<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
MFS(R) RESEARCH
INTERNATIONAL FUND
SEMIANNUAL REPORT o FEBRUARY 28, 1999
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DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 31)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 22
MFS' Year 2000 Readiness Disclosure ....................................... 29
Trustees and Officers ..................................................... 33
MFS CELEBRATES ITS DIAMOND ANNIVERSARY!
MARCH 21, 1999, MARKS THE 75TH ANNIVERSARY OF MFS' INVENTION OF
THE MUTUAL FUND. THE MUTUAL FUND INDUSTRY HAS BROUGHT THE POWER
OF INVESTING TO EVERY AMERICAN, OFFERING THEM THE OPPORTUNITY FOR
COLLEGE DEGREES, HOME OWNERSHIP, AND COMFORTABLE RETIREMENT.
IMAGINE TODAY'S WORLD WITHOUT MUTUAL
FUNDS. WE COULDN'T. AND WHILE THE MFS 75 YEARS
YEARS AHEAD WILL BRING A NUMBER OF [graphic omitted]
CHALLENGES, OUR 75 YEARS OF EXPERIENCE EXPERIENCE THE FUTURE(SM)
WILL HELP GUIDE A NEW GENERATION OF
INVESTORS INTO THE FUTURE.
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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:
Since we launched Massachusetts Investors Trust, the nation's first mutual fund,
75 years ago, MFS has weathered numerous market and economic cycles, from the
occasional recession to long periods of growth and prosperity. Throughout that
time, we have tried to give investors a realistic assessment of the investment
markets and, when necessary, to sound a note of caution -- even when market
conditions appear quite favorable.
Although the equity markets have overcome last year's volatility, we still think
stocks are overdue for a correction that will rid them of the excesses that have
developed. Perhaps the most glaring measure of those excesses is the high level
of valuations, that is, the amount equity investors are paying for each dollar
of earnings. By mid-March, the price-to-earnings (P/E) ratio of the average
stock in the Standard & Poor's 500 Composite Index, a popular, unmanaged index
of common stock total return performance, was almost 28% higher than it was a
year ago. While P/E ratios keep going up, earnings have essentially been flat,
and we believe they are likely to stay that way, for a few months at least. This
leaves stock prices vulnerable to negative events such as a domestic or
international crisis, a sudden increase in interest rates, or a slowing economy,
any of which could lead to lower corporate earnings.
While risks in the overall market have increased, one industry calls for
particular attention. For several months, Internet-related stocks have
exhibited extreme price volatility. The Internet's potential impact on the
way individuals and companies communicate and conduct business is certainly
great, but we feel that most of the recent run-up in the share prices of these
companies is unjustified. Many of them have not yet reported any profits, and
there is no way of knowing which of today's "hot" Internet stocks will be
successful -- or even in existence -- a few years from now. Therefore, we
think the frenzy surrounding even the best-known Internet stocks is
purely speculative.
However, there are some established companies offering Internet-related products
and services that may generate revenue. These include companies that provide
networking equipment, that make servers to store information, and that help
customers make better use of Internet services. Because they already have
profitable businesses as well as the potential to use the Internet to increase
their opportunities to generate revenue, these companies have been the focus of
our research efforts.
Although we think valuations for the overall equity market, and especially for
Internet stocks, are excessive, we see this situation as an opportunity for
our portfolio managers to capitalize on MFS(R) Original Research(SM). This is
a fundamental, company-by-company process that helps us find investments that
we believe are most likely to achieve long-term earnings growth, through both
negative and positive market cycles.
We also rely heavily on our research process when investing in the fixed-
income markets. Last year, turmoil in emerging markets and volatility in the
U.S. stock market helped create a "flight to quality," meaning that investors
moved toward U.S. Treasury securities, which are seen as carrying less risk,
and away from almost everything else. As a result, yields on non-Treasury
securities increased, while yields on Treasuries fell. Some of these yield
spreads, or differentials, have narrowed, but they have not returned to the
levels seen before last year's market turmoil. We think this has created
opportunities for our portfolio managers to find attractive yields in
these markets.
Individual investors, meanwhile, should keep in mind that the tremendous
increases in the broad stock market averages of the past several years are a
historical aberration and do not necessarily indicate future market performance.
If they are not already diversified across a range of investments, including
growth stock funds, value-oriented funds, and fixed-income funds, investors may
want to talk to their financial advisers about developing well-diversified
portfolios with the potential to weather unexpected changes in the markets.
Doing so may help investors more effectively meet their long-term financial
goals. We appreciate your confidence 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)
March 16, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of David A. Antonelli]
David A. Antonelli
For the period ended February 28, 1999, Class A shares of the Fund provided a
total return of 8.57%, Class B shares 8.34%, Class C shares 8.25%, and Class I
shares 8.94%. These returns, which include the reinvestment of distributions
but exclude the effects of any sales charges, compare to a 14.01% return for
the Morgan Stanley Capital International (MSCI) Europe, Australia, Far East
(EAFE) Index, an unmanaged index of international stocks, and to a 10.21%
return for the average international fund as reported by Lipper Analytical
Services, Inc., an independent firm that tracks mutual fund performance.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. On the negative side, our underperformance of the MSCI EAFE Index was
largely a function of the Fund's holdings in small- and mid-cap stocks,
which were generally outperformed by large-cap stocks. Large-cap stocks'
overperformance was caused by some investors rushing to buy stocks of the
largest European companies in preparation for European monetary union
(EMU). However, we don't share the belief that the largest stocks in Europe
are necessarily the best ones in which to invest today. We base this
reasoning on MFS(R) Original Research(SM), a process by which we select
stocks after analyzing the fundamental outlooks, competitive landscapes,
and economic and political factors that impact the securities in which we
invest. Broadly speaking, our research is pointing us to smaller companies
that have stronger growth rates and are more attractively valued than
large-cap stocks. In the short term, this position hurt the Fund relative
to the MSCI EAFE Index, but we feel that over the long term the Fund should
benefit from our stock selections as more investors become accustomed to
the new economic landscape in Europe and seek out a wider variety of growth
stocks.
