<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) INTERNATIONAL
GROWTH AND INCOME
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
--------------
(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 Frederick J. Simmons]
Frederick J. Simmons
For the 12 months ended May 31, 2000, Class A shares of the fund provided a
total return of 19.57%, Class B shares 18.97%, Class C shares 18.90%, and Class
I shares 20.19%. These returns assume the reinvestment of any distributions but
exclude the effects of any sales charges. During the same period, the average
international fund tracked by Lipper Inc., an independent firm that reports
mutual fund performance, returned 25.54%. The fund's results also compare to
returns of 23.77% and 17.43%, respectively, for the fund's benchmarks -- the
Lipper International Funds Index (the Lipper Index) and the Morgan Stanley
Capital International (MSCI) Europe, Australia, Far East (EAFE) Index. The
Lipper mutual fund indices are unmanaged indices of the largest qualifying
mutual funds within their respective investment objectives adjusted for the
reinvestment of capital gain distributions and income dividends. The MSCI EAFE
Index is an unmanaged index of international stocks.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST YEAR?
A. Overall it was a good 12 months for international investing, as evidenced by
the returns of the fund, its Lipper peer group, and the indices. However,
the market environment for value investing was difficult throughout 1999. In
1999, funds like ours that were not heavily invested in the technology
sector struggled on a relative basis. We held relatively few technology
stocks because we felt that most were overpriced. We believe this
underweighting was a significant factor in our underperformance relative to
our Lipper peers.
Nevertheless, our view regarding technology and value investing was somewhat
vindicated through the first five months of 2000. We witnessed an overall
retrenchment in the technology sector, as exuberance seemed to give way to
doubt as to whether many technology companies could fulfill the promise
reflected in their share prices. We believe the fund's underweighting in
technology helped our performance in recent months.
Q. WHAT TYPES OF INVESTMENT THEMES DID YOU PURSUE OVER THE COURSE OF THE FUND'S
FISCAL YEAR?
A. During the first half of the year, we took advantage of opportunities in the
telecommunications industry, especially stocks of telecommunications service
providers. One such company that added considerably to fund performance was
Mannesmann, which was acquired by Vodafone during the period. After the
acquisition, we sold off a significant portion of our Vodafone shares and
reduced our weighting in this sector because we felt that most stocks had
reached high valuations.
Q. CAN YOU GIVE US SOME EXAMPLES OF COMPANIES OR SECTORS THAT CONTINUED TO MAKE
EARNINGS PROGRESS?
A. Canon, the Japanese electronics company that offers a broad base of high-
technology products, was one. So was Compass Group, a British company that
is the largest caterer in the world, running food services for hospitals,
schools, and companies. Compass is presently considering merging with
another company, and we think it has proven its ability to increase its
earnings. French broadcaster Television Francaise has benefited from the
strong local economy and underlying demand for advertising.
Pharmaceutical companies also continued to make earnings progress, despite
concerns that governments around the world were working to keep drug prices
down. This trend included the United States, which historically has allowed
the freest market for drug pricing. The fund currently has extensive
holdings in this industry, including Pharmacia, Takeda Chemical, and
Aventis.
Q. SIX MONTHS AGO YOU MENTIONED RENEWED OPTIMISM ABOUT JAPAN. WHAT'S YOUR
FEELING AT THIS POINT?
A. We still believe that Japan offers opportunities. Following the lead of
companies in the United States and Europe, Japanese firms are now
streamlining in fundamentally important ways. For example, Japanese
corporations have historically engaged in cross-ownership -- holding shares
in each others' companies. While this is a time-honored way of doing
business in Japan, we believe it is a very poor use of capital. Now,
Japanese corporations are working to eliminate these kinds of business
practices, focusing instead on what we believe are more shareholder-
friendly strategies such as restructuring, stock buybacks, and selling off
businesses to focus on core operations. Over the course of the year, the
fund's stake in Japan declined a bit because some companies, such as Sony,
were taking longer to turn around than we expected. However, our long-term
view on well-managed Japanese companies like Sony is very bullish.
Q. LET'S TURN TO EUROPE. WHAT'S BEEN YOUR APPROACH THERE?
A. We reduced our European holdings to about 44% of fund assets by the end of
May. While valuations had reached high levels and some economies had begun
to soften, we felt this decline was not the result of an overall negative
view of European stocks. Instead, it was the consequence of buying and
selling decisions at the company level. Remember, we are bottom-up stock
pickers, choosing companies for the portfolio based on their individual
prospects. In terms of country weightings, companies from smaller European
nations currently are well represented, as were French companies during the
course of the year. Our allocation to German companies declined, but that
was largely due to the aforementioned acquisition of Mannesmann by the
British firm Vodafone.
