<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) INTERNATIONAL
GROWTH FUND
ANNUAL REPORT o MAY 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
Independent Auditors' Report .............................................. 30
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
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 stock 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 -- five, 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 which 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, by moving 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 seven
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 seven 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)
June 15, 2000
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(1) For a more complete explanation of dollar-cost averaging and the math
involved, see "ABCs of Investing" in the Investor Education section of our
Web site (www.mfs.com).
(2) Source: 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
[Photo of David R. Mannheim]
David R. Mannheim
For the 12 months ended May 31, 2000, Class A shares of the fund provided a
total return of 26.58%, Class B shares 25.85%, Class C shares 25.94%, and Class
I shares 27.54%. These returns, which assume the reinvestment of any
distributions but exclude the effects of any sales charges, compare to returns
over the same period of 17.43% and 23.77%, respectively, for the fund's
benchmarks, the Morgan Stanley Capital International (MSCI) Europe, Australia,
Far East (EAFE) Index and the Lipper International Funds Index (the Lipper
Index). During the same period, the average international fund tracked by Lipper
Inc., an independent firm that reports mutual fund performance, returned 25.54%.
The MSCI EAFE Index is an unmanaged, market-capitalization-weighted total
return index of developed-country global stock markets, excluding the United
States, Canada, and the South African mining component. The Lipper mutual fund
indices are unmanaged, net-asset-value-weighted indices of the largest
qualifying mutual funds within their respective fund classifications, adjusted
for the reinvestment of capital gain distributions and income dividends.
Q. THE FUND OUTPERFORMED BOTH ITS BENCHMARKS AND A MAJORITY OF ITS COMPETITORS
OVER THE PAST YEAR. WHAT ARE SOME OF THE FACTORS THAT AFFECTED PERFORMANCE?
A. We feel the fund's strategy of relatively broad sector diversification was a
major factor in helping us outperform in difficult market conditions. In
Asia and Europe, we witnessed the same market phenomena as in the United
States: high volatility and rotation between new-economy stocks, or
companies seen as being technology rich, and old-economy stocks, or
companies viewed as being technology poor and as having done business the
same way for a long time. Through the fourth quarter of 1999 and into
February 2000, we had a strong rally in new-economy stocks, or what
Europeans refer to as TMT: technology, media, and telecommunications. Then
in late winter and spring we had what we view as a natural correction in
high-valuation TMT issues, with money rotating back toward old-economy
stocks.
The big drivers of the fund's performance for much of the period were our
TMT holdings. But when we gave back a portion of our TMT gains during the
market volatility in late winter and spring, the rotation into old-economy
stocks helped some of our other sectors, such as financial services. So we
feel conditions during the period supported our long-standing belief that
diversification may help serve investors well by providing competitive
returns over a variety of market cycles. We also took advantage of market
volatility to buy shares in what we believed were fundamentally sound
companies with depressed stock prices.
A factor that hurt performance, however, was the decline of the euro over
the period. Since our results must always be converted back into dollars,
any profits we make on European equities are decreased if the euro declines
versus the dollar. Conversely, a rising euro would give an extra boost to
profits on our European holdings.
Q. ABOUT A YEAR AGO, UTILITIES AND COMMUNICATIONS BECAME THE LARGEST SECTOR IN
THE FUND AND HAS REMAINED SO. COULD YOU COMMENT ON THAT?
A. This is actually a byproduct of our style of individual bottom-up stock
picking. Utilities and communications, particularly telecommunications, is
simply the area in which we have found the most companies with strong
earnings growth prospects at reasonable valuations -- as opposed to some
other areas of TMT, where we feel valuations have gotten dangerously high.
Although, as we mentioned, these holdings gave up some of their gains late
in the period, we still feel very positive about them as a group.
Our focus has been largely on wireless carriers and what are called
alternative carriers. These are companies that come into a market with new
technology, such as all-fiber-optic networks, and are able to undercut the
incumbents' prices. Cable & Wireless in the United Kingdom and AT&T Canada
are examples of alternative carriers. Major wireless carriers that we hold
include NTT Mobile Communications, the largest cellular company in Japan,
KPN in the Netherlands, and Vodafone AirTouch in the United Kingdom.
Q. IN WHAT AREAS ARE YOU FINDING NEW OPPORTUNITIES?
A. Fast Retailing is a stock that we think exemplifies how our bottom-up
Original Research(SM) may uncover new opportunities in difficult markets.
With rising unemployment and a weak economy, we would not generally consider
Japan to be a great environment in which to invest in a retail company. But
Fast Retailing is a chain of unisex casual clothing stores that has broken
out of the traditional Japanese retail mold. By cutting out layers of
middlemen, it has been able to undercut department store prices by as much
as 50% to 60%. However, until recently the market's perception seemed to be
that the company's stock was already fully valued.