On the positive side our holdings in the telecommunications, media, and
retail sectors helped the Fund. A surge in December for wireless
communications helped growth in global telecommunications stocks. Strong
administrative focus & consumer spending helped media & retail stocks,
which we feel were buoyed by diminished fears of a worldwide economic
slowdown.
Q. PLEASE DISCUSS SOME OF THE MORE SIGNIFICANT CHANGES TO THE FUND'S HOLDINGS
OVER THE PAST SIX MONTHS.
A. The most significant change was our increase in Japanese stocks. In Japan,
we've seen good opportunities in stocks that focus on the domestic food and
beverage market, such as ITO EN, a beverage manufacturer, and Mikuni Cola,
a Japanese Coca-Cola bottler. ITO EN is a leader in the green tea market
and has seen strong earnings growth. Mikuni Cola is attractive now because
we are anticipating a move by Coca-Cola to consolidate many of its foreign
bottlers, which could unlock the value of each individual holding. In the
Netherlands, we trimmed a number of our consumer staples holdings in order
to secure profits. One example of this is Benckiser, which has been a long
time holding and a good performer for the Fund. Despite reducing its
position, it remains one of our top holdings. We also completely sold out
of Telebras, the Brazilian telecommunications company, because of worries
about Brazil's macroeconomic problems. Another of our largest holdings was
auto parts manufacturer LucasVarity, which was acquired by TRW, a provider
of advanced technology products and services for the automotive, space,
defense, and information technology markets. We sold the stock at about the
offering price, providing a nice gain for the portfolio.
Q. BEARING IN MIND THAT THE FUND PURSUES A BOTTOM-UP STRATEGY, AS OPPOSED TO A
REGIONAL ALLOCATION MODEL, WHAT ARE THE TOP FIVE MARKETS IN WHICH THE FUND IS
INVESTED?
A. Our top five markets are Japan, the United Kingdom, the Netherlands, Italy,
and France.
Q. IN WHAT SECTORS ARE YOU FINDING THE MOST PROMISING STOCKS?
A. We believe the telecommunications sector in Europe looks very promising.
Deregulation has opened up the market, creating opportunities for new service
providers to take market share away from the monopoly phone companies. In
general, those new providers have had higher growth potential than the
incumbents, and the growth has come in the most profitable segments of the
telecommunications market, such as wireless services and Internet-related
data communications. Despite the consumer staples sector's recent troubles
related to emerging market exposure, we like the sector as a long-term
investment. We believe most of the bad news has already been factored into
stock prices and, as the year wears on, companies' earnings comparisons to
last year's numbers should look favorable. This may set the stage for a
rebound in earnings growth and share prices among many of these stocks.
Q. WHAT ARE SOME OF THE FUND'S BEST IDEAS THAT CONTRIBUTED POSITIVELY TO
PERFORMANCE?
A. Telecom Italia has recently been bid for by Olivetti and is in the process
of restructuring its business to defend against the bid. The company is
selling off noncore assets, cutting costs, and planning a buyback of
shares, all of which are positive for its stock price. Reuters' stock had
been beaten down based on fears that EMU and bank consolidations would
shrink the market for financial information services. However, the
company's revenues have been stronger than expected. Through a number of
investments in Internet technology, we believe Reuters has created new
sources of potential future growth. We bought the stock when it was
suffering because we liked the long-term prospects for the company, and it
has performed well since then. San Paolo IMI is an Italian bank created by
the merger of San Paolo Torino and IMI. Investors generally have been
skeptical of the merger's benefits; however, our research indicated that
the combined companies could exploit business synergies and cut costs. The
new company has done so, resulting in a strong balance sheet and good
growth prospects thus far. Profit growth has also been positively impacted
by the strong demand for asset management services, and IMI is one of the
leaders in this area.
Q. WHAT ABOUT STOCKS THAT DISAPPOINTED DURING THE PAST SIX MONTHS? ARE YOU
CONTINUING TO HOLD THESE AND, IF SO, WHY?
A. We saw underperformance from some of our bank holdings in peripheral
markets such as Portugal, Ireland, and Italy. As I mentioned earlier, this
underperformance was a function of the knee-jerk move toward large stocks
in general and toward big banks in better-known markets of the United
Kingdom, France, and Germany. Based on our research, we think that our
holdings in less well-known stocks, including Banco Pinto & Sotto Mayor in
Portugal and Anglo Irish Bank in Ireland, display better fundamentals and
are better values than many of the largest European banks. We are
continuing to hold these stocks and are confident in their long-range
prospects. Hunter Douglas, the Dutch manufacturer of shades and blinds,
suffered during this period for three reasons. First, one of its major U.S.
competitors reported disappointing earnings and sales volume, and Hunter
Douglas was punished by the market based on the belief that it would have
similar problems. Second, it was bruised by the market's disdain for small-
cap stocks. Third, because of its exposure to the cyclical home-building
industry, investors feared that it would suffer from a lag in home
construction. Our research shows that the company is bucking the trend in
its industry and picking up market shares. We've added to our holdings
because we have confidence in its earnings
growth forecasts.
