<PAGE>
[Logo] M F S (R) SEMIANNUAL REPORT
INVESTMENT MANAGEMENT JANUARY 31,2000
We invented the mutual fund(R)
[graphic omitted]
MFS(R) EUROPEAN EQUITY FUND
MFS(R) HIGH YIELD FUND
MFS(R) INCOME FUND
<PAGE>
MFS(R) EUROPEAN EQUITY FUND
MFS(R) HIGH YIELD FUND
MFS(R) INCOME FUND
<TABLE>
<S> <C>
TRUSTEES ASSISTANT TREASURERS
J. Atwood Ives+ -- Chairman and Chief Mark E. Bradley*
Executive Officer, Eastern Enterprises Ellen Moynihan*
(diversified services company) James O. Yost*
Lawrence T. Perera+ -- Partner, Hemenway & SECRETARY
Barnes (attorneys) Stephen E. Cavan*
William J. Poorvu+ -- Adjunct Professor, ASSISTANT SECRETARY
Harvard University Graduate School of James R. Bordewick, Jr.*
Business Administration
CUSTODIAN
Charles W. Schmidt+ -- Private Investor State Street Bank and Trust Company
Arnold D. Scott* -- Senior Executive Vice INVESTOR INFORMATION
President, Director, and Secretary, For information on MFS mutual funds, call your
MFS Investment Management investment professional or, for an information
kit, call toll free: 1-800-637-2929 any business
Jeffrey L. Shames* -- Chairman and Chief day from 9 a.m. to 5 p.m. Eastern time (or leave
Executive Officer, MFS Investment Management a message anytime).
Elaine R. Smith+ -- Independent Consultant INVESTOR SERVICE
MFS Service Center, Inc.
David B. Stone+ -- Chairman, North P.O. Box 2281
American Management Corp. (investment adviser) Boston, MA 02107-9906
INVESTMENT ADVISER For general information, call toll free:
Massachusetts Financial Services Company 1-800-225-2606 any business day from 8 a.m. to
500 Boylston Street 8 p.m. Eastern time.
Boston, MA 02116-3741
For service to speech- or hearing-impaired,
DISTRIBUTOR call toll free: 1-800-637-6576 any business day
MFS Fund Distributors, Inc. from 9 a.m. to 5 p.m. Eastern time. (To use this
500 Boylston Street service, your phone must be equipped with a
Boston, MA 02116-3741 Telecommunications Device for the Deaf.)
CHAIRMAN AND PRESIDENT For share prices, account balances, exchanges,
Jeffrey L. Shames* or stock and bond outlooks, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime
DIRECTOR OF INTERNATIONAL EQUITY RESEARCH from a touch-tone telephone.
David A. Antonelli*
WORLD WIDE WEB
PORTFOLIO MANAGERS www.mfs.com
John Addeo*
Robert J. Manning*
Bernard A. Scozzafava*
TREASURER
W. Thomas London*
+Independent Trustee
*MFS Investment Management
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
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 an
investment 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, the 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 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 an investment 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 as well as down markets. And for many
investors, working with an investment 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 investment professional'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)
February 15, 2000
- --------------
(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
MFS EUROPEAN EQUITY FUND
Dear Shareholders,
The Fund commenced investment operations on August 3, 1999. Our portfolio is
constructed by our European equity analysts, who focus on stocks rather than a
particular investment style. Our bias is toward good companies that are in
growth industries, have strong managements, and are trading at attractive
valuations.
The Fund has overweighted positions in wireless communications providers and
telecommunications equipment manufacturers. Significant holdings in these
industries included, Mannesmann in Germany, Telecom Italia Mobile in Italy, and
Libertel in the Netherlands, all of which benefited from the extraordinary
worldwide growth in cellular subscribers and robust consolidation activity.
During the period, shares of Orange rallied following Mannesmann's takeover bid
for the company. Early this year, shares of Mannesmann rose considerably after
it received a $180 billion takeover bid from Vodafone AirTouch PLC.
The Fund also benefited from investments in media companies such as Capital
Radio in the United Kingdom and Television Francaise in France, which
experienced strong earnings growth due to significant increases in advertising
spending driven by intense competition among telecommunications and Internet
companies to build brand awareness.
Looking ahead, we think the European market offers numerous opportunities and
attractive investment alternatives to those of the United States and other parts
of the world. In general, the European equity market sells at a discount to the
U.S. market and most emerging markets. Moreover, according to our research,
earnings growth in Europe looks at least as good as that in the United States
and some emerging economies, especially considering the restructuring
initiatives taking place at many European corporations. While many stocks have
risen to what we think are unrealistic valuations given their long-term earnings
prospects, we think there are numerous companies that exhibit encouraging growth
outlooks at more reasonable valuations. Of course, we'll continue to utilize the
extensive bottom-up analysis and expertise of our research team to help uncover
these opportunities.
Respectfully,
/s/ David A. Antonelli
David A. Antonelli
Director of International Equity Research
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.
<PAGE>
MFS HIGH YIELD FUND
Dear Shareholders,
The Fund commenced investment operations on August 3, 1999. It primarily seeks
high current income and secondarily seeks capital appreciation. Under normal
market conditions, the Fund invests at least 65% of its total assets in
high-yield fixed-income securities. The Fund focuses its investments on bonds
issued by domestic or foreign (including emerging market) corporations. It may
also invest in income-producing equity securities, such as preferred stocks, and
foreign government securities.
In selecting fixed-income investments for the Fund, we consider the views of our
large group of fixed-income portfolio managers and research analysts. This group
periodically assesses the three-month total return outlook for various segments
of the fixed-income markets. We do not rely solely on credit ratings assigned by
credit-rating agencies since we would rather perform our own independent credit
analysis.
During the period, we favored the telecommunications industry because of the
consolidation and accelerating earnings growth that have been taking place
worldwide. The Fund's holdings in media and cable industries were also strong
performers due to increased advertising spending and robust demand for data and
voice transmission.
