<PAGE>
[LOGO] M F S(SM) Annual Report
INVESTMENT MANAGEMENT for Year Ended
September 30, 1997
MFS(R) RESEARCH FUND
[GRAPHIC OMITTED]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
A Discussion with the Director of Research ................................ 2
Fund Facts ................................................................ 5
Performance Summary ....................................................... 5
Portfolio Concentration ................................................... 8
Tax Form Summary .......................................................... 8
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 21
Independent Auditors' Report .............................................. 28
Trustees and Officers ..................................................... 29
HIGHLIGHTS
o FOR THE 12 MONTHS ENDED SEPTEMBER 30, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 28.72%, CLASS B SHARES
27.88%, CLASS C SHARES 27.87%, AND CLASS I SHARES 29.06%. (SEE PERFORMANCE
SUMMARY FOR MORE INFORMATION.)
o ALMOST ALL OF THE FUND'S UNDERPERFORMANCE RELATIVE TO ITS BENCHMARK
OCCURRED IN THE FIRST TWO QUARTERS OF ITS FISCAL YEAR, WHEN MOST OF THE
RETURNS FROM THE STANDARD & POOR'S 500 COMPOSITE INDEX CAME FROM THE
BIGGEST COMPANIES IN THE INDEX, NOT THE BROADER MARKET IN WHICH THE FUND
INVESTS.
o TECHNOLOGY AND FINANCIAL SERVICES REPRESENT THE LARGEST SECTORS IN THE
FUND. TECHNOLOGY IS LED BY THE EVER- INCREASING DEMAND FOR INFORMATION AND
PRODUCTIVITY, WHILE FINANCIAL SERVICES COMPANIES, PARTICULARLY IN
INSURANCE, HAVE BENEFITED FROM RESTRUCTURINGS AND CONSOLIDATIONS.
o STOCKS THAT HAVE MADE GREATER-THAN- EXPECTED CONTRIBUTIONS TO PERFORMANCE
INCLUDE COMPAQ COMPUTER, COLGATE- PALMOLIVE, AND SMALL-COMPANY STOCKS SUCH
AS EARTHGRAINS, A BREAD BAKERY COMPANY.
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still uncomfortably
high. The rapid pace of growth seen in the first quarter slowed in the second
quarter, to an annual rate of 3.3%. While real (inflation-adjusted) growth could
moderate further in the third quarter, we believe economic momentum will carry
well into the first quarter of 1998. Although the economy appears to be in a
modest lull, the money supply is increasing at a rapid rate, and it still
appears that Christmas sales could be quite good. Because economic growth
continues to be impressive, markets are likely to begin focusing on the Federal
Reserve Board's willingness to raise interest rates.
Although the U.S. equity market has seen increased price volatility of late, we
have been surprised by its overall strength thus far in 1997. Much of this is
the result of continuing gains in corporate earnings. Even as the current
recovery enters its seventh year, more and more U.S. companies have been
exceeding analysts' earnings estimates. In the first quarter of 1997, for
example, two-thirds of all companies met or exceeded analysts' expectations, a
trend that could be an important indicator of the U.S. equity market's future
direction. However, while the near-term outlook for profits is generally
favorable, we believe equity valuations have risen to a point where a cautious
investment approach seems warranted.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
October 15, 1997
<PAGE>
A DISCUSSION WITH THE DIRECTOR OF RESEARCH
[Photo of Kevin R. Parke]
Kevin R. Parke
For the 12 months ended September 30, 1997, Class A shares of the Fund provided
a total return of 28.72%, Class B shares 27.88%, Class C shares 27.87%, and
Class I shares 29.06%. These returns assume the reinvestment of distributions
but exclude the effects of any sales charges and compare to a 40.45% return for
the Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged
index of common stock total return performance, for the same period.
Q. WHAT DO YOU SEE AS SOME REASONS FOR THE FUND'S PERFORMANCE OVER THE PAST
YEAR?
A. There were two reasons for the underperformance. The fourth quarter of 1996
and the first quarter of 1997 were particularly narrow in the marketplace,
with the largest-capitalized stocks in the S&P 500 leading the other indices
by a wide margin. While the S&P 500 was up about 40%, the Russell 2000 Total
Return Index (the Russell 2000) was up 31%, and the NASDAQ industrials were
up 24%. (The Russell 2000 is comprised of 2,000 of the smallest
U.S.-domiciled company common stocks that are traded on the New York Stock
Exchange, the American Stock Exchange, and NASDAQ.) So most of the returns in
those two quarters came from the largest companies in the S&P 500, which
outperformed the average stock by about 50%. By its nature, MFS(R) Research
Fund is more diversified because it includes the best ideas of the analysts
across all market capitalizations. For the past two quarters, the S&P 500 was
up 26.3%, and the Research Fund was closer, up 26.1%; so it was the first six
months that created the gap. Second, a few of the industry groups in the Fund
underperformed, and some stocks did not meet earnings expectations.
Q. IN THE LAST REPORT, FINANCIAL SERVICES AND TECHNOLOGY WERE THE TWO LARGEST
SECTORS IN THE FUND. HAS THAT CHANGED? WHY DO THE ANALYSTS THINK THESE
SECTORS ARE STILL ATTRACTIVE?
A. Yes, they're still the largest sectors. Our attraction to the technology
industry is being driven by the future demand we see for technology,
including the need to get information faster, to manipulate it better, and to
use it as a competitive tool. The demand for technology, not only in this
country but around the world, has been tremendous, and we see that trend
continuing for the next three to five years. Technology is now 21% of the
portfolio, with names like Compaq Computer, Intel, Oracle Systems, and
Microsoft among the top 10 holdings. The key is to find companies that are
adding value and can sustain profit growth, not just the ones that have had
onetime increases in earnings. Financial services is being driven by the
insurance weighting. The Fund has 18% of its assets in financial services,
and about half of that is in insurance, almost triple the insurance weighting
for the S&P 500.