Q. WHAT'S THE STATE OF AFFAIRS IN EMERGING MARKETS TODAY, AND HOW IS THE FUND
INVESTED THERE?
A. We are relatively light in emerging markets. Currently, the Fund has less
than 2% of its assets invested in Asia -- not including Japan. Although, we
do see signs of improvement in the Asian economies, helped by stabilization
of the banking sector. As banks recapitalize, loan growth should be
stimulated, reigniting investment in the region. We have been selectively
adding to positions in Asia, but at the current time we are unwilling to
build up large positions. This is because we feel a significant recovery
has already been factored into share prices, so we don't see a lot of room
for growth. China is a wild card because its economic growth is slowing and
exports are weakening. If these trends continue, the country will be under
pressure to devalue, which could touch off a new round of turmoil across
Asia. We believe a devaluation will happen eventually, but if it is timed
and communicated properly the problems may be more muted than what we saw
last year in Asia. In Latin America, we're expecting a recessionary
environment in Brazil, which may ripple through neighboring countries. As a
result, it is hard to find many stock ideas where we have confidence in
earnings outlooks. Thus the Fund has only slightly more than 1% of its
assets invested in Latin America. Mexico is one bright spot, though,
because its economy is more tied to the growing U.S. economy. In emerging
Europe, we have concentrated our investments in Greece, which we feel has
benefited from a convergence in interest rates with developed Europe. We
are currently looking at Poland and Hungary. These countries have the next
most developed economies in the region and may also benefit from
convergence with developed Europe.
Q. IN YOUR OPINION, WHAT WILL SHAPE THE FUTURE ENVIRONMENT OF INTERNATIONAL
INVESTING?
A. EMU, developments in emerging markets, and Japan will all be critical
factors going forward. The transition to EMU has gone smoothly; it now
remains to be seen whether the European Central Bank will be able to act
quickly enough to raise or lower interest rates to accommodate the
economies of the union's individual countries. In emerging markets, we'll
be looking for further stability and, eventually, a return to growth. Japan
is the lynchpin to much of the global balance of trade. If Japan can get
its economic house in order, that will be a huge factor in driving global
demand, which will help virtually all world economies.
Q. HOW DOES THE INTERNATIONAL RESEARCH AND STOCK-SELECTION PROCESS WORK?
A. Our stock-selection process is managed by our committee of international
research analysts. The Committee meets regularly to review current and
prospective holdings, discuss international investing ideas, and adjust the
portfolio as necessary. In addition to its staff of global analysts
headquartered in Boston, MFS also has analysts in key international markets
such as London, Singapore, and Tokyo. We believe that bottom-up fundamental
research is particularly critical for gathering first hand, quality
information on international stocks because most foreign companies do not
report earnings with either the frequency or detail of their American
counterparts.
/s/ David A. Antonelli
David A. Antonelli
Director of International Equity Research
The committee of MFS international equity research analysts is responsible for
the day-to-day management of the Fund under the general supervision of Mr.
Antonelli.
The opinions expressed in this report are those of the Director of
International Equity Research and are only through the end of the period of
the report as stated on the cover. His views are subject to change at any time
based on market and other conditions, and no forecasts can
be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS CAPITAL APPRECIATION.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JANUARY 2, 1997
CLASS INCEPTION: CLASS A JANUARY 2, 1997
CLASS B JANUARY 2, 1998
CLASS C JANUARY 2, 1998
CLASS I JANUARY 2, 1997
SIZE: $18.6 MILLION NET ASSETS AS OF FEBRUARY 28, 1999
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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.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH FEBRUARY 28, 1999
CLASS A
6 Months 1 Year 10 Years/Life*
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Cumulative Total Return +8.57% +2.47% +23.66%
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Average Annual Total Return -- +2.47% +10.35%
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SEC Results -- -3.42% + 7.36%
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CLASS B
6 Months 1 Year 10 Years/Life*
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Cumulative Total Return +8.34% +2.04% +23.03%
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Average Annual Total Return -- +2.04% +10.09%
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SEC Results -- -1.96% + 8.85%
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CLASS C
6 Months 1 Year 10 Years/Life*
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Cumulative Total Return +8.25% +1.86% +22.93%
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Average Annual Total Return -- +1.86% +10.05%
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SEC Results -- +0.86% +10.05%
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CLASS I
6 Months 1 Year10 Years/Life*
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Cumulative Total Return +8.94% +2.92% +24.34%
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Average Annual Total Return -- +2.92% +10.63%
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*For the period from the commencement of the Fund's investment operations,
January 2, 1997, through February 28, 1999.
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
B and C results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of A for periods prior to the inception of B and C.
Because operating expenses of B and C are higher than those of A, B and C
performance generally would have been lower than A performance. The A
performance included in the B and C SEC performance has been adjusted to
reflect the CDSC generally applicable to B and C rather than the initial sales
charge generally applicable to A.
