<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) INTERNATIONAL
GROWTH AND INCOME
FUND
SEMIANNUAL REPORT o NOVEMBER 30, 1999
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MUTUAL FUND GIFT KITS (see page 30)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 16
Notes to Financial Statements ............................................. 23
MFS' Year 2000 Readiness Disclosure ....................................... 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,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that
this new communication medium is changing forever the way we work, play, and
shop. One might also argue that investing in this new technology represents
the investment opportunity of a lifetime. The question for any investor is
whether and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no
doubt that Internet-delivered information and brokerage services enable
individual investors to be well-informed and to trade at bargain prices. But
we believe the numbers and facts argue that, for most of us, mutual funds
purchased through a financial professional will continue to be one of the best
products for long-term investing in this new millennium.
According to a survey by the Investment Company Institute, a national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of
course that doesn't tell us how well they did owning those funds or stocks,
but another statistic gives us a clue. In the third quarter of 1999, during a
period of volatility in the greatest bull market in history, a quarter of the
7,500 stocks tracked by Morningstar, a popular rating service, lost more than
20% of their value. But during the same period, less than 1% of the mutual
funds tracked by Morningstar -- 6 out of 10,000 funds -- were down by a
similar amount.(2) So, with all things being equal, an investor's chance of
picking one of those losing stocks was about 25 times greater than his or her
chance of picking an equally losing fund.
The numbers also show that a majority of Americans seek professional advice
when buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through a financial professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up markets and down ones. And for many
investors, working with a financial professional may be the best way to
develop a plan. Although the Internet abounds with calculators for developing
all sorts of investment plans, none has your broker or consultant's high level
of experience and an understanding of your unique situation. And no calculator
can counsel you during a down market, when you may be tempted to abandon your
goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns dozens
or even hundreds of holdings is better positioned to survive a disappointment
in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost inevitable
part of investing. Few mutual funds, of course, are going to be up when the
overall market is down. But as the numbers above from the third quarter of
1999 demonstrate, mutual funds may be less likely to suffer the extreme
downturns experienced by a large number of individual holdings when the market
heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights. The
diversification and professional management of mutual funds help make them
inherently less risky than individual stock picking, and funds are available
in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
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)
December 15, 1999
(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore
Sun's Dollars and Sense Conference, 10/99. In the period 7/1/99 through
9/30/99, of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more;
of the 10,000 mutual funds tracked by Morningstar, six lost 20% or more.
Mutual fund results are at net asset value; if sales charges had been
reflected, results would have been lower.
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 six months ended November 30, 1999, Class A shares of the Fund
provided a total return of 11.99%, Class B shares 11.74%, Class C shares
11.72%, and Class I shares 12.29%. 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
Analytical Services, Inc., an independent firm that reports mutual fund
performance, returned 22.69%. The Fund's returns also compare to returns of
20.27% for the Lipper International Funds Index (the Lipper Index) and 16.58%
for the Morgan Stanley Capital International (MSCI) Europe, Australia, Far East
(EAFE) Index, an unmanaged index of international stocks. The Lipper mutual fund
indices are unmanaged indices of the largest qualifying mutual funds within
their respective investment objectives adjusted for the reinvestment of capital
gain distributions and income dividends.
Q. WHAT FACTORS CAUSED THE FUND TO UNDERPERFORM THE INDICES DURING THE
SIX-MONTH PERIOD?
A. The Fund held fewer investments in technology than its indices did. While
technology stocks performed very well, we were hesitant to match the market
weighting in this sector because, overall, we found it to be too highly
valued and too volatile. During the period, the Fund also held an
underweighted position in Japan. Until quite recently, many funds had been
helped by not investing in Japan because that market performed dismally from
the early 1990s until the end of 1998. In 1999, however, Japanese stocks
posted a strong recovery. Having less invested in that country hurt the
Fund's relative performance.
Q. IT LOOKS AS IF RECENTLY YOU'VE INCREASED THE FUND'S INVESTMENTS IN BOTH
TECHNOLOGY AND JAPAN.
A. Yes, and those two moves tended to complement each other. At the same time,
shareholders should understand that these shifts were strictly the byproduct
of bottom-up, company-by-company research and not based on decisions
regarding technology as a sector or Japan's economy. That said, we carefully
increased the Fund's technology weighting to 14.6% at the end of the period.