Our retail analyst in Tokyo had been following the stock for some time when
he urged us last fall to increase our existing small position in Fast
Retailing. The analyst had been visiting its stores and had seen lines of
customers stretching around the block. Conversations with store managers
confirmed that the company was experiencing phenomenal sales growth. We
concluded that Fast Retailing's stock was actually underpriced relative to
future earnings, and we strongly increased our position. Subsequently, the
market appears to have arrived at a similar opinion, and our holding has
appreciated considerably.
Another large holding that illustrates our Original Research process is
Chugai Pharmaceutical. We added this Japanese company to the portfolio over
a year ago because our research revealed that, although the company's
earnings growth was only average or slightly above, it appeared to have a
hidden gem that was not yet reflected in its stock price. GenProbe, a Chugai
subsidiary in San Diego, was developing a blood-screening technology that we
believe may become a world standard in the screening for AIDS and other
diseases. As the market has come to recognize the potential of GenProbe, the
price of Chugai stock has risen significantly. We believe it may have
further potential as its blood-screening technology comes closer to its
initial product launch.
Q. COULD YOU GIVE US YOUR OUTLOOK ON THE MARKETS?
A. On a cautionary note, we feel that valuations in the markets are high, so
investors should not expect overall returns to be what they've been in the
past. That said, we think the prospects for earnings growth have actually
improved over the past year for a majority of the companies in which we're
invested. Japan has moved from negative to positive earnings growth. In much
of the rest of Asia, we've seen continued and accelerating recovery from the
regional financial crisis of 1998. And in Europe, our projections of average
annual earnings growth have increased from 8% to 10% a year ago to 12% to
15% for 2000, a rate we feel may be sustainable into next year. However, no
forecasts are guaranteed.
One factor in this positive outlook is the strong dollar. We talked about
this earlier as being, in one respect, a negative for the fund. But it is a
positive factor for overseas firms competing against dollar-based companies.
In the United States, for example, a strong dollar makes imported goods less
expensive and therefore more competitive.
We also see the establishment of the euro zone as a positive development. We
believe it is propelling European companies into a wider marketplace,
forcing them to act more competitively and focus more on delivering stock
performance for shareholders. Other factors contributing to our outlook for
strong international earnings growth include continued deregulation in many
foreign marketplaces and industries, as well as ongoing restructuring in
Europe and Asia -- trends that echo earlier developments in the United
States that have contributed strongly to our current economic boom.
/s/ David R. Mannheim
David R. Mannheim
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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DAVID R. MANNHEIM IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND DIRECTOR OF INTERNATIONAL PORTFOLIO MANAGEMENT. HE IS
PORTFOLIO MANAGER OF MFS(R) GLOBAL EQUITY FUND, MFS(R) INTERNATIONAL
GROWTH FUND, MFS(R) INSTITUTIONAL INTERNATIONAL EQUITY FUND, AND THE
INTERNATIONAL GROWTH SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY
PRODUCTS.
MR. MANNHEIM JOINED MFS IN 1988 AND WAS NAMED INVESTMENT OFFICER IN
1990, ASSISTANT VICE PRESIDENT IN 1991, VICE PRESIDENT AND PORTFOLIO
MANAGER IN 1992, SENIOR VICE PRESIDENT IN 1997, AND DIRECTOR OF
INTERNATIONAL PORTFOLIO MANAGEMENT IN 1999. HE IS A GRADUATE OF AMHERST
COLLEGE AND THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF
MANAGEMENT.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS TO PROVIDE CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN NON-U.S. STOCKS GROWING AT RATES EXPECTED
TO BE WELL ABOVE THE GROWTH RATE OF THE OVERALL
U.S. ECONOMY.
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 24, 1995
CLASS INCEPTION: CLASS A OCTOBER 24, 1995
CLASS B OCTOBER 24, 1995
CLASS C JULY 1, 1996
CLASS I JANUARY 2, 1997
SIZE: $119.7 MILLION NET ASSETS AS OF MAY 31, 2000
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PERFORMANCE SUMMARY
The following information illustrates the historical performance of the fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary.) It is not possible to
invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
October 24, 1995, through May 31, 2000. Index information is from November 1,
1995.)