Performance results reflect any applicable expenses 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 dividends and
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 more details.
PORTFOLIO CONCENTRATION AS OF FEBRUARY 28, 1999
FIVE LARGEST SECTORS
FINANCIAL SERVICES 17.9%
UTILITIES & COMMUNICATIONS 14.5%
CONSUMER STAPLES 11.3%
HEALTH CARE 9.2%
INDUSTRIAL GOODS & SERVICES 7.8%
TOP 10 STOCK HOLDINGS
TELECOM ITALIA S.P.A. 3.0% UBS AG 2.1%
Italian telecommunications company Swiss financial services company
BENCKISER N.V., "B" 2.5% TAKEDA CHEMICAL INDUSTRIES CO. 2.1%
Dutch cleaning products manufacturer Japanese chemical manufacturer
BP AMOCO PLC 2.4% HENKEL KGAA 2.0%
Oil exploration and production company German consumer products company
SAN PAOLO IMI S.P.A. 2.2% SKANDIA FORSAKRINGS AB 1.8%
Italian bank Swedish insurance company
MANNESMANN AG 2.2% CANADIAN NATIONAL RAILWAY CO. 1.8%
German telecommunications company Railway and transportation company
The portfolio is actively managed, and holdings are subject to change.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 28, 1999
Stocks - 96.0%
<CAPTION>
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ISSUER SHARES VALUE
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<S> <C> <C>
Foreign Stocks - 92.0%
Australia - 1.6%
QBE Insurance Group Ltd. (Insurance)* 78,429 $ 293,238
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Bermuda - 0.9%
Dairy Farm International Holdings Ltd. (Retail Stores -
Supermarkets) 153,000 $ 163,710
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Canada - 1.7%
Canadian National Railway Co. (Railroads) 6,488 $ 313,452
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Finland - 3.1%
Helsingin Puhelin Oyj (Telecommunications) 4,449 $ 278,064
Pohjola Group Insurance Corp. (Insurance) 2,030 111,884
Rapala Normark Corp. (Consumer Goods and Services)* 3,600 31,349
Tieto Corp. (Computer Software - Systems) 3,896 156,752
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$ 578,049
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France - 7.0%
Castorama Dubois Investisse (Stores - Building Products) 885 $ 187,303
Renault Regie Nationale (Automobiles) 6,282 294,298
Sanofi S.A. (Medical and Health Products) 818 144,539
SEITA (Tobacco) 3,437 204,585
Television Francaise (Entertainment) 1,562 280,652
Thomson CSF (Aerospace and Defense) 6,600 196,430
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$ 1,307,807
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Germany - 4.0%
Henkel KGaA (Chemicals) 4,377 $ 352,208
Mannesmann AG (Conglomerate) 2,897 390,548
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$ 742,756
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Greece - 2.5%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 9,851 $ 260,453
Stet Hellas Telecommunications S.A., ADR
(Telecommunications)* 6,373 207,521
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$ 467,974
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Hong Kong - 0.8%
Li & Fung Ltd. (Wholesale) 82,000 $ 148,181
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Ireland - 1.4%
Anglo Irish Bank PLC (Banks and Credit Cos.)* 87,115 $ 254,313
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Italy - 9.0%
Banca Carige S.p.A. (Banks and Credit Cos.) 11,790 $ 97,471
ERG S.p.A. (Oils) 27,930 100,982
Industrie Natuzzi S.p.A., ADR (Consumer Goods and
Services) 4,758 91,889
Mediaset S.p.A. (Entertainment) 30,165 285,958
San Paolo IMI S.p.A (Banks and Credit Cos.) 22,617 396,398
Telecom Italia Mobile S.p.A., Saving Shares
(Telecommunications) 44,944 182,314
Telecom Italia S.p.A. (Telecommunications)* 50,296 531,682
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$ 1,686,694
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Japan - 17.9%
Aeon Credit Service Co. Ltd. (Financial Services) 3,476 $ 221,816
Canon, Inc. (Special Products and Services) 5,000 106,776
Fujimi, Inc. (Electronics) 3,600 148,613
Fujitsu Ltd. (Computer Hardware - Systems) 15,000 186,649
ITO EN Ltd. (Beverage Products) 3,500 166,849
Keyence Corp. (Electronics) 1,910 224,498
Kinki Coca-Cola Bottling Co. (Beverages) 2,000 24,550
Meitec Corp. (Computer Software - Systems) 6,800 157,508
Mikuni Coca-Cola Bottling Co. (Food and Beverage
Products) 8,000 172,188
Nippon Telephone & Telegraph Co. (Utilities -
Telephone) 24 197,343
NTT Mobile Communication Network, Inc.