Many of the opportunities in the sector were found in Japan. We increased
our Japanese allocation to 23.5%, from 13.4% at the beginning of the period,
adding investments in large Japanese technology conglomerates such as
Hitachi, Fujitsu, and Toshiba. We felt these companies were attractive
because their managements are working hard to improve profits regardless of
the direction of the Japanese economy or how much the government intercedes
to help spur growth. Many Japanese companies have turned their attention to
the pursuit of the same kinds of restructuring programs that U.S. businesses
have undertaken for some time and that European firms have adopted more
recently.
Q. DID YOU PURSUE ANY PARTICULAR THEMES DURING THE PERIOD?
A. We found many opportunities in the dynamic telecommunications industry. Our
emphasis has been on telecommunications providers, which comprised the
majority of the telecommunications stocks in the MSCI EAFE Index, rather
than on equipment manufacturers. We owned a number of stocks in this sector,
including British Telecommunications, NTT Mobile Communications Network in
Japan, and the Fund's largest holding, Mannesmann in Germany. These stocks
all benefited from deregulation and significant growth in the wireless side
of the business. Cellular subscriber growth continued to expand, and
companies made advances related to the availability of wireless data
transmission, which allows customers to access the Internet and e-mail via
their handsets.
Q. HAVE YOU FOUND MANY VALUES IN EUROPE?
A. The Fund currently is overweighted in Europe relative to the MSCI EAFE
Index. We're overweighted in French companies relative to the MSCI EAFE
Index. These allocations represent a classic example of our bottom-up
research. Our investments here do not reflect our feelings about Europe or
the French market. Instead, we chose to invest in individual companies that
we believed offered good prospects. Our investments in France included
television company Television Francaise, insurance company AXA, retailers
Castorama-Dubois and Pinault-Printemps-Redoute, and beverage company
Pernod-Ricard.
Overall, Europe offered some value, but not as much as a few months ago when
companies with growth rates similar to those of U.S. companies were selling
at significantly lower valuations. Since then, European stock prices have
caught up. We have looked for companies that we believe do not have equals
in the United States. An example would be Compass, a British company that is
the largest caterer in the world. This firm has ridden the outsourcing wave,
offering food services to companies like IBM that are seeking to trim costs
and leave the onus of running corporate cafeterias to an expert.
We've also invested in European banks as a way to benefit from a particular
country's economy. For example, the Fund held investments in some Spanish
banks, even though the country doesn't necessarily offer compelling
industrial investment alternatives.
Q. WHICH STOCKS PERFORMED WELL AND WHICH WERE DISAPPOINTMENTS FOR THE FUND?
A. The Fund's best-performing investments were predominantly Japanese
companies. They included NTT Mobile Communications Network, security-
services company Secom, Fujitsu, Hitachi, and Rohm, an electronic devices
manufacturer. Television Francaise in France and BCE in Canada also provided
strong performance. BCE owns a majority stake in Nortel Networks, a
top-performing networking and telecommunications infrastructure company.
On the down side, Xerox struggled for a number of reasons, including
increased competition, concerns related to potential year 2000 computer
problems, and difficulties with its Brazilian operations. Galileo
International, a full- service travel agency, suffered from perceived
difficulties within its Internet-based travel booking business. And
retailers such as Boots in the United Kingdom and Ahold in the Netherlands
suffered from fears that Wal- Mart's entry into the grocery business would
cut into their profits.
Q. WHAT HAS BEEN YOUR APPROACH WITH EMERGING MARKETS?
A. In our opinion, this is a conservative fund, so our stake in emerging
markets has been quite small because we felt the values were not compelling
enough to offset the additional risk they posed.
Q. WHAT IS YOUR ECONOMIC OUTLOOK?
A. Remember, I am a stock picker, not an economist. As a result, my approach
generally remains the same regardless of the economic backdrop. That said,
conditions in Japan and the rest of Asia look to be improving, and I think
growth in Europe will increase a bit as well. Worldwide markets have been
outpaced by strong U.S. growth, but I would not be surprised to see the U.S.
market slow somewhat. It could very well be that we're entering a period
when international stocks might perform better than alternatives in the
United States, but that remains to be seen.
