<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) EMERGING
MARKETS EQUITY FUND
(FORMERLY MFS(R)/FOREIGN & COLONIAL
EMERGING MARKETS EQUITY FUND)
ANNUAL REPORT o MAY 31, 2000
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MUTUAL FUND GIFT KITS (see page 31)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 22
Independent Auditors' Report .............................................. 29
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 David A. Antonelli]
David A. Antonelli
For the 12 months ended May 31, 2000, Class A shares of the fund provided a
total return of 11.47%, Class B shares 11.00%, Class C shares 10.91%, and Class
I shares 12.03%. These returns assume the reinvestment of any distributions but
exclude the effects of any sales charges. During the same period, the average
emerging market fund tracked by Lipper Inc., an independent firm that reports
mutual fund performance, returned 23.55%. These results also compare to returns
of 17.75% and 19.83%, respectively, for the fund's benchmarks, the Morgan
Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index, a broad,
unmanaged, market-capitalization-weighted index of equities in emerging markets
and the Lipper Emerging Markets Funds Index (the Lipper 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.
Q. WHAT FACTORS CAUSED THE FUND TO UNDERPERFORM THE MSCI EMF INDEX AND THE
LIPPER INDEX DURING THE PERIOD?
A. During the first six months of the period, the fund benefited from an
impressive global economic recovery that spilled over into most emerging
markets. Our holdings in Southeast Asia and Latin America produced strong
results. Year to date, however, we've seen a lot of correlation between the
performance of the U.S. market and emerging markets. As investors became
increasingly concerned about stock valuations and whether future earnings
could support those prices, we witnessed broad-based selling in emerging
markets. Technology and telecommunications stocks, two of the largest sector
weightings for the fund, came under the most pressure. Unfortunately, some
of the more liquid markets, such as South Korea and Taiwan, where the fund
was overweighted relative to its benchmarks, were hardest hit.
Q. WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO IN AN EFFORT TO IMPROVE
RELATIVE PERFORMANCE?
A. Early in 2000, we began to reduce our positions in South Korea because many
of these stocks reached our price targets and we believed they were fairly
valued following impressive results in 1999. In India, we added a number of
technology, telecommunications, and financial services stocks in an effort
to capitalize on what we saw as rapid growth at these companies. As prices
came down in Southeast Asian markets in the second quarter, we began to
increase our exposure to what we believe are high-quality companies selling
at reasonable valuations, especially in the telecommunications industry. We
believe that many emerging market telecommunications companies -- through
their wireless, Internet, and data-transmission services -- have transformed
themselves from slow-growth utilities into fast-growing, dynamic companies.
In addition to large, established telecommunications companies, we've
focused on new telecom entrants that possess innovative product lines and
dynamic business plans.
Q. HOW DID THESE STRATEGIES WORK FOR THE FUND? WHICH HOLDINGS CONTRIBUTED
TO PERFORMANCE?
A. Our stock selection across a broad range of countries helped performance. A
particularly strong performer was Teva Pharmaceuticals, an Israeli
biotechnology and health care company, whose stock price surged dramatically
on strong sales of its multiple sclerosis treatment Copaxone and recent
approval by the U.S. Food and Drug Administration of Nabumetone, its generic
form of arthritis treatment. Other strong contributors and significant
holdings in the fund were Li & Fung Ltd. and Dimension Data. In Hong Kong,
Li & Fung benefited from surging sales and strong demand for apparel
manufacturing outsourcing in developed economies. South African computer
services firm Dimension Data boosted fund performance as the company
experienced strong demand for its information technology services, as well
as favorable revenue and earnings growth.
Q. WHERE ELSE DO YOU SEE OPPORTUNITIES FOR THE FUND?
A. Recently, we've increased the fund's holdings in Taiwan because we've
located what we think are some compelling growth opportunities in this
country. We believe Taiwan is a very important emerging market that is
slowly becoming more open to investors as it enhances its stock market
technology and improves its financial reporting standards. We think these
trends should help cash flows into this market. More importantly, some of
the most innovative and competitive semiconductor companies in the world are
located in Taiwan. In our view, companies such as Taiwan Semiconductor are
well positioned to benefit from the global trend of increased spending on
technology and the tremendous growth potential of the Internet and
telecommunications.
Q. WHICH HOLDINGS HURT RELATIVE PERFORMANCE?
A. Ironically, some of the industries where we see the strongest prospects for
future earnings growth detracted from performance in recent months, namely,
technology and telecommunications. Primarily due to concerns about high
valuations, investors began to unload shares in these sectors. Along with
many technology and telecommunications companies, Korea Telecom, Telefonos
de Mexico, and Israel's Partner Communications have experienced weakness in
recent months. We believe the fundamental business outlooks for these
companies are still very strong and their valuations have become more
attractive.
