<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) RESEARCH
INTERNATIONAL FUND
ANNUAL REPORT o AUGUST 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
Independent Auditors' Report .............................................. 30
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- make us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flows, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as front-line workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flows, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes each manager will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in it's
January 10, 2000 issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people tend to stick around -- the average
MFS tenure of our portfolio managers is 11 years, with over 16 years in the
investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 35 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance,
by finding opportunities before they are generally recognized by the market and
by avoiding mistakes whenever possible. Original Research does, we believe, make
a difference.
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)
September 15, 2000
A prospectus containing more complete information on any MFS product, including
all charges and expenses, can be obtained from your investment professional.
Please read it carefully before you invest or send money. Investments in mutual
funds will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of David A. Antonelli]
David A. Antonelli
For the 12 months ended August 31, 2000, Class A shares of the fund provided a
total return of 33.00%, Class B shares 32.14%, Class C shares 32.17%, and Class
I shares 33.61%. These returns include the reinvestment of distributions but
exclude the effects of any sales charges and compare over the same period to a
9.81% return for the fund's benchmark, the Morgan Stanley Capital International
(MSCI) Europe, Australasia, Far East (EAFE) Index, an unmanaged index of
international stocks. During the same period, the average international fund
tracked by Lipper Inc., an independent firm that reports mutual fund
performance, returned 17.86%.
Q. THE FUND PERFORMED VERY WELL DURING THE 12-MONTH PERIOD. TO WHAT DO YOU
ATTRIBUTE THIS SUCCESS?
A. Essentially, it came down to astute stock selection combined with favorable
industry and geographical diversification, which are byproducts of our
research-intensive, bottom-up, stock-picking style. As some of last year's
laggards became this year's stars, our analysts did an excellent job of
identifying which companies would produce accelerating earnings growth. In
addition, our research led us to maintain significant exposure to financial
services, health care, energy, and industrial goods and services stocks,
which generally provided strong contributions to the fund's total return.
Q. WHAT'S YOUR TAKE ON THE CURRENT MARKET ENVIRONMENT?
A. During the past two quarters, we've experienced quite a bit of volatility
due to concerns about inflation and fears of higher interest rates
potentially stifling economic growth. Nevertheless, we continue to maintain
an upbeat outlook for international markets, supported by the fact that we
do not see significant signs of inflation, nor do we see much need for
further interest rate hikes, given the generally benign inflation reports of
late. Perhaps more importantly, however, is the increased interest we've
seen in equity investing, as well as accelerated spending on new technology
by foreign investors and corporations. We believe these trends could bode
well for overseas equity markets over the long term.
Q. HAS THE INCREASED MARKET VOLATILITY HAD ANY EFFECT ON YOUR INVESTMENT
STRATEGY?
A. We always keep a close eye on potential market and fundamental business
risks to the portfolio, but we generally maintain a fully invested portfolio
of international stocks. At the same time, our focus is on finding what we
believe are the best opportunities for growth and capital appreciation
through our process of bottom-up Original Research(SM). As a result, we
don't spend too much time analyzing macroeconomic trends and influences. In
fact, we have found that volatility often creates opportunities for the
portfolio as investors indiscriminately sell off stocks based on emotional
considerations rather than fundamental analysis. This has been demonstrated
by the fund's historically strong performance in both good and bad markets.
Q. FINANCIAL SERVICES AND TECHNOLOGY STOCKS REPRESENTED A SIGNIFICANT PORTION
OF THE PORTFOLIO'S ASSETS. WHERE WERE YOU FINDING OPPORTUNITIES IN THESE
SECTORS?
A. We've noticed a pronounced increase in equity investing and retirement
planning among foreign investors, which we believe is helping to drive
accelerating earnings growth among diversified financial services companies
such as HSBC Holdings and ING Groep. In addition to favorable business
conditions for the brokerage and asset management divisions at companies
such as these, we anticipate strong earnings growth among their life
insurance subsidiaries. Among technology stocks, we continued to find
attractive investment opportunities in companies exhibiting strong business
fundamentals across a broad range of industries, including electronics,
semiconductors, software, telecommunications infrastructure, and
telecommunications equipment.
Q. WHAT ABOUT HEALTH CARE AND INDUSTRIAL GOODS AND SERVICES STOCKS?
A. After seeing significant gains from Japanese pharmaceutical stocks, we've
started to redirect our attention toward a number of European pharmaceutical
and medical device companies that we believe are poised for strong earnings
growth and offer more attractive valuations compared to their Japanese
counterparts. In the industrial goods and services sector, we've maintained
our overweighted exposure to European aerospace companies because we see the
potential for 15% to 20% earnings growth this year and because many of these
stocks have been trading at what we think are very low valuations. Overall,
our holdings in the health care and industrial goods and services sectors
rallied during the past few months as we experienced a rotation out of
technology, media, and telecommunications stocks. In general, this trend,
along with favorable stock selection, has aided the portfolio's relative
performance during the past quarter.
