I shares
EUROPEAN HIGH
EQUITY FUND YIELD FUND INCOME FUND
---------------------- ---------------------- ----------------------
PERIOD ENDED JULY 31, 2000*** SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 20 $ 198 20 $ 200 20 $ 200
*** For the period from the inception of Class I, August 4, 1999, through July 31, 2000.
</TABLE>
(6) Line of Credit
The funds and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. 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. There was no commitment fee allocated to the funds.
The funds had no significant borrowings during the period.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Trustees and Shareholders of MFS Series Trust X:
We have audited the accompanying statements of assets and liabilities of MFS
Concentrated Growth Fund, MFS European Equity Fund, MFS High Yield Fund and MFS
Income Fund (four of the series comprising MFS Series Trust X), including the
portfolios of investments, as of July 31, 2000, and the related statements of
operations, statements of changes in net assets and the financial highlights for
the period from the commencement of investment operations, through July 31,
2000. These financial statements and financial highlights are the responsibility
of the Trust'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 auditing standards generally accepted
in the United States of America. 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. Our procedures included confirmation of
securities owned as of July 31, 2000, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. 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
Concentrated Growth Fund, MFS European Equity Fund, MFS High Yield Fund and MFS
Income Fund as of July 31, 2000, and the results of their operations, the
changes in their net assets and their financial highlights for the period from
the commencement of investment operations, through July 31, 2000 in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 7, 2000
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
FEDERAL TAX INFORMATION
In January 2001, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2000.
For the period ended July 31, 2000, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 3.00%
for the European Equity Fund.
For the period ended July 31, 2000, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 1.75%
for the High Yield Fund.
For the period ended July 31, 2000, income from foreign sources was $11,373,
and the European Equity Fund designated a foreign tax credit of $1,283.
<PAGE>
MFS(R) CONCENTRATED GROWTH FUND
MFS(R) EUROPEAN EQUITY FUND
MFS(R) HIGH YIELD FUND
MFS(R) INCOME FUND
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
INC-2 Xb 9/00 1.5M