/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.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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FREDERICK J. SIMMONS IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF MFS(R) GLOBAL TOTAL RETURN FUND,
MFS(R) INTERNATIONAL GROWTH AND INCOME FUND, AND THE GLOBAL TOTAL RETURN
SERIES AND INTERNATIONAL GROWTH AND INCOME SERIES OFFERED THROUGH
MFS(R)/SUN LIFE ANNUITY PRODUCTS. HE ALSO MANAGES THE NOMURA GLOBAL
BALANCED OPEN FUND AND THE NOMURA GN GLOBAL TOTAL RETURN FUND UNDER
SUBADVISORY AGREEMENTS WITH NOMURA ASSET MANAGEMENT CO. OF JAPAN.
MR. SIMMONS JOINED MFS IN 1971 AS INVESTMENT OFFICER IN THE RESEARCH
DEPARTMENT AND WAS NAMED ASSISTANT VICE PRESIDENT IN 1974, VICE
PRESIDENT IN 1975, AND SENIOR VICE PRESIDENT IN 1983. MR. SIMMONS
GRADUATED WITH HONORS FROM THE AMOS TUCK SCHOOL OF BUSINESS
ADMINISTRATION OF DARTMOUTH COLLEGE. HE IS A CHARTERED FINANCIAL
ANALYST, A MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY, INC., AND
PAST PRESIDENT OF THE ELECTRONIC ANALYSTS OF BOSTON.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial consultant, 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: $57.7 MILLION NET ASSETS AS OF NOVEMBER 30, 1999
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes
to Performance Summary.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH NOVEMBER 30, 1999
CLASS A
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding Sales
Charge +11.99% +10.44% +33.37% +44.53%
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Average Annual Total Return Excluding
Sales Charge -- +10.44% +10.07% + 9.40%
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Average Annual Total Return Including
Sales Charge -- + 5.20% + 8.30% + 8.11%
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CLASS B
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding Sales
Charge +11.74% +10.01% +31.53% +41.75%
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Average Annual Total Return Excluding
Sales Charge -- +10.01% + 9.57% + 8.88%
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Average Annual Total Return Including
Sales Charge -- + 6.01% + 8.73% + 8.50%
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CLASS C
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding Sales
Charge +11.72% + 9.98% +31.45% +42.02%
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Average Annual Total Return Excluding
Sales Charge -- + 9.98% + 9.54% + 8.93%
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Average Annual Total Return Including
Sales Charge -- + 8.98% + 9.54% + 8.93%
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CLASS I
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding Sales
Charge +12.29% +11.05% +34.86% +46.15%
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Average Annual Total Return Excluding
Sales Charge -- +11.05% +10.48% + 9.69%
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* For the period from the commencement of the Fund's investment operations,
October 24, 1995, through November 30, 1999.
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. 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 NOVEMBER 30, 1999
FIVE LARGEST STOCK SECTORS
UTILITIES & COMMUNICATIONS 16.1%
TECHNOLOGY 14.6%
FINANCIAL SERVICES 13.2%
CONSUMER STAPLES 10.8%
CONGLOMERATES, SPECIAL PRODUCTS/SERVICES 8.4%
TOP 10 STOCK HOLDINGS
MANNESMANN AG 5.1% PINAULT-PRINTEMPS-REDOUTE S.A. 2.8%
German industrial and French department store chain
telecommunications company
ROHM CO. 3.3% BP AMOCO PLC 2.7%
Japanese electronics manufacturer British oil and petrochemical company
SECOM CO. 3.2% COMPASS GROUP PLC 2.7%
Japanese security-services company British commercial food catering company
TELEFONICA DE ESPANA SA 3.0% TAKEDA CHEMICAL INDUSTRIES CO. 2.7%
Spanish telephone services provider Japanese pharmaceutical company
CANON, INC. 2.9% SEITA SA 2.6%
Japanese office equipment and imaging French tobacco company
company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- November 30, 1999
<TABLE>
<CAPTION>
Stocks - 92.2%
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ISSUER SHARES VALUE
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<S> <C> <C>
Foreign Stocks - 80.6%
Australia - 2.4%
Australia & New Zealand Banking Group Ltd. (Banks and
Credit Cos.)* 59,810 $ 430,223
QBE Insurance Group Ltd. (Insurance)* 243,702 970,265