(Telecommunications) 4 162,099
Olympus Optical Co. (Conglomerate) 25,000 271,145
Osaka Sanso Kogyo Ltd. (Chemicals) 2,000 3,195
Rock Field Co., Ltd. (Food Products) 4,000 82,058
Rohm Co. (Electronics) 1,000 97,528
Secom Co. (Consumer Goods and Services) 4,000 309,736
Takeda Chemical Industries Co. (Pharmaceuticals) 11,000 377,333
Terumo Corp. (Pharmaceuticals) 12,000 244,157
Ushio, Inc. (Electronics) 17,000 182,092
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$ 3,336,133
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Mexico - 1.1%
Cifra S.A., ADR (Retail)* 16,883 $ 208,927
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Netherlands - 10.2%
Akzo Nobel N.V. (Chemicals) 3,487 $ 132,801
Benckiser N.V., "B" (Consumer Goods and Services) 6,939 449,753
Equant N.V., (Data Network Services)* 1,483 106,776
Fugro N.V. (Engineering)* 5,909 114,637
Hunter Douglas N.V., ADR (Consumer Goods and
Services)* 8,077 263,537
IHC Caland N.V. (Marine Equipment)* 2,405 77,940
ING Groep N.V. (Financial Services)* 4,577 257,307
Koninklijke Ahrend Groep N.V. (Consumer Goods and
Services)* 10,762 192,180
Unilever N.V. (Consumer Goods and Services) 2,003 145,059
Van der Moolen Holding N.V. (Financial Services)* 2,115 158,533
-----------
$ 1,898,523
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Philippines - 0.1%
Philippine Long Distance Telephone Co.
(Telecommunications) 600 $ 14,250
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Portugal - 2.6%
Banco Pinto & Sotto Mayor S.A. (Banks and Credit Cos.) 14,807 $ 298,199
BPI - SGPS, S.A. (Banks and Credit Cos.) 5,552 193,513
-----------
$ 491,712
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Spain - 1.3%
Cortefiel S.A. (Retail) 3,629 $ 94,766
Telefonica de Espana (Utilities - Telephone) 3,294 151,048
-----------
$ 245,814
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Sweden - 5.3%
Celsius AB (Aerospace) 12,394 $ 194,397
Ericsson LM, "B" (Telecommunications) 8,231 218,867
Saab AB, "B" (Aerospace)* 29,050 256,298
Skandia Forsakrings AB (Insurance) 17,121 315,742
-----------
$ 985,304
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Switzerland - 6.2%
Barry Callebaut AG (Food and Beverage Products) 897 $ 179,871
Julius Baer Holdings (Banks and Credit Cos.) 71 216,063
Kuoni Reisen Holdings AG (Transportation) 40 163,186
Nestle S.A. (Food and Beverage Products) 109 206,137
UBS AG (Banks and Credit Cos.) 1,231 383,890
-----------
$ 1,149,147
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United Kingdom - 15.3%
British Aerospace PLC (Aerospace and Defense)* 39,124 $ 249,137
British American Tobacco PLC (Tobacco Products) 3,935 35,945
BP Amoco PLC (Oils)* 29,693 420,790
Cable & Wireless Communications PLC
(Telecommunications)* 7,842 92,956
Capital Radio PLC (Broadcasting) 13,628 157,824
Computacenter PLC (Computer - Services)* 12,038 100,020
Glaxo Wellcome PLC (Pharmaceuticals)* 5,409 172,827
Jarvis Hotels PLC (Restaurants and Lodging)+ 14,759 25,212
Kwik-Fit Holdings PLC (Automotive Repair Centers) 32,953 199,270
Next PLC (Stores) 8,919 104,434
Reuters Group PLC (Business Services) 21,228 297,254
Sema Group PLC (Computer Software - Systems) 18,897 212,176
SmithKline Beecham PLC (Pharmaceuticals) 14,041 198,755
Taylor Nelson Sofres PLC (Market Research) 158,772 299,238
Williams PLC (Conglomerate) 45,308 281,975
-----------
$ 2,847,813
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Total Foreign Stocks $17,133,797
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U.S. Stocks - 4.0%
Automotive - 0.9%
Federal-Mogul Corp. 3,488 $ 171,566
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Forest and Paper Products - 0.6%
Jefferson Smurfit* 56,564 $ 121,576
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Medical and Health Products - 1.3%
Pharmacia & Upjohn, Inc. 4,343 $ 236,694
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Telecommunications - 1.2%
Global TeleSystems Group, Inc.* 3,929 $ 218,060
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Total U.S. Stocks $ 747,896
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Total Stocks (Identified Cost, $17,406,918) $17,881,693
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 11.7%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 3/01/99 $ 1,470 $ 1,470,000
Navigator Securities Lending Prime Portfolio 709 709,331
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 2,179,331
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $19,586,249) $20,061,024
Other Assets, Less Liabilities - (7.7)% (1,426,837)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $18,634,187
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
+ Restricted security.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
FEBRUARY 28, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $19,586,249) $20,061,024
Cash 5,025
Foreign currency, at value (identified cost, $15,775) 15,066
Receivable for Fund shares sold 96,147
Receivable for investments sold 351,344
Dividends and interest receivable 21,840
Other assets 78
-----------
Total assets $20,550,524
-----------
Liabilities:
Payable for Fund shares reacquired $ 30,061
Payable for investments purchased 1,155,670
Collateral for securities loaned, at value 709,331
Payable to affiliates -
Management fee 1,531
Distribution and service fee 9,338
Accrued expenses and other liabilities 10,406
-----------
Total liabilities $ 1,916,337
-----------
Net assets $18,634,187
===========
Net assets consist of:
Paid-in capital $18,530,859
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 473,887
Accumulated undistributed net realized loss on investments
and foreign currency transactions (304,490)
Accumulated net investment loss (66,069)
-----------
Total $18,634,187
===========
Shares of beneficial interest outstanding 1,703,219
=========
Class A shares:
Net asset value per share
(net assets of $9,401,230 / 857,742 shares of beneficial
interest outstanding) $10.96
======
Offering price per share (100 / 94.25) $11.63
======
Class B shares:
Net asset value and offering price per share
(net assets of $6,378,192 / 584,541 shares of beneficial
interest outstanding) $10.91
======
Class C shares:
Net asset value and offering price per share
(net assets of $1,749,481 / 160,523 shares of beneficial
interest outstanding) $10.90
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $1,105,284 / 100,413 shares of beneficial