Q. WHAT'S YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A. In general, our outlook for emerging markets is positive. The prospects for
global economic growth are favorable, and we expect this growth to benefit a
wide range of our holdings. We also believe emerging market stock valuations
have been very attractive, especially given the recent pullback. In
addition, we feel the anticipated growth rates and earnings outlooks for
emerging market equities appear compelling compared to those of the United
States and other developed economies. From our standpoint, these markets
provide some of the most interesting growth opportunities in the world, and
the positive trends we've outlined could support investor interest in the
region.
/s/ David A. Antonelli
David A. Antonelli
Director of International Equity Research
The committee of MFS international research analysts is responsible for the
day-to-day management of the fund under the general supervision of Mr.
Antonelli.
The opinions expressed in this report are those of the Director of International
Equity Research and are current only through the end of the period of the report
as stated on the cover. His 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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FUND FACTS
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OBJECTIVE: SEEKS TO PROVIDE CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN STOCKS OF COMPANIES IN EMERGING
MARKET COUNTRIES.
COMMENCEMENT OF
INVESTMENT OPERATIONS: OCTOBER 24, 1995
CLASS INCEPTION: CLASS A OCTOBER 24, 1995
CLASS B OCTOBER 24, 1995
CLASS C JUNE 27, 1996
CLASS I JANUARY 2, 1997
SIZE: $74.6 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 LIPPER
EMERGING MARKETS EMERGING MARKETS MSCI
EQUITY FUND FUNDS EMF
- CLASS A INDEX INDEX
---------------------------------------------------------------
11/95 $ 9,525 $10,000 $10,000
5/96 10,500 11,457 11,281
5/97 12,225 12,713 12,156
5/98 10,502 9,309 8,716
5/99 9,078 9,018 10,041
5/00 10,120 10,807 10,618
TOTAL RATES OF RETURN THROUGH MAY 31, 2000
CLASS A
1 Year 3 Years Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +11.47% -17.22% +6.24%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +11.47% - 6.11% +1.32%
-------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge + 6.18% - 7.62% +0.26%
-------------------------------------------------------------------------------
CLASS B
1 Year 3 Years Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +11.00% -18.43% +3.83%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +11.00% - 6.56% +0.82%
-------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge + 7.00% - 7.49% +0.39%
-------------------------------------------------------------------------------
CLASS C
1 Year 3 Years Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +10.91% -18.24% +4.15%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +10.91% - 6.49% +0.89%
-------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge + 9.91% - 6.49% +0.89%
-------------------------------------------------------------------------------
CLASS I
1 Year 3 Years Life*
-------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales Charge +12.03% -15.93% +8.13%
-------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +12.03% - 5.62% +1.71%
-------------------------------------------------------------------------------
COMPARATIVE INDICES(+)
1 Year 3 Years Life*
-------------------------------------------------------------------------------
Average emerging market fund+ +23.55% - 3.95% +2.81%
-------------------------------------------------------------------------------
MSCI EMF Index# +17.75% - 4.41% +1.32%
-------------------------------------------------------------------------------
Lipper Emerging Markets Funds Index# +19.83% - 5.27% +1.71%
-------------------------------------------------------------------------------
* 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.
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 27.4%
TECHNOLOGY 23.4%
FINANCIAL SERVICES 13.0%
SPECIAL PRODUCTS & SERVICES 8.9%
ENERGY 7.1%
TOP 10 STOCK HOLDINGS
SAMSUNG ELECTRONICS 5.2% CHARTERED SEMICONDUCTOR MANUFACTURING
South Korean electronics company CO., ADR 2.6%
Singaporan semiconductor manufacturer
TAIPEI FUND 4.6%
Taiwanese closed-end country fund HELLENIC TELECOMMUNICATION ORGANIZATION
S.A., GDR (OTE) 2.6%
TELEFONOS DE MEXICO S.A. 3.6% Greek telecommunications services company
Mexican telecommunications company
HYUNDAI ELECTRONICS INDUSTRIES CO. 2.5%
R.O.C. TAIWAN FUND 3.3% South Korean electronics manufacturer
Taiwanese closed-end country fund
TAIWAN SEMICONDUCTOR MANUFACTURING
TEVA PHARMACEUTICAL INDUSTRIES LTD., CO. LTD., ADR 2.4%
ADR 3.2% Taiwanese semiconductor manufacturer
Israeli biotechnology and health
care company PETROCHINA CO. LTD. 2.1%
Hong Kong oil and natural gas company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- May 31, 2000
<TABLE>
<CAPTION>
Stocks - 97.7%
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ISSUER SHARES VALUE
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<S> <C> <C>
Argentina - 0.1%
IMPSAT Fiber Networks, Inc. (Telecommunications)* 6,550 $ 72,050
----------------------------------------------------------------------------------------------