Q. WHICH STOCKS PERFORMED WELL AND WHICH WERE DISAPPOINTMENTS FOR THE FUND?
A. Rohm, a Japanese electronic-devices manufacturer, performed well as it
continued to increase earnings. The French company STMicroelectronics
benefited from its niche as the only European semiconductor manufacturer.
Finally, Nortel Networks, a telecommunications-equipment provider, proved to
be a winner after its successful spin-off from Bell Canada.
Conversely, Akzo Nobel, an economically sensitive chemical company,
disappointed. So did Canadian National Railway, which suffered from fears of
an imminent economic slowdown. Diageo, a consumer goods company that owns
Pillsbury, Guinness, and Burger King, lagged due to general investor
disinterest in this sector.
Q. WHAT IS YOUR OUTLOOK?
A. Please remember that we are stock pickers, not economists. When we look
ahead, though, we note that consumer spending has been helping to sustain
vibrant economic growth in the United States. We believe this growth should
help buoy the U.S. stock market for some time. It also should help support
advances in the European stock market. We think that Japan could benefit as
well, but because of its economic problems, it has the toughest row to hoe.
Due to its growth over the past decade, the U.S. stock market currently
accounts for a very large percentage of the world's total stock holdings. We
believe that that value is excessive when weighed against the significant
amount of business taking place around the rest of the world. As a result,
we think foreign markets should catch up over the longer term. That doesn't
mean that the U.S. market will necessarily decline, but we believe it may
tread water while stocks overseas post higher gains.
/s/ Frederick J. Simmons
Frederick J. Simmons
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
--------------------------------------------------------------------------------
FREDERICK J. SIMMONS IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF MFS(R) GLOBAL TOTAL RETURN FUND,
MFS(R) INTERNATIONAL GROWTH AND INCOME FUND, AND THE GLOBAL TOTAL RETURN
SERIES AND THE INTERNATIONAL GROWTH AND INCOME SERIES OFFERED THROUGH
MFS(R)/SUN LIFE ANNUITY PRODUCTS. HE ALSO MANAGES THE NOMURA GLOBAL
BALANCED OPEN FUND AND THE NOMURA GN GLOBAL TOTAL RETURN FUND UNDER
SUBADVISORY AGREEMENTS WITH NOMURA ASSET MANAGEMENT CO. OF JAPAN.
MR. SIMMONS JOINED MFS IN 1971 AS INVESTMENT OFFICER IN THE RESEARCH
DEPARTMENT AND WAS NAMED ASSISTANT VICE PRESIDENT IN 1974, VICE
PRESIDENT IN 1975, AND SENIOR VICE PRESIDENT IN 1983. MR. SIMMONS
GRADUATED WITH HONORS FROM THE AMOS TUCK SCHOOL OF BUSINESS
ADMINISTRATION OF DARTMOUTH COLLEGE. HE IS A CHARTERED FINANCIAL
ANALYST, A MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY, INC., AND
PAST PRESIDENT OF THE ELECTRONIC ANALYSTS OF BOSTON.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
--------------------------------------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your 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 BOTH CAPITAL APPRECIATION AND CURRENT
INCOME BY INVESTING PRIMARILY IN EQUITY
SECURITIES OF ISSUERS WHOSE PRINCIPAL ACTIVITIES
ARE OUTSIDE THE UNITED STATES.
COMMENCEMENT OF INVESTMENT OPERATIONS: OCTOBER 24, 1995
CLASS INCEPTION: CLASS A OCTOBER 24, 1995
CLASS B OCTOBER 24, 1995
CLASS C JULY 1, 1996
CLASS I JANUARY 2, 1997
SIZE: $66.3 MILLION NET ASSETS AS OF MAY 31, 2000
--------------------------------------------------------------------------------
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 and Income International MSCI EAFE
Fund - Class A Funds Index Index
----------------- ------------- ---------
10/95 $ 9,525 $10,000 $10,000
5/96 10,164 11,196 11,132
5/97 10,457 12,936 12,006
5/98 12,733 14,908 13,376
5/99 12,293 14,672 13,999
5/00 14,699 18,159 16,439
<PAGE>
TOTAL RATES OF RETURN THROUGH MAY 31, 2000
<TABLE>
CLASS A
<CAPTION>
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +19.57% +40.57% +54.32%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +19.57% +12.02% + 9.88%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +13.89% +10.22% + 8.73%
---------------------------------------------------------------------------------------------------
CLASS B
<CAPTION>
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +18.97% +38.66% +50.93%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +18.97% +11.51% + 9.35%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +14.97% +10.70% + 9.04%
---------------------------------------------------------------------------------------------------
CLASS C
<CAPTION>
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +18.90% +38.49% +51.14%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +18.90% +11.46% + 9.39%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +17.90% +11.46% + 9.39%
---------------------------------------------------------------------------------------------------
CLASS I
<CAPTION>
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +20.19% +42.50% +56.44%
---------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +20.19% +12.53% +10.21%
---------------------------------------------------------------------------------------------------
COMPARATIVE INDICES(+)
<CAPTION>
1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------
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%
---------------------------------------------------------------------------------------------------
(+) Average annual rates of return.