Q. WHICH HOLDINGS CONTRIBUTED FAVORABLY AND WHICH HURT PERFORMANCE?
A. In the financial services sector, we've already mentioned HSBC and ING
Groep, but other contributors were Axa Group, Royal Bank of Scotland, CGU,
and Credit Suisse Group, all of which benefited from improving business
fundamentals and a recovering economic environment. Among health care
stocks, fund performance benefited from substantial holdings in Pharmacia,
AstraZeneca, Novartis, and Chugai Pharmaceuticals, which experienced strong
price appreciation due to steady earnings growth and robust demand for their
products. On the negative side, the fund was hurt by our holdings in
Vodafone Group and KPN Royal Dutch Telecom. In spite of our belief that
growth and earnings outlooks for these companies remain positive, investors
sold off these stocks along with most wireless and telephone services stocks
during the latter part of the period.
Q. WHAT'S YOUR OUTLOOK FOR INTERNATIONAL MARKETS?
A. We continue to believe that the pace and benefits of corporate restructuring
and consolidation should accelerate over the next few years. Increasingly,
company executives overseas have been placing an emphasis on getting the
stock prices of their firms higher, as evidenced by the increasing number of
corporate announcements from international companies detailing restructuring
efforts and mergers and acquisitions. In addition, tough global competition
has pushed industry consolidation and restructuring to the forefront of
corporate boardrooms. In our view, these are positive business trends that
are likely to persist in the near term, and could provide support for
international equity markets.
/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 current only through the end of the period of the report
as stated on the cover. His views are subject to change at any time based on
market and other conditions, and no forecasts can be guaranteed.
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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: $211.4 MILLION NET ASSETS AS OF AUGUST 31, 2000
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including the reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary.) It is not possible to
invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
January 2, 1997, through August 31, 2000. Index information is from January 1,
1997.)
MFS Research
International MSCI EAFE
Fund - Class A Index
-------------------------------------------------
1/97 $ 9,425 $10,000
8/97 10,330 10,476
8/98 10,735 10,490
8/99 13,261 13,220
8/00 17,638 14,517
TOTAL RATES OF RETURN THROUGH AUGUST 31, 2000
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years Life*
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +33.00% +70.74% +87.14%
-----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +33.00% +19.52% +18.67%
-----------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +25.35% +17.19% +16.77%
-----------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years Life*
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.14% +68.20% +84.35%
-----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +32.14% +18.93% +18.19%
-----------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +28.14% +18.21% +17.66%
-----------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
1 Year 3 Years Life*
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.17% +68.11% +84.24%
-----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +32.17% +18.90% +18.17%
-----------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +31.17% +18.90% +18.17%
-----------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
1 Year 3 Years Life*
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +33.61% +72.63% +89.20%
-----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +33.61% +19.96% +19.03%
-----------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years Life*
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average international fund+ +17.86% +12.56% +12.48%
-----------------------------------------------------------------------------------------------------
MSCI EAFE Index# + 9.81% +11.49% +10.70%
-----------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, January 2, 1997, through
August 31, 2000. Index information is from January 1, 1997.
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class B and C share performance include the performance of the fund's Class A
shares for periods prior to their inception (blended performance). Class B and C
blended performance has been adjusted to take into account the CDSC applicable
to Class B and C shares rather than the initial sales charge (load) applicable
to Class A shares. These blended performance figures have not been adjusted to
take into account differences in class-specific operating expenses. Because
operating expenses of Class B and C shares are higher than those of Class A, the
blended Class B and C share performance is higher than it would have been had
Class B and C shares been offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably affected
by changes in interest rates and currency exchange rates, market conditions, and
the economic and political conditions of the countries where investments are
made. These risks may increase share price volatility. See the prospectus for
details.
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 2000
FIVE LARGEST STOCK SECTORS
FINANCIAL SERVICES 17.8%
TECHNOLOGY 17.4%
UTILITIES & COMMUNICATIONS 16.9%
HEALTH CARE 11.8%
INDUSTRIAL GOODS & SERVICES 8.2%
TOP 10 STOCK HOLDINGS
<TABLE>
<S> <C>
VODAFONE GROUP PLC 4.2% NOVARTIS A.G. 2.2%
U.K. telecommunications company Swiss pharmaceutical company
ING GROEP N.V. 2.7% ROYAL DUTCH PETROLEUM CO. 2.0%
Dutch insurance company Oil exploration and production company
HSBC HOLDING CORP. 2.6% AUSTRALIA & NEW ZEALAND BANKING GROUP LTD. 1.8%
U.K. insurance company Multinational bank holding company
BP AMOCO PLC 2.5% NIPPON TELEGRAPH & TELEPHONE CO. 1.7%
U.K. oil and production company Japanese telecommunications services company
CHUGAI PHARMACEUTICAL CO. LTD. 2.3% ALCATEL 1.7%
Japanese pharmaceutical company French telecommunications equipment company
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 2000
Stocks - 91.6%
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ISSUER SHARES VALUE
-----------------------------------------------------------------------------
Foreign Stocks - 89.0%
Australia - 3.0%
Australia & New Zealand Banking Group Ltd.