Looking forward, we expect the high-yield market to perform well. In addition,
we think the present environment of moderate economic growth and low inflation
is a favorable one for high-yield bonds. However, given the uncertainties in the
world economies, we believe that careful credit selection will remain crucial to
the Fund's performance.
Respectfully,
/s/ John Addeo /s/ Robert J. Manning
John Addeo Robert J. Manning
Portfolio Manager Portfolio Manager
Lower-rated securities may provide greater returns, but they are also associated
with greater-than-average risk. These risks may increase share price volatility.
See the prospectus for details.
<PAGE>
MFS INCOME FUND
Dear Shareholders,
The Fund commenced investment operations on August 3, 1999. Our investment
philosophy is consistent across all of the high-income funds that we manage. The
high-yield fixed-income management team believes that an active, fundamental
approach to investing in below investment-grade bonds may enhance total return.
Credit analysis is therefore the foundation for the high-yield
security-selection process. For a bond to be chosen for inclusion in a
high-yield portfolio, analysts and portfolio managers carefully evaluate a
number of considerations, including a company's senior management's strength and
depth, historical as well as projected financial performance, asset protection
available to bond holders, capital structure or leverage, and industry
fundamentals.
During most of the period, the market environment for high-yield bonds was
difficult due to the heavy supply of new bonds and credit problems within the
health care and energy sectors. The increased credit problems in these two
industries accounted for much of the rise in the high-yield market default rate.
Additionally, concerns over Medicare reforms and previously low oil prices cast
a pall over these sectors and the high-yield market in general.
The Fund was aided by our successful avoidance of specific credit problems in
various sectors of the market and strong security selection within the
telecommunications, media, and cable industries. In telecommunications,
consolidation and accelerating earnings provided key contributions to relative
performance. Strong advertising spending and robust demand for data and voice
transmission sparked favorable performance in the media and cable industries.
The Fund's position in Nextel Communications, for example, appreciated notably
after Microsoft announced its $600 million investment in the company. More
recently, the Fund received an additional boost from generally strong corporate
earnings and attractive yields, which we believe has helped lure investors back
to the high-yield marketplace.
In our view, a number of factors are likely to serve our shareholders well in
the coming months. We believe our extensive credit analysis and focus on
high-quality high-yield bonds may increase the Fund's ability to avoid defaults
and bankruptcies. In addition, we anticipate continued improvement in high-yield
bond performance given its attractive yield relative to Treasuries (Principal
value and interest on Treasury securities are guaranteed by the U.S. government
if held to maturity), and a favorable supply and demand environment.
Respectfully,
/s/ Bernard A. Scozzafava
Bernard A. Scozzafava
Portfolio Manager
Lower-rated securities may provide greater returns, but they are also associated
with greater-than-average risk. These risks may increase share price volatility.
See the prospectus for details.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' 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.
The portfolios are actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - January 31, 2000
<TABLE>
MFS EUROPEAN EQUITY FUND
<CAPTION>
Stocks - 96.5%
- -------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 3.3%
Internet - 0.1%
724 Solutions, Inc.* 10 $ 679
- -------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.2%
Pharmacia & Upjohn, Inc. 162 $ 7,614
- -------------------------------------------------------------------------------------------------------
Telecommunications - 2.0%
Global TeleSystems Group, Inc.* 148 $ 3,690
Telecomunicacoes De Sao Paulo* 300 8,700
----------
$ 12,390
- -------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 20,683
- -------------------------------------------------------------------------------------------------------
Foreign Stocks - 93.2%
Denmark - 0.9%
ISS International Service System (Commercial Services) 82 $ 5,862
- -------------------------------------------------------------------------------------------------------
Finland - 1.0%
Tieto Corp. (Computer Software - Systems) 111 $ 6,283
- -------------------------------------------------------------------------------------------------------
France - 14.6%
Alcatel (Telecommunications) 29 $ 5,774
AXA (Insurance) 101 12,705
Banque Nationale de Paris (Banks and Credit Cos.) 104 8,246
Bouygues S.A. (Telecommunications) 6 3,777
Castorama-Dubois Investisse (Stores) 22 5,133
Sanofi-Synthelabo S.A. (Medical and Health Products)* 211 7,928
STMicroelectronics Co. (Electronics)* 37 6,048
Technip S.A. (Construction) 88 9,309
Television Francaise (Entertainment) 7 3,730
Total Fina S.A. (Oils) 109 13,531
Vivendi (Business Services) 94 9,632
Wavecom S.A. (Electronics)* 72 6,120
----------
$ 91,933
- -------------------------------------------------------------------------------------------------------
Germany - 11.2%
Fielmann AG, (Retail) 103 $ 3,367
GFT Technologies AG (Computer Software - Systems)* 15 1,906
Henkel KGaA (Chemicals) 148 8,175
Karstadtquelle AG (Retail)* 165 5,233
Mannesmann AG (Telecommunications) 123 33,640
MobilCom AG (Cellular Telephones) 59 5,729
Porsche AG (Automotive)* 2 5,875
Prosieben Media AG (Entertainment) 85 6,512
----------
$ 70,437
- -------------------------------------------------------------------------------------------------------
Greece - 1.8%
Antenna TV S.A., ADR (Broadcasting)* 194 $ 4,147
Hellenic Telecommunication Organization S.A. (Telecommunications) 155 3,500
Panafon Hellenic Telecom S.A. (Telecommunications) 282 3,623
----------
$ 11,270
- -------------------------------------------------------------------------------------------------------
Ireland - 3.1%
Bank of Ireland (Banks and Credit Cos.)* 1,280 $ 8,269
Elan Corporation, PLC, ADR (Health Products)* 254 7,636
Trintech Group PLC, ADR (Computer Software - Products)* 57 3,363
----------
$ 19,268