* 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.
# Source: Lipper Inc.
+ Source: Standard & Poor's Micropal, Inc.
</TABLE>
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
TECHNOLOGY 16.6%
FINANCIAL SERVICES 14.1%
UTILITIES & COMMUNICATIONS 13.7%
CONSUMER STAPLES 9.7%
HEALTH CARE 9.4%
<TABLE>
TOP 10 STOCK HOLDINGS
<S> <C>
ROHM CO. 3.6% AMERICAN INTERNATIONAL GROUP, INC. 2.4%
Japanese electronics manufacturer Insurance and financial services company
VODAFONE AIRTOUCH PLC 3.1% TELEFONICA DE ESPANA S.A. 2.3%
British mobile telecommunications company Spanish telephone services provider
HEWLETT-PACKARD CO. 2.9% ANHEUSER-BUSCH COMPANIES, INC. 2.3%
Computing and imaging solutions provider Producer and distributor of beer and aluminum
beverage containers
BP AMOCO PLC 2.8%
British oil and petrochemical company ALTADIS S.A. 2.3%
Spanish-based tobacco company
TERUMO CORP. 2.6%
Japanese medical products and equipment CANON, INC. 2.3%
manufacturer Japanese office equipment and imaging company
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- May 31, 2000
Stocks - 92.0%
------------------------------------------------------------------------------------------------------
<CAPTION>
ISSUER SHARES VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - 73.6%
Australia - 3.1%
Australia & New Zealand Banking Group Ltd. (Banks and
Credit Cos.)* 79,420 $ 550,098
QBE Insurance Group Ltd. (Insurance)* 318,789 1,211,249
Telstra Corp., Ltd. (Telecommunications) 82,770 321,098
-----------
$ 2,082,445
------------------------------------------------------------------------------------------------------
Bermuda - 1.2%
Tyco International Ltd. (Manufacturing) 15,922 $ 749,329
FLAG Telecom Holdings Ltd. (Telecommunications)* 1,420 20,146
-----------
$ 769,475
------------------------------------------------------------------------------------------------------
Canada - 3.2%
BCE, Inc. (Telecommunications) 10,220 $ 235,060
Canadian National Railway Co. (Railroads) 27,161 728,254
Manitoba Telecom Services (Telecommunications) 17,900 315,587
Nortel Networks Corp. (Telecommunications)* 16,049 871,662
-----------
$ 2,150,563
------------------------------------------------------------------------------------------------------
Denmark - 0.6%
International Service Systems Co. (Business Services)* 5,210 $ 377,730
------------------------------------------------------------------------------------------------------
France - 9.4%
Aventis (Pharmaceuticals) 7,990 $ 519,423
AXA (Insurance) 3,220 474,520
Castorama-Dubois Investissements (Building Retailer) 3,827 967,319
Pinault-Printemps-Redoute S.A. (Retail) 3,427 737,401
Sanofi-Synthelabo S.A. (Medical and Health Products)* 11,308 493,071
STMicroelectronics Co., N.V. (Electronics) 13,935 830,520
Technip S.A. (Construction) 3,150 328,469
Television Francaise (Broadcasting) 1,879 1,209,255
Total S.A., ADR (Oils) 8,822 696,387
-----------
$ 6,256,365
------------------------------------------------------------------------------------------------------
Germany - 2.5%
Fresenius AG (Medical Services) 1,630 $ 416,563
Henkel KGAA (Consumer Products) 10,738 625,958
Prosieben Media AG (Broadcasting) 6,300 601,703
-----------
$ 1,644,224
------------------------------------------------------------------------------------------------------
Hong Kong - 0.9%
China Telecom Ltd. (Telecommunications) 79,000 $ 590,566
------------------------------------------------------------------------------------------------------
Italy - 1.2%
San Paolo Imi S.p.A. (Banks and Credit Cos.) 52,580 $ 769,949
------------------------------------------------------------------------------------------------------
Japan - 19.6%
Canon, Inc. (Office Equipment) 30,000 $ 1,381,872
Eisai Co., Ltd. (Medical and Health Products) 16,000 344,725
Fuji Heavy Industries Ltd. (Automotive) 43,000 319,465
Fujitsu Ltd. (Computer Hardware - Systems) 36,000 1,019,688
Hitachi Electronics Ltd. (Electronics) 78,000 966,308
Nintendo Co. (Entertainment) 1,600 237,741
Nippon Telegraph & Telephone Co. (Utilities - Telephone) 25 297,177
NTT Mobile Communications Network, Inc. (Telecommunications) 34 877,786
Rohm Co. (Electronics) 7,100 2,215,453
Secom Co. (Consumer Goods and Services) 20,000 1,355,869
Sony Corp. (Electronics) 5,900 534,222
Takeda Chemical Industries Co. (Pharmaceuticals) 13,000 887,351
Terumo Corp. (Medical Equipment) 49,000 1,565,379
Tokyo Gas Co. (Utilities - Gas) 127,000 311,367