interest outstanding) $11.01
======
On sales of $50,000 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 FEBRUARY 28, 1999
- --------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 53,944
Interest 24,715
Foreign taxes withheld (3,473)
----------
Total investment income $ 75,186
----------
Expenses -
Management fee $ 70,025
Shareholder servicing agent fee 7,878
Distribution and service fee (Class A) 11,793
Distribution and service fee (Class B) 24,188
Distribution and service fee (Class C) 6,191
Administrative fee 693
Custodian fee 18,602
Printing 26,829
Postage 4,173
Auditing fees 16,194
Legal fees 496
Registration fees 36,355
Miscellaneous 4,392
----------
Total expenses $ 227,809
Preliminary reduction of expenses by investment adviser
and distributor (85,803)
Fees paid indirectly (1,800)
----------
Net expenses $ 140,206
----------
Net investment loss $ (65,020)
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (292,561)
Foreign currency transactions 5,154
----------
Net realized loss on investments and foreign currency
transactions $ (287,407)
----------
Change in unrealized appreciation (depreciation) -
Investments $1,556,253
Translation of assets and liabilities in foreign currencies (573)
----------
Net unrealized gain on investments and foreign currency
translation $1,555,680
----------
Net realized and unrealized gain on investments and
foreign currency translation $1,268,273
----------
Increase in net assets from operations $1,203,253
==========
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (65,020) $ 9,828
Net realized gain (loss) on investments and foreign
currency transactions (287,407) 193,471
Net unrealized gain (loss) on investments and foreign
currency translation 1,555,680 (1,033,460)
----------- -----------
Increase (decrease) in net assets from operations $ 1,203,253 $ (830,161)
----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,023) $ (5,588)
From net investment income (Class B) (630) --
From net investment income (Class C) (186) --
From net investment income (Class I) (1,934) (5,193)
From net realized gain on investments and foreign currency
transactions (Class A) (103,796) (125,647)
From net realized gain on investments and foreign currency
transactions (Class B) (70,643) --
From net realized gain on investments and foreign currency
transactions (Class C) (19,022) --
From net realized gain on investments and foreign currency
transactions (Class I) (17,130) (116,751)
----------- -----------
Total distributions declared to shareholders $ (218,364) $ (253,179)
----------- -----------
Net increase in net assets from Fund share transactions $ 8,839,505 $ 7,557,045
----------- -----------
Total increase in net assets $ 9,824,394 $ 6,473,705
Net assets:
At beginning of period 8,809,793 2,336,088
----------- -----------
At end of period (including accumulated net investment
loss of $66,069 and accumulated undistributed net
investment income of $6,724, respectively) $18,634,187 $ 8,809,793
=========== ===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998 AUGUST 31, 1997*
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.24 $10.95 $10.00
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.04) $ 0.03 $ 0.06
Net realized and unrealized gain on investments and
foreign currency transactions 0.92 0.35 0.89
------ ------ ------
Total from investment operations $ 0.88 $ 0.38 $ 0.95
------ ------ ------
Less distributions declared to shareholders -
From net investment income
$(0.01) $(0.05) $ --
From net realized gain on investments and foreign
currency transactions (0.15) (1.04) --
------ ------ ------
Total distributions declared to shareholders
$(0.16) $(1.09) $ --
------ ------ ------
Net asset value - end of period $10.96 $10.24 $10.95
====== ====== ======
Total return(+) 8.57%++ 3.92% 9.60%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.79%+ 1.77% 1.68%+
Net investment income (loss) (0.69)%+ 0.28% 0.71%+
Portfolio turnover 62% 89% 137%
Net assets at end of period (000 omitted) $9,401 $3,741 $1,314
* For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without
reduction for this expense offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more than 0.40% of average daily net assets. For the period ended
August 31, 1997, the investment adviser agreed to maintain the other expenses of the Fund at not more than 1.75% of the
Fund's average daily net assets. The investment adviser, distributor, and shareholder servicing agent did not impose
any of their fees for the period ended August 31, 1997. If these fees had not been waived and actual expenses had been
over/under this limitation, the net investment loss per share and the ratios would have been:
Net investment loss $(0.10) $(0.19) $(0.01)
Ratios (to average net assets):
Expenses## 3.02%+ 3.99% 3.31%+
Net investment loss (1.92)%+ (1.94)% (0.91)%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.21 $ 9.93
------ ------
Income from investment operations# -
Net investment loss(S) $(0.07) $(0.03)
Net realized and unrealized gain on investments and foreign
currency transactions 0.92 0.31
------ ------
Total from investment operations $ 0.85 $ 0.28
------ ------
Less distributions declared to shareholders -
From net investment income
$(0.00)+++ $ --
From net realized gain on investments and foreign currency
transactions (0.15) --
------ ------
Total distributions declared to shareholders
$(0.15) $ --
------ ------
Net asset value - end of period $10.91 $10.21
====== ======
Total return 8.34%++ 2.82%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.44%+ 2.42%+
Net investment loss (1.33)%+ (0.29)%+
Portfolio turnover 62% 89%
Net assets at end of period (000 omitted) $6,378 $3,141
* For the period from the inception of Class B, January 2, 1998, through August 31, 1998.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fees based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without
reduction for this expense offset arrangement.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more than 0.40% of average daily net assets. To the extent actual
expenses were over/ under this limitation, the net investment loss per share and the ratios would have been:
Net investment loss $(0.13) $(0.24)
Ratios (to average net assets):
Expenses## 3.67%+ 4.56%+