(Banks and Credit Cos.)* 476,090 $ 3,575,671
Broken Hill Proprietary Co. Ltd. (Mining) 131,900 1,442,007
Cable & Wireless Optus Ltd. (Telecommunications) 515,084 1,371,653
------------
$ 6,389,331
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Bermuda - 0.1%
FLAG Telecom Holdings Ltd. (Telecommunications)* 18,290 $ 285,781
-----------------------------------------------------------------------------
Canada - 3.3%
AT&T Canada, Inc. (Telecommunications)* 23,820 $ 790,526
BCE, Inc. (Telecommunications) 89,100 2,004,750
Manitoba Telecom Services (Telecommunications) 66,870 1,238,333
Nortel Networks Corp. (Telecommunications) 35,564 2,900,689
------------
$ 6,934,298
-----------------------------------------------------------------------------
China - 1.0%
China Telecom Ltd. (Telecommunications) 285,000 $ 2,192,729
-----------------------------------------------------------------------------
Finland - 0.2%
Sonera Oyj (Telecommunications) 12,330 $ 411,406
-----------------------------------------------------------------------------
France - 9.4%
Alcatel (Telecommunications) 40,570 $ 3,313,966
Axa (Financial Services) 13,893 1,976,281
Banque Nationale de Paris
(Banks and Credit Cos.) 19,340 1,776,299
Business Objects S.A., ADR
(Computer Software - Systems)* 4,660 533,570
Integra S.A. (Computer Software - Services)* 41,750 681,700
Natexis Co. (Financial Services)* 6,120 464,341
Sanofi-Synthelabo S.A.
(Medical and Health Products)* 27,360 1,332,931
Societe Television Francaise (Entertainment) 26,136 1,904,152
STMicroelectronics N.V. (Electronics) 31,270 1,914,680
Technip S.A. (Construction) 20,650 2,677,254
Total S.A., "B" (Oils) 21,683 3,215,252
------------
$ 19,790,426
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Germany - 1.3%
Fresenius AG (Medical Supplies) 6,080 $ 1,467,546
Fresenius AG, Preferred (Medical Supplies) 14,570 665,865
GFT Technology AG (Computer Software
- Services)* 8,270 565,087
------------
$ 2,698,498
-----------------------------------------------------------------------------
Hong Kong - 0.5%
Li & Fung Ltd. (Consumer Goods and Services) 218,000 $ 950,439
-----------------------------------------------------------------------------
Ireland - 0.3%
Trintech Group PLC, ADR (Computer Software
- Products)* 21,090 $ 569,430
-----------------------------------------------------------------------------
Italy - 1.2%
Banca Intesa S.p.A. (Financial Services) 377,440 $ 1,614,411
Monte Paschi Siena (Banks and Credit Cos.) 191,870 890,488
------------
$ 2,504,899
-----------------------------------------------------------------------------
Japan - 23.0%
Canon, Inc. (Special Products and Services) 65,000 $ 2,908,537
Chugai Pharmaceutical Co. Ltd.
(Medical and Health Products) 253,000 4,509,381
Daikin Industries Ltd. (Consumer Goods
and Services) 83,000 1,670,122
Eisai Co. Ltd. (Medical and Health Products) 52,000 1,570,732
Fast Retailing Co. (Retail) 30,400 4,882,251
Fujitsu Ltd. (Computer Hardware - Systems) 56,000 1,623,264
Hitachi Ltd. (Electronics) 100,000 1,184,803
Honda Motor Co (Automotive) 45,000 1,646,341
Keyence Corp. (Electronics) 6,110 2,029,024
Meitec Corp. (Computer Software - Systems) 3,800 175,741
Mimasu Semiconductor Industry Co. Ltd.
(Electronics) 59,600 1,006,938
Mitsubishi Electric Corp. (Electronics) 201,000 1,876,126
Murata Manufacturing Co. Ltd. (Electronics) 17,800 2,726,773
Nintendo Co. (Entertainment) 5,700 986,004
Nippon Telegraph & Telephone Co. (Utilities -
Telephone) 280 3,335,835
Nitto Denko Corp. (Industrial Goods
and Services) 24,700 1,000,976
NTT Mobile Communications Network, Inc.
(Telecommunications) 95 2,513,133
Pioneer Electronic Corp. (Electronics) 34,000 1,435,272
Rohm Co. (Electronics) 6,500 1,850,610
Secom Co. (Consumer Goods and Services) 24,500 1,785,788
Sony Corp. (Electronics) 25,000 2,790,807
Sumitomo Realty & Development
(Banks and Credit Cos.) 251,000 1,090,178
Tokyo Broadcasting System, Inc. (Entertainment) 43,000 1,540,901
Tokyo Gas Co. Ltd. (Gas) 387,000 994,728
Victor Company of Japan (Telecommunications) 145,000 1,224,203
Yahoo Japan Corp. (Internet)* 1 300,188
------------
$ 48,658,656
-----------------------------------------------------------------------------
Mexico - 0.6%
Telefonos de Mexico S.A., ADR
(Telecommunications) 23,710 $ 1,290,713
-----------------------------------------------------------------------------
Netherlands - 11.0%
ABN Amro Holdings N.V. (Finance) 22,650 562,789
Akzo Nobel N.V. (Chemicals) 44,533 1,968,420
Fugro N.V. (Engineering)* 18,610 1,040,414
Hunter Douglas N.V., ADR (Consumer Goods and
Services)* 45,345 1,297,712
ING Groep N.V. (Financial Services)* 80,521 5,387,655
Jomed N.V. (Medical and Health Products)* 34,460 2,097,479
KPN N.V. (Telecommunications)* 91,440 2,435,126
Libertel N.V. (Telecommunications)* 63,540 899,347
Philips Electronics N.V. (Electronics) 52,713 2,563,407
Royal Dutch Petroleum Co. (Oils) 64,670 3,931,087
Versatel Telecommunications N.V.