Brazil - 11.9%
Banco Itau S.A. (Banks and Credit Cos.) 6,555,300 $ 493,892
Caemi Mineracao e Metalurgica S.A. (Minerals) 3,472,000 298,687
Cia Brasileira de Distribuicao Grupo Pao de Acucar, ADR
(Supermarkets) 18,270 548,100
Companhia Cervejaria Brahma, Preferred (Beverages) 12,950 187,775
Companhia Vale Rio Doce, Bonus Shares (Mining) 8,880 221,329
Companhia Vale Rio Doce, Preferred (Mining) 3,270 81,526
Embratel Participacoes S.A., Preferred (Telecommunications) 30,520 639,012
Petroleo Brasileiro S.A. (Oils) 19,230 447,694
Petroleo Brasileiro S.A., Preferred (Oils) 6,233,135 1,431,059
Tele Centro Oeste Celular Participacoes S.A., ADR
(Telecommunications) 84,100 856,769
Tele Centro Sul Participacoes S.A. (Telecommunications) 30,252,204 272,187
Tele Centro Sul Participacoes S.A., ADR (Telecommunications) 4,660 279,600
Tele Centro Sul Participacoes S.A., Preferred
(Telecommunications) 20,034,300 241,290
Tele Norte Celular Participacoes S.A., ADR
(Cellular Telecommunications) 14,130 649,980
Tele Sudeste Celular Participacoes S.A. (Telecommunications) 12,190 524,170
Telecomunicacoes de Sao Paulo S.A. (Telecommunications) 5,430 137,786
Telemig Celular Participacoes S.A., ADR (Telecommunications) 10,000 580,625
Telesp Participacoes S.A., Preferred (Telecommunications) 24,100 607,452
Uniao de Banco Brasiliero S.A. (Banks and Credit Cos.) 15,486 374,568
-----------
$ 8,873,501
----------------------------------------------------------------------------------------------
Chile - 0.3%
Antofagasta Holdings PLC (Minerals) 38,590 $ 194,604
----------------------------------------------------------------------------------------------
Croatia - 0.5%
Pliva d.d. Co. (Medical and Health Products)* 9,900 $ 108,900
Pliva d.d. Co., GDR (Medical and Health Products)* 21,900 240,900
-----------
$ 349,800
----------------------------------------------------------------------------------------------
Czechoslovakia - 0.7%
Cesky Telecom A.S. (Telecommunications)* 29,620 $ 555,375
----------------------------------------------------------------------------------------------
Dominican Republic - 0.1%
Tricom S.A., ADR (Telecommunications)* 5,900 $ 88,500
----------------------------------------------------------------------------------------------
Egypt - 1.0%
Al Ahram Beverages Co. S.A., GDR (Beverages)* 19,900 $ 350,240
Egypt Mobile Phone (Telecommunications)* 10,590 435,375
-----------
$ 785,615
----------------------------------------------------------------------------------------------
Estonia - 0.6%
AS Eesti Telekom, GDR (Telecommunications) 23,800 $ 486,808
----------------------------------------------------------------------------------------------
Greece - 3.1%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 77,860 $ 1,922,389
STET Hellas Telecommunications S.A., ADR (Telecommunications)* 17,100 359,100
-----------
$ 2,281,489
----------------------------------------------------------------------------------------------
Hong Kong - 6.9%
China Telecom Hong Kong Ltd. (Telecommunications)* 7,230 $ 1,062,810
China Telecom Ltd. (Telecommunications) 117,000 874,636
HSBC Holdings (Holding Company and Other Instruments) 32,400 357,579
Li & Fung Ltd. (Consumer Goods and Services) 299,000 1,281,631
PetroChina Co. Ltd. (Oils)* 7,796,000 1,580,791
-----------
$ 5,157,447
----------------------------------------------------------------------------------------------
Hungary - 1.0%
Magyar Tavkozlesi Rt., ADR (Telecommunications) 21,240 4 724,815
----------------------------------------------------------------------------------------------
India - 2.7%
Infosys Technologies Ltd., ADR (Computer Software - Services) 1,980 $ 303,930
Mahanagar Telephone Nigam Ltd., GDR (Telecommunications)## 33,450 329,483
Reliance Industries Ltd. (Conglomerate)## 26,750 648,687
Satyam Infoway Ltd. (Telecommunications)* 6,380 132,385
Videsh Sanchar Nigam Ltd., GDR (Telecommunications)## 37,250 573,650
-----------
$ 1,988,135
----------------------------------------------------------------------------------------------
Israel - 4.5%
Amdocs Ltd. (Telecommunications)* 8,940 $ 553,721
Partner Communications Co. Ltd., ADR (Cellular Telephones)* 70,160 499,890
Teva Pharmaceutical Industries Ltd., ADR (Pharmaceuticals) 43,360 2,336,020
-----------
$ 3,389,631
----------------------------------------------------------------------------------------------
Malaysia - 4.0%
Malayan Banking Berhad (Banks and Credit Cos.)+ 99,000 $ 422,075
Malaysian Pacific Industries Berhad (Electronics)+ 90,000 1,012,553
Resorts World Berhad (Entertainment)+ 128,000 400,863
Sime Darby Berhad (Conglomerate)+ 278,000 359,956
Telekom Malaysia Berhad (Telecommunications)+ 116,000 424,338
Unisem (M) Berhad (Electronics) 48,000 407,390
-----------
$ 3,027,175
----------------------------------------------------------------------------------------------
Mexico - 9.7%
Fomento Economico Mexicano S.A. (Food and Beverage Products) 6,255 $ 238,081
Grupo Continential S.A. (Food and Beverage Products) 144,840 146,272
Grupo Financiero Banorte S.A. de C.V. (Finance)* 200,500 272,086
Grupo Iusacell S.A. De C.V. Neuvo (Telecommunications)* 52,820 699,865
Grupo Mexico S.A. (Metals)* 72,320 246,493
Grupo Modelo S.A. de C.V. (Brewery) 197,630 436,591