- -------------------------------------------------------------------------------------------------------
Israel - 0.8%
Partner Communications Co. Ltd. (Cellular Telephones)* 277 $ 5,090
- -------------------------------------------------------------------------------------------------------
Italy - 5.1%
Beni Stabili (Real Estate)* 720 $ 264
San Paolo - Imi S.p.A. (Banks and Credit Cos.) 685 8,169
Telecom Italia Mobile S.p.A. (Telecommunications) 377 4,146
Telecom Italia Mobile S.p.A., Saving Shares (Telecommunications) 1,166 4,586
Telecom Italia S.p.A. (Telecommunications) 929 15,086
----------
$ 32,251
- -------------------------------------------------------------------------------------------------------
Netherlands - 13.9%
Akzo Nobel N.V. (Chemicals) 282 $ 11,707
Fugro N.V. (Engineering)* 163 7,794
Hunter Douglas N.V., ADR (Consumer Goods and Services)* 230 5,499
IHC Caland N.V. (Marine Equipment)* 99 3,865
ING Groep N.V. (Financial Services)* 226 11,381
Koninklijke Ahrend Groep N.V. (Consumer Goods and Services)* 397 5,075
Koninklijke N.V. (Telecommunications)* 206 17,631
Koninklijke Philips Electronics N.V. (Electronics) 63 9,253
Libertel N.V. (Cellular Telephones)* 293 5,204
Royal Dutch Petroleum Co. ADR (Oils) 144 7,664
Versatel Telecom International N.V. (Telecommunications)* 60 2,328
----------
$ 87,401
- -------------------------------------------------------------------------------------------------------
Norway - 0.6%
Sparebanken NOR (Banks and Credit Cos.) 174 $ 3,852
- -------------------------------------------------------------------------------------------------------
Portugal - 0.1%
PT Multimedia SGPS S.A. (Conglomerate)* 12 $ 755
- -------------------------------------------------------------------------------------------------------
Spain - 3.6%
Altadis (Tobacco)* 614 $ 6,711
Cortefiel S.A. (Retail) 290 5,898
Repsol S.A. (Oils) 516 9,744
----------
$ 22,353
- -------------------------------------------------------------------------------------------------------
Sweden - 6.8%
Allgon AB (Electronics) 335 $ 5,824
Ericsson LM, "B" (Telecommunications) 134 9,470
Saab AB, "B" (Aerospace) 2,029 15,677
Skandia Forsakrings AB (Insurance) 453 12,096
----------
$ 43,067
- -------------------------------------------------------------------------------------------------------
Switzerland - 6.2%
Julius Baer Holdings (Banks and Credit Cos.) 2 $ 5,719
Nestle S.A. (Food and Beverage Products) 8 13,131
Novartis AG (Medical and Health Products) 7 8,615
Synthes-Stratec, Inc. (Medical Products)* 16 7,507
UBS AG (Banks and Credit Cos.) 16 3,737
----------
$ 38,709
- -------------------------------------------------------------------------------------------------------
United Kingdom - 23.5%
365 Corporation PLC (Telecommunications)* 520 $ 1,675
AstraZeneca Group PLC (Pharmaceuticals) 229 8,470
Boots Co. PLC (Retail)* 620 5,018
BP Amoco PLC (Oils)* 1,639 14,458
British Aerospace PLC (Aerospace)* 1,575 8,432
British Telecommunications PLC (Telecommunications)* 997 19,385
Cable & Wireless Communications PLC (Telecommunications)* 508 7,739
Capital Radio PLC (Broadcasting) 232 6,045
CGU PLC (Insurance)* 499 6,558
Diageo PLC (Food and Beverage Products)* 833 6,202
Lloyds TSB Group PLC (Banks and Credit Cos.)* 1,297 13,100
Matalan PLC (Retail) 170 5,572
National Westminster (Finance) 155 2,973
NDS Group PLC (Internet)* 11 517
Next PLC (Stores) 728 5,733
Nycomed Amersham PLC (Medical and Health Products) 1,330 8,417
Reuters Group PLC (Business Services) 771 11,568
United News & Media PLC (Broadcasting) 1,372 16,322
----------
$ 148,184
- -------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 586,715
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $593,429) $ 607,398
- -------------------------------------------------------------------------------------------------------
Short-Term Obligation - 3.2%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 2/01/00, at Amortized Cost $ 20 $ 20,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $613,429) $ 627,398
Other Assets, Less Liabilities - 0.3% 1,880
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 629,278
- -------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - January 31, 2000
<TABLE>
MFS HIGH YIELD FUND
<CAPTION>
Bonds - 71.5%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 63.0%
Aerospace - 1.7%
K & F Industries, Inc., 9.25s, 2007 $ 25 $ 23,938
- -------------------------------------------------------------------------------------------------------
Building - 3.3%
Building Materials Corp., 8.625s, 2006 $ 25 $ 23,625
Formica Corp., 10.875s, 2009 25 21,875
----------
$ 45,500
- -------------------------------------------------------------------------------------------------------
Chemicals - 3.8%
Lyondell Chemical Co., 9.625s, 2007 $ 25 $ 24,687
Sterling Chemicals, Inc., 11.75s, 2006 35 28,000
----------
$ 52,687
- -------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.7%
Polymer Group, Inc., 9s, 2007 $ 25 $ 23,750
- -------------------------------------------------------------------------------------------------------
Container, Forest and Paper Products - 5.2%
Applied Extrusion Technologies, Inc., 11.5s, 2002 $ 25 $ 25,312
Gaylord Container Corp., 9.75s, 2007 25 23,313
Riverwood International Corp., 10.875s, 2008 25 24,125
----------
$ 72,750
- -------------------------------------------------------------------------------------------------------
Energy - 3.3%
Cheasapeake Energy Corp., 9.625s, 2005 $ 25 $ 23,000
P&L Coal Holdings Corp., 9.625s, 2008 25 23,656
----------
$ 46,656
- -------------------------------------------------------------------------------------------------------
Gaming and Hotels - 3.4%
Coast Hotels & Casinos, Inc., 9.5s, 2009 $ 25 $ 23,125
Hollywood Park, Inc., 9.25s, 2007 25 24,063
----------
$ 47,188
- -------------------------------------------------------------------------------------------------------
Industrial - 4.8%
Allied Waste North America, Inc., 10s, 2009## $ 25 $ 21,750
Fairfield Manufacturing, Inc., 9.625s, 2008 25 23,313
Thermadyne Manufacturing/Capital Corp., 9.875s, 2008 25 21,156
----------
$ 66,219
- -------------------------------------------------------------------------------------------------------
Media - 6.8%
Adelphia Communications Corp., 8.375s, 2008 $ 25 $ 22,625
Charter Communications Holdings, 0s to 2004, 9.92s to 2011 40 23,400
Granite Broadcasting Corp., 10.375s, 2005 25 25,375
NTL Communications Corp., 0s to 2003, 12.375s to 2006 35 23,887
----------
$ 95,287
- -------------------------------------------------------------------------------------------------------