(Telecommunications)* 38,200 1,088,147
------------
$ 23,271,583
-----------------------------------------------------------------------------
Singapore - 2.5%
Datacraft Asia Ltd. (Telecommunications) 178,745 $ 1,501,458
DBS Group Holdings Ltd. (Financial Services) 78,260 946,070
Natsteel Electronics Ltd. (Electronics) 160,600 536,702
Overseas Union Bank Ltd. (Banks and Credit Cos.) 237,000 1,198,361
Singapore Press Holdings Ltd. (Printing and
Publishing) 70,000 1,126,933
------------
$ 5,309,524
-----------------------------------------------------------------------------
South Korea - 1.6%
Korea Telecom Corp. (Telecommunications)* 21,055 $ 797,458
Samsung Electronics (Electronics) 10,770 2,656,801
------------
$ 3,454,259
-----------------------------------------------------------------------------
Spain - 1.3%
Altadis S.A. (Tobacco) 98,387 $ 1,439,719
Cortefiel S.A. (Retail) 62,381 1,260,476
------------
$ 2,700,195
-----------------------------------------------------------------------------
Sweden - 2.0%
Saab AB, "B" (Aerospace) 317,463 $ 2,557,255
Scandinavia Online Co. (Internet)* 25,680 446,381
Skandia Forsakrings AB (Financial Services) 57,428 1,162,584
Tele Europe Holdings AB (Telecommunications)* 2,350 28,893
------------
$ 4,195,113
-----------------------------------------------------------------------------
Switzerland - 5.8%
Credit Suisse Group (Banks and Credit Cos.) 9,890 $ 2,067,161
Leica Geosystems AG (Engineering)* 4,170 1,266,684
Nestle S.A. (Food and Beverage Products) 909 1,959,452
Novartis AG (Medical and Health Products) 2,870 4,340,844
Synthes-Stratec, Inc. (Medical and Health
Products)* 4,135 2,613,320
------------
$ 12,247,461
-----------------------------------------------------------------------------
United Kingdom - 20.9%
AstraZeneca Group PLC (Medical and Health
Products) 62,471 $ 2,845,481
BAE Systems PLC (Aerospace)* 514,353 3,200,856
Boots Co. PLC (Retail)* 132,450 976,030
BP Amoco PLC, ADR (Oils) 89,424 4,940,676
British Telecommunications PLC
(Telecommunications)* 112,477 1,427,642
Cable & Wireless Communications PLC, ADR
(Telecommunications)* 44,654 824,587
Capital Radio PLC (Broadcasting) 44,744 1,018,369
Carlton Communications PLC (Broadcasting) 48,490 527,547
CGU PLC (Financial Services)* 174,051 2,676,271
Diageo PLC (Food and Beverage Products)* 189,057 1,612,567
Granada Media PLC (Entertainment)* 121,180 1,142,594
HSBC Holdings PLC (Financial Services)* 363,430 5,224,468
HSBC Holdings PLC, Hong Kong Registered
(Financial Services)* 168,000 2,391,229
Matalan PLC (Apparel and Textiles) 121,580 1,085,520
Next PLC (Retail) 121,448 1,095,793
Reuters Group PLC (Business Services) 135,291 2,708,293
Royal Bank of Scotland PLC
(Banks and Credit Cos.)* 70,275 1,268,145
Standard Chartered PLC (Banks and Credit Cos.)* 69,040 955,425
Vodafone Group PLC (Telecommunications)* 2,059,438 8,312,497
------------
$ 44,233,990
-----------------------------------------------------------------------------
Total Foreign Stocks $188,088,731
-----------------------------------------------------------------------------
U.S. Stocks - 2.6%
Biotechnology - 0.9%
Pharmacia Corp. 32,867 $ 1,924,774
-----------------------------------------------------------------------------
Internet - 0.2%
VIA Net.Works, Inc.* 28,160 $ 364,320
-----------------------------------------------------------------------------
Oils - 0.6%
Santa Fe International Corp. 31,740 $ 1,247,779
-----------------------------------------------------------------------------
Telecommunications - 0.9%
NTL, Inc.* 29,333 $ 1,285,152
UnitedGlobalCom, Inc.* 16,020 613,766
------------
$ 1,898,918
-----------------------------------------------------------------------------
Total U.S. Stocks $ 5,435,791
-----------------------------------------------------------------------------
Total Stocks (Identified Cost, $186,826,221) $193,524,522
-----------------------------------------------------------------------------
Preferred Stock - 2.2%
-----------------------------------------------------------------------------
Germany - 2.2%
Henkel KGaA, Preferred (Chemicals) 10,291 $ 663,000
ProSieben Media AG, Preferred (Entertainment)* 13,480 2,015,622
SAP AG, Preferred (Computer Software - Systems) 8,190 2,064,056
-----------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $3,937,733) $ 4,742,678
-----------------------------------------------------------------------------
Short-Term Obligations - 3.4%
-----------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-----------------------------------------------------------------------------
Federal Home Loan Bank, due 9/01/00,
at Amortized Cost $ 7,260 $ 7,260,000
-----------------------------------------------------------------------------
Total Investments (Identified Cost, $198,023,954) $205,527,200
Other Assets, Less Liabilities - 2.8% 5,865,705
-----------------------------------------------------------------------------
Net Assets - 100.0% $211,392,905
-----------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
AUGUST 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $198,023,954) $205,527,200
Investment of cash collateral for securities loaned, at
identified cost and value 14,728,387
Cash 511,818
Foreign currency, at value (identified cost, $107,149) 104,602
Receivable for investments sold 1,979,527
Receivable for fund shares sold 11,109,619
Interest and dividends receivable 334,783
Other assets 2,378
------------
Total assets $234,298,314
------------
Liabilities:
Payable for investments purchased $ 1,622,637
Payable for fund shares reacquired 6,542,833
Collateral for securities loaned, at value 14,728,387
Payable to affiliates -
Management fee 5,734
Reimbursement fee 2,290
Distribution and service fee 3,528