MFS INTERNATIONAL LIPPER
GROWTH FUND INTERNATIONAL MSCI EAFE
- CLASS A FUNDS INDEX INDEX
----------------------------------------------------------
5/96 $10,614 $11,196 $11,132
5/97 10,840 12,936 12,006
5/98 11,607 14,908 13,376
5/99 10,180 14,672 13,999
5/00 12,886 18,159 16,439
<TABLE>
TOTAL RATES OF RETURN THROUGH MAY 31, 2000
<CAPTION>
CLASS A
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +26.58% +18.88% +35.29%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +26.58% + 5.93% + 6.79%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +20.57% + 4.23% + 5.66%
---------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +25.85% +16.97% +31.93%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +25.85% + 5.36% + 6.21%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +21.85% + 4.45% + 5.85%
---------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +25.94% +16.99% +32.30%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +25.94% + 5.37% + 6.27%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +24.94% + 5.37% + 6.27%
---------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +27.54% +20.91% +37.85%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +27.54% + 6.53% + 7.22%
---------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average international fund+ +25.54% +11.88% +12.71%
---------------------------------------------------------------------------------------------------
Lipper International Funds Index+ +23.77% +11.97% +13.90%
---------------------------------------------------------------------------------------------------
MSCI EAFE Index# +17.43% +11.04% +11.45%
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* For the period from the commencement of the fund's investment operations, October 24, 1995,
through May 31, 2000. Index information is from November 1, 1995.
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance
Including Sales Charge takes into account the deduction of the applicable
contingent deferred sales charge (CDSC), which declines over six years from 4%
to 0%. Class C Share Performance Including Sales Charge takes into account the
deduction of the 1% CDSC applicable to Class C shares redeemed within 12
months. Class I shares have no sales charge and are only available to certain
institutional investors.
Class C share performance includes the performance of the fund's Class B
shares for periods prior to its inception (blended performance). Class C
blended performance has been adjusted to take into account the lower CDSC
applicable to Class C shares. This blended performance has not been adjusted
to take into account differences in class-specific operating expenses. Because
operating expenses of Class B and C shares are approximately the same, the
blended Class C performance is approximately the same as it would have
been had Class C shares been offered for the entire period. Class I share
performance includes the performance of the fund's Class A shares for
periods prior to its inception (blended performance). Class I share blended
performance has been adjusted to account for the fact that Class I shares have
no sales charge. This blended performance has not been adjusted to take into
account differences in class-specific operating expenses. Because operating
expenses of Class I shares are lower than those of Class A, the blended Class
I share performance is lower than it would have been had Class I shares been
offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of 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.
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.
PORTFOLIO CONCENTRATION AS OF MAY 31, 2000
FIVE LARGEST STOCK SECTORS
UTILITIES & COMMUNICATIONS 23.4%
TECHNOLOGY 11.9%
FINANCIAL SERVICES 11.8%
LEISURE 11.2%
HEALTH CARE 10.6%
TOP 10 STOCK HOLDINGS
VODAFONE AIRTOUCH PLC 3.9% PROSIEBEN MEDIA AG 2.6%
U.K. telecommunications company German commercial television
network
NTT MOBILE COMMUNICATIONS NETWORK, INC. 3.5%
Japanese mobile phone company NOVARTIS AG 2.6%
Swiss pharmaceutical company
CANON, INC. 3.4%
Japanese office equipment and imaging company AKZO NOBEL N.V. 2.6%
Dutch diversified pharmaceutical
HITACHI LTD. 3.2% and chemical company
Japanese electronics company
SAAB AB 2.5%
CHUGAI PHARMACEUTICAL CO. LTD. 3.1% Swedish aircraft, space, and
Japanese pharmaceutical manufacturer defense company
NTL, INC. 2.5%
U.S.-based telecommunications
company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- May 31, 2000
<CAPTION>
Stocks - 95.9%
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ISSUER SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - 93.5%
Australia - 2.6%
Publishing & Broadcasting Ltd. (Broadcasting) 149,600 $ 1,100,974
QBE Insurance Group Ltd. (Insurance)* 545,459 2,072,488
------------
$ 3,173,462
--------------------------------------------------------------------------------------------------------
Bermuda - 0.4%
FLAG Telecom Holdings Ltd. (Telecommunications)* 37,680 $ 534,585
--------------------------------------------------------------------------------------------------------
Canada - 4.8%
Anderson Exploration Ltd. (Oils)* 65,400 $ 1,207,633
AT&T Canada, Inc. (Telecommunications)* 22,700 885,300
BCE, Inc. (Telecommunications) 39,800 930,279
Canadian National Railway Co. (Railroads) 75,208 2,016,514
Nortel Networks Corp. (Telecommunications) 13,505 719,263
------------
$ 5,758,989