Grupo Televisa S.A. de C.V., GDR (Entertainment)* 11,960 666,022
Kimberly-Clark de Mexico S.A. de C.V. (Forest and Paper
Products) 235,004 729,289
Organiz Soriana S.A., "B" - (Retail)* 165,952 560,389
Telefonos de Mexico S.A., ADR (Telecommunications) 54,974 2,676,547
Tubos de Acero de Mexico S.A. (Steel) 9,980 134,730
Wal-Mart de Mexico S.A. de C.V. (Retail)* 151,660 312,382
Wal-Mart de Mexico S.A. de C.V., ADR (Retail)* 7,000 144,287
-----------
$ 7,263,034
----------------------------------------------------------------------------------------------
Peru - 0.7%
Telefonica del Peru S.A., ADR (Telecommunications) 34,760 $ 495,330
----------------------------------------------------------------------------------------------
Philippines - 0.9%
Philippine Long Distance Telephone Co. (Utilities - Telephone) 36,800 $ 648,600
----------------------------------------------------------------------------------------------
Poland - 1.5%
Polski Koncern Naftowy S.A. (Oil) 40,400 $ 375,720
Telekomunikacja Polska S.A., GDR (Telecommunications) 103,000 715,850
-----------
$ 1,091,570
----------------------------------------------------------------------------------------------
Russia - 1.4%
Lukoil Oil Co., ADR (Oils) 12,300 $ 667,275
Rostelecom, ADR (Telecommunications) 27,200 413,100
-----------
$ 1,080,375
----------------------------------------------------------------------------------------------
Singapore - 5.9%
Chartered Semiconductor Manufacturing Co., ADR (Electronics)* 24,100 $ 1,934,025
Datacraft Asia Ltd. (Telecommunications) 200,000 1,390,000
DBS Group Holdings Ltd. (Financial Services) 26,000 259,550
Natsteel Electronics Ltd. (Electronics) 278,000 818,119
-----------
$ 4,401,694
----------------------------------------------------------------------------------------------
South Africa - 7.6%
Anglo American PLC (Metals) 12,894 $ 560,561
Anglo American PLC, ADR (Metals) 2,840 123,185
De Beers Centenary AG (Diamonds - Precious Stones) 24,923 539,611
De Beers Consolidated Mines Ltd. (Mining) 7,340 159,645
Dimension Data Holdings Ltd. (Computer Services) 168,987 1,176,722
Imperial Holdings Ltd. (Conglomerate)* 62,953 465,481
Liberty Life Association of Africa Ltd. (Insurance) 45,158 382,530
Nedcor Ltd. (Banks and Credit Cos.)* 31,222 596,199
Sasol Ltd. (Oils) 116,138 761,192
South African Breweries Ltd. (Brewery) 80,742 492,683
South African Breweries Ltd., ADR (Brewery) 69,480 425,236
-----------
$ 5,683,045
----------------------------------------------------------------------------------------------
South Korea - 11.7%
Housing & Commercial Bank of Korea (Banks and Credit Cos.) 18,100 $ 328,654
Hyundai Electronics Industries Co. (Electronics) 116,690 1,819,082
Korea Telecom Corp. (Telecommunications) 37,020 1,369,740
Mirae Corp. (Electronics) 160,500 629,774
Mirae Corp., ADR (Electronics) 6,580 47,705
Samsung Corp. (Electronics) 40,540 324,966
Samsung Electro Mechanics Co., Ltd. (Electronics) 5,200 327,015
Samsung Electronics (Electronics) 14,247 3,886,693
-----------
$ 8,733,629
----------------------------------------------------------------------------------------------
Taiwan - 15.3%
Acer, Inc., GDR (Computer Software - Systems) 89,330 $ 893,300
Advanced Semiconducor, Inc., GDR (Electronics) 54,790 884,859
ASE Test Ltd. (Business Services)* 46,470 1,283,734
Far Eastern Textile Ltd., GDR (Textiles)* 18,590 316,030
R.O.C. Taiwan Fund (Closed-End Fund)* 276,830 2,456,866
Ritek Corp. (Computer - Software Systems)*## 23,400 319,410
Taipei Fund (Holding Company and Other Investments)* 348 3,434,064
Taiwan Semiconductor Manufacturing Co. Ltd., ADR (Electronics) 51,008 1,801,220
-----------
$11,389,483
----------------------------------------------------------------------------------------------
Thailand - 2.2%
Hana Microelectronics Public Co. Ltd. (Electronics) 55,300 $ 423,430
Total Access Communications Public Co. Ltd., ADR
(Telecommunications) 452,800 1,218,032
-----------
$ 1,641,462
----------------------------------------------------------------------------------------------
Turkey - 3.2%
Turkiye Garanti Bankasi (Banks and Credit Cos.)* 81,715,600 $ 1,049,169
Vestel Electronik Sanayi ve Ticaret A.S. (Electronics)* 2,266,200 708,993
Yapi ve Kredi Bankasi (Banks and Credit Cos.) 23,144,480 285,874
Yapi ve Kredi Bankasi, Bonus Shares (Banks and Credit Cos.) 25,227,483 311,602
-----------
$ 2,355,638
----------------------------------------------------------------------------------------------
Venezuela - 0.2%
Mavesa S.A. (Consumer Goods and Services) 60,350 $ 162,191
----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $71,862,604) $72,920,996
Other Assets, Less Liabilities - 2.3% 1,693,118
----------------------------------------------------------------------------------------------
Net Assets - 100.0% $74,614,114
----------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
MAY 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $71,862,604) $72,920,996
Foreign currency, at value (identified cost, $1,415,883) 1,425,922
Cash 48,598
Receivable for Fund shares sold 202,136
Receivable for investments sold 1,353,006
Dividends receivable 91,161
Deferred organization expenses 2,090
Other assets 1,474
-----------
Total assets $76,045,383
-----------
Liabilities:
Notes payable $ 758,000