Q. WHY DOES INSURANCE LOOK SO GOOD?
A. We think there are more opportunities for significant restructurings and
consolidations in this business. One of the analysts' top picks is Conseco.
The company is growing its earnings by consolidating a very fragmented life
insurance business, cutting costs, and adding value. Equitable of Iowa, which
was another of our top insurance positions, was bought out by ING Barings
this year, and we think there will be more buyouts of insurance companies in
the future. Also, the industry's profit growth looks good because companies
are more capital focused than they were two years ago; that is, they're
buying back stock and shedding losing operations. Their earnings growth also
looks good. The greatest beneficiary of restructuring we own is CIGNA, which
is in every aspect of insurance: property casualty, life, and health. CIGNA
was up 43% over the past year, and the analysts think it will continue to
restructure and perform well.
Q. ANY OTHER SECTORS THE FUND IS EMPHASIZING NOW, AND WHY?
A. Retailing is now a top five sector. Our weighting is about three percentage
points higher than that of the S&P 500. Here, the emphasis has been on the
drug store industry, with companies like Rite Aid and CVS. We've seen a big
consolidation in that industry, driven mainly by health maintenance
organizations (HMOs) that only want to deal with certain pharmacies, with the
result that the big are getting bigger. That, combined with drug usage, which
is going up as the population gets older, is also helping this business.
Getting back to financial services, the Fund holds companies like Tyco
International, which just bought ADT, as well as AccuStaff and First Data in
the processing area. At the same time, aerospace has been cut back. It used
to comprise 8% or 9% of the portfolio; now it's 4% to 5% because
consolidation in that industry has occurred so quickly there just aren't as
many companies to buy.
Q. WHAT ABOUT INDIVIDUAL STOCKS? COULD YOU TALK ABOUT SOME OF THE FUND'S TOP
HOLDINGS, AND WHY THEY PERFORMED WELL?
A. Compaq Computer went up 184%, driven by good margins, higher valuations, and
better utilization of its working capital. Microsoft was up 97%. Both of
these companies are benefiting from the growth in demand for technology.
Colgate-Palmolive, which was up 62%, dominates in Latin America, where it has
its greatest foreign exposure. We've also seen good performance from several
small stocks, like Earthgrains, a bread bakery company that was up 131% in
the past 12 months.
Q. NOW, WHAT ABOUT SOME STOCKS OR SECTORS THAT DID NOT PERFORM AS WELL AS YOU
WOULD HAVE LIKED?
A. Advanta, a credit card company, is down about 40% because of credit card
losses that exceeded expectations. This is a fallout of the heavy consumer
debt load, which most of the other companies have gotten through pretty well.
There have also been earnings disappointments at St. Jude Medical, Gymboree,
and Wisconsin Central Transportation.
Q. HAVE THERE BEEN ANY CHANGES IN THE SYSTEM OF USING THE TEAM OF MFS RESEARCH
ANALYSTS TO SELECT STOCKS FOR THE FUND?
A. We now have 30 analysts, a strong increase over 12 months ago when we had 24.
We have hired people to cover international as well as domestic markets. It
means we can cover more companies and do more in-depth research. Most of the
value added to the Fund in the past five years has been from stock, not
industry, selection. So if you want the best stocks in each industry group,
it follows that the more people you have with in-depth, specialized
information, the better your numbers should be.
Q. LOOKING AHEAD, WHAT KIND OF MARKET OR ECONOMIC ENVIRONMENT DO YOU SEE, AND
HOW MIGHT THIS AFFECT SOME OF THE ANALYSTS' INVESTMENT DECISIONS?
A. The economy seems to be showing signs of slowing. Consumer demand is down,
while auto and retail sales are weak. We expect the economy to stay
relatively weak, with little or no acceleration. This could cause more
earnings disappointments, so you have to be increasingly selective about what
stocks you own. If earnings risk increases in the next 12 months, more
homework will be needed.
/s/ Kevin R. Parke
Kevin R. Parke
Director of Research
The committee of MFS research analysts is responsible for the day-to-day
management of the Fund under the general supervision of Mr. Parke.
<PAGE>
FUND FACTS
OBJECTIVE: THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE LONG-TERM
GROWTH OF CAPITAL AND FUTURE INCOME.
COMMENCEMENT OF INVESTMENT OPERATIONS: OCTOBER 13, 1971
CLASS INCEPTION: CLASS A OCTOBER 13, 1971
CLASS B SEPTEMBER 7, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $4.5 BILLION NET ASSETS AS OF SEPTEMBER 30, 1997
PERFORMANCE SUMMARY
The information below and on the following page illustrates the historical
performance of MFS Research Fund -- Class A shares in comparison to various
market indicators. Class A share performance results reflect the deduction of
the 5.75% maximum sales charge; 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, based on differences in charges and
fees paid by shareholders investing in different classes. It is not possible to
invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the 5-year period ended
September 30, 1997)
Period MFS Research Consumer Price S&P 500
End Fund - Class A Index - U.S. Composite Index
--- -------------- ------------ ---------------
9/30/92 $ 9,427 $10,000 $10,000
9/30/93 12,092 10,269 11,300
9/30/94 13,026 10,573 11,717
9/30/95 16,217 10,842 15,202
9/30/96 20,521 11,168 18,293
9/30/97 26,414 11,401 25,692
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the 10-year period ended
September 30, 1997)
Period MFS Research Consumer Price S&P 500
End Fund - Class A Index - U.S. Composite Index
--- -------------- ------------ ---------------
9/30/87 $ 9,421 $10,000 $10,000
9/30/89 10,100 10,870 11,656
9/30/91 11,400 11,931 13,876
9/30/93 16,347 12,618 17,413
9/30/95 21,922 13,322 23,425
9/30/97 35,707 14,009 39,590
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Fund (Class A) including 5.75% sales
charge (SEC results) +21.32% +24.09% +21.44% +13.57%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Fund (Class A) at net asset value +28.72% +26.57% +22.88% +14.25%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Fund (Class B) with CDSC (SEC results) +23.88% +25.02% +21.99% +13.92%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Fund (Class B) at net asset value +27.88% +25.66% +22.17% +13.92%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Fund (Class C) with CDSC (SEC results) +26.87% +25.70% +22.23% +13.95%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Fund (Class C) at net asset value +27.87% +25.70% +22.23% +13.95%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Research Fund (Class I) at net asset value +29.06% +26.68% +22.95% +14.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Average growth fund* +33.52% +24.84% +18.62% +13.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index** +40.45% +29.92% +20.77% +14.75%
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Price Index+** + 2.10% + 2.55% + 2.66% + 3.43%
- -----------------------------------------------------------------------------------------------------------------------------------
* Source: Lipper Analytical Services, Inc.