Metals and Minerals - 1.8%
Commonwealth Aluminum Corp., 10.75s, 2006 $ 25 $ 25,000
- -------------------------------------------------------------------------------------------------------
Retail - 3.3%
Duane Reade, Inc., 9.25s, 2008 $ 25 $ 24,375
J. Crew Group, Inc., 0s to 2002, 13.125s to 2008 40 21,100
----------
$ 45,475
- -------------------------------------------------------------------------------------------------------
Supermarkets - 0.4%
Jitney-Jungle Stores of America, Inc., 12s, 2006** $ 25 $ 5,000
- -------------------------------------------------------------------------------------------------------
Telecommunications - 23.5%
Centennial Cellular Operating Co., 10.75s, 2008 $ 25 $ 25,937
Crown Castle International Corp., 9s, 2011 25 23,563
Exodus Communications, Inc., 10.75s, 2009 25 25,500
Focal Communications Corp., 11.875s, 2010 25 25,625
ITC Deltacom, Inc., 9.75s, 2008 25 24,750
Level 3 Communications, Inc., 9.125s, 2008 25 23,188
Nextel Communications, Inc., 0s to 2003, 9.95s to 2008 35 24,238
Nextlink Communications, Inc., 10.75s, 2009 25 25,187
PSINET, Inc., 11s, 2009 25 25,562
Spectrasite Holdings, Inc., 0s to 2004, 11.25s to 2009 45 26,100
Time Warner Telecommunications LLC, 9.75s, 2008 25 25,062
Voicestream Wire, 10.375s, 2009## 25 25,625
Worldwide Fiber, Inc., 12s, 2009## 25 26,000
----------
$ 326,337
- -------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 875,787
- -------------------------------------------------------------------------------------------------------
Foreign Bonds - 8.5%
Belgium - 1.8%
Hermes Europe Railtel BV, 10.375s, 2009
(Telecommunications) $ 25 $ 24,250
- -------------------------------------------------------------------------------------------------------
Bermuda - 1.7%
Global Crossing Holdings Ltd., 9.625s, 2008 (Telecommunications) $ 25 $ 24,188
- -------------------------------------------------------------------------------------------------------
Canada - 1.0%
GT Group Telecom Inc., 0s to 2005, 13.25s to 2010
(Telecommunications) $ 25 $ 13,250
- -------------------------------------------------------------------------------------------------------
Netherlands - 1.9%
Versatel Telecom B.V., 13.25s, 2008 (Telecommunications) $ 25 $ 26,437
- -------------------------------------------------------------------------------------------------------
United Kingdom - 2.1%
Esat Telecom Group PLC, 11.875s, 2008 (Telecommunications) $ 25 $ 29,250
- -------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 117,375
- -------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,024,156) $ 993,162
- -------------------------------------------------------------------------------------------------------
Stocks - 24.7%
- -------------------------------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------------------------------
U.S. Stocks - 23.3%
Agricultural Products - 0.7%
AGCO Corp. 800 $ 9,300
- -------------------------------------------------------------------------------------------------------
Automotive - 2.4%
Delphi Automotive Systems Corp. 1,100 $ 19,043
Federal-Mogul Corp. 910 13,764
----------
$ 32,807
- -------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 0.3%
PNC Bank Corp. 100 $ 4,800
- -------------------------------------------------------------------------------------------------------
Business Machines - 1.0%
Seagate Technology, Inc.* 330 $ 13,221
- -------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 1.0%
Compaq Computer Corp. 500 $ 13,687
- -------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.9%
Philip Morris Cos., Inc. 620 $ 12,981
- -------------------------------------------------------------------------------------------------------
Containers - 2.4%
Ivex Packaging Corp.* 3,320 $ 25,108
Owens Illinois, Inc.* 420 7,691
----------
$ 32,799
- -------------------------------------------------------------------------------------------------------
Energy - 1.8%
Devon Energy Corp. 710 $ 24,939
- -------------------------------------------------------------------------------------------------------
Financial Institutions - 0.8%
Edwards (A.G.), Inc. 330 $ 10,931
- -------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.5%
Archer-Daniels-Midland Co. 605 $ 7,109
- -------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.9%
Bowater, Inc. 250 $ 12,922
- -------------------------------------------------------------------------------------------------------
Machinery - 1.0%
Deere & Co., Inc. 330 $ 14,417
- -------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.5%
Cytyc Corp.* 1,160 $ 34,872
Health Management Associates, Inc., "A"* 1,000 13,938
----------
$ 48,810
- -------------------------------------------------------------------------------------------------------
Oil Services - 2.6%
BJ Services Co.* 270 $ 11,577
Noble Drilling Corp.* 660 19,346
Smith International, Inc.* 100 5,131
----------
$ 36,054
- -------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.5%
Hilton Hotels Corp. 750 $ 6,328
- -------------------------------------------------------------------------------------------------------
Stores - 1.8%
Office Depot, Inc.* 1,660 $ 16,704
Rite Aid Corp. 1,240 8,757
----------
$ 25,461
- -------------------------------------------------------------------------------------------------------
Supermarkets - 1.2%
Kroger Co.* 1,000 $ 17,375
- -------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 323,941
- -------------------------------------------------------------------------------------------------------
Foreign Stocks - 1.4%
Canada - 0.8%
Abitibi-Consolidated, Inc. (Forest and Paper Products) 910 $ 11,262
- -------------------------------------------------------------------------------------------------------
Ireland - 0.6%
Jefferson Smurfit Group PLC, ADR (Containers) 290 $ 8,156
- -------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 19,418
- -------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $317,859) $ 343,359
- -------------------------------------------------------------------------------------------------------
Short-Term Obligation - 2.9%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 2/01/00, at Amortized Cost $ 40 $ 40,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,382,015) $1,376,521
Other Assets, Less Liabilities - 0.9% 12,817
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,389,338
- -------------------------------------------------------------------------------------------------------