Payable for Fund shares reacquired 87,576
Payable for investments purchased 469,090
Payable to affiliates -
Management fee 2,245
Shareholder servicing agent fee 204
Distribution and service fee 1,544
Accrued expenses and other liabilities 112,610
-----------
Total liabilities $ 1,431,269
-----------
Net assets $74,614,114
===========
Net assets consist of:
Paid-in capital $84,455,340
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 1,056,752
Accumulated net realized loss on investments and foreign
currency transactions (10,695,041)
Accumulated net investment loss (202,937)
-----------
Total $74,614,114
===========
Shares of beneficial interest outstanding 4,898,342
=========
Class A shares:
Net asset value per share
(net assets of $34,515,370 / 2,248,342 shares of
beneficial interest outstanding) $15.35
======
Offering price per share (100 / 95.25 of net asset
value per share) $16.12
======
Class B shares:
Net asset value and offering price per share
(net assets of $34,373,935 / 2,271,548 shares of
beneficial interest outstanding) $15.13
======
Class C shares:
Net asset value and offering price per share
(net assets of $4,859,595 / 322,817 shares of
beneficial interest outstanding) $15.05
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $865,214 / 55,635
shares of beneficial interest outstanding) $15.55
======
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 -
Interest $ 113,066
Dividends 971,579
Foreign taxes withheld (80,936)
-----------
Total investment income $ 1,003,709
-----------
Expenses -
Management fee $ 951,951
Trustees' compensation 10,255
Shareholder servicing agent fee 76,156
Distribution and service fee (Class A) 175,937
Distribution and service fee (Class B) 355,278
Distribution and service fee (Class C) 46,581
Administrative fee 10,271
Custodian fee 117,717
Registration fees 53,889
Printing 44,663
Auditing fees 46,115
Postage 29,218
Interest expense 33,671
Amortization of organization expenses 5,200
Legal fees 1,166
Miscellaneous 73,621
-----------
Total expenses $ 2,031,689
Fees paid indirectly (22,617)
Reduction of expenses by investment adviser (105,107)
-----------
Net expenses $ 1,903,965
-----------
Net investment loss (900,256)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $11,426,050
Foreign currency transactions (253,515)
-----------
Net realized gain on investments and foreign
currency transactions $11,172,535
-----------
Change in unrealized appreciation (depreciation) -
Investments $(4,255,409)
Translation of assets and liabilities in foreign
currencies 30,819
-----------
Net unrealized loss on investments and foreign
currency translation $(4,224,590)
-----------
Net realized and unrealized gain on investments
and foreign currency $ 6,947,945
-----------
Increase in net assets from operations $ 6,047,689
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<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) $ (900,256) $ 77,597
Net realized gain (loss) on investments and foreign
currency transactions 11,172,535 (22,490,682)
Net unrealized gain (loss) on invesments and foreign
currency translation (4,224,590) 10,911,175
------------ ------------
Increase (decrease) in net assets from operations $ 6,047,689 $(11,501,910)
------------ ------------
Distributions declared to shareholders -
Inexcess of net realized gain on investments and foreign
currency transactions (Class A) $ -- $ (197,155)
In excess of net realized gain on investments and foreign
currency transactions (Class B) -- (200,996)
In excess of net realized gain on investments and foreign
currency transactions (Class C) -- (17,217)
In excess of net realized gain on investments and foreign
currency transactions (Class I) -- (2,833)
------------ ------------
Total distributions declared to shareholders $ -- $ (418,201)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions $ 2,354,272 $ (2,421,006)
------------ ------------
Total increase (decrease) in net assets $ 8,401,961 $(14,341,117)
Net assets:
At beginning of year 66,212,153 80,553,270
------------ ------------
At end of year (including accumulated net investment loss of
$202,937 and $445,389, respectively) $ 74,614,114 $ 66,212,153
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<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 $13.77 $16.06 $18.96 $16.52 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.15) $ 0.05 $(0.02) $(0.07) $ 0.04
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.73 (2.25) (2.64) 2.74 1.50
------ ------ ------ ------ ------
Total from investment operations $ 1.58 $(2.20) $(2.66) $ 2.67 $ 1.54
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $(0.02)
From net realized gain on investments
and foreign currency transactions -- -- (0.16) (0.23) --
In excess of net investment income
and foreign currency transactions -- -- (0.08) -- --
In excess of net realized gain on
investments and foreign currency
transactions -- (0.09) -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.09) $(0.24) $(0.23) $(0.02)
------ ------ ------ ------ ------
Net asset value - end of period $15.35 $13.77 $16.06 $18.96 $16.52
====== ====== ====== ====== ======
Total return(+) 11.47% (13.56)% (14.09)% 16.43% 10.24%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 2.26% 2.45% 2.35% 2.51% 2.48%+