------------
Total liabilities $ 22,905,409
------------
Net assets $211,392,905
============
Net assets consist of:
Paid-in capital $195,697,992
Unrealized appreciation on investments and
translation of assets and liabilities
in foreign currencies 7,491,622
Accumulated undistributed net realized gain on
investments and foreign currency transactions 6,801,828
Accumulated undistributed net investment income 1,401,463
------------
Total $211,392,905
============
Shares of beneficial interest outstanding 13,125,842
==========
Class A shares:
Net asset value per share
(net assets of $109,309,758 / 6,749,825 shares of
beneficial interest outstanding) $16.19
======
Offering price per share (100 / 94.25 of net asset value
per share) $17.18
======
Class B shares:
Net asset value and offering price per share
(net assets of $60,558,589 / 3,789,967 shares of
beneficial interest outstanding) $15.98
======
Class C shares:
Net asset value and offering price per share
(net assets of $31,125,989 / 1,949,433 shares of
beneficial interest outstanding) $15.97
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $10,398,569 / 636,617
shares of beneficial interest outstanding) $16.33
======
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
------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000
------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 3,340,385
Interest 390,256
Foreign taxes withheld (173,913)
-----------
Total investment income $ 3,556,728
-----------
Expenses -
Management fee $ 978,083
Shareholder servicing agent fee 97,809
Distribution and service fee (Class A) 179,177
Distribution and service fee (Class B) 307,656
Distribution and service fee (Class C) 132,709
Administrative fee 15,845
Custodian fee 184,786
Printing 29,576
Postage 22,087
Auditing fees 17,214
Legal fees 1,645
Miscellaneous 110,791
-----------
Total expenses $ 2,077,378
Fees paid indirectly (18,714)
Reduction of expenses by investment adviser (69,805)
-----------
Net expenses $ 1,988,859
-----------
Net investment income $ 1,567,869
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 7,385,933
Foreign currency transactions (130,537)
-----------
Net realized gain on investments and foreign
currency transactions $ 7,255,396
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 4,892,017
Translation of assets and liabilities in foreign currencies (13,293)
-----------
Net unrealized gain on investments and foreign
currency translation $ 4,878,724
-----------
Net realized and unrealized gain on investments
and foreign currency $12,134,120
-----------
Increase in net assets from operations $13,701,989
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,567,869 $ 1,580
Net realized gain on investments and foreign currency
transactions 7,255,396 665,065
Net unrealized gain on investments and foreign currency
translation 4,878,724 3,694,691
------------- -------------
Increase in net assets from operations $ 13,701,989 $ 4,361,336
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (29,205) $ (5,023)
From net investment income (Class B) -- (630)
From net investment income (Class C) -- (186)
From net investment income (Class I) (4,468) (1,934)
From net realized gain on investments and foreign currency
transactions (Class A) (622,589) (103,796)
From net realized gain on investments and foreign currency
transactions (Class B) (413,053) (70,643)
From net realized gain on investments and foreign currency
transactions (Class C) (144,208) (19,022)
From net realized gain on investments and foreign currency
transactions (Class I) (36,231) (17,130)
------------- -------------
Total distributions declared to shareholders $ (1,249,754) $ (218,364)
------------- -------------
Net increase in net assets from fund share transactions $ 166,568,540 $ 19,419,365
------------- -------------
Total increase in net assets $ 179,020,775 $ 23,562,337
Net assets:
At beginning of period 32,372,130 8,809,793
------------- -------------
At end of period (including accumulated undistributed net
investment income of $1,401,463 and $31,465, respectively) $ 211,392,905 $ 32,372,130
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
--------------------------- AUGUST 31,
2000 1999 1998 1997*
------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $12.47 $10.24 $10.95 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.30 $ 0.03 $ 0.03 $ 0.06
Net realized and unrealized gain on investments and foreign currency 3.78 2.36 0.35 0.89
------ ------ ------ ------
Total from investment operations $ 4.08 $ 2.39 $ 0.38 $ 0.95
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.02) $(0.01) $(0.05) $ --
From net realized gain on investments and foreign currency transactions (0.34) (0.15) (1.04) --
------ ------ ------ ------
Total distributions declared to shareholders $(0.36) $(0.16) $(1.09) $ --
------ ------ ------ ------
Net asset value - end of period $16.19 $12.47 $10.24 $10.95
====== ====== ====== ======
Total return(+) 33.00% 23.53% 3.92% 9.60%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.77% 1.72% 1.76% 1.68%+
Net investment income 1.91% 0.27% 0.28% 0.71%+
Portfolio turnover 123% 136% 89% 137%
Net assets at end of period (000 Omitted) $109,310 $16,839 $3,741 $1,314
(S) Subject to reimbursement by the fund, the investment adviser voluntarily agreed under a temporary expense
reimbursement agreement to pay all of the fund's operating expenses, exclusive of management and distribution and
service fees. In consideration, the fund pays the investment adviser a reimbursement fee not greater than 0.40% of
average daily net assets. For the period ended August 31, 1997, the investment adviser agreed to maintain the
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.