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$ 1,400,488
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Bermuda - 0.9%
Tyco International Ltd. (Manufacturing) 12,252 $ 490,846
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Canada - 2.9%
BCE, Inc. (Telecommunications) 7,900 $ 534,237
Canadian National Railway Co. (Railroads) 37,891 1,134,362
-----------
$ 1,668,599
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France - 11.9%
AXA (Insurance) 2,560 $ 345,321
Castorama-Dubois Investissements (Building Retailer) 2,955 768,032
Pernod-Ricard Co. (Beverages) 6,070 346,104
Pinault-Printemps-Redoute SA (Retail) 7,257 1,513,316
Rhone-Poulenc SA (Pharmaceuticals) 6,150 381,024
Seita SA (Tobacco) 26,702 1,371,880
Synthelabo (Pharmaceuticals)* 8,698 358,381
Television Francaise (Broadcasting) 3,679 1,334,241
Total SA, ADR (Oils) 6,812 450,444
-----------
$ 6,868,743
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Germany - 7.1%
Henkel KGAA (Consumer Products) 8,278 $ 521,204
Jefferson Smurfit Corp. (Forest and Paper Products) 204,050 543,313
Mannesmann AG (Telecommunications) 12,938 2,690,165
Porsche AG (Automotive) 121 329,118
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$ 4,083,800
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Hong Kong - 0.8%
China Telecom Ltd. (Telecommunications) 91,000 $ 486,286
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Italy - 2.9%
Beni Stabili S.p.A (Real Estate)* 38,560 $ 13,557
Sao Paolo Imi S.p.A. (Banks and Credit Cos.) 40,560 506,666
Telecom Italia Mobile S.p.A. (Telecommunications) 100,314 393,109
Telecom Italia S.p.A. (Telecommunications) 55,400 610,561
Unione Immobiliare S.p.A. (Real Estate) 248,969 121,895
-----------
$ 1,645,788
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Japan - 23.5%
Canon, Inc. (Office Equipment) 53,000 $ 1,562,654
East Japan Railway Co. (Railroads) 51 300,737
Fuji Heavy Industries Ltd. (Automotive) 34,000 254,290
Fujitsu Ltd. (Computer Hardware - Systems) 28,000 996,167
Hitachi Electronics Ltd. (Electronics) 80,000 1,108,599
Mitsubishi Motor (Automotive) 60,000 279,509
Nippon Telephone & Telegraph Co. (Utilities - Telephone) 19 341,720
NTT Mobile Communications Network, Inc. (Telecommunications) 26 914,791
Orix Corp. (Financial Services) 2,100 343,017
Rohm Co. (Electronics) 6,500 1,768,255
Secom Co. (Consumer Goods and Services) 15,000 1,695,332
Takeda Chemical Industries Co. (Pharmaceuticals) 24,000 1,419,951
Terumo Corp. (Medical Equipment) 41,000 1,249,140
Tokyo Marine & Fire Insurance (Insurance) 54,000 689,926
Toshiba Corp. (Electronics) 39,000 287,853
Uni Charm Corp. (Forest and Paper Products) 2,400 146,241
Ushio, Inc. (Electronics) 16,000 208,511
-----------
$13,566,693
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Luxembourg - 0.5%
HypoVereinsbank (Banks and Credit Cos.) 4,750 $ 294,765
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Mexico - 0.7%
Fomento Economico Mexicano SA (Food and
Beverage Products) 6,140 $ 232,552
Panamerican Beverage (Beverages) 9,110 170,813
-----------
$ 403,365
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Netherlands - 6.9%
Akzo Nobel N.V. (Chemicals) 26,454 $ 1,132,615
Fox Kids Europe N.V. (Broadcasting)* 3,410 46,547
ING Groep N.V. (Financial Services)* 6,512 366,387
Koninklijke Ahold N.V., ADR (Food/Retail) 8,880 284,160
Royal Dutch Petroleum Co., N.V., ADR (Oils) 8,727 506,166
STMicroelectronics Co. (Electronics)* 3,875 526,996
Wolters Kluwer N.V. (Printing and Publishing)* 37,552 1,133,006
-----------
$ 3,995,877
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Portugal - 0.1%
PT Multimedia SGPS SA (Telecommunications)* 830 $ 32,710
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South Korea - 0.4%
Korea Electric Power Corp. (Utilities - Electric) 6,440 $ 255,600
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Spain - 4.0%
Banco Popular Espanol SA (Banks and Credit Cos.) 5,580 $ 360,887
Repsol SA (Oils)* 16,190 353,923
Telefonica de Espana SA (Utilities - Telephone)* 76,497 1,593,665
Terra Networks, S.A. (Internet)* 680 23,435
-----------
$ 2,331,910
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Sweden - 1.7%
Saab AB,"B" (Aerospace and Defense) 83,046 $ 644,600
Skandia Forsakrings AB (Insurance) 13,532 323,858
-----------
$ 968,458
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Switzerland - 1.8%