--------------------------------------------------------------------------------------------------------
Finland - 2.1%
Helsingin Puhelin Oyj (Telecommunications) 33,400 $ 2,367,566
HPY Holding - HTF Holding Oyj Abp (Telecommunications)* 4,100 133,804
------------
$ 2,501,370
--------------------------------------------------------------------------------------------------------
France - 12.0%
Aventis S.A. (Pharmaceuticals) 18,200 $ 1,183,167
Banque Nationale de Paris (Banks and Credit Cos.) 19,800 1,786,727
Bouygues S.A. (Telecommunications) 3,020 1,870,325
Castorama Dubois Investisse (Retail) 2,623 662,994
Sanofi-Synthelabo S.A. (Medical and Health Products)* 54,800 2,389,485
Technip S.A. (Construction) 14,200 1,480,717
Television Francaise (Entertainment) 757 487,177
Total S.A., "B" (Oils) 14,000 2,205,463
Vivendi S.A. (Business Services) 21,100 2,263,197
------------
$ 14,329,252
--------------------------------------------------------------------------------------------------------
Germany - 2.5%
ProSieben Media AG, Preferred (Entertainment)* 31,800 $ 3,037,170
--------------------------------------------------------------------------------------------------------
Greece - 0.4%
Antenna TV S.A., ADR (Broadcasting)* 28,547 $ 449,615
--------------------------------------------------------------------------------------------------------
Ireland - 0.4%
Anglo Irish Bank Corp. PLC (Banks and Credit Cos.) 230,511 $ 510,506
--------------------------------------------------------------------------------------------------------
Israel - 0.3%
Partner Communications Co. Ltd., ADR (Cellular Telephones)* 47,325 $ 337,191
--------------------------------------------------------------------------------------------------------
Italy - 1.5%
Telecom Italia Mobile S.p.A. (Telecommunications) 156,080 $ 1,626,082
Telecom Italia Mobile S.p.A., Saving Shares
(Telecommunications) 30,400 128,161
------------
$ 1,754,243
--------------------------------------------------------------------------------------------------------
Japan - 21.9%
Canon, Inc. (Special Products and Services) 84,000 $ 3,869,242
Chugai Pharmaceutical Co. Ltd. (Pharmaceuticals) 208,000 3,563,893
Chukyo Coca-Cola Bottling Co. Ltd. (Food and
Beverage Products) 38,000 392,069
Fast Retailing Co. (Retail) 5,600 2,389,673
Fuji Heavy Industries Ltd. (Automotive) 162,000 1,203,566
Fujitsu Ltd. (Computer Hardware - Systems) 58,000 1,642,831
Hitachi Ltd. (Electronics) 295,000 3,654,625
Mikuni Coca-Cola Bottling Co. Ltd. (Food and
Beverage Products) 55,000 776,885
Mitsubishi Electric Corp. (Electronics) 110,000 1,080,795
Mitsubishi Motors Corp. (Automotive) 186,000 604,569
Nippon Telegraph & Telephone Co. (Utilities - Telephone) 132 1,569,094
NTT Mobile Communications Network, Inc. (Telecommunications) 157 4,053,306
Sony Corp. (Electronics) 9,000 814,915
Toshiba Corp. (Electronics) 59,000 569,836
------------
$ 26,185,299
--------------------------------------------------------------------------------------------------------
Mexico - 1.1%
Grupo Television S.A. de C.V., GDR (Entertainment)* 17,800 $ 991,237
Kimberly-Clark de Mexico S.A. de C.V. (Forest and
Paper Products) 119,800 371,776
------------
$ 1,363,013
--------------------------------------------------------------------------------------------------------
Netherlands - 10.4%
Akzo Nobel N.V. (Chemicals) 77,200 $ 2,945,702
Completel Europe N.V. (Telecommunications)* 1,310 15,273
ING Groep N.V. (Financial Services)* 32,932 1,969,182
Koninklijke (Royal) Philips Electronics N.V. (Electronics) 51,700 2,307,838
KPN N.V. (Telecommunications)* 26,214 2,366,741
Libertel N.V. (Cellular Telecommunications)* 39,200 606,926
Royal Dutch Petroleum Co. (Oils) 35,600 2,192,468
------------
$ 12,404,130
--------------------------------------------------------------------------------------------------------
Norway - 1.5%
NetCom ASA (Telecommunications)* 9,890 $ 392,276
Schibsted ASA (Publishing) 40,310 785,875
Sparebanken NOR (Banks and Credit Cos.) 30,000 579,832
------------
$ 1,757,983
--------------------------------------------------------------------------------------------------------
Portugal - 0.9%
Telecel - Comunicacoes Pessoais, S.A. (Cellular
Telecommunications) 64,800 $ 1,051,638
--------------------------------------------------------------------------------------------------------
Singapore - 3.0%
Overseas Union Bank Ltd. (Banks and Credit Cos.) 487,626 $ 1,674,192
Overseas-Chinese Banking Corp. Ltd. (Banks and Credit Cos.) 187,000 1,052,077
Singapore Press Holdings Ltd. (Printing and Publishing) 58,000 873,514
------------
$ 3,599,783
--------------------------------------------------------------------------------------------------------
South Korea
Mirae Corp., ADR (Electronics)* 5,460 $ 39,585
--------------------------------------------------------------------------------------------------------
Spain - 1.1%
Repsol S.A. (Oils) 61,900 $ 1,320,380
--------------------------------------------------------------------------------------------------------
Sweden - 2.7%
NetCom AB (Telecommunications)* 4,700 $ 332,387
Saab AB, "B" (Aerospace) 349,200 2,839,024
Tele1 Europe Holdings AB (Telecommunications)* 1,020 12,326
------------
$ 3,183,737
--------------------------------------------------------------------------------------------------------
Switzerland - 2.6%
Novartis AG (Medical and Health Products) 2,000 $ 2,951,111