To the extent actual expenses were over these limitations, the net investment income (loss) per share and the
ratios would have been:
Net investment income (loss) $ 0.29 $(0.05) $(0.19) $(0.01)
Ratios (to average net assets):
Expenses## 1.84% 2.45% 3.99% 3.31%+
Net investment
income (loss) 1.84% (0.46)% (1.94)% (0.91)%+
* 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.
## Ratios do not reflect expense reductions from directed brokerage and 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.
<PAGE>
FINANCIAL STATEMENTS -- continued
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights - continued
---------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
------------------------------ AUGUST 31,
2000 1999 1998*
---------------------------------------------------------------------------------------------------------------
CLASS B
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.37 $10.21 $ 9.93
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $ 0.18 $(0.04) $(0.03)
Net realized and unrealized gain on investments
and foreign currency 3.77 2.35 0.31
------ ------ ------
Total from investment operations $ 3.95 $ 2.31 $ 0.28
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.00)+++ $ --
From net realized gain on investments and
foreign currency transactions (0.34) (0.15) --
------ ------ ------
Total distributions declared to shareholders $(0.34) $(0.15) $ --
------ ------ ------
Net asset value - end of period $15.98 $12.37 $10.21
====== ====== ======
Total return 32.14% 22.84% 2.82%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.42% 2.37% 2.41%+
Net investment income (loss) 1.19% (0.36)% (0.29)%+
Portfolio turnover 123% 136% 89%
Net assets at end of period (000 Omitted) $60,559 $10,683 $3,141
(S) Subject to reimbursement by the fund, the investment adviser voluntarily agreed under a temporary expense
reimbursement agreement to pay all of the fund's operating expenses, exclusive of management and distribution and
service fees. In consideration, the fund pays the investment adviser a reimbursement fee not greater than 0.40% of
average daily net assets. To the extent actual expenses were over this limitation, the net investment income
(loss) per share and the ratios would have been:
Net investment income (loss) $ 0.17 $(0.12) $(0.24)
Ratios (to average net assets):
Expenses## 2.49% 3.10% 4.56%+
Net investment income (loss) 1.12% (1.09)% (2.43)%+
* For the period from the inception of Class B shares, 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.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
---------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
---------------------------- AUGUST 31,
2000 1999 1998*
---------------------------------------------------------------------------------------------------------------
CLASS C
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.36 $10.21 $ 9.93
------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $ 0.19 $(0.04) $(0.01)
Net realized and unrealized gain on investments
and foreign currency 3.76 2.34 0.29
------ ------ ------
Total from investment operations $ 3.95 $ 2.30 $ 0.28
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.00)+++ $ --
From net realized gain on investments and
foreign currency transactions (0.34) (0.15) --
------ ------ ------
Total distributions declared to shareholders $(0.34) $(0.15) --
------ ------ ------
Net asset value - end of period $15.97 $12.36 $10.21
====== ====== ======
Total return 32.17% 22.74% 2.82%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.42% 2.37% 2.40%+
Net investment income (loss) 1.28% (0.33)% (0.10)%+
Portfolio turnover 123% 136% 89%
Net assets at end of period (000 Omitted) $31,126 $3,802 $729
(S) Subject to reimbursement by the fund, the investment adviser voluntarily agreed under a temporary expense
reimbursement agreement to pay all of the fund's operating expenses, exclusive of management and distribution and
service fees. In consideration, the fund pays the investment adviser a reimbursement fee not greater than 0.40% of
average daily net assets. To the extent actual expenses were over this limitation, the net investment income
(loss) per share and the ratios would have been:
Net investment income (loss) $ 0.18 $(0.12) $(0.22)
Ratios (to average net assets):
Expenses## 2.49% 3.10% 4.55%+
Net investment income (loss) 1.21% (1.06)% (2.24)%+
* For the period from the inception of Class C shares, 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.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
---------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
-------------------------------- AUGUST 31,
2000 1999 1998 1997*
--------------------------------------------------------------------------------------------------------------
CLASS I
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.55 $10.26 $10.95 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.26 $ 0.05 $ 0.06 $ 0.07
Net realized and unrealized gain on investments and
foreign currency 3.90 2.42 0.34 0.88