## SEC Rule 144A restriction.
** Non-income producing security-in default.
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) - January 31, 2000
<TABLE>
MFS INCOME FUND
<CAPTION>
Bonds - 89.5%
- -------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 82.1%
Aerospace - 4.4%
BE Aerospace, Inc., 8s, 2008 $ 25 $ 21,313
K & F Industries, Inc., 9.25s, 2007 25 23,937
----------
$ 45,250
- -------------------------------------------------------------------------------------------------------
Building - 6.8%
American Standard, Inc., 7.375s, 2008 $ 25 $ 22,750
Building Materials Corp., 8s, 2007 25 22,750
Nortek, Inc., 9.25s, 2007 25 23,937
----------
$ 69,437
- -------------------------------------------------------------------------------------------------------
Business Services - 2.3%
Iron Mountain, Inc., 8.75s, 2009 $ 25 $ 23,188
- -------------------------------------------------------------------------------------------------------
Chemicals - 4.9%
Huntsman ICI Chemicals, Inc., 10.125s, 2009## $ 25 $ 25,250
Lyondell Chemical Co., 9.625s, 2007 25 24,687
----------
$ 49,937
- -------------------------------------------------------------------------------------------------------
Consumer Products - 2.1%
Westpoint Stevens, Inc., 7.875s, 2008 $ 25 $ 21,438
- -------------------------------------------------------------------------------------------------------
Container, Forest and Paper Products - 7.2%
Ball Corp., 8.25s, 2008 $ 25 $ 23,750
Buckeye Cellulose Corp., 8.5s, 2005 25 24,250
U.S. Can Corp., 10.125s, 2006 25 25,500
----------
$ 73,500
- -------------------------------------------------------------------------------------------------------
Energy - 4.7%
Ocean Energy, Inc., 8.875s, 2007 $ 25 $ 24,500
P&L Coal Holdings Corp., 8.875s, 2008 25 23,937
----------
$ 48,437
- -------------------------------------------------------------------------------------------------------
Gaming and Hotels - 7.0%
Boyd Gaming Corp., 9.5s, 2007(++) $ 25 $ 24,000
Circus Circus Enterprises, Inc., 9.25s, 2005 25 24,687
Park Place Entertainment Corp., 7.875s, 2005 25 23,563
----------
$ 72,250
- -------------------------------------------------------------------------------------------------------
Industrial - 2.3%
Hayes Wheels International, Inc., 9.125s, 2007 $ 25 $ 23,625
- -------------------------------------------------------------------------------------------------------
Media - 19.0%
Bresnan Communications Group, 8s, 2009 $ 25 $ 25,187
Century Communications Corp., 9.5s, 2005 25 24,813
Chancellor Media Corp., 8s, 2008 25 24,875
Charter Communications Holdings, 8.25s, 2007 25 23,125
CSC Holdings, Inc., 8.125s, 2009 25 24,708
Echostar DBS Corp., 9.375s, 2009 25 24,625
Insight Midwest, 9.75s, 2009## 25 25,000
Primedia, Inc., 7.625s, 2008 25 22,750
----------
$ 195,083
- -------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.2%
Tenet Healthcare Corp., 8.125s, 2008 $ 25 $ 23,063
- -------------------------------------------------------------------------------------------------------
Metals and Mining - 2.5%
National Steel Corp., 9.875s, 2009 $ 25 $ 25,562
- -------------------------------------------------------------------------------------------------------
Printing and Publishing - 2.3%
Hollinger International Publishing, 9.25s, 2007 $ 25 $ 24,000
- -------------------------------------------------------------------------------------------------------
Retail - 2.1%
Southland Corp., 5s, 2003 $ 25 $ 21,438
- -------------------------------------------------------------------------------------------------------
Telecommunications - 12.3%
ITC Deltacom, Inc., 8.875s, 2008 $ 25 $ 23,625
Nextel Communications, Inc., 9.75s, 2004 25 25,812
PSINET, Inc., 11s, 2009 25 25,562
Time Warner Telecommunications LLC, 9.75s, 2008 25 25,063
Voicestream Wire, 10.375s, 2009## 25 25,625
----------
$ 125,687
- -------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 841,895
- -------------------------------------------------------------------------------------------------------
Foreign Bonds - 7.4%
Netherlands - 4.8%
Kpnqwest BV, 8.125s, 2009 (Telecommunications) $ 25 $ 23,938
United Pan Europe Commerce NV, 11.25s, 2010 (Media) 25 25,125
----------
$ 49,063
- -------------------------------------------------------------------------------------------------------
United Kingdom - 2.6%
Energis PLC, 9.75s, 2009 (Telecommunications) $ 25 $ 26,375
- -------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 75,438
- -------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $933,966) $ 917,333
- -------------------------------------------------------------------------------------------------------
Short-Term Obligation - 3.9%
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 2/01/00, at Amortized Cost $ 40 $ 40,000
- -------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $973,966) $ 957,333
Other Assets, Less Liabilities - 6.6% 67,370
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,024,703
- -------------------------------------------------------------------------------------------------------