** Source: CDA/Wiesenberger.
+ The Consumer Price Index is published by the U.S. Bureau of Labor Statistics and measures the cost of living (inflation).
</TABLE>
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.
Class A share SEC results include the maximum 5.75% sales charge. Class B share
SEC results reflect the applicable contingent deferred sales charge (CDSC),
which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge but, along with Class B shares, have higher
annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares
have no sales charge or Rule 12b-1 fees and are only available to certain
institutional investors.
Class B and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods prior
to the inception of Class B and Class C shares. Because operating expenses
attributable to Class B and Class C shares are higher than those of Class A
shares, Class B and Class C share performance generally would have been lower
than Class A share performance. The Class A share performance included within
the Class B and Class C share SEC performance has been adjusted to reflect the
CDSC generally applicable to Class B and Class C shares rather than the initial
sales charge generally applicable to Class A shares.
Class I share results include the performance and the operating expenses (e.g.,
Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the inception
of Class I shares. Because operating expenses attributable to Class A shares are
greater than those of Class I shares, Class I share performance generally would
have been higher than Class A share performance. The Class A share performance
included within the Class I share performance has been adjusted to reflect the
fact that Class I shares have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.
<PAGE>
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 1997
TOP 10 HOLDINGS
COMPAQ COMPUTER CORP. HFS, INC.
Personal computer company Franchiser of hotels and real estate
companies
TYCO INTERNATIONAL LTD.
Manufacturer of fire protection, UNITED TECHNOLOGIES CORP.
packaging, and electronic equipment Aerospace, defense, and building
equipment company
MICROSOFT CORP.
Computer software and systems company ORACLE SYSTEMS CORP.
Developer and manufacturer of
INTEL CORP. database software
Semiconductor manufacturer
PHILIP MORRIS COS., INC.
COLGATE-PALMOLIVE CO. Tobacco, food, and beverage
Cosmetics and toiletries company conglomerate
BRISTOL-MYERS SQUIBB CO.
Pharmaceutical products company
LARGEST SECTORS
Other Sectors 30.4%
Technology 21.3%
Financial Services 18.1%
Consumer Staples 12.7%
Health Care 9.1%
Retailing 8.4%
For a more complete breakdown, refer to the Portfolio of Investments.
TAX FORM SUMMARY
IN JANUARY 1998, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1997.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
THE FUND HAS DESIGNATED $44,731,747 AS A LONG-TERM CAPITAL GAIN.
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED SEPTEMBER 30, 1997, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 30.41%.
<PAGE>
PORTFOLIO OF INVESTMENTS - September 30, 1997
Stocks - 96.5%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 88.2%
Aerospace - 3.3%
Lockheed-Martin Corp. 603,400 $ 64,337,525
United Technologies Corp. 1,041,700 84,377,700
-------------
$ 148,715,225
- --------------------------------------------------------------------------------------------------
Agricultural Products - 0.6%
Case Corp. 429,300 $ 28,602,113
- --------------------------------------------------------------------------------------------------
Apparel and Textiles - 0.8%
Reebok International Ltd. 776,200 $ 37,791,238
- --------------------------------------------------------------------------------------------------
Banks and Credit Companies - 4.5%
BankBoston Corp. 285,520 $ 25,250,675
Chase Manhattan Corp. 538,904 63,590,672
Comerica, Inc. 496,500 39,192,469
Fleet/Norstar Financial Group, Inc. 437,600 28,690,150
PNC Bank Corp. 515,200 25,148,200
Wells Fargo & Co. 87,300 24,007,500
-------------
$ 205,879,666
- --------------------------------------------------------------------------------------------------
Building - 0.9%
Newport News Shipbuilding, Inc. 1,683,500 $ 39,667,469
- --------------------------------------------------------------------------------------------------
Business Machines - 0.3%
Sun Microsystems, Inc.* 257,100 $ 12,035,494
- --------------------------------------------------------------------------------------------------
Business Services - 1.5%
AccuStaff, Inc.* 762,400 $ 24,015,600
First Data Corp. 1,204,300 45,236,519
-------------
$ 69,252,119
- --------------------------------------------------------------------------------------------------
Chemicals - 3.4%
Air Products & Chemicals, Inc. 783,400 $ 64,973,237
duPont (E. I.) de Nemours & Co., Inc. 1,178,600 72,557,562
Ferro Corp. 366,600 13,999,538
-------------
$ 151,530,337
- --------------------------------------------------------------------------------------------------
Computer Hardware - 2.5%
Compaq Computer Corp.* 1,507,500 $ 112,685,625
- --------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 3.9%
Adobe Systems, Inc. 655,000 $ 32,995,625
Electronic Arts, Inc.* 935,900 36,149,137
Microsoft Corp.* 799,100 105,730,919
-------------
$ 174,875,681
- --------------------------------------------------------------------------------------------------
Computer Software - Systems - 6.5%
BMC Software, Inc.* 670,700 $ 43,427,825
Cadence Design Systems, Inc.* 858,875 45,949,812
Computer Associates International, Inc. 768,050 55,155,591
Compuware Corp.* 595,400 36,021,700
Oracle Systems Corp.* 2,251,188 82,027,645
Sybase, Inc.* 531,900 9,574,200
Synopsys, Inc.* 551,000 23,417,500
-------------
$ 295,574,273
- --------------------------------------------------------------------------------------------------
Construction Services - 0.4%
Champion International Corp. 293,600 $ 17,891,250