Net investment loss (2.56)%+ (2.43)%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.21 $ 9.93
------ ------
Income from investment operations# -
Net investment loss(S) $(0.07) $(0.01)
Net realized and unrealized gain on investments and foreign
currency transactions 0.91 0.29
------ ------
Total from investment operations $ 0.84 $ 0.28
------ ------
Less distributions declared to shareholders -
From net investment income
$(0.00)+++ $ --
From net realized gain on investments and foreign currency
transactions (0.15) --
------ ------
Total distributions declared to shareholders
$(0.15) $ --
------ ------
Net asset value - end of period $10.90 $10.21
====== ======
Total return 8.25%++ 2.82%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.44%+ 2.41%+
Net investment loss (1.34)%+ (0.10)%+
Portfolio turnover 62% 89%
Net assets at end of period (000 omitted) $1,750 $729
* For the period from the inception of Class C, January 2, 1998, through August 31, 1998.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fees based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without
reduction for this expense offset arrangement.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more than 0.40% of average daily net assets. To the extent actual
expenses were over/ under this limitation, the net investment loss per share and the ratios would have been:
Net investment loss $(0.14) $(0.22)
Ratios (to average net assets):
Expenses## 3.67%+ 4.55%+
Net investment loss (2.57)%+ (2.24)%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998 AUGUST 31, 1997*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.26 $10.95 $10.00
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.02) $ 0.06 $ 0.07
Net realized and unrealized gain on investments and
foreign currency transactions 0.94 0.34 0.88
------ ------ ------
Total from investment operations $ 0.92 $ 0.40 $ 0.95
------ ------ ------
Less distributions declared to shareholders -
From net investment income
$(0.02) $(0.05) $ --
From net realized gain on investments and foreign
currency transactions (0.15) (1.04) --
------ ------ ------
Total distributions declared to shareholders
$(0.17) $(1.09) $ --
------ ------ ------
Net asset value - end of period $11.01 $10.26 $10.95
====== ====== ======
Total return 8.94%++ 4.13% 9.60%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.44%+ 1.41% 1.68%+
Net investment income (loss) (0.30)%+ 0.53% 0.85%+
Portfolio turnover 62% 89% 137%
Net assets at end of period (000 omitted) $1,105 $1,199 $1,022
* For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without
reduction for this expense offset arrangement.
(S) Subject to reimbursement by the Fund, the investment adviser agreed to maintain the expenses of the Fund, exclusive of
management and distribution and service fees, at not more than 0.40% of average daily net assets. For the period ended
August 31, 1997, the investment adviser agreed to maintain the other expenses of the Fund at not more than 1.75% of the
Fund's average daily net assets. The investment adviser, distributor, and shareholder servicing agent did not impose
any of their fees for the period ended August 31, 1997. If these fees had not been waived and actual expenses had been
over/under this limitation, the net investment loss per share and the ratios would have been:
Net investment loss $(0.08) $(0.15) $ --
Ratios (to average net assets):
Expenses## 2.67%+ 3.55% 2.81%+
Net investment loss (1.53)%+ (1.61)% (0.28)%+
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Research International Fund (the Fund) is a diversified series of MFS
Series Trust I (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. 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 at fair value as determined in good
faith by or at the direction of 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.
Security Loans - The Fund may lend its securities to member banks of the Federal
Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The securities are loaned by State Street Bank and Trust
Company ("State Street"), as agent, to certain brokers approved by the Fund (the
"Borrowers"). The loans are collateralized at all times by cash or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street provides the Fund with indemnification against Borrower
default. The Fund bears the risk of loss with respect to the investment of cash
collateral.
At February 28, 1999, the value of securities loaned was $674,590. These loans
were collateralized by cash of $709,331. Cash collateral is invested in short-
term securities which are included in the Portfolio of Investments. 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 State Street in
its capacity as lending agent. Income from securities lending is included in
interest income on the Statement of Operations. The dividend and interest
income earned on the securities loaned is accounted for in the same manner as
other dividend and interest income.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund may enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Fund may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. The Fund may also use contracts in a manner intended to
protect foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend 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. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Fund's tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on
Form 1099-DIV.
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 are reported in the financial statements as a tax return of 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 average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 1.00%
of the Fund's average daily net assets.
The Fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of the Fund's operating expenses, exclusive of
management, distribution, and service fees. The Fund in turn will pay MFS an
expense reimbursement fee not greater than 0.40% of average daily net assets.
To the extent that the expense reimbursement fee exceeds the Fund's actual
expenses, the excess will be applied to amounts paid by MFS in prior years. At
February 28, 1999, the aggregate unreimbursed expenses owed to MFS by the Fund
amounted to $165,785.
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 Trustees are currently
not receiving any payments for their services to the Fund.