Clariant AG (Chemicals) 371 $ 159,427
Nestle AG, Registered Shares (Food and Beverage Products) 491 884,133
-----------
$ 1,043,560
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United Kingdom - 12.1%
AstraZeneca Group PLC (Medical and Health Products) 8,081 $ 361,141
Avis Europe PLC (Auto Rental)##* 138,757 555,298
Boots Co. PLC (Retail)* 57,800 580,585
BP Amoco PLC, ADR (Oils) 23,894 1,456,041
British Aerospace PLC (Aerospace and Defense)* 42,145 243,250
British Telecommunications PLC (Telecommunications)* 37,960 761,385
Cable & Wireless Communications PLC (Telecommunications) 33,703 378,839
Compass Group PLC (Food and Catering) 117,960 1,429,374
Diageo PLC (Food and Beverage Products)* 63,874 577,946
Rentokil Initial (Office Services) 47,015 181,030
Reuters Group PLC (Business Services) 39,215 437,983
-----------
$ 6,962,872
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Total Foreign Stocks $46,500,360
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U.S. Stocks - 11.6%
American International Group, Inc. (Insurance) 10,140 $ 1,046,955
Anheuser-Busch Cos., Inc. (Food and Beverage) 7,745 579,423
Associates First Capital Corp., "A" (Financial Services) 9,750 324,188
Cooper Industries, Inc. (Electrical Equipment) 8,511 365,441
Delphi Automotive Systems Corp. (Automotive) 10,265 161,674
Galileo International, Inc. (Business Services) 6,660 213,120
General Electric Co. (Conglomerate) 6,000 780,000
Goldman Sachs Group, Inc. (Financial Institution) 530 39,816
Hewlett-Packard Co. (Business Machines) 7,810 740,974
Newell Rubbermaid, Inc. (Consumer Goods and Services) 9,049 296,920
Pharmacia & Upjohn, Inc. (Pharmaceuticals) 7,802 426,672
Philip Morris Cos., Inc. (Tobacco) 12,179 320,460
ReliaStar Financial Corp. (Insurance) 19,051 828,718
United Parcel Service Inc. (Transport-Services) 1,300 85,881
Xerox Corp. (Office Equipment) 5,413 146,489
Young & Rubicam, Inc. (Advertising) 6,740 351,744
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 6,708,475
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $45,582,164) $53,208,835
- --------------------------------------------------------------------------------------------------------
Warrants
- --------------------------------------------------------------------------------------------------------
Vivendi (Utilities - Water)* (Identified Cost, $1,239) 1,640 $ 4,428
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 7.6%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., due 12/01/99
at Amortized Cost $ 4,400 $ 4,400,000
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $49,983,403) $57,613,263
Other Assets, Less Liabilities - 0.2% 121,954
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $57,735,217
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
NOVEMBER 30, 1999
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $49,983,403) $57,613,263
Investments of cash collateral for securities loaned, at
value (identified cost, $3,391,648) 3,391,648
Cash 108,040
Foreign currency, at value (identified cost, $32,808) 31,219
Receivable for Fund shares sold 48,185
Receivable for investments sold 219,997
Interest and dividends receivable 78,539
Deferred organization expenses 5,512
Other assets 6,444
-----------
Total assets $61,502,847
-----------
Liabilities:
Payable for Fund shares reacquired $ 339,261
Payable upon return of securities loaned 3,391,648
Payable to affiliates -
Management fee 4,737
Shareholder servicing agent fee 486
Distribution and service fee 3,641
Accrued expenses and other liabilities 27,857
-----------
Total liabilities $ 3,767,630
-----------
Net assets $57,735,217
===========
Net assets consist of:
Paid-in capital $47,291,813
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 7,627,748
Accumulated undistributed net realized gain on investments
and foreign currency transactions 2,975,441
Accumulated net investment loss (159,785)
-----------
Total $57,735,217
===========
Shares of beneficial interest outstanding 2,876,117
=========
Class A shares:
Net asset value per share
(net assets of $29,026,005 / 1,438,331 shares of
beneficial interest outstanding) $20.18
======
Offering price per share (100 / 95.25 of net asset value
per share) $21.19
======
Class B shares:
Net asset value and offering price per share
(net assets of $25,372,921 / 1,269,506 shares of
beneficial interest outstanding) $19.99
======