- --------------------------------------------------------------------------------------------------
Consumer Goods and Services - 10.2%
Clorox Co. 253,700 $ 18,805,512
Colgate-Palmolive Co. 1,369,200 95,416,125
Gillette Co. 777,100 67,073,444
Philip Morris Cos., Inc. 1,961,600 81,529,000
Procter & Gamble Co. 885,400 61,147,937
Revlon, Inc., "A"* 564,800 27,992,900
Tyco International Ltd.* 1,364,765 111,996,028
-------------
$ 463,960,946
- --------------------------------------------------------------------------------------------------
Containers - 0.6%
Stone Container Corp. 1,858,400 $ 28,921,350
- --------------------------------------------------------------------------------------------------
Electronics - 3.1%
Analog Devices, Inc.* 592,100 $ 19,835,347
Intel Corp. 1,071,800 98,940,537
Teradyne, Inc.* 391,600 21,072,975
-------------
$ 139,848,859
- --------------------------------------------------------------------------------------------------
Energy - 0.1%
Calenergy, Inc. 137,100 $ 4,558,575
- --------------------------------------------------------------------------------------------------
Entertainment - 1.1%
Clear Channel Communications, Inc.* 421,800 $ 27,364,275
Jacor Communications, Inc., "A"* 521,000 23,021,688
-------------
$ 50,385,963
- --------------------------------------------------------------------------------------------------
Financial Institutions - 3.9%
Advanta Corp.,"B" 693,700 $ 18,903,325
American Express Co. 308,600 25,266,625
Associates First Capital Corp., "A" 374,900 23,337,525
Federal National Mortgage Assn. 705,600 33,163,200
Franklin Resources, Inc. 294,850 27,457,906
Morgan Stanley, Dean Witter, Discover and Co. 331,800 17,937,938
Union Planters Corp. 544,637 30,431,592
-------------
$ 176,498,111
- --------------------------------------------------------------------------------------------------
Food and Beverage Products - 2.5%
Coca-Cola Co. 1,205,500 $ 73,460,156
Earthgrains Co. 393,900 16,937,700
McCormick & Co., Inc. 974,800 23,456,125
------------------
$ 113,853,981
- --------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.3%
Kimberly-Clark Corp. 1,224,700 $ 59,933,756
- --------------------------------------------------------------------------------------------------
Insurance - 8.5%
Allstate Corp. 424,810 $ 34,144,104
Chubb Corp. 448,600 31,878,637
CIGNA Corp. 402,400 74,947,000
Conseco, Inc. 1,595,500 77,880,344
Frontier Insurance Group, Inc. 308,800 11,734,400
Hartford Financial Services Group, Inc. 527,100 45,363,544
Lincoln National Corp. 271,700 18,917,112
PennCorp Financial Group, Inc. 577,815 17,912,265
Reliastar Financial Corp. 684,752 27,261,689
Travelers Group, Inc. 671,000 45,795,750
-------------
$ 385,834,845
- --------------------------------------------------------------------------------------------------
Medical and Health Products - 2.6%
Boston Scientific Corp.* 500,600 $ 27,626,862
Bristol-Myers Squibb Co. 982,300 81,285,325
Uromed Corp.*++ 1,496,800 9,916,300
-------------
$ 118,828,487
- --------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 6.0%
Cardinal Health, Inc. 334,600 $ 23,756,600
HBO & Co. 1,383,200 52,215,800
HEALTHSOUTH Corp.* 254,500 6,791,969
Horizon CMS Healthcare Corp.* 1,177,600 26,348,800
Medpartners, Inc.* 553,300 11,861,369
St. Jude Medical, Inc.* 803,950 28,188,497
Tenet Healthcare Corp.* 819,030 23,854,248
United Healthcare Corp. 1,559,600 77,980,000
Vencor, Inc.* 557,200 22,984,500
-------------
$ 273,981,783
- --------------------------------------------------------------------------------------------------
Office Equipment - 0.4%
Office Depot, Inc.* 810,800 $ 16,368,025
- --------------------------------------------------------------------------------------------------
Oil Services - 1.3%
Baker Hughes, Inc. 819,000 35,831,250
Burlington Resources 469,900 24,111,744
-------------
$ 59,942,994
- --------------------------------------------------------------------------------------------------
Oils - 1.0%
Apache Corp. 276,300 $ 11,846,363
Chevron Corp. 291,200 24,224,200
Enron Oil & Gas Co. 452,200 10,061,450
-------------
$ 46,132,013
- --------------------------------------------------------------------------------------------------
Pollution Control - 1.0%
Browning Ferris Industries, Inc. 701,100 $ 26,685,619
Waste Management, Inc. 580,600 20,284,712
-------------
$ 46,970,331
- --------------------------------------------------------------------------------------------------
Railroads - 1.9%
Burlington Northern Santa Fe Railway Co. 458,990 $ 44,349,909
Wisconsin Central Transportation Corp.* 1,356,100 43,140,931
-------------
$ 87,490,840
- --------------------------------------------------------------------------------------------------
Restaurants and Lodging - 3.6%
HFS, Inc.* 1,134,400 $ 84,441,900
Hilton Hotels Corp. 1,091,600 36,773,275
Host Marriott Corp.* 1,560,300 35,496,825
Promus Hotel Corp.* 185,450 8,310,478
-------------
$ 165,022,478
- --------------------------------------------------------------------------------------------------
Retail - 0.2%
Estee Lauder Cos., "A"* 221,400 $ 10,239,750
- --------------------------------------------------------------------------------------------------
Stores - 4.5%
AnnTaylor Stores Corp.* 617,370 $ 9,183,379
CVS Corp. 796,800 45,318,000
Gymboree Corp.* 960,400 24,970,400
Hollywood Entertainment Corp.* 349,900 4,570,569
Home Depot, Inc. 852,500 44,436,562
Lowes Co., Inc. 541,500 21,050,813
Meyer (Fred), Inc. 51,200 2,726,400
Rite Aid Corp. 905,050 50,173,709
-------------
$ 202,429,832
- --------------------------------------------------------------------------------------------------
Supermarkets - 1.2%
Safeway, Inc.* 1,006,300 $ 54,717,563
- --------------------------------------------------------------------------------------------------
Telecommunications - 3.2%
Aspect Telecommunications Corp.* 2,245,900 $ 52,497,912
Intermedia Communications, Inc.* 267,100 12,537,006
Lucent Technologies, Inc. 387,000 31,492,125