Net investment income (loss) (0.92)% 0.37% (0.12)% (0.42)% 0.35%+
Portfolio turnover 161% 108% 83% 47% 22%
Net assets at end of period (000
omitted) $34,515 $29,233 $36,669 $37,540 $19,861
*** 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 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.
(S) Effective July 1, 1999, the investment adviser voluntarily waived a portion of its fee. For the years ended May 31, 1998, and
1997, subject to reimbursement by the Fund, MFS voluntarily agreed, under a temporary expense reimbursement agreement, to pay
all of the Fund's operating expenses, exclusive of management and distribution fees. In consideration, the Fund paid MFS a fee
not greater than 0.75% of average daily net assets. For the period ended May 31, 1996, the adviser voluntarily agreed to
maintain total expenses of the Fund at not more than 2.50%, 3.07%, and 3.00% of average daily net assets for Class A, Class B,
and Class C shares, respectively. If these fees had not been incurred by the Fund, the net investment income (loss) ratios
would have been:
Net investment income (loss) $(0.17) $ -- $(0.02) $(0.06) $ 0.02
Ratios (to average net assets):
Expenses## 2.40% -- 2.31% 2.45% 2.73%+
Net investment income (loss)# (1.06)% -- (0.08)% (0.37)% 0.10%+
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<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 $13.64 $16.00 $18.89 $16.47 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.22) $(0.01) $(0.13) $(0.15) $(0.02)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.71 (2.26) (2.60) 2.73 1.50
------ ------ ------ ------ ------
Total from investment operations $ 1.49 $(2.27) $(2.73) $ 2.58 $ 1.48
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments
and foreign currency transactions $ -- $ -- $(0.16) $(0.16) $ --
In excess of net investment income
and foreign currency transactions -- -- -- -- (0.01)
In excess of net realized gain on
investments and foreign currency
transactions -- (0.09) -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.09) $(0.16) $(0.16) $(0.01)
------ ------ ------ ------ ------
Net asset value - end of period $15.13 $13.64 $16.00 $18.89 $16.47
====== ====== ====== ====== ======
Total return 11.00% (14.05)% (14.49)% 15.87% 9.85%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.75% 2.95% 2.85% 3.04% 3.06%+
Net investment loss (1.40)% (0.09)% (0.67)% (0.87)% (0.19)%+
Portfolio turnover 161% 108% 83% 47% 22%
Net assets at end of period
(000 omitted) $34,374 $32,257 $39,978 $51,020 $20,021
*** For the period from the commencement of the Fund's investment operations, October 24, 1995, through May 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) Effective July 1, 1999, the investment adviser voluntarily waived a portion of its fee. For the years ended May 31, 1998, and
1997, subject to reimbursement by the Fund, MFS voluntarily agreed, under a temporary expense reimbursement agreement, to pay
all of the Fund's operating expenses, exclusive of management and distribution fees. In consideration, the Fund paid MFS a fee
not greater than 0.75% of average daily net assets. For the period ended May 31, 1996, the adviser voluntarily agreed to
maintain total expenses of the Fund at not more than 2.50%, 3.07%, and 3.00% of average daily net assets for Class A, Class B,
and Class C shares, respectively. If these fees had not been incurred by the Fund, the net investment income (loss) ratios
would have been:
Net investment loss $(0.24) $ -- $(0.12) $(0.14) $(0.08)
Ratios (to average net assets):
Expenses## 2.89% -- 2.81% 2.98% 3.30%+
Net investment loss (1.54)% -- (0.63)% (0.82)% (0.44)%+
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<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 $13.57 $15.88 $18.76 $16.77
------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.21) $(0.01) $(0.12) $(0.08)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.69 (2.21) (2.58) 2.36
------ ------ ------ ------
Total from investment operations $ 1.48 $(2.22) $(2.70) $ 2.28
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.02) $ --
From net realized gain on investments and
foreign currency transactions -- -- (0.16) (0.29)
In excess of net realized gain on investments
and foreign currency transactions -- (0.09) -- --
------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.09) $(0.18) $(0.29)
------ ------ ------ ------
Net asset value - end of period $15.05 $13.57 $15.88 $18.76
====== ====== ====== ======
Total return 10.91% (13.84)% (14.44)% 13.89%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.75% 2.93% 2.84% 3.00%+
Net investment loss (1.33)% (0.10)% (0.66)% (0.48)%+
Portfolio turnover 161% 108% 83% 47%
Net assets at end of period (000 omitted) $4,860 $4,182 $3,478 $2,659
*** For the period from the inception of offering Class C shares, June 27, 1996, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) Effective July 1, 1999, the investment adviser voluntarily waived a portion of its fee. For the years ended May 31, 1998, and
1997, subject to reimbursement by the Fund, MFS voluntarily agreed, under a temporary expense reimbursement agreement, to pay