Synthes-Stratec, Inc. (Medical and Health Products)* 450 200,250
------------
$ 3,151,361
--------------------------------------------------------------------------------------------------------
United Kingdom - 21.3%
AstraZeneca Group PLC (Medical and Health Products) 45,266 $ 1,898,056
BAE Systems PLC (Aerospace)* 248,338 1,558,915
BP Amoco PLC (Oils) 224,700 2,046,026
Cable & Wireless Communications PLC, ADR (Telecommunications) 130,733 2,181,260
Capital Radio PLC (Broadcasting) 34,600 652,044
Carlton Communicatons PLC (Broadcasting) 165,900 1,971,125
CGNU PLC (Insurance)* 130,700 2,001,989
Diageo PLC (Food and Beverage Products)* 189,321 1,620,475
NDS Group PLC, ADR (Internet)* 1,970 131,005
Next PLC (Retail) 145,300 1,358,917
Reckitt Benckiser PLC (Consumer Goods and Services)* 117,500 1,288,811
Royal Bank of Scotland PLC (Banks and Credit Cos.)* 112,796 1,856,666
United News & Media PLC (Broadcasting) 191,500 2,417,137
Vodafone AirTouch PLC (Telecommunications)* 978,261 4,464,800
------------
$ 25,447,226
--------------------------------------------------------------------------------------------------------
Total Foreign Stocks $111,890,518
--------------------------------------------------------------------------------------------------------
U.S. Stocks - 2.4%
Telecommunications - 2.4%
NTL, Inc.* 47,999 $ 2,834,941
--------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $103,445,413) $114,725,459
--------------------------------------------------------------------------------------------------------
Short-Term Obligations - 9.0%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------------------------------------
Associates First Capital Corp., due 6/01/00 $ 4,000 $ 4,000,000
General Electric Capital Corp., due 6/01/00 4,000 4,000,000
Morgan Stanley Dean Witter & Co., due 6/01/00 2,783 2,783,000
--------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 10,783,000
--------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $114,228,413) $125,508,459
Other Assets, Less Liabilities - (4.9)% (5,855,241)
--------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $119,653,218
--------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
MAY 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $114,228,413) $125,508,459
Investments of cash collateral for securities loaned, at
identified cost and value 15,019,151
Foreign currency, at value (identified cost, $173,900) 172,875
Receivable for Fund shares sold 977,889
Receivable for investments sold 589,747
Interest and dividends receivable 319,394
Deferred organization expenses 2,091
Other assets 805
------------
Total assets $142,590,411
------------
Liabilities:
Payable to custodian $ 837,256
Collateral for securities loaned, at value 15,019,151
Payable for Fund shares reacquired 6,749,695
Payable for investments purchased 192,546
Payable to affiliates -
Management fee 3,073
Shareholder servicing agent fee 315
Distribution and service fee 2,385
Administrative fee 55
Accrued expenses and other liabilities 132,717
------------
Total liabilities $ 22,937,193
------------
Net assets $119,653,218
============
Net assets consist of:
Paid-in capital $ 95,416,240
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 11,269,947
Accumulated undistributed net realized gain on
investments and foreign currency transactions 12,773,322
Accumulated undistributed net investment income 193,709
------------
Total $119,653,218
============
Shares of beneficial interest outstanding 6,285,861
=========
Class A shares:
Net asset value per share
(net assets of $60,133,258 / 3,133,912 shares of
beneficial interest outstanding) $19.19
======
Offering price per share (100 / 95.25 of net asset value
per share) $20.15
======
Class B shares:
Net asset value and offering price per share
(net assets of $53,764,154 / 2,845,574 shares of
beneficial interest outstanding) $18.89
======
Class C shares:
Net asset value and offering price per share
(net assets of $5,755,682 / 306,369 shares of
beneficial interest outstanding) $18.79
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $124 / 6.375 shares of beneficial
interest outstanding) $19.45
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
-------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2000
-------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 2,508,008
Interest 267,650
Foreign taxes withheld (231,564)
------------
Total investment income $ 2,544,094
------------
Expenses -
Management fee $ 1,046,635
Trustees' compensation 18,873
Shareholder servicing agent fee 107,347
Distribution and service fee (Class A) 267,254
Distribution and service fee (Class B) 492,172
Distribution and service fee (Class C) 45,624
Administrative fee 14,360
Custodian fee 187,644
Printing 44,562
Postage 22,789
Auditing fees 46,855
Legal fees 2,555
Amortization of organization expenses 5,197
Miscellaneous 184,875
------------
Total expenses $ 2,486,742
Fees paid indirectly (9,324)
------------
Net expenses $ 2,477,418
------------
Net investment income $ 66,676
------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 20,427,129
Foreign currency transactions 122,362
------------
Net realized gain on investments and foreign currency
transactions $ 20,549,491
------------
Change in unrealized appreciation (depreciation) -
Investments $ 4,890,876
Translation of assets and liabilities in foreign currencies (94,768)