Uni Charm Corp. (Forest and Paper Products) 2,800 163,819
Ushio, Inc. (Electronics) 22,000 498,514
-----------
$12,976,736
------------------------------------------------------------------------------------------------------
Mexico - 1.2%
Fomento Economico Mexicano S.A. (Food and Beverage Products) 7,980 $ 303,739
Grupo Iusacell S.A. de CV (Telecommunications)* 11,720 155,290
Grupo Television S.A. de CV GDR (Entertainment)* 5,900 328,556
-----------
$ 787,585
------------------------------------------------------------------------------------------------------
Netherlands - 5.3%
Akzo Nobel N.V. (Chemicals) 34,284 $ 1,308,166
ING Groep N.V. (Financial Services)* 12,182 728,428
Koninklijke KPN N.V. (Telecommunications)* 4,703 424,612
Royal Dutch Petroleum Co., N.V., ADR (Oils) 16,927 1,056,880
-----------
$ 3,518,086
------------------------------------------------------------------------------------------------------
Singapore - 0.5%
Singapore Press Holdings Ltd. (Printing and Publishing) 22,000 $ 331,333
------------------------------------------------------------------------------------------------------
South Korea - 0.3%
Korea Electric Power Corp. (Utilities - Electric) 7,640 $ 205,042
------------------------------------------------------------------------------------------------------
Spain - 5.1%
Altadis S.A. (Tobacco) 94,847 $ 1,384,458
Altadis S.A. (New) (Tobacco) 9,450 138,556
Repsol S.A. (Oils) 20,960 447,095
Telefonica de Espana S.A. (Telecommunications) 68,107 1,397,515
-----------
$ 3,367,624
------------------------------------------------------------------------------------------------------
Sweden - 2.2%
Saab AB, "B" (Aerospace and Defense) 107,506 $ 874,032
Skandia Forsakrings AB (Insurance) 23,764 608,723
Tele1 Europe Holding AB (Telecommunications)* 1,070 12,930
-----------
$ 1,495,685
------------------------------------------------------------------------------------------------------
Switzerland - 1.9%
Carrier 1 International S.A., ADR (Telecommunications)* 580 $ 46,253
Nestle AG, Registered Shares (Food and Beverage Products) 636 1,213,582
-----------
$ 1,259,835
------------------------------------------------------------------------------------------------------
United Kingdom - 15.4%
AstraZeneca Group PLC (Medical and Health Products) 10,401 $ 436,126
BP Amoco PLC, ADR (Oils) 30,882 1,679,209
British Aerospace PLC (Aerospace and Defense)* 99,575 625,072
British Telecommunications PLC (Telecommunications)* 49,662 720,104
Cable & Wireless Communications PLC (Telecommunications)* 20,212 337,234
Carlton Communicatons PLC (Broadcasting)* 35,980 427,493
CGU PLC (Insurance)* 48,420 741,670
Compass Group PLC (Food and Catering) 63,080 707,002
Diageo PLC (Food and Beverage Products)* 84,028 719,229
Lloyds TSB Group PLC (Banks and Credit Cos.)* 37,394 405,124
Reuters Group PLC (Business Services) 50,875 758,248
United News & Media PLC (Broadcasting) 61,810 780,174
Vodafone AirTouch PLC (Telecommunications)* 409,096 1,867,121
-----------
$10,203,806
------------------------------------------------------------------------------------------------------
Total Foreign Stocks $48,787,049
------------------------------------------------------------------------------------------------------
U.S. Stocks - 18.4%
American International Group, Inc. (Insurance) 13,090 $ 1,473,443
Anheuser-Busch Companies, Inc. (Food and Beverage) 17,975 1,393,062
Boeing Co. (Aerospace and Defense) 9,340 364,844
Computer Sciences Corp. (Computer Services)* 4,450 426,922
Delphi Automotive Systems Corp. (Automotive) 13,185 238,154
Emerson Electric Co. (Electronics) 14,890 878,510
General Electric Co. (Conglomerate) 23,460 1,234,583
Goldman Sachs Group, Inc. (Financial Institution) 630 46,344
Halliburton Co. (Oil Services) 13,800 703,800
Hewlett-Packard Co. (Business Machines) 14,790 1,776,649
Ingersoll-Rand Co. (Building Materials) 7,930 361,311
Merrill Lynch & Co., Inc. (Financial Institution) 2,970 292,916
NTL, Inc. (Telecommunications)* 3,852 227,509
Omnicom Group, Inc. (Advertising) 3,580 300,496
Pharmacia Corp. (Medical and Health Products)* 20,719 1,076,093
ReliaStar Financial Corp. (Insurance) 24,721 1,273,132
United Parcel Service, Inc. (Transport - Services) 1,630 97,596
VIA NET.WORKS, Inc. (Internet)* 890 12,571
------------------------------------------------------------------------------------------------------
Total U.S. Stocks $12,177,935