## SEC Rule 144A restriction.
(++) Inverse floating rate security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (Unaudited)
- -----------------------------------------------------------------------------------------------------
EUROPEAN HIGH YIELD INCOME
JANUARY 31, 2000 EQUITY FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments -
Identified cost $ 613,429 $1,382,015 $ 973,966
Unrealized appreciation (depreciation) 13,969 (5,494) (16,633)
---------- ---------- ----------
Total investments, at value $ 627,398 $1,376,521 $ 957,333
Cash -- 2,308 2,351
Foreign currency, at value (identified cost, $1,184) 1,135 -- --
Receivable for Fund shares sold 100 -- --
Receivable for investments sold 11,446 -- 40,801
Interest and dividends receivable 716 23,674 24,221
---------- ---------- ----------
Total assets $ 640,795 $1,402,503 $1,024,706
---------- ---------- ----------
Liabilities:
Payable to custodian $ 2,138 $ -- $ --
Payable for Fund shares reacquired 1,025 -- --
Payable for investments purchased 8,285 13,165 --
Payable to affiliates -
Management fee 54 -- --
Shareholder servicing agent fee 5 -- --
Accrued expenses and other liabilities 10 -- 3
---------- ---------- ----------
Total liabilities $ 11,517 $ 13,165 $ 3
---------- ---------- ----------
Net assets $ 629,278 $1,389,338 $1,024,703
========== ========== ==========
Net assets consist of:
Paid-in capital $ 546,333 $1,382,885 $1,046,972
Unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities in foreign currencies 13,863 (5,494) (16,633)
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions 69,003 13,230 (5,313)
Accumulated undistributed (distributions in
excess of) net investment income 79 (1,283) (323)
---------- ---------- ----------
Total $ 629,278 $1,389,338 $1,024,703
========== ========== ==========
Shares of beneficial interest outstanding:
Class A 54,088 138,333 104,737
Class I 20 20 20
---------- ---------- ----------
Total shares of beneficial interest
outstanding 54,108 138,353 104,757
========== ========== ==========
Net assets:
Class A $ 629,045 $1,389,137 $1,024,508
Class I 233.27 200.80 195.31
---------- ---------- ----------
Total net assets $ 629,278 $1,389,338 $1,024,703
========== ========== ==========
Class A shares:
Net asset value per share
(net assets / shares of beneficial interest
outstanding) $11.63 $10.04 $ 9.78
====== ====== ======
Offering price per share for European Equity Fund
(100 / 94.25 of net asset value per share) and
for High Yield Fund and Income Fund (100 / 95.25
of net asset value per share) $12.34 $10.54 $10.27
====== ====== ======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets / shares of beneficial interest
outstanding) $11.66 $10.04 $ 9.77
====== ====== ======
On sales of $50,000, $100,000, and $50,000, respectively, the offering price of Class A shares is
reduced. A contingent deferred sales charge may be imposed on redemptions of Class A shares.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations (Unaudited)
- -----------------------------------------------------------------------------------------------------
EUROPEAN HIGH YIELD INCOME
PERIOD ENDED JANUARY 31, 2000* EQUITY FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income:
Income -
Interest $ 1,031 $ 46,897 $ 44,105
Dividends 3,042 1,525 --
Foreign taxes withheld (329) (20) --
---------- ---------- ----------
Total investment income $ 3,744 $ 48,402 $ 44,105
---------- ---------- ----------
Expenses -
Management fee $ 2,112 $ 3,701 $ 2,998
Shareholder servicing agent fee 279 620 499
Administrative fee 28 64 53
Custodian fee 2,314 1,653 1,387
Printing 6,791 6,834 6,388
Postage 69 19 17
Auditing fees 4,500 4,750 5,000
Legal fees 1,017 1,229 883
Registration fees 4,000 4,000 4,000
Miscellaneous 552 917 1,431
---------- ---------- ----------
Total expenses $ 21,662 $ 23,787 $ 22,656
Fees paid indirectly (78) (184) (162)
Reduction of expenses by investment adviser (18,772) (23,603) (22,494)
---------- ---------- ----------
Net expenses $ 2,812 $ -- $ --
---------- ---------- ----------
Net investment income $ 932 $ 48,402 $ 44,105
---------- ---------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 73,624 $ 41,100 $ (3,151)
Foreign currency transactions (373) 1 --
---------- ---------- ----------
Net realized gain (loss) on investments and
foreign currency transactions $ 73,251 $ 41,101 $ (3,151)
---------- ---------- ----------
Change in unrealized appreciation (depreciation) -
Investments $ 13,969 $ (5,494) $ (16,633)
Translation of assets and liabilities in foreign
currencies (106) -- --
---------- ---------- ----------
Net unrealized gain (loss) on investments and
foreign currency translation $ 13,863 $ (5,494) $ (16,633)
---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 87,114 $ 35,607 $ (19,784)
---------- ---------- ----------
Increase in net assets from operations $ 88,046 $ 84,009 $ 24,321
========== ========== ==========
* For the period from the commencement of the Fund's investment operations, August 3, 1999, through
January 31, 2000.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes to Net Assets (Unaudited)
- ----------------------------------------------------------------------------------------------------
EUROPEAN HIGH YIELD INCOME
PERIOD ENDED JANUARY 31, 2000* EQUITY FUND FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 932 $ 48,402 $ 44,105
Net realized gain (loss) on investments and foreign
currency transactions 73,251 41,101 (3,151)
Net unrealized gain (loss) on investments and
foreign currency translation 13,863 (5,494) (16,633)
---------- ---------- ----------
Increase in net assets from operations $ 88,046 $ 84,009 $ 24,321
---------- ---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (852) $ (49,677) $ (44,419)
From net investment income (Class I) (1) (8) (9)
From net realized gain on investments and foreign
currency transactions (Class A) (4,246) (27,867) (2,161)