------------
Net unrealized gain on investments and foreign currency
translation $ 4,796,108
------------
Net realized and unrealized gain on investments and
foreign currency $ 25,345,599
------------
Increase in net assets from operations $ 25,412,275
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Statement of Changes in Net Assets
-----------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2000 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ 66,676 $ (177,674)
Net realized gain (loss) on investments and foreign
currency transactions 20,549,491 (7,452,326)
Net unrealized gain (loss) on investments and foreign
currency translation 4,796,108 (4,950,889)
------------ ------------
Increase (decrease) in net assets from operations $ 25,412,275 $(12,580,889)
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions (Class A) $ -- $ (1,316,893)
From net realized gain on investments and foreign currency
transactions (Class B) -- (1,304,683)
From net realized gain on investments and foreign currency
transactions (Class C) -- (102,675)
From net realized gain on investments and foreign currency
transactions (Class I) -- (3,104)
------------ ------------
Total distributions declared to shareholders $ -- $ (2,727,355)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions $ 4,867,725 $(11,566,970)
------------ ------------
Total increase (decrease) in net assets $ 30,280,000 $(26,875,214)
Net assets:
At beginning of period 89,373,218 116,248,432
------------ ------------
At end of period (including accumulated undistributed net
investment income of $193,709 and accumulated net investment
loss of $11,356, respectively) $119,653,218 $ 89,373,218
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights
----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
-------------------------------------------------------- PERIOD ENDED
2000 1999 1998 1997 MAY 31, 1996*
----------------------------------------------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $15.16 $17.78 $16.90 $16.71 $15.00
------ ------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $ 0.05 $ 0.01 $(0.01) $ 0.02 $ 0.03
Net realized and unrealized gain (loss)
on investments and foreign currency 3.98 (2.20) 1.18 0.32 1.69
------ ------ ------ ------ ------
Total from investment operations $ 4.03 $(2.19) $ 1.17 $ 0.34 $ 1.72
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.22) $ -- $(0.01)
From net realized gain on investments
and foreign currency transactions -- (0.43) (0.07) (0.15) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.43) $(0.29) $(0.15) $(0.01)
------ ------ ------ ------ ------
Net asset value - end of period $19.19 $15.16 $17.78 $16.90 $16.71
====== ====== ====== ====== ======
Total return(+) 26.58% (12.30)% 7.08% 2.13% 11.43%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.04% 2.01% 2.01% 1.99% 2.24%+
Net investment income (loss) 0.31% 0.09% (0.08)% 0.13% 0.24%+
Portfolio turnover 110% 100% 225% 53% 11%
Net assets at end of period (000 Omitted) $60,133 $43,678 $53,659 $56,810 $41,483
* For the period from the commencement of the Fund's investment operations, October 24, 1995, through May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## 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.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
--------------------------------------------------------- PERIOD ENDED
2000 1999 1998 1997 MAY 31, 1996*
----------------------------------------------------------------------------------------------------------------------------
CLASS B
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $15.01 $17.71 $16.82 $16.66 $15.00
------ ------ ------ ------ ------
Income (loss) from investment operations# -
Net investment loss $(0.04) $(0.07) $(0.10) $(0.07) $(0.03)
Net realized and unrealized gain (loss)
on investments and foreign currency 3.92 (2.20) 1.19 0.31 1.69
------ ------ ------ ------ ------
Total from investment operations $ 3.88 $(2.27) $ 1.09 $ 0.24 $ 1.66
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.13) $ -- $ --
From net realized gain on investments
and foreign currency transactions -- (0.43) (0.07) (0.08) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.43) $(0.20) $(0.08) $ --
------ ------ ------ ------ ------
Net asset value - end of period $18.89 $15.01 $17.71 $16.82 $16.66
====== ====== ====== ====== ======
Total return 25.85% (12.80)% 6.59% 1.56% 11.07%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.54% 2.51% 2.51% 2.53% 2.85%+
Net investment loss (0.21)% (0.42)% (0.57)% (0.42)% (0.31)%+
Portfolio turnover 110% 100% 225% 53% 11%
Net assets at end of period (000 Omitted) $53,764 $41,959 $59,055 $62,958 $43,264
* For the period from the commencement of the Fund's investment operations, October 24, 1995, through May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
------------------------------------------ PERIOD ENDED
2000 1999 1998 MAY 31, 1997*
------------------------------------------------------------------------------------------------------------------------
CLASS C
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $14.93 $17.62 $16.76 $16.83
------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $ 0.01 $(0.07) $(0.10) $(0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency 3.85 (2.19) 1.19 0.15
------ ------ ------ ------
Total from investment operations $ 3.86 $(2.26) $ 1.09 $ 0.11