------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $52,846,251) $60,964,984
------------------------------------------------------------------------------------------------------
Warrants
------------------------------------------------------------------------------------------------------
ISSUER
------------------------------------------------------------------------------------------------------
Vivendi (Utilities - Water)* (Identified Cost, $1,565) 1,740 $ 8,504
------------------------------------------------------------------------------------------------------
Short-Term Obligations - 6.8%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
------------------------------------------------------------------------------------------------------
American Express Credit Corp., due 6/01/00 $ 3,000 $ 3,000,000
General Electric Capital Corp., due 6/01/00 1,509 1,509,000
------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 4,509,000
------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $57,356,816) $65,482,488
Other Assets, Less Liabilities - 1.2% 799,521
------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $66,282,009
------------------------------------------------------------------------------------------------------
* 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, $57,356,816) $65,482,488
Investments of cash collateral for securities loaned, at
value (identified cost, $8,845,926) 8,845,926
Foreign currency, at value (identified cost, $153,818) 157,405
Cash 510
Receivable for Fund shares sold 405,232
Receivable for investments sold 743,112
Interest and dividends receivable 184,302
Deferred organization expenses 3,013
-----------
Total assets $75,821,988
-----------
Liabilities:
Payable for Fund shares reacquired $ 612,223
Payable for investments purchased 7,646
Payable upon return of securities loaned 8,845,926
Payable to affiliates -
Management fee 1,786
Shareholder servicing agent fee 183
Distribution and service fee 1,365
Administrative fee 32
Accrued expenses and other liabilities 70,818
-----------
Total liabilities $ 9,539,979
-----------
Net assets $66,282,009
===========
Net assets consist of:
Paid-in capital $54,340,197
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 8,124,337
Accumulated undistributed net realized gain on investments
and foreign currency transactions 3,082,795
Accumulated undistributed net investment income 734,680
-----------
Total $66,282,009
===========
Shares of beneficial interest outstanding 3,239,692
=========
Class A shares:
Net asset value per share
(net assets of $33,766,972 / 1,638,797 shares of
beneficial interest outstanding) $20.60
======
Offering price per share (100 / 95.25 of net asset value
per share) $21.63
======
Class B shares:
Net asset value and offering price per share
(net assets of $27,390,430 / 1,346,682 shares of
beneficial interest outstanding) $20.34
======
Class C shares:
Net asset value and offering price per share
(net assets of $5,035,241 / 249,910 shares of beneficial
interest outstanding) $20.15
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $89,366 / 4,303 shares of beneficial
interest outstanding) $20.77
======
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>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2000
------------------------------------------------------------------------------------------
<S> <C>
Net investment income (loss):
Income -
Dividends $ 2,005,408
Interest 253,316
Foreign taxes withheld (128,125)
-----------
Total investment income $ 2,130,599
-----------
Expenses -
Management fee $ 569,536
Trustees' compensation 7,286
Shareholder servicing agent fee 58,413
Distribution and service fee (Class A) 145,631
Distribution and service fee (Class B) 255,706
Distribution and service fee (Class C) 36,426
Administrative fee 7,788
Custodian fee 81,227
Registration fees 43,682
Printing 37,244
Postage 13,967
Auditing fees 27,615
Legal fees 2,369
Amortization of organization expenses 5,029
Miscellaneous 52,428
-----------
Total expenses $ 1,344,347
Fees paid indirectly (3,461)
-----------
Net expenses $ 1,340,886
-----------
Net investment income $ 789,713
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 3,327,121
Foreign currency transactions (42,062)
-----------
Net realized gain on investments and foreign currency transactions $ 3,285,059
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 6,157,238