Nextlink Communications, Inc. 19,000 456,000
WorldCom, Inc.* 1,313,500 46,465,063
-------------
$ 143,448,106
- --------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.4%
Brooks Fiber Properties, Inc.* 327,200 $ 15,276,150
MCI Communications Corp. 273,700 8,039,937
Sprint Corp. 821,100 41,055,000
--------------
$ 64,371,087
- --------------------------------------------------------------------------------------------------
Total U.S. Stocks $4,008,240,165
- --------------------------------------------------------------------------------------------------
Foreign Stocks - 8.3%
France
Union des Assurances Federales SA (Insurance) 8,620 $ 919,051
- --------------------------------------------------------------------------------------------------
Hong Kong - 0.5%
Wharf Holdings Ltd. (Real Estate) 5,988,000 $ 22,055,600
- --------------------------------------------------------------------------------------------------
Italy - 0.5%
Gucci Group Designs NV (Apparel and Textiles) 456,700 $ 21,407,813
- --------------------------------------------------------------------------------------------------
Japan - 2.7%
Canon, Inc. (Special Products and Services) 1,519,000 $ 44,605,739
Sankyo Co. Ltd. (Medical and Health Products) 221,000 7,684,684
Sony Corp. (Electronics) 484,000 45,899,656
TDK Corp. (Special Products and Services) 265,000 23,808,315
--------------
$ 121,998,394
- --------------------------------------------------------------------------------------------------
Mexico - 0.4%
Companhia Cerveja Ria Brahma (Broadcasting) 1,307,800 $ 20,107,425
- --------------------------------------------------------------------------------------------------
Sweden - 0.5%
Skandia Foersaekrings AB (Insurance) 499,000 $ 22,353,617
- --------------------------------------------------------------------------------------------------
Switzerland - 1.1%
Novartis AG (Pharmaceuticals) 32,186 $ 49,499,848
- --------------------------------------------------------------------------------------------------
United Kingdom - 2.6%
British Petroleum PLC, ADR (Oil and Gas) 703,058 $ 63,846,455
Jarvis Hotels PLC (Restaurants and Lodging)*+ 7,234,295 17,507,717
Kwik-Fit Holdings PLC (Retail) 4,596,600 23,769,019
Storehouse PLC (Retail)* 2,626,700 10,721,927
--------------
$ 115,845,118
- --------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 374,186,866
- --------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $3,484,584,362) $4,382,427,031
- --------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.3%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------
Associates Corp., of North America, due 10/01/97 $10,000 $ 10,000,000
Federal Farm Credit Bank, due 10/15/97 6,950 6,935,513
Federal Home Loan Bank, due 10/08/97 10,660 10,648,766
Federal Home Loan Mortgage Corp.,
due 10/02/97 - 10/31/97 77,350 76,516,074
Federal National Mortgage Assn.,
due 10/16/97 - 11/24/97 28,325 28,162,404
Goldman Sachs Group LP, due 11/14/97 8,230 8,174,475
Tennessee Valley Authority, due 10/28/97 9,400 9,362,142
- --------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 149,799,374
- --------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $3,634,383,736) $4,532,226,405
Other Assets, Less Liabilities - 0.2% 8,961,037
- --------------------------------------------------------------------------------------------------
Net Assets - 100.0% $4,541,187,442
- --------------------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
+Restricted security.
++Affiliated issuers are those in which the Fund's holdings of an
issuer represent 5% or more of the outstanding voting securities of
the issuer.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Assets:
Investments, at value:
Unaffiliated issuers (identified cost, $3,621,277,633) $4,522,310,105
Affiliated issuer (identified cost, $13,106,103) 9,916,300
--------------
Total investments, at value (identified cost,
$3,634,383,736) $4,532,226,405
Cash 133,497
Receivable for Fund shares sold 21,506,100
Receivable for investments sold 18,326,331
Dividends and interest receivable 5,032,819
Other assets 20,395
--------------
Total assets $4,577,245,547
--------------
Liabilities:
Payable for Fund shares reacquired $ 11,012,244
Payable for investments purchased 23,925,350
Payable to affiliates -
Management fee 125,465
Shareholder servicing agent fee 48,261
Distribution fee 252,549
Administrative fee 3,082
Accrued expenses and other liabilities 691,154
--------------
Total liabilities $ 36,058,105
--------------
Net assets $4,541,187,442
==============
Net assets consist of:
Paid-in capital $3,465,031,468
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 897,836,609
Accumulated undistributed net realized gain on
investments and foreign currency transactions 179,309,876
Accumulated undistributed net investment loss (990,511)
--------------
Total $4,541,187,442
==============
Shares of beneficial interest outstanding 202,598,800
===========
Class A shares:
Net asset value per share
(net assets of $2,201,849,422 / 97,059,972 shares of
beneficial interest outstanding) $22.69
======
Offering price per share (100 / 94.25) $24.07
======
Class B shares:
Net asset value and offering price per share
(net assets of $1,860,129,557 / 83,947,722 shares of
beneficial interest outstanding) $22.16
======
Class C shares:
Net asset value and offering price per share
(net assets of $459,808,617 / 20,738,347 shares of
beneficial interest outstanding) $22.17
======
Class I shares:
Net asset value per share (net assets of $19,399,846 / 852,759
shares of beneficial interest outstanding) $22.75
======
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
<TABLE>
<CAPTION>
Statement of Operations
- --------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------------------
Net investment income:
Income -
<S> <C>
Interest $ 5,091,516
Dividends 29,939,818
Foreign taxes withheld (518,749)
-------------
Total investment income $ 34,512,585