------ ------ ------ ------
Total from investment operations $ 4.16 $ 2.47 $ 0.40 $ 0.95
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.04) $(0.02) $(0.05) $ --
From net realized gain on investments and foreign
currency transactions (0.34) (0.16) (1.04) --
------ ------ ------ ------
Total distributions declared to shareholders $(0.38) $(0.18) $(1.09) $ --
------ ------ ------ ------
Net asset value - end of period $16.33 $12.55 $10.26 $10.95
====== ====== ====== ======
Total return 33.61% 24.08% 4.13% 9.60%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.42% 1.37% 1.40% 1.68%+
Net investment income 1.66% 0.47% 0.53% 0.85%+
Portfolio turnover 123% 136% 89% 137%
Net assets at end of period
(000 Omitted) $10,398 $1,047 $1,199 $1,022
(S) Subject to reimbursement by the fund, the investment adviser voluntarily agreed under a temporary expense
reimbursement agreement to pay all of the fund's operating expenses, exclusive of management fee. In
consideration, the fund pays the investment adviser a reimbursement fee not greater than 0.40% of average daily
net assets. For the period ended August 31, 1997, the investment adviser agreed to maintain the expenses of the
fund at not more than 1.75% of the fund's average daily net assets. The investment adviser and shareholder
servicing agent did not impose any of their fees for the period ended August 31, 1997. To the extent actual
expenses were over these limitations, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.25 $(0.03) $(0.15) $ --
Ratios (to average net assets):
Expenses## 1.49% 2.10% 3.55% 2.81%+
Net investment income (loss) 1.59% (0.26)% (1.61)% (0.28)%+
* 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.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(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. The fund can
invest in foreign securities. Investments in foreign securities are vulnerable
to the effects of changes in the relative values of the local currency and the
U.S. dollar and to the effects of changes in each country's legal, political,
and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there are
no such quotations or valuations are valued in good faith, at fair value, by the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the fund to certain qualified
institutions (the "Borrowers") approved by the fund. The loans are
collateralized at all times by cash and/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.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the fund and the lending agent. Income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for in
the same manner as other dividend and interest income.
At August 31, 2000, the value of securities loaned was $16,517,383. These loans
were collateralized by U.S. Treasury securities of $2,516,529 and cash of
$14,728,387 which was invested in the following short-term obligation:
IDENTIFIED COST
SHARES AND VALUE
------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 14,728,387 $14,728,387
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 reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. During the period, the fund's custodian fees were reduced by $7,020 under
this arrangement. The fund has entered into a directed brokerage agreement,
under which the broker will credit the fund a portion of the commissions
generated, to offset certain expenses of the fund. For the period, the fund's
custodian fees were reduced by $11,694 under this agreement. These amounts are
shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended August 31, 2000, accumulated undistributed net investment income
decreased by $164,198 accumulated undistributed net realized gain on investments
and foreign currency transactions increased by $100,425 and paid-in capital
increased by $63,773 due to differences between book and tax accounting for
foreign currency transactions. This change had no effect on the net assets or
net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that differ in their respective distribution and service fees.
All shareholders bear the common expenses of the fund based on daily net assets
of each class, without distinction between share classes. Dividends are declared
separately for each class. Differences in per share dividend rates are generally
due to differences in separate class expenses. Class B shares will convert to
Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 1.00% 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
August 31, 2000, aggregate unreimbursed expenses amounted to $292,629.
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 incurs an administrative fee at the following annual
percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$167,112 for the year ended August 31, 2000, as its portion of the sales charge
on sales of Class A shares of the fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD up to 0.35% 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 $5,212 for the year ended August 31, 2000.