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.16) $ --
From net realized gain on investments and
foreign currency transactions
-- (0.43) (0.07) (0.18)
------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.43) $(0.23) $(0.18)
------ ------ ------ ------
Net asset value - end of period $18.79 $14.93 $17.62 $16.76
====== ====== ====== ======
Total return 25.94% (12.87)% 6.62% 0.79%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.54% 2.51% 2.52% 2.50%+
Net investment income (loss) 0.04% (0.43)% (0.56)% (0.27)%+
Portfolio turnover 110% 100% 225% 53%
Net assets at end of period (000 Omitted) $5,756 $3,608 $3,380 $2,397
* For the period from the inception of Class C, July 1, 1996, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
------------------------------------------- PERIOD ENDED
2000 1999 1998 MAY 31, 1997*
------------------------------------------------------------------------------------------------------------------------
CLASS I
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $15.26 $17.81 $16.94 $15.90
------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $(0.07) $ 0.10 $ 0.10 $ 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency 4.26 (2.22) 1.15 0.93
------ ------ ------ ------
Total from investment operations $ 4.19 $(2.12) $ 1.25 $ 1.04
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.31) $ --
From net realized gain on investments and
foreign currency transactions
-- (0.43) (0.07) --
------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.43) $(0.38) $ --
------ ------ ------ ------
Net asset value - end of period $19.45 $15.26 $17.81 $16.94
====== ====== ====== ======
Total return 27.54% (11.94)% 7.65% 6.54%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.59% 1.51% 1.52% 1.52%+
Net investment income (loss) (0.40)% 0.65% 0.59% 1.40%+
Portfolio turnover 110% 100% 225% 53%
Net assets at end of period (000 Omitted) $ -- $128 $155 $84
* For the period from the inception of Class I, January 2, 1997, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS International Growth Fund (the Fund) is a diversified series of MFS Series
Trust X (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The Fund
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 - 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.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Fund
operations.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the Fund to certain qualified
institutions (the "Borrowers") approved by the Fund. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the Fund with indemnification against Borrower default. The
Fund bears the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the Fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the Fund and the lending agent. Income from
securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
At May 31, 2000, the value of securities loaned was $15,670,926. These loans
were collateralized by U.S. Treasury securities of $1,509,020 and cash of
$15,019,151 which was invested in the following short-term obligation:
AMORTIZED COST
SHARES AND VALUE
------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 15,019,151 $15,019,151
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is amortized or accreted for financial statement and tax reporting purposes as
required by federal income tax regulations. Dividends received in cash are
recorded on the ex-dividend date. Dividend and interest payments received in
additional securities are recorded on the ex-dividend or ex-interest date in
an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is 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 - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
During the year ended May 31, 2000, $122,363 and $16,026 were reclassified
from accumulated undistributed net realized gain on investments and foreign
currency transactions and paid-in capital, respectively, to accumulated
undistributed net investment income due to differences between book and tax
accounting for foreign currency transactions. This change had no effect on the
net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.975%
of the Fund's average daily net assets up to $500 million, after which the
rate is reduced to 0.90%.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees. Included in
Trustees' compensation is a net periodic pension expense of $5,282 for the
year ended May 31, 2000.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund incurs an administrative fee at
the following annual percentages of the 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, received
$35,126 for the year ended May 31, 2000, as its portion of the sales charge on
sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.25% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $6,248 for
the year ended May 31, 2000. Fees incurred under the distribution plan during
the year ended May 31, 2000, were 0.50% of average daily net assets
attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $309 and $9 for Class B
and Class C shares, respectively, for the year ended May 31, 2000. Fees
incurred under the distribution plan during the year ended May 31, 2000, were
1.00% of average daily net assets attributable to Class B and Class C shares,
on an annualized basis.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended May 31, 2000, were