all of the Fund's operating expenses, exclusive of management and distribution fees. In consideration, the Fund paid MFS a fee
not greater than 0.75% of average daily net assets. For the period ended May 31, 1996, the adviser voluntarily agreed to
maintain total expenses of the Fund at not more than 2.50%, 3.07%, and 3.00% of average daily net assets for Class A, Class B,
and Class C shares, respectively. If these fees had not been incurred by the Fund, the net investment loss ratios would have
been:
Net investment loss $(0.23) $ -- $(0.12) $(0.07)
Ratios (to average net assets):
Expenses## 2.89% -- 2.80% 2.97%+
Net investment loss (1.47)% -- (0.62)% (0.39)%+
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<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 $13.88 $16.11 $19.00 $16.47
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.07) $ 0.11 $ 0.08 $ 0.10
Net realized and unrealized gain (loss) on
investments and foreign currency 1.74 (2.25) (2.65) 2.43
------ ------ ------ ------
Total from investment operations $ 1.67 $(2.14) $(2.57) $ 2.53
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.16) $ --
From net realized gain on investments and
foreign currency transactions -- -- (0.16) --
In excess of net realized gain on investments
and foreign currency transactions -- (0.09) -- --
------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.09) $(0.32) $ --
------ ------ ------ ------
Net asset value - end of period $15.55 $13.88 $16.11 $19.00
====== ====== ====== ======
Total return 12.03% (13.09)% (13.66)% 15.36%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.74% 1.96% 1.85% 2.01%+
Net investment income (loss) (0.43)% 0.88% 0.43% 1.14%+
Portfolio turnover 161% 108% 83% 47%
Net assets at end of period (000 omitted) $865 $540 $428 $299
*** For the period from the inception of Class I shares, January 2, 1997, through May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) Effective July 1, 1999, the investment adviser voluntarily waived a portion of its fee. For the years ended May 31, 1998, and
1997, subject to reimbursement by the Fund, MFS voluntarily agreed, under a temporary expense reimbursement agreement, to pay
all of the Fund's operating expenses, exclusive of management and distribution fees. In consideration, the Fund paid MFS a fee
not greater than 0.75% of average daily net assets. For the period ended May 31, 1996, the adviser voluntarily agreed to
maintain total expenses of the Fund at not more than 2.50%, 3.07%, and 3.00% of average daily net assets for Class A, Class B,
and Class C shares, respectively. If these fees had not been incurred by the Fund, the net investment income (loss) ratios
would have been:
Net investment income (loss) $(0.09) $ -- $ 0.09 $ 0.10
Ratios (to average net assets):
Expenses## 1.88% -- 1.81% 1.99%+
Net investment income (loss) (0.57)% -- 0.47% 1.14%+
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Emerging Markets Equity Fund (formerly MFS/Foreign & Colonial Emerging
Markets Equity 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. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues and forward contracts 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. 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.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
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 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, $360,089 and $1,142,708 was reclassified from
paid-in capital to accumulated net realized loss on investments and foreign
currency transactions and accumulated net investment loss, 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. At May
31, 2000, accumulated net investment loss and accumulated net realized loss on
investments and foreign currency transactions under book accounting were
different from tax accounting due to temporary differences in accounting for
capital losses.
At May 31, 2000, the Fund, for federal income tax purposes, had a capital loss
carryforward of $9,430,506 which may be applied against any net taxable realized
gains of each succeeding year until the earlier of its utilization or expiration
on May 31, 2007.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on 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 1.25% of
the Fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee, which is shown as a reduction of total
expenses in the Statement of Operations.
The advisory agreement permits the adviser to engage one or more sub-advisers
and, through December 1, 1999, the adviser engaged Foreign & Colonial Management
Ltd. and Foreign & Colonial Emerging Markets Ltd., each an England and Wales
Company, to assist in the performance of its services. Effective December 1,
1999, MFS assumed all portfolio management responsibilities.