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
$15,236 for the six months ended February 28, 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 0.35% 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 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 0.10% 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 $945 for the six months ended February 28,
1999. Fees incurred under the distribution plan during the six months ended
February 28, 1999, were 0.35% of average daily net assets attributable to Class
A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $3 and $0 for Class B
and Class C shares, respectively, for the six months ended February 28, 1999.
Fees incurred under the distribution plan during the six months ended February
28, 1999, were 1.00% of average daily net assets attributable to both Class B
and Class C shares on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemption's 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 February
28, 1999, were $0, $7,255, and $919 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 effective 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
$16,207,019 and $8,186,083, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $19,586,249
-----------
Gross unrealized appreciation $ 1,214,022
Gross unrealized depreciation (739,247)
-----------
Net unrealized appreciation $ 474,775
===========
(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:
Class A Shares
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
---------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
Shares sold 684,486 $ 7,178,510 470,158 $ 5,458,261
Shares issued to shareholders
in reinvestment of
distributions 9,760 104,436 12,095 114,270
Shares reacquired (201,913) (2,115,192) (236,784) (2,697,790)
-------- ----------- -------- -----------
Net increase 492,333 $ 5,167,754 245,469 $ 2,874,741
======== =========== ======== ===========
Class B Shares
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998*
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 418,107 $ 4,377,906 370,461 $ 4,311,689
Shares issued to shareholders
in reinvestment of
distributions 6,544 69,831 19 225
Shares reacquired (147,822) (1,529,382) (62,768) (674,423)
-------- ----------- -------- -----------
Net increase 276,829 $ 2,918,355 307,712 $ 3,637,491
======== =========== ======== ===========
Class C Shares
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998*
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 126,052 $ 1,325,980 92,989 $ 1,074,271
Shares issued to shareholders
in reinvestment of
distributions 1,735 18,473 -- --
Shares reacquired (38,691) (411,520) (21,562) (257,534)
-------- ----------- -------- -----------
Net increase 89,096 $ 932,933 71,427 $ 816,737
======== =========== ======== ===========
Class I Shares
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 8,072 $ 84,250 42,939 $ 476,825
Shares issued to shareholders
in reinvestment of
distributions 1,775 19,062 12,558 117,015
Shares reacquired (26,264) (282,849) (32,032) (365,764)
-------- ----------- -------- -----------
Net increase (decrease) (16,417) $ (179,537) 23,465 $ 228,076
======== =========== ======== ===========
* For the period from the inception of Class B and Class C, January 2, 1998,
through August 31, 1998.
(6) Line of Credit
The Fund and other affiliated funds participate in an $805 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. The commitment fee allocated to
the Fund for the six months ended February 28, 1999, was $55.
(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.
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At February 28,
1999, the Fund owned the following restricted security (constituting 0.14% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Fund does not have the right to demand that such
security be registered. The value of this security is determined by valuations
furnished by dealers or by a pricing service, or if not available, is valued
at fair value as determined in good faith by or at the direction of the
Trustees.
<TABLE>
<CAPTION>
DESCRIPTION DATE OF ACQUISITION SHARE AMOUNT COST VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jarvis Hotels PLC 1/7/97 - 1/7/99 14,759 $27,783 $25,212
</TABLE>
--------------------------------------------
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>
<TABLE>
MFS(R) RESEARCH INTERNATIONAL FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
CUSTODIAN
Lawrence H. Cohn, M.D. - Chief of Cardiac State Street Bank and Trust Company
Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School INVESTOR INFORMATION
For MFS stock and bond market outlooks, call
The Hon. Sir J. David Gibbons, KBE - Chief toll free: 1-800-637-4458 anytime from a
Executive Officer, Edmund Gibbons Ltd.; touch-tone telephone.
Chairman, Colonial Insurance Company, Ltd.
For information on MFS mutual funds, call your
Abby M. O'Neill - Private Investor financial adviser or, for an information kit,
call toll free: 1-800-637-2929 any business day
Walter E. Robb, III - President and Treasurer, from 9 a.m. to 5 p.m. Eastern time (or leave a
Benchmark Advisors, Inc. (corporate financial message anytime).
consultants); President, Benchmark Consulting
Group, Inc. (office services) INVESTOR SERVICE
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive P.O. Box 2281
Vice President, Director, and Secretary, Boston, MA 02107-9906
MFS Investment Management
For general information, call toll free:
Jeffrey L. Shames* - Chairman, Chief 1-800-225-2606 any business day from
Executive Officer, and Director, 8 a.m. to 8 p.m. Eastern time.
MFS Investment Management
For service to speech- or hearing-impaired,
J. Dale Sherratt - President, Insight call toll free: 1-800-637-6576 any business day
Resources, Inc. (acquisition planning from 9 a.m. to 5 p.m. Eastern time. (To use
specialists) Ward Smith - Former Chairman this service, your phone must be equipped with
(until 1994), NACCO Industries (holding a Telecommunications Device for the Deaf.) For
company) share prices, account balances, and exchanges,
call toll free: 1-800-MFS-TALK (1-800-637-8255)
INVESTMENT ADVISER anytime from a touch-tone telephone.
Massachusetts Financial Services Company
500 Boylston Street WORLD WIDE WEB
Boston, MA 02116-3741 www.mfs.com
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
DIRECTOR OF INTERNATIONAL EQUITY RESEARCH
David A. Antonelli*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) RESEARCH INTERNATIONAL 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)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MRI-3 4/99 6M 99/299/399/899