Expenses -
Management fee $ 10,295,600
Trustees' compensation 56,705
Shareholder servicing agent fee 3,280,404
Shareholder servicing agent fee (Class A) 361,223
Shareholder servicing agent fee (Class B) 413,163
Shareholder servicing agent fee (Class C) 63,488
Distribution and service fee (Class A) 5,323,018
Distribution and service fee (Class B) 12,220,376
Distribution and service fee (Class C) 2,851,761
Administrative fee 252,317
Custodian fee 541,158
Postage 432,494
Printing 151,466
Auditing fees 42,382
Legal fees 22,662
Miscellaneous 2,819,770
-------------
Total expenses $ 39,127,987
Fees paid indirectly (94,621)
-------------
Net expenses $ 39,033,366
-------------
Net investment loss $ (4,520,781)
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 185,845,150
Foreign currency transactions (290,553)
-------------
Net realized gain on investments and foreign currency transactions $ 185,554,597
-------------
Change in unrealized appreciation (depreciation) -
Investments $ 623,461,273
Translation of assets and liabilities in foreign currencies (5,428)
-------------
Net unrealized gain on investments and foreign currency translation $ 623,455,845
-------------
Net realized and unrealized gain on investments and foreign
currency $ 809,010,442
-------------
Increase in net assets from operations $ 804,489,661
=============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (4,520,781) $ 888,631
Net realized gain on investments and foreign currency
transactions 185,554,597 109,853,790
Net unrealized gain on investments and foreign
currency translation 623,455,845 148,650,510
-------------- --------------
Increase in net assets from operations $ 804,489,661 $ 259,392,931
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (394,105) $ (1,746,150)
From net investment income (Class C) (6,127) --
From net realized gain on investments and foreign
currency transactions (Class A) (56,495,941) (33,116,571)
From net realized gain on investments and foreign
currency transactions (Class B) (41,918,137) (13,804,424)
From net realized gain on investments and foreign
currency transactions (Class C) (9,190,644) (1,987,076)
In excess of net investment income (Class A) (1,113,029) --
In excess of net investment income (Class C) (17,305) (5,537)
-------------- --------------
Total distributions declared to shareholders $ (109,135,288) $ (50,659,758)
-------------- --------------
Net increase in net assets from Fund share
transactions $2,056,992,568 $ 868,469,394
-------------- --------------
Total increase in net assets $2,752,346,941 $1,077,202,567
Net assets:
At beginning of year 1,788,840,501 711,637,934
-------------- --------------
At end of year (including accumulated undistributed
net investment income (loss) of $(990,511) and
$400,233, respectively) $4,541,187,442 $1,788,840,501
============== ==============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1997 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $18.53 $15.61 $12.59 $14.47 $12.18 $11.84
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.04 $ 0.06 $ 0.08 $ 0.02 $ 0.11 $ 0.07
Net realized and unrealized
gain on investments and
foreign currency
transactions 5.07 3.88 2.99 1.01 3.15 1.27
------ ------ ------ ------ ------ ------
Total from investment
operations $ 5.11 $ 3.94 $ 3.07 $ 1.03 $ 3.26 $ 1.34
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.01) $(0.05) $(0.02) $(0.03) $(0.07) $ --
From net realized gain on
investments and foreign
currency transactions (0.92) (0.97) (0.03) (2.87) (0.90) (1.00)
In excess of net investment
income (0.02) -- -- (0.01) -- --
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(0.95) $(1.02) $(0.05) $(2.91) $(0.97) $(1.00)
------ ------ ------ ------ ------ ------
Net asset value - end of period $22.69 $18.53 $15.61 $12.59 $14.47 $12.18
====== ====== ====== ====== ====== ======
Total return(+) 28.72% 26.54% 24.49% 7.72% 28.87% 11.79%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.96% 0.91% 0.95% 0.91% 0.90% 0.84%
Net investment income 0.18% 0.36% 0.58% 0.14% 0.36% 0.59%
Portfolio turnover 79% 81% 94% 79% 93% 74%
Average commission rate### $0.0388 $0.0269 $ -- $ -- $ -- $ --
Net assets at end of period
(000 omitted) $2,201,849 $972,353 $507,784 $318,170 $294,019 $240,366
(+) Total return for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
# Per share data for the periods subsequent to September 30, 1993, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
(S) The distributor did not impose a portion of its distribution fee for the periods indicated. If this fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income -- -- $ 0.07 $ 0.01 -- --
Ratios (to average net assets):
Expenses -- -- 1.05% 1.01% -- --
Net investment income -- -- 0.48% 0.04% -- --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 9.62 $11.49 $10.20 $12.54 $10.42
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.27 $ 0.36 $ 0.39 $ 0.23 $ 0.19
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 2.21 (1.52) 2.30 (2.19) 4.43
------ ------ ------ ------ ------
Total from investment operations $ 2.48 $(1.16) $ 2.69 $(1.96) $ 4.62
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.26) $(0.36) $(0.39) $(0.24) $(0.19)
From net realized gain on investments -- (0.35)* (1.01) (0.14) (2.31)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.26) $(0.71) $(1.40) $(0.38) $(2.50)
------ ------ ------ ------ ------
Net asset value - end of period $11.84 $ 9.62 $11.49 $10.20 $12.54
====== ====== ====== ====== ======
Total return(+) 25.87% (12.73)% 26.91% (15.60)% 44.80%
Ratios (to average net assets)/Supplemental data:
Expenses 0.95% 0.83% 0.88% 0.86% 0.73%
Net investment income 2.48% 3.21% 3.48% 2.36% 1.51%
Portfolio turnover 177% 79% 99% 116% 101%
Net assets at end of period (000 omitted) $231,316 $202,377 $251,857 $239,616 $321,050
* For the year ended September 30, 1990, the per share distribution from paid-in-capital was $0.0009.