$1,861, $140,115, and $2,777 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$116,807,836 and $113,852,830, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $115,543,696
------------
Gross unrealized appreciation $ 16,755,502
Gross unrealized depreciation (6,790,739)
------------
Net unrealized appreciation $ 9,964,763
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 17,262,145 $ 308,924,901 19,265,541 $ 313,672,087
Shares issued to shareholders in
reinvestment of distributions -- -- 80,466 1,204,607
Shares reacquired (17,008,605) (306,103,555) (19,483,471) (318,825,781)
----------- ------------- ----------- -------------
Net increase (decrease) 253,540 $ 2,821,346 (137,464) $ (3,949,087)
=========== ============= =========== =============
<CAPTION>
Class B Shares
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,308,759 $ 40,847,049 1,382,116 $ 22,299,934
Shares issued to shareholders in
reinvestment of distributions -- -- 76,087 1,131,101
Shares reacquired (2,257,997) (39,672,150) (1,998,294) (31,687,051)
----------- ------------- ----------- -------------
Net increase (decrease) 50,762 $ 1,174,899 (540,091) $ (8,256,016)
=========== ============= =========== =============
<CAPTION>
Class C Shares
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,099,197 $ 52,523,520 3,492,233 $ 56,401,138
Shares issued to shareholders in
reinvestment of distributions -- -- 6,506 96,225
Shares reacquired (3,034,523) (51,469,976) (3,448,938) (55,848,685)
----------- ------------- ----------- -------------
Net increase 64,674 $ 1,053,544 49,801 $ 648,678
=========== ============= =========== =============
<CAPTION>
Class I Shares
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,202 $ 119,742 2,259 $ 34,678
Shares issued to shareholders in
reinvestment of distributions -- -- 206 3,103
Shares reacquired (15,586) (301,806) (2,759) (48,326)
----------- ------------- ----------- -------------
Net decrease (8,384) $ (182,064) (294) $ (10,545)
=========== ============= =========== =============
</TABLE>
(6) Line of Credit
The Fund 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.
Interest expense incurred on the borrowings amounted to $22,050 for the year
ended May 31, 2000. The average dollar amount of borrowings was $319,006 and the
weighted average interest rate on these borrowings was 6.19%. A commitment fee
of $784, which is based on the average daily unused portion of the line of
credit, is included in miscellaneous expense.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust X and Shareholders of MFS International
Growth Fund:
We have audited the accompanying statements of assets and liabilities of MFS
International Growth Fund, including the schedule of portfolio investments, as
of May 31, 2000, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended and for the period from October 24, 1995 (commencement of
operations) to May 31, 1996. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of May 31, 2000, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
International Growth Fund at May 31, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the four
years in the period then ended and for the period October 24, 1995
(commencement of operations) to May 31, 1996, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
July 7, 2000
<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 YEAR ENDED MAY 31, 2000, INCOME FROM FOREIGN SOURCES WAS
$2,494,450, AND THE FUND DESIGNATED A FOREIGN TAX CREDIT OF $215,537.
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) INTERNATIONAL GROWTH FUND
<S> <C>
TRUSTEES SECRETARY
J. Atwood Ives+ - Chairman and Chief Executive Stephen E. Cavan*
Officer, Eastern Enterprises (diversified services
company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner, Hemenway
& Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct Professor, Harvard
University Graduate School of Business AUDITORS
Administration Ernst & Young LLP
Charles W. Schmidt+ - Private Investor INVESTOR INFORMATION
For information on MFS mutual funds, call your
Arnold D. Scott* - Senior Executive investment professional or, for an information
Vice President, Director, and Secretary, kit, call toll free: 1-800-637-2929 any business
MFS Investment Management day from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Jeffrey L. Shames* - Chairman and Chief
Executive Officer, MFS Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Elaine R. Smith+ - Independent Consultant P.O. Box 2281
Boston, MA 02107-9906
David B. Stone+ - Chairman, North American
Management Corp. (investment adviser) For general information, call toll free:
1-800-225-2606 any business day from
INVESTMENT ADVISER 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired, call
Boston, MA 02116-3741 toll free: 1-800-637-6576 any business day from 9
a.m. to 5 p.m. Eastern time. (To use this service,
DISTRIBUTOR your phone must be equipped with a
MFS Fund Distributors, Inc. Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges, or
stock and bond outlooks, call toll free:
CHAIRMAN AND PRESIDENT 1-800-MFS-TALK (1-800-637-8255) anytime from a
Jeffrey L. Shames* touch-tone telephone.
PORTFOLIO MANAGER WORLD WIDE WEB
David R. Mannheim* www.mfs.com
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) INTERNATIONAL GROWTH FUND ------------
BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MIF-2 7/00 28.5M 86/286/386/886