Translation of assets and liabilities in foreign currencies (3,745)
-----------
Net unrealized gain on investments and foreign currency translation $ 6,153,493
-----------
Net realized and unrealized gain on investments and foreign
currency $ 9,438,552
-----------
Increase in net assets from operations $10,228,265
===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
----------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31, 2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment gain (loss) $ 789,713 $ (125,179)
Net realized gain on investments and foreign currency
transactions 3,285,059 2,573,280
Net unrealized gain (loss) on investments and foreign
currency translation 6,153,493 (3,717,266)
----------- -----------
Increase (decrease) in net assets from operations $10,228,265 $(1,269,165)
----------- -----------
Distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions (Class A) $(1,328,651) $ (301,721)
From net realized gain on investments and foreign currency
transactions (Class B) (1,172,029) (408,082)
From net realized gain on investments and foreign currency
transactions (Class C) (193,451) (29,382)
From net realized gain on investments and foreign currency
transactions (Class I) (3,676) (1,045)
----------- -----------
Total distributions declared to shareholders $(2,697,807) $ (740,230)
----------- -----------
Net increase in net assets from Fund share transactions $10,378,350 $15,478,510
----------- -----------
Total increase in net assets $17,908,808 $13,469,115
Net assets:
At beginning of year 48,373,201 34,904,086
----------- -----------
At end of year (including accumulated undistributed net
investment income (loss) of $734,680 and ($12,971),
respectively) $66,282,009 $48,373,201
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31, 2000 1999 1998 1997 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 $18.03 $19.01 $16.32 $15.98 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $
$ 0.32 -- $(0.05) $ 0.11 $ 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency 3.17 (0.64) 3.45 0.35 0.90
------ ------ ------ ------ ------
Total from investment operations $ 3.49 $(0.64) $ 3.40 $ 0.46 $ 1.01
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.08) $(0.03)
From net realized gain on investments and
foreign currency transactions (0.92) (0.34) (0.59) (0.04) --
In excess of net investment income -- -- (0.12) -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.92) $(0.34) $(0.71) $(0.12) $(0.03)
------ ------ ------ ------ ------
Net asset value - end of period $20.60 $18.03 $19.01 $16.32 $15.98
====== ====== ====== ====== ======
Total return(+) 19.57% (3.45)% 21.77% 2.88% 6.71%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.04% 2.11% 2.22% 2.39% 2.52%+
Net investment income (loss) 1.63% 0.02% (0.28)% 0.72% 1.04%+
Portfolio turnover 82% 89% 158% 89% 29%
Net assets at end of period (000 omitted) $33,767 $22,287 $15,087 $13,425 $11,950
* 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 Highlights - continued
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31, 2000 1999 1998 1997 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 $17.89 $18.96 $16.27 $15.94 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $ 0.20 $(0.10) $(0.14) $ 0.03 $ 0.05
Net realized and unrealized gain (loss) on
investments and foreign currency 3.17 (0.63) 3.47 0.34 0.90
------ ------ ------ ------ ------
Total from investment operations $ 3.37 $(0.73) $ 3.33 $ 0.37 $ 0.95
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $(0.01)
From net realized gain on investments and
foreign currency transactions (0.92) (0.34) (0.59) (0.04) --
In excess of net investment income -- -- (0.05) -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.92) $(0.34) $(0.64) $(0.04) $(0.01)
------ ------ ------ ------ ------
Net asset value - end of period $20.34 $17.89 $18.96 $16.27 $15.94
====== ====== ====== ====== ======
Total return 18.97% (3.89)% 21.26% 2.33% 6.37%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.53% 2.61% 2.72% 2.94% 3.11%+
Net investment income (loss) 1.03% (0.55)% (0.79)% 0.18% 0.49%+
Portfolio turnover 82% 89% 158% 89% 29%
Net assets at end of period (000 omitted) $27,390 $23,482 $18,987 $15,749 $13,641
* 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
Financial Highlights - continued
---------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31, 2000 1999 1998 1997*
---------------------------------------------------------------------------------------------------------