Class C shares:
Net asset value and offering price per share
(net assets of $3,270,006 / 165,013 shares of beneficial
interest outstanding) $19.82
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $66,285 / 3,267 shares of beneficial
interest outstanding) $20.29
======
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 (Unaudited)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
Net investment loss:
Income -
Interest $ 112,330
Dividends 388,573
Foreign taxes withheld (36,138)
-----------
Total investment income $ 464,765
-----------
Expenses -
Management fee $ 260,718
Trustees' compensation 3,844
Shareholder servicing agent fee 26,740
Distribution and service fee (Class A) 65,080
Distribution and service fee (Class B) 121,104
Distribution and service fee (Class C) 15,826
Administrative fee 3,528
Custodian fee 36,480
Registration fees 28,034
Printing 14,007
Postage 6,933
Auditing fees 5,648
Legal fees 478
Amortization of organization expenses 2,530
Miscellaneous 22,714
-----------
Total expenses $ 613,664
Fees paid indirectly (2,085)
-----------
Net expenses $ 611,579
-----------
Net investment loss $ (146,814)
-----------
Realized and unrealized gain on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 518,820
Foreign currency transactions (23,985)
-----------
Net realized gain on investments and foreign currency
transactions $ 494,835
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 5,661,426
Translation of assets and liabilities in foreign currencies (4,522)
-----------
Net unrealized gain on investments and foreign currency
translation $ 5,656,904
-----------
Net realized and unrealized gain on investments and
foreign currency $ 6,151,739
-----------
Increase in net assets from operations $ 6,004,925
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (146,814) $ (125,179)
Net realized gain on investments and foreign currency
transactions 494,835 2,573,280
Net unrealized gain (loss) on investments and foreign
currency translation 5,656,904 (3,717,266)
----------- -----------
Increase (decrease) in net assets from operations $ 6,004,925 $(1,269,165)
----------- -----------
Distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions (Class A) $ -- $ (301,721)
From net realized gain on investments and foreign currency
transactions (Class B) -- (408,082)
From net realized gain on investments and foreign currency
transactions (Class C) -- (29,382)
From net realized gain on investments and foreign currency
transactions (Class I) -- (1,045)
----------- -----------
Total distributions declared to shareholders $ -- $ (740,230)
----------- -----------
Net increase in net assets from Fund share transactions $ 3,357,091 $15,478,510
----------- -----------
Total increase in net assets $ 9,362,016 $13,469,115
Net assets:
At beginning of period 48,373,201 34,904,086
----------- -----------
At end of period (including accumulated net investment loss
of $159,785 and $12,971, respectively) $57,735,217 $48,373,201
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
SIX MONTHS ENDED --------------------------------------------------------
NOVEMBER 30, 1999 1999 1998 1997 1996*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
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) $(0.03) $ -- $(0.05) $ 0.11 $ 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency 2.18 (0.64) 3.45 0.35 0.90
------ ------ ------ ------ ------
Total from investment operations $ 2.15 $(0.64) $ 3.40 $ 0.46 $ 1.01
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.08) $(0.03)
From net realized gain on investments and
foreign currency transactions -- (0.34) (0.59) (0.04) --
In excess of net investment income -- -- (0.12) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.34) $(0.71) $(0.12) $(0.03)
------ ------ ------ ------ ------
Net asset value - end of period $20.18 $18.03 $19.01 $16.32 $15.98
====== ====== ====== ====== ======
Total return(+) 11.99%++ (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) (0.32)%+ 0.02% (0.28)% 0.72% 1.04%+
Portfolio turnover 42% 89% 158% 89% 29%
Net assets at end of period (000 Omitted) $29,026 $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>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
SIX MONTHS ENDED --------------------------------------------------------
NOVEMBER 30, 1999 1999 1998 1997 1996*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