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 $3,389 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
$25,414 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 $11,892 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 $3,933 and $1,110 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 each class' average daily net assets
attributable to Class B and Class C shares 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 $3,438, $108,323, and $2,251 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
$119,286,588 and $121,853,663 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 $73,308,971
-----------
Gross unrealized appreciation $ 9,958,705
Gross unrealized depreciation (10,346,680)
-----------
Net unrealized depreciation $ (387,975)
===========
(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 5,902,963 $ 93,421,425 9,572,824 $ 123,603,865
Shares issued to shareholders in
reinvestment of distributions -- -- 15,201 172,987
Shares reacquired (5,777,949) (91,804,744) (9,748,073) (126,386,045)
------------- ------------- ------------- -------------
Net increase (decrease) 125,014 $ 1,616,681 (160,048) $ (2,609,193)
============= ============= ============= =============
<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 2,193,594 $ 35,396,874 2,255,671 $ 29,849,662
Shares issued to shareholders in
reinvestment of distributions -- -- 16,140 182,444
Shares reacquired (2,286,554) (35,259,852) (2,406,513) (31,134,564)
------------- ------------- ------------- -------------
Net increase (decrease) (92,960) $ 137,022 (134,702) $ (1,102,458)
============= ============= ============= =============
<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 1,048,189 $ 15,826,673 1,073,599 $ 13,797,921
Shares issued to shareholders in
reinvestment of distributions -- -- 1,344 15,106
Shares reacquired (1,033,626) (15,521,954) (985,737) (12,683,053)
------------- ------------- ------------- -------------
Net increase 14,563 $ 304,719 89,206 $ 1,129,974
============= ============= ============= =============
<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 89,114 $ 1,594,854 17,858 $ 233,209
Shares issued to shareholders in
reinvestment of distributions -- -- 248 2,833
Shares reacquired (72,420) (1,299,004) (5,718) (75,371)
------------- ------------- ------------- -------------
Net increase 16,694 $ 295,850 12,388 $ 160,671
============= ============= ============= =============
</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. At
the end of the period, $758,000 was outstanding. Interest expense incurred on
the borrowings amounted to $33,671 for the period ending May 31, 2000. The
average dollar amount of borrowings was $596,854 and the weighted average
interest rate on these borrowings was 5.64%. A commitment fee of $581 which is
based on the average daily unused portion of the line of credit in included in
miscellaneous expense.
(7) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At May 31, 2000, the
Fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 6.0% of net assets which may not be publicly sold
without registration under the Securities Act of 1933. The Fund does not have
the right to demand that such securities be registered. The value of these
securities is determined by valuations furnished by dealers or by a pricing
service, or if not available, in good faith, at fair value, by the Trustees.
<TABLE>
<CAPTION>
SHARE/PAR
DESCRIPTION DATE OF ACQUISITION AMOUNT COST VALUE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mahanagar Telephone Nigam Ltd. 2/2/2000 33,450 $580,481 $ 329,483
Malayan Banking Berhad 5/12/1999 99,000 277,164 422,075
Malaysia Pacific Industries Berhad 12/3/1999 90,000 459,756 1,012,553
Reliance Industries Ltd. 1/14/2000 26,750 493,277 648,687
Resorts World Berhad 5/12/1999 128,000 239,704 400,863
Ritek Corp. 12/7/1999 23,400 272,185 319,410
Sime Darby Berhad 5/12/1999 278,000 353,974 359,956
Telekom Malaysia Berhad 5/12/1999 116,000 380,221 424,338
Videsh Sanchar Nigam Ltd. 12/10/1999 37,250 974,918 573,650
----------
$4,491,015
==========
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust X and Shareholders of MFS Emerging Markets
Equity Fund:
We have audited the accompanying statements of assets and liabilities of MFS
Emerging Markets Equity 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
Emerging Markets Equity 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.
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.
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) EMERGING MARKETS EQUITY FUND
<TABLE>
<S> <C>
TRUSTEES SECRETARY
Stephen E. Cavan*
J. Atwood Ives + - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified services ASSISTANT SECRETARY
company) James R. Bordewick, Jr.*
Lawrence T. Perera + - Partner, Hemenway & Barnes CUSTODIAN
(attorneys) State Street Bank and Trust Company
William J. Poorvu + - Adjunct Professor, Harvard AUDITORS
University Graduate School of Business Ernst & Young LLP
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 Vice kit, call toll free: 1-800-637-2929 any business
President, Director, and Secretary, MFS Investment day from 9 a.m. to 5 p.m. Eastern time (or leave a
Management message anytime).
Jeffrey L. Shames* - Chairman and Chief Executive INVESTOR SERVICE
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, call
500 Boylston Street toll free: 1-800-637-6576 any business day from
Boston, MA 02116-3741 9 a.m. to 5 p.m. Eastern time. (To use this service,
your phone must be equipped with a
DISTRIBUTOR 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
DIRECTOR OF INTERNATIONAL www.mfs.com
EQUITY RESEARCH
David A. Antonelli*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) EMERGING MARKETS EQUITY 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
FEM-2 7/00 22M 85/285/385/885