(+) Total return for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to
October 1, 1989). If the charge had been included, the results would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1997 1996 1995 1994 1993**
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $18.19 $15.40 $12.50 $14.47 $13.95
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.10) $(0.06) $(0.03) $(0.08) $(0.04)
Net realized and unrealized gain on
investments and foreign currency
transactions 4.97 3.82 2.96 1.00 0.56
------ ------ ------ ------ ------
Total from investment operations $ 4.87 $ 3.76 $ 2.93 $ 0.92 $ 0.52
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ --+++ $(0.02) --
From net realized gain on investments
and foreign currency transactions (0.90) (0.97) (0.03) (2.87) --
------ ------ ------ ------ -----
Total distributions declared to
shareholders $(0.90) $(0.97) $(0.03) $(2.89) $ --
------ ------ ------ ------ ------
Net asset value - end of period $22.16 $18.19 $15.40 $12.50 $14.47
====== ====== ====== ====== ======
Total return 27.88% 25.59% 23.55% 6.91% 3.73%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.63% 1.66% 1.78% 1.82% 2.33%+
Net investment income (loss) (0.49)% (0.37)% (0.21)% (0.65)% (0.89)%+
Portfolio turnover 79% 81% 94% 79% 93%
Average commission rate### $0.0388 $0.0269 $ -- $ -- $ --
Net assets at end of period (000 omitted) $1,860,130 $680,456 $178,117 $25,672 $447
** For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993, through September
30, 1993.
+ Annualized.
++ Not annualized.
+++ For the year ended September 30, 1995, the per share distribution from net investment income was $0.00003.
# Per share data for the periods subsequent to September 30, 1993, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated with fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1997 1996 1995 1994*** 1997*
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $18.22 $15.42 $12.51 $13.18 $18.34
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.09) $(0.06) $(0.02) $(0.04) $ 0.07
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 4.96 3.83 2.96 0.62 4.34
------ ------ ------ ------ ------
Total from investment operations $ 4.87 $ 3.77 $ 2.94 $ 0.58 $ 4.41
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ --+++ $ -- $ -- $ -- $ --
In excess of net investment income --+++ --+++ -- -- --
From net realized gain on investments
and foreign currency transactions (0.92) (0.97) (0.03) (1.25) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.92) $(0.97) $(0.03) $(1.25) --
------ ------ ------ ------ ------
Net asset value - end of period $22.17 $18.22 $15.42 $12.51 $22.75
====== ====== ====== ====== ======
Total return 27.87% 25.67% 23.58% 4.43%++ 24.05%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.62% 1.67% 1.71% 1.74%+ 0.63%+
Net investment income (loss) (0.47)% (0.38)% (0.15)% (0.54)%+ 0.51%+
Portfolio turnover 79% 81% 94% 79% 79%
Average commission rate### $ 0.0388 $0.0269 $ $ $0.0388
Net assets at end of period (000 omitted) $459,809 $136,032 $25,737 $4,821 $19,400
* For the period from the commencement of the Fund's offering of Class I shares, January 2, 1997, through September 30,
1997.
*** For the period from the commencement of the Fund's offering of Class C shares, January 3, 1994, through September 30,
1994.
+ Annualized.
++ Not annualized.
+++ For the year ended September 30, 1997, the per share distribution from net investment income was $0.0004, and for the
years ended September 30, 1997 and 1996, the per share distribution in excess of net investment income were $0.0012
and $0.0027, respectively.
# Per share data for the periods subsequent to September 30, 1993, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Research Fund (the Fund) is a diversified series of MFS Series Trust V (the
Trust). The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues and forward contracts, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon exchange
or over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. 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.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Dividend and interest
payments received in additional securities are recorded on the ex- dividend or
ex-interest date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. This fee is reduced according to an expense
offset arrangement with State Street Bank, the dividend disbursing agent, which
provides for partial reimbursement of custody fees based on a formula developed
to measure the value of cash deposited by the Fund with the custodian and with
the dividend disbursing agent. 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 accumulated net realized
gains. During the year ended September 30, 1997, $4,660,603 and $1,943,360 were
reclassified to accumulated net investment loss and paid-in capital,
respectively, from accumulated net realized gain on investments and foreign
currency transactions due to differences between book and tax accounting for
currency transactions and the offset of net investment loss against short-term
capital gains. 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. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of the Fund pro rata
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.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at the following annual rates:
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME
- --------------------------------------------------------------------------------
First $100 million 0.40% First $2 million 5.0%
Next $400 million 0.32% Next $8 million 4.0%
In excess of $500 million 0.29% In excess of $10 million 3.6%
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal, and other
administrative services. As 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, provided that the
administrative fee is not assessed on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
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 of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD),
and MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit
plan for all its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $22,308 for the year ended
September 30, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$2,307,594 for the year ended September 30, 1997, 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 to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum
(reduced to 0.15% per annum for assets sold prior to March 1, 1991) of the
Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, 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,
commissions to dealers and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD retains the service fee for accounts not attributable
to a securities dealer which amounted to $588,484 for the year ended September
30, 1997. Fees incurred under the distribution plan during the year ended
September 30, 1997, 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 additional 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 $152,176 and $147,017 for Class B and Class C shares,
respectively, for the year ended September 30, 1997. Fees incurred under the
distribution plan during the year ended September 30, 1997, were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis.