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) $(0.07) $(0.10) $(0.14) $ 0.03 $ 0.05
Net realized and unrealized gain (loss) on
investments and foreign currency 2.17 (0.63) 3.47 0.34 0.90
------ ------ ------ ------ ------
Total from investment operations $ 2.10 $(0.73) $ 3.33 $ 0.37 $ 0.95
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $(0.01)
From net realized gain on investments and
foreign currency transactions -- (0.34) (0.59) (0.04) --
In excess of net investment income -- -- (0.05) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $(0.34) $(0.64) $(0.04) $(0.01)
------ ------ ------ ------ ------
Net asset value - end of period $19.99 $17.89 $18.96 $16.27 $15.94
====== ====== ====== ====== ======
Total return 11.74%++ (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) (0.77)%+ (0.55)% (0.79)% 0.18% 0.49%+
Portfolio turnover 42% 89% 158% 89% 29%
Net assets at end of period (000 Omitted) $25,373 $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>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
SIX MONTHS ENDED ---------------------------------------------
NOVEMBER 30, 1999 1999 1998 1997*
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
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) $(0.07) $(0.09) $(0.10) $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency 2.15 (0.63) 3.39 0.21
------ ------ ------ ------
Total from investment operations $ 2.08 $(0.72) $ 3.29 $ 0.33
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.12)
From net realized gain on investments and foreign
currency transactions -- (0.34) (0.59) (0.04)
In excess of net investment income -- -- (0.09) --
------ ------ ------ ------
Total distributions declared to shareholders $ -- $(0.34) $(0.68) $(0.16)
------ ------ ------ ------
Net asset value - end of period $19.82 $17.74 $18.80 $16.19
====== ====== ====== ======
Total return 11.72%++ (3.87)% 21.15% 2.09%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.53%+ 2.59% 2.71% 2.64%+
Net investment income (loss) (0.78)%+ (0.49)% (0.61)% 0.80%+
Portfolio turnover 42% 89% 158% 89%
Net assets at end of period (000 Omitted) $3,270 $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>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
SIX MONTHS ENDED ---------------------------------------------
NOVEMBER 30, 1999 1999 1998 1997*
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
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 $ 0.02 $ 0.07 $ 0.06 $ 0.16
Net realized and unrealized gain (loss) on
investments and foreign currency 2.19 (0.60) 3.37 0.45
------ ------ ------ ------
Total from investment operations $ 2.21 $(0.53) $ 3.43 $ 0.61
------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions $ -- (0.34) (0.59) $ --
In excess of net investment income -- -- (0.21) --
------ ------ ------ ------
Total distributions declared to shareholders $ -- $(0.34) $(0.80) $ --
------ ------ ------ ------
Net asset value - end of period $20.29 $18.08 $18.95 $16.32
====== ====== ====== ======
Total return 12.29%++ (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 0.23%+ 0.40% 0.33% 2.33%+
Portfolio turnover 42% 89% 158% 89%
Net assets at end of period (000 Omitted) $66 $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 (Unaudited)
(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 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 agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the Fund and the lending agents. 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 November 30, 1999, the value of securities loaned was $3,286,089. These
loans were collateralized by cash of $3,391,648 which was invested in the
following short-term obligation:
SHARES VALUE
------ -----
Navigator Securities Lending
Prime Portfolio at amortized cost 3,391,648 $3,391,648
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund may enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Fund may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. The Fund may also use contracts in a manner intended to
protect foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. Dividends
received in cash are recorded on the ex-dividend date. Dividend and interest
payments received in additional securities are recorded on the ex-dividend or
ex-interest date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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.