From net realized gain on investments and foreign
currency transactions (Class I) (2) (4) (1)
---------- ---------- ----------
Total distributions declared to shareholders $ (5,101) $ (77,556) $ (46,590)
---------- ---------- ----------
Net increase in net assets from Fund share
transactions $ 546,333 $1,382,885 $1,046,972
---------- ---------- ----------
Total increase in net assets $ 629,278 $1,389,338 $1,024,703
Net assets:
At beginning of period -- -- --
---------- ---------- ----------
At end of period $ 629,278 $1,389,338 $1,024,703
---------- ---------- ----------
Accumulated undistributed (distributions in excess
of) net investment income included in net assets
at end of period $ 79 $ (1,283) $ (323)
========== ========== ==========
* For the period from the commencement of the Fund's investment operations, August 3, 1999, through
January 31, 2000.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- ---------------------------------------------------------------------------------------------------------
EUROPEAN EQUITY FUND
- ---------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
JANUARY 31, 2000* JANUARY 31, 2000**
(UNAUDITED) (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00 $ 9.93
------ ------
Income from investment operations# -
Net investment income(S) $ 0.02 $ 0.02
Net realized and unrealized gain on investments and foreign
currency 1.70 1.80
------ ------
Total from investment operations $ 1.72 $ 1.82
------ ------
Less distributions declared to shareholders -
From net investment income $(0.01) $(0.01)
From net realized gain on investments and foreign currency
transactions (0.08) (0.08)
------ ------
Total distributions declared to shareholders $(0.09) $(0.09)
------ ------
Net asset value - end of period $11.63 $11.66
====== ======
Total return(+) 17.22%++ 18.35%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.03%+ 1.03%+
Net investment income 0.33%+ 0.33%+
Portfolio turnover 76% 76%
Net assets at end of period (000 Omitted) $ 629 --
(S) MFS has voluntarily agreed under a temporary reimbursement expense agreement to pay all of the Fund's
operating expenses, exclusive of management fees. In consideration, the Fund pays MFS a fee not
greater than 0.25% of the average daily net assets. To the extent actual expenses were over this
limitation, the net investment loss per share and ratios would have been:
Net investment loss $(0.34) $(0.34)
Ratios (to average net assets):
Expenses## 7.70%+ 7.70%+
Net investment income (6.34)%+ (6.34)%+
* For the period from the commencement of the Fund's investment operations, August 3, 1999, through
January 31, 2000.
** For the period from the inception of Class I, August 4, 1999, through January 31, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------------------
HIGH YIELD FUND
- ---------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
JANUARY 31, 2000* JANUARY 31, 2000**
(UNAUDITED) (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.40 $ 0.40
Net realized and unrealized gain on investments and foreign
currency 0.26 0.26
------ ------
Total from investment operations $ 0.66 $ 0.66
------ ------
Less distributions declared to shareholders -
From net investment income $(0.41) $(0.41)
From net realized gain on investments and foreign currency
transactions (0.21) (0.21)
------ ------
Total distributions declared to shareholders $(0.62) $(0.62)
------ ------
Net asset value - end of period $10.04 $10.04
====== ======
Total return(+) 6.68%++ 6.45%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03%+
Net investment income 7.81%+ 7.81%+
Portfolio turnover 56% 56%
Net assets at end of period (000 Omitted) $1,389 --
(S) MFS has voluntarily agreed under a temporary expense agreement to pay all of the Fund's operating
expenses in excess of 0.00%. In addition, the investment adviser voluntarily waived its fees for the
period indicated. To the extent actual expenses were over these limitations and the waivers had not
been in place, the net investment income per share and the ratios would have been:
Net investment income $ 0.20 $ 0.20
Ratios (to average net assets):
Expenses## 3.84%+ 3.84%+
Net investment income 4.00%+ 4.00%+
* For the period from the commencement of the Fund's investment operations, August 3, 1999, through
January 31, 2000.
** For the period from the inception of Class I, August 4, 1999, through January 31, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------------------
INCOME FUND
- ---------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED
JANUARY 31, 2000* JANUARY 31, 2000**
(UNAUDITED) (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.43 $ 0.41
Net realized and unrealized loss on investments (0.19) (0.19)
------ ------
Total from investment operations $ 0.24 $ 0.22
------ ------
Less distributions declared to shareholders -
From net investment income $(0.44) $(0.43)
From net realized gain on investments (0.02) (0.02)
------ ------
Total distributions declared to shareholders $(0.46) $(0.45)
------ ------
Net asset value - end of period $ 9.78 $ 9.77
====== ======
Total return(+) 2.41%++ 3.21%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.03%+ 0.03%+
Net investment income 8.78%+ 8.62%+
Portfolio turnover 50% 50%
Net assets at end of period (000 Omitted) $1,025 --
(S) MFS has voluntarily agreed under a temporary expense agreement to pay all of the Fund's operating
expenses in excess of 0.00%. In addition, the investment adviser voluntarily waived its fees for the
period indicated. To the extent actual expenses were over these limitations and the waivers had not
been in place, the net investment income per share and the ratios would have been:
Net investment income $ 0.21 $0.18
Ratios (to average net assets):
Expenses## 4.54%+ 4.54%+
Net investment income 4.27%+ 4.11%+
* For the period from the commencement of the Fund's investment operations, August 3, 1999, through
January 31, 2000.