CLASS C
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $17.74 $18.80 $16.19 $16.02
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $ 0.24 $(0.09) $(0.10) $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency 3.09 (0.63) 3.39 0.21
------ ------ ------ ------
Total from investment operations $ 3.33 $(0.72) $ 3.29 $ 0.33
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.12)
From net realized gain on investments and
foreign currency transactions (0.92) (0.34) (0.59) (0.04)
In excess of net investment income -- -- (0.09) --
------ ------ ------ ------
Total distributions declared to shareholders $(0.92) $(0.34) $(0.68) $(0.16)
------ ------ ------ ------
Net asset value - end of period $20.15 $17.74 $18.80 $16.19
====== ====== ====== ======
Total return 18.90% (3.87)% 21.15% 2.09%++
Ratios (to average net assets)/ Supplemental data:
Expenses## 2.54% 2.59% 2.71% 2.64%+
Net investment income (loss) 1.24% (0.49)% (0.61)% 0.80%+
Portfolio turnover 82% 89% 158% 89%
Net assets at end of period (000 omitted) $5,035 $2,545 $824 $235
* For the period from the inception of Class C, July 1, 1996, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
--------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31, 2000 1999 1998 1997*
--------------------------------------------------------------------------------------------------------------
CLASS I
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $18.08 $18.95 $16.32 $15.71
------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.44 $ 0.07 $ 0.06 $ 0.16
Net realized and unrealized gain (loss) on
investments and foreign currency 3.17 (0.60) 3.37 0.45
------ ------ ------ ------
Total from investment operations $ 3.61 $(0.53) $ 3.43 $ 0.61
------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions
$(0.92) $(0.34) $(0.59) $ --
In excess of net investment income -- -- (0.21) --
------ ------ ------ ------
Total distributions declared to shareholders
$(0.92) $(0.34) $(0.80) --
------ ------ ------ ------
Net asset value - end of period $20.77 $18.08 $18.95 $16.32
====== ====== ====== ======
Total return 20.19% (2.88)% 22.08% 3.88%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.54% 1.59% 1.64% 1.89%+
Net investment income 2.21% 0.40% 0.33% 2.33%+
Portfolio turnover 82% 89% 158% 89%
Net assets at end of period (000 omitted) $89 $59 $6 $ --
* For the period from the inception of Class I, January 2, 1997, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## 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 and Income Fund (the Fund) is a diversified series of
MFS Series Trust X (the Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the effects
of changes in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, forward contracts, and swap agreements,
are valued on the basis of valuations furnished by dealers or by a pricing
service with consideration to factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon exchange or over-the-counter prices. Short- term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value. Securities for which there are no such quotations or
valuations are valued 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 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 $8,456,558. These loans
were collateralized by U.S. Treasury securities of $23,607 and cash of
$8,845,926 which was invested in the following short-term obligations:
SHARES VALUE
-------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at amortized cost 8,845,926 $8,845,926
----------
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. Dividends
received in cash are recorded on the ex-dividend date. Dividend and interest
payments received in additional securities are recorded on the ex-dividend or
ex-interest date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is 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 that only distributions in excess of tax basis earnings and
profits be 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 that 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, $14,937 and $27,125 was reclassified from
accumulated undistributed net investment income to accumulated undistributed
net realized gain on investments and foreign currency transactions and paid in
capital, respectively, 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%
up to $500 million in net assets, after which the rate is reduced to 0.900%.