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 the following annual rate
of 0.975% up to $500 million in net assets, after which the rate is reduced to
0.90%.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $864
for the six months ended November 30, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$8,639 for the six months ended November 30, 1999, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.50% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $2,712 for the six months ended November
30, 1999. Fees incurred under the distribution plan during the six months ended
November 30, 1999, 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 $1,457 and $54 for
Class B and Class C shares, respectively, for the six months ended November
30, 1999. Fees incurred under the distribution plan during the six months
ended November 30, 1999, 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 six months ended November
30, 1999, were $49, $30,223, and $416 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%. Prior to April 1, 1999, the fee was calculated as a percentage of the
Fund's average daily net assets at an annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$21,508,812 and $20,557,105, 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 $50,128,777
-----------
Gross unrealized appreciation $ 9,915,224
Gross unrealized depreciation (2,430,738)
-----------
Net unrealized appreciation $ 7,484,486
===========
(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
SIX MONTHS ENDED NOVEMBER 30, 1999 YEAR ENDED MAY 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,380,604 $ 26,028,274 2,407,294 $ 44,428,290
Shares issued to shareholders in
reinvestment of distributions -- -- 15,602 283,963
Shares reacquired (1,178,617) (22,212,774) (1,980,038) (36,681,341)
---------- ------------ ---------- ------------
Net increase 201,987 $ 3,815,500 442,858 $ 8,030,912
========== ============ ========== ============
<CAPTION>
Class B Shares
SIX MONTHS ENDED NOVEMBER 30, 1999 YEAR ENDED MAY 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 234,107 $ 4,406,028 1,079,430 $ 19,996,186
Shares issued to shareholders in
reinvestment of distributions -- -- 20,024 362,645
Shares reacquired (276,851) (5,190,438) (788,680) (14,733,069)
---------- ------------ ---------- ------------
Net increase (decrease) (42,744) $ (784,410) 310,774 $ 5,625,762
========== ============ ========== ============
<CAPTION>
Class C Shares
SIX MONTHS ENDED NOVEMBER 30, 1999 YEAR ENDED MAY 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 663,032 $ 12,356,643 761,163 $ 13,730,404
Shares issued to shareholders in
reinvestment of distributions -- -- 1,506 27,057
Shares reacquired (641,468) (12,030,548) (663,041) (11,987,865)
---------- ------------ ---------- ------------
Net increase 21,564 $ 326,095 99,628 $ 1,769,596
========== ============ ========== ============
<CAPTION>
Class I Shares
SIX MONTHS ENDED NOVEMBER 30, 1999 YEAR ENDED MAY 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 255 $ 4,837 3,003 $ 54,006
Shares issued to shareholders in
reinvestment of distributions -- -- 57 1,045
Shares reacquired (258) (4,931) (129) (2,811)
---------- ------------ ---------- ------------
Net increase (decrease) (3) $ (94) 2,931 $ 52,240
========== ============ ========== ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. Interest expense incurred on the borrowings
amounted to $202 for the six months ended November 30, 1999. The average dollar
amount of borrowings was $454,481 and the weighted average interest rate on
these borrowings was 5.363%. In addition, a commitment fee, based on the average
daily unused portion of the line of credit is allocated among the participating
funds at the end of each quarter. The commitment fee allocated to the Fund for
the six months ended November 30, 1999, was $191.
(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>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and
on behalf of the MFS funds, is committed to the effective
use of technology in managing our portfolio investments,
delivering high-quality service to MFS fund shareholders, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
<TABLE>
MFS(R) INTERNATIONAL GROWTH AND INCOME FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey - Private Investor; Former Stephen E. Cavan*
Chairman and Director (until 1991), MFS Investment
Management(R) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
J. Atwood Ives+ - Chairman and Chief
Executive Officer, Eastern Enterprises CUSTODIAN
(diversified services company) State Street Bank and Trust Company
Lawrence T. Perera+ - Partner, Hemenway INVESTOR INFORMATION
& Barnes (attorneys)
For information on MFS mutual funds, call your
William J. Poorvu+ - Adjunct Professor, Harvard financial consultant or, for an informa- tion kit,
University Graduate School of Business call toll free: 1-800-637-2929 any business day
Administration from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Charles W. Schmidt+ - Private Investor
INVESTOR SERVICE
Arnold D. Scott* - Senior Executive MFS Service Center, Inc.
Vice President, Director, and Secretary, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman and Chief For general information, call toll free:
Executive Officer, MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Elaine R. Smith+ - Independent Consultant
For service to speech- or hearing-impaired, call
David B. Stone+ - Chairman, toll free: 1-800-637-6576 any business day from 9
North American Management Corp. a.m. to 5 p.m. Eastern time. (To use this service,
(investment advisers) your phone must be equipped with a
Telecommunications Device for the Deaf.)
INVESTMENT ADVISER
Massachusetts Financial Services Company For share prices, account balances, exchanges, or
500 Boylston Street MFS stock and bond outlooks, call toll free:
Boston, MA 02116-3741 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
DISTRIBUTOR
MFS Fund Distributors, Inc. WORLD WIDE WEB
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGER
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-3 01/00 16M 86/286/386/886