** For the period from the inception of Class I, August 4, 1999, through January 31, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS European Equity Fund, MFS High Yield Fund, and MFS Income Fund (the Funds)
are each 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 MFS High Yield Fund and MFS Income Fund can invest up to 100% of its
portfolio in high-yield securities rated below investment grade. Investments in
high-yield securities involve greater degrees of credit and market risk than
investments in higher-rated securities and tend to be more sensitive to economic
conditions.
The Funds can invest in foreign securities. Investments in foreign securities
are vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. 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. 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. Securities for which there are no such quotations or valuations are
valued in good faith, at fair value, by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date. The Funds use the effective
interest method for reporting interest income on payment-in-kind (PIK) bonds.
Legal fees and other related expenses incurred to preserve and protect the value
of a security owned are added to the cost of the security; other legal fees are
expensed. Capital infusions made directly to the security issuer, which are
generally non-recurring, incurred to protect or enhance the value of high-yield
debt securities, are reported as additions to the cost basis of the security.
Costs that are incurred to negotiate the terms or conditions of capital
infusions or that are expected to result in a plan of reorganization are
reported as realized losses. Ongoing costs incurred to protect or enhance an
investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - Each Fund's custody fee is calculated as a percentage of
each 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 - Each 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 Funds
distinguish between distributions on a tax basis and a financial reporting basis
and require 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.
(3) Transactions with Affiliates
Investment Adviser - The Funds have an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. For MFS
High Yield Fund and MFS Income Fund, the management fee is computed daily and
paid monthly at an annual rate of 0.60% of each Fund's average daily net assets.
The investment adviser has voluntarily agreed to waive its fee, which is shown
as a reduction of expenses in the Statement of Operations. For MFS European
Equity Fund the management fee is computed daily and paid monthly at an annual
rate of 0.75% of the Fund's average daily net assets.
MFS European Equity Fund has a temporary expense reimbursement agreement whereby
MFS has voluntarily agreed to pay all of the Fund's operating expenses,
exclusive of management fee. The Fund in turn will pay MFS an expense
reimbursement fee not greater than 0.25% of average daily net assets. At January
31, 2000, aggregate unreimbursed expenses amounted to $18,772.
The investment adviser has voluntarily agreed to pay MFS High Yield Fund and MFS
Income Fund operating expenses such that the Funds' aggregate expenses do not
exceed 0.00% of their average daily net assets. This is reflected as a reduction
of expenses in the Statement of Operations.
The Funds pay no compensation directly to their Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Funds from MFS. Certain officers and Trustees of the
Funds are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Trustees currently are not receiving any
payments for their services for the Funds.
Administrator - The Funds have an administrative service agreement with MFS to
provide the Funds with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Funds pay MFS an administrative fee at
the following annual percentages of each 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, did not
receive any sales charges on sales of Class A shares of the Funds for the period
ended January 31, 2000.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum of each Fund's average daily net assets attributable to Class
A shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.10% per annum of each Funds' average daily net assets
attributable to Class A shares. For the Funds, payment of the 0.10% per annum
Class A distribution fee and the 0.25% per annum Class A service fee will
commence on such date as the Trustees of the Trust may determine.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. MFD
receives all contingent deferred sales charges. There were no contingent
deferred sales charges imposed on Class A shares of the Funds during the period
ended January 31, 2000.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each Fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
EUROPEAN HIGH
EQUITY FUND YIELD FUND INCOME FUND
- ------------------------------------------------------------------------------
Purchases $938,961 $1,873,856 $1,403,013
-------- ---------- ----------
Sales $418,883 $ 569,395 $ 467,055
-------- ---------- ----------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each Fund, as computed on a federal income tax basis, are
as follows:
EUROPEAN HIGH
EQUITY FUND YIELD FUND INCOME FUND
- -------------------------------------------------------------------------------
Aggregate cost $613,429 $1,382,015 $973,966
-------- ---------- --------
Gross unrealized appreciation $ 63,844 $ 63,123 $ 4,337
Gross unrealized depreciation (49,875) (68,617) (20,970)
-------- ---------- --------
Net unrealized appreciation
(depreciation) $ 13,969 $ (5,494) $(16,633)
======== ========== ========
(5) Shares of Beneficial Interest
Each Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
EUROPEAN EQUITY FUND HIGH YIELD FUND INCOME FUND
--------------------- ----------------------- -----------------------
PERIOD ENDED JANUARY 31, 2000* SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 58,156 $ 594,107 130,930 $1,307,653 100,020 $1,000,200
Shares issued to shareholders in
reinvestment of distributions 428 5,003 7,644 77,464 4,717 46,572
Shares reacquired (4,496) (52,975) (241) (2,432) -- --
------- ---------- -------- ---------- -------- ----------
Net increase 54,088 $ 546,135 138,333 $1,382,685 104,737 $1,046,772
======= ========== ======== ========== ======== ==========
* For the period from the commencement of the Fund's investment operations, August 3, 1999, through January 31, 2000.
<CAPTION>
Class I Shares
EUROPEAN EQUITY FUND HIGH YIELD FUND INCOME FUND
--------------------- ----------------------- -----------------------
PERIOD ENDED JANUARY 31, 2000* SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 20 $ 198 20 $ 200 20 $ 200
------- ---------- -------- ---------- -------- ----------
* For the period from the inception of Class I, August 4, 1999, through January 31, 2000.
</TABLE>
(6) Line of Credit
The Funds 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. 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. For the period ended January 31,
2000, there was no commitment fee allocated to the MFS European Equity Fund, MFS
High Yield Fund and MFS Income Fund. The Funds had no significant borrowings
during the period.
--------------------------------------------
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' 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 [graphic omitted]
MFS fund shareholders, retirement plan participants,
and MFS' institutional clients, and supporting the
investment professionals 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>
MFS(R) EUROPEAN EQUITY FUND
MFS(R) HIGH YIELD FUND
MFS(R) INCOME FUND
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston,MA 02116-3741
(C)2000 MFS Investment Management.
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
INC-X4-3 03/00 2.4M