Fees incurred under the distribution plan during the year ended August 31, 2000,
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 $40 and $4 for Class B and Class C shares, respectively, for the
year ended August 31, 2000. Fees incurred under the distribution plan during the
year ended August 31, 2000, were 1.00% and 1.00% of average daily net assets
attributable to Class B and Class C shares, respectively, on an annualized
basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended August 31, 2000,
were $13,733, $69,534 and $3,475 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$270,166,675 and $116,388,125, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $199,347,714
------------
Gross unrealized appreciation $ 16,147,855
Gross unrealized depreciation (9,968,369)
------------
Net unrealized appreciation $ 6,179,486
============
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
<TABLE>
<CAPTION>
Class A shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,762,714 $ 155,804,018 1,418,503 $ 15,861,961
Shares issued to shareholders in
reinvestment of distributions 38,629 584,112 9,757 104,402
Shares reacquired (4,401,882) (70,876,231) (443,305) (5,020,037)
------------- ------------- ------------- -------------
Net increase 5,399,461 $ 85,511,899 984,955 $ 10,946,326
============= ============= ============= =============
<CAPTION>
Class B shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,651,628 $ 57,652,124 802,162 $ 8,858,974
Shares issued to shareholders in
reinvestment of distributions 25,657 384,601 6,545 69,831
Shares reacquired (750,837) (11,885,597) (252,900) (2,765,499)
------------- ------------- ------------- -------------
Net increase 2,926,448 $ 46,151,128 555,807 $ 6,163,306
============= ============= ============= =============
<CAPTION>
Class C shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,502,389 $ 39,526,126 293,111 $ 3,297,967
Shares issued to shareholders in
reinvestment of distributions 9,306 139,302 1,735 18,473
Shares reacquired (869,909) (13,671,152) (58,626) (642,674)
------------- ------------- ------------- -------------
Net increase 1,641,786 $ 25,994,276 236,220 $ 2,673,766
============= ============= ============= =============
<CAPTION>
Class I shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,088,856 $ 17,683,646 20,210 $ 228,697
Shares issued to shareholders in
reinvestment of distributions 2,675 40,695 1,775 19,062
Shares reacquired (538,370) (8,813,104) (55,359) (611,792)
------------- ------------- ------------- -------------
Net increase (decrease) 553,161 $ 8,911,237 (33,374) $ (364,033)
============= ============= ============= =============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. Interest expense incurred
on the borrowings amounted to $46 for the year. The average dollar amount of
borrowings was $234,700 and the weighted average interest rate on these
borrowings was 7.00%. A commitment fee of $885 which is based on the average
daily unused portion of the line of credit is included in miscellaneous expense.
--------------------------------------------
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>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of the MFS Series Trust I and the Shareholders of MFS Research
International Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Research International Fund (the Fund), including the schedule of portfolio
investments, as of August 31, 2000, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
three years in the period then ended, and for the period from January 2, 1997
(commencement of operations) to August 31, 1997. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at August 31, 2000, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Research International Fund at August 31, 2000, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the three
years in the period then ended, and for the period from January 2, 1997
(commencement of operations) to August 31, 1997, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
October 9, 2000
<PAGE>
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
--------------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 2000.
THE FUND HAS DESIGNATED $695,804 AS A CAPITAL GAIN DIVIDEND FOR THE YEAR ENDED
AUGUST 31, 2000.
FOR THE YEAR ENDED AUGUST 31, 2000, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS IS 0.70%.
FOR THE YEAR ENDED AUGUST 31, 2000, INCOME FROM FOREIGN SOURCES WAS $3,136,145,
AND THE FUND DESIGNATED A FOREIGN TAX CREDIT OF $135,654.
<PAGE>
MFS(R) RESEARCH INTERNATIONAL FUND
<TABLE>
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Marshall N. Cohan+ - Private Investor Mark E. Bradley*
Robert Flaherty*
Lawrence H. Cohn, M.D.+ - Chief of Cardiac Laura Healy*
Surgery, Brigham and Women's Hospital; Ellen Moynihan*
Professor of Surgery, Harvard Medical School
SECRETARY
The Hon. Sir J. David Gibbons, KBE+ - Chief Stephen E. Cavan*
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Colonial Insurance Company, Ltd. ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Abby M. O'Neill+ - Private Investor
CUSTODIAN
Walter E. Robb, III+ - President and Treasurer, State Street Bank and Trust Company
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting AUDITORS
Group, Inc. (office services) Ernst & Young LLP
Arnold D. Scott* - Senior Executive INVESTOR INFORMATION
Vice President, Director, and Secretary, For information on MFS mutual funds, call
MFS Investment Management your investment professional or, for an
information kit, call toll free: 1-800-637-2929
Jeffrey L. Shames* - Chairman and Chief any business day from 9 a.m. to 5 p.m.
Executive Officer, MFS Investment Eastern time (or leave a message anytime).
Management
INVESTOR SERVICE
J. Dale Sherratt+ - President, Insight Resources, MFS Service Center, Inc.
Inc. (acquisition planning specialists) P.O. Box 2281
Boston, MA 02107-9906
Ward Smith+ - Former Chairman
(until 1994), NACCO Industries For general information, call toll free:
(holding company) 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTMENT ADVISER
Massachusetts Financial Services Company For service to speech- or hearing-impaired,
500 Boylston Street call toll free: 1-800-637-6576 any business day
Boston, MA 02116-3741 from 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be equipped with
DISTRIBUTOR a Telecommunications Device for the Deaf.)
MFS Fund Distributors, Inc.
500 Boylston Street For share prices, account balances, exchanges,
Boston, MA 02116-3741 or stock and bond outlooks, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime
CHAIRMAN AND PRESIDENT from a touch-tone telephone.
Jeffrey L. Shames*
WORLD WIDE WEB
DIRECTOR OF INTERNATIONAL www.mfs.com
EQUITY RESEARCH
David A. Antonelli*
TREASURER
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</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)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MRI-2 10/00 25M 99/299/399/899