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 $1,949 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
$19,320 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 $6,027 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 Trustees have adopted a distribution plan relating to 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 a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $3,101 and $209 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, respectively, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended May 31, 2000,
were $189, $53,851, and $645 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
$50,198,532 and $44,793,203, 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 $57,432,258
----------
Gross unrealized appreciation $10,457,868
Gross unrealized depreciation (2,407,638)
----------
Net unrealized appreciation $ 8,050,230
===========
(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>
Class A Shares
<CAPTION>
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,784,100 $ 54,856,662 2,407,294 $ 44,428,290
Shares issued to shareholders in
reinvestment of distributions 62,179 1,247,995 15,602 283,963
Shares reacquired (2,443,826) (48,419,948) (1,980,038) (36,681,341)
----------- ------------ ---------- ------------
Net increase 402,453 $ 7,684,709 442,858 $ 8,030,912
=========== ============ ========== ============
Class B Shares
<CAPTION>
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
Shares sold 465,297 $ 9,110,195 1,079,430 $ 19,996,186
Shares issued to shareholders in
reinvestment of distributions 53,430 1,060,129 20,024 362,645
Shares reacquired (484,295) (9,419,660) (788,680) (14,733,069)
----------- ------------ ---------- ------------
Net increase 34,432 $ 750,664 310,774 $ 5,625,762
=========== ============ ========== ============
Class C Shares
<CAPTION>
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
Shares sold 1,507,256 $ 29,318,176 761,163 $ 13,730,404
Shares issued to shareholders in
reinvestment of distributions 8,492 166,954 1,506 27,057
Shares reacquired (1,409,287) (27,563,835) (663,041) (11,987,865)
----------- ------------ ---------- ------------
Net increase 106,461 $ 1,921,295 99,628 $ 1,769,596
=========== ============ ========== ============
Class I Shares
<CAPTION>
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
Shares sold 5,588 $ 119,191 3,003 $ 54,006
Shares issued to shareholders in
reinvestment of distributions 182 3,676 57 1,045
Shares reacquired (4,737) (101,185) (129) (2,811)
----------- ------------ ---------- ------------
Net increase 1,033 $ 21,682 2,931 $ 52,240
=========== ============ ========== ============
</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 $202 for the year ended
May 31, 2000. The average dollar amount of borrowings was $3,735 and the
weighted average interest rate on these borrowings was 5.345%. A commitment fee
of $399 which is based on the average daily unused portion of the line of credit
is included in miscellaneous expense.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts, swap agreements, and futures contracts. The notional or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the
risks associated with these instruments is meaningful only when all related
and offsetting transactions are considered.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust X and Shareholders of
MFS International Growth and Income Fund:
We have audited the accompanying statements of assets and liabilities of MFS
International Growth and Income 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 and Income Fund at May 31, 2000, and 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.
THE FUND HAS DESIGNATED $2,697,807 AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED MAY 31, 2000.
FOR THE YEAR ENDED MAY 31, 2000, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS IS
16.04%.
FOR THE YEAR ENDED MAY 31, 2000, INCOME FROM FOREIGN SOURCES WAS
$1,875,852, AND THE FUND DESIGNATED A FOREIGN TAX CREDIT OF $119,701.
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) INTERNATIONAL GROWTH AND INCOME FUND
<S> <C>
TRUSTEES SECRETARY
Stephen E. Cavan*
J. Atwood Ives - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified ASSISTANT SECRETARY
services company) James R. Bordewick, Jr.*
Lawrence T. Perera - Partner, Hemenway CUSTODIAN
& Barnes (attorneys) State Street Bank and Trust Company
William J. Poorvu - Adjunct Professor, AUDITORS
Harvard University Graduate School of Ernst & Young LLP
Business Administration
INVESTOR INFORMATION
Charles W. Schmidt - Private Investor For information on MFS mutual funds, call your
investment professional or, for an information
Arnold D. Scott* - Senior Executive kit, call toll free: 1-800-637-2929 any
Vice President, Director, and Secretary, business day from 9 a.m. to 5 p.m. Eastern time
MFS Investment Management (or leave a message anytime).
Jeffrey L. Shames* - Chairman and Chief INVESTOR SERVICE
Executive Officer, MFS Investment Management MFS Service Center, Inc.
P.O. Box 2281
Elaine R. Smith - Independent Consultant Boston, MA 02107-9906
David B. Stone - Chairman, North American For general information, call toll free:
Management Corp. (investment adviser) 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTMENT ADVISER
Massachusetts Financial Services Company For service to speech- or hearing-impaired,
500 Boylston Street call toll free: 1-800-637-6576 any business day
Boston, MA 02116-3741 from 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be equipped with
DISTRIBUTOR a Telecommunications Device for the Deaf.)
MFS Fund Distributors, Inc.
500 Boylston Street For share prices, account balances, exchanges, or
Boston, MA 02116-3741 stock and bond outlooks, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a
CHAIRMAN AND PRESIDENT touch-tone telephone.
Jeffrey L. Shames*
WORLD WIDE WEB
PORTFOLIO MANAGER www.mfs.com
Frederick J. Simmons*
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 AND INCOME FUND BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MGI-2 7/00 19.5M 87/287/387/887