Purchases over $1 million of Class A shares and certain purchases by retirement
plans are subject to a contingent deferred sales charge in the event of a
shareholder redemption within 12 months following such 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. A contingent
deferred sales charge is imposed on shareholder redemptions of Class C shares in
the event of a shareholder redemption within twelve months of purchase. MFD
receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the year ended September 30, 1997, were $27,929,
$1,598,460, and $107,032 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
0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of the
average daily net assets of each class of shares at an effective annual rate of
up to 0.15%, up to 0.22%, and up to 0.15% attributable to Class A, Class B, and
Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$4,177,161,173 and $2,326,747,588, 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 $3,639,664,484
==============
Gross unrealized appreciation $ 929,674,349
Gross unrealized depreciation (37,112,428)
--------------
Net unrealized appreciation $ 892,561,921
==============
(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 (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED SEPTEMBER 30, 1997 YEAR ENDED SEPTEMBER 30, 1996
-------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 65,650,680 $1,306,495,417 28,748,439 $ 487,826,641
Shares issued to
shareholders in
reinvestment of
distributions 2,821,097 52,146,730 1,940,972 30,104,947
Shares transferred to Class I (807,081) (14,801,865) -- --
Shares reacquired (23,091,507) (461,271,501) (10,737,215) (180,437,578)
----------- -------------- ---------- --------------
Net increase 44,573,189 $ 882,568,781 19,952,196 $ 337,494,010
=========== ============== ========== ==============
Class B Shares
YEAR ENDED SEPTEMBER 30, 1997 YEAR ENDED SEPTEMBER 30, 1996
-------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
Shares sold 54,545,061 $1,060,979,848 29,925,009 $ 502,583,896
Shares issued to
shareholders in
reinvestment of
distributions 1,931,398 35,055,000 788,392 12,070,744
Shares reacquired (9,937,744) (194,950,157) (4,869,789) (81,458,430)
----------- -------------- ---------- --------------
Net increase 46,538,715 $ 901,084,691 25,843,612 $ 433,196,210
=========== ============== ========== ==============
Class C Shares
YEAR ENDED SEPTEMBER 30, 1997 YEAR ENDED SEPTEMBER 30, 1996
-------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
Shares sold 15,371,511 $ 299,397,595 6,609,234 $ 111,382,136
Shares issued to
shareholders in
reinvestment of
distributions 345,098 6,266,936 99,391 1,523,677
Shares reacquired (2,445,437) (48,012,155) (910,720) (15,126,639)
----------- -------------- ---------- -------------
Net increase 13,271,172 $ 257,652,376 5,797,905 $ 97,779,174
=========== ============== ========== =============
Class I Shares
PERIOD ENDED SEPTEMBER 30, 1997*
--------------------------------
SHARES AMOUNT
- ------------------------------------------------------------------
Shares sold 140,144 $ 2,789,802
Shares transferred from
Class A 807,081 14,801,865
Shares reacquired (94,466) (1,904,947)
------- --------------
Net increase 852,759 $ 15,686,720
======= ==============
</TABLE>
*For the period from the commencement of the Fund's offering of Class I shares,
January 2, 1997, through September 30, 1997.
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 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
year ended September 30, 1997, was $28,666.
(7) Restricted Securities
The Fund may invest not more than 10% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At September 30, 1997,
the Fund owned the following restricted securities (consisting of 0.39% of its
net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees.
DATE OF
FUND/DESCRIPTION ACQUISITION SHARES COST VALUE
- --------------------------------------------------------------------------------
Jarvis Hotels PLC 6/21/96-8/12/97 7,234,295 $19,283,864 $17,507,717
(8) Transactions in Securities of Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's investments
in such securities of these issuers during the year ended September 30, 1997, is
set forth below. The Fund had no dispositions of the security and the security
paid no distributions during the year ended September 30, 1997.
<TABLE>
<CAPTION>
ACQUISITIONS
BEGINNING --------------------- ENDING ENDING
AFFILIATE SHARES SHARES COST SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Uromed Corp. 1,351,000 145,800 $650,336 1,496,800 $9,916,300
----------
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust V and Shareholders of MFS Research Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Research Fund (one of the series
constituting MFS Series Trust V) as of September 30, 1997, the related statement
of operations for the year then ended, the statement of changes in net assets
for the years ended September 30, 1997 and 1996, and the financial highlights
for each of the years in the ten-year period ended September 30, 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 generally accepted auditing
standards. 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. Our procedures included confirmation of the securities owned at
September 30, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Research Fund at
September 30, 1997, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 31, 1997
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) Research Fund
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and Investors Bank & Trust Company
President
AUDITORS
Richard B. Bailey* - Private Investor; Deloitte & Touche LLP
Former Chairman and Director (until
1991), Massachusetts Financial INVESTOR INFORMATION
Services Company; Director, Cambridge For MFS stock and bond market
Bancorp; Director, Cambridge Trust outlooks, call toll free:
Company 1-800-637-4458 anytime from a
touch-tone telephone.
Peter G. Harwood - Private Investor
For information on MFS mutual funds,
J. Atwood Ives - Chairman and Chief call your financial adviser or, for an
Executive Officer, Eastern Enterprises information kit, call toll free:
1-800-637-2929 any business day from 9
Lawrence T. Perera - Partner, Hemenway a.m. to 5 p.m. Eastern time (or leave
& Barnes a message anytime).
William J. Poorvu - Adjunct Professor, INVESTOR SERVICE
Harvard University Graduate School of MFS Service Center, Inc.
Business Administration P.O. Box 2281
Boston, MA 02107-9906
Charles W. Schmidt - Private Investor
For general information, call toll free
Arnold D. Scott* - Senior Executive 1-800-225-2606 any business day from
Vice President, Director and 8 a.m. to 8 p.m. Eastern time.
Secretary, Massachusetts Financial
Services Company For service to speech- or
hearing-impaired, call toll free:
Jeffrey L. Shames* - President and 1-800-637-6576 any business day from 9
Director, Massachusetts Financial a.m. to 5 p.m. Eastern time. (To use
Services Company this service, your phone must be
equipped with a Telecommunications
Elaine R. Smith - Independent Device for the Deaf.)
Consultant
For share prices, account balances,
David B. Stone - Chairman, North and exchanges, call toll free:
American Management Corp. (investment 1-800-MFS-TALK (1-800-637-8255)
advisers) anytime from a touch-tone telephone.
INVESTMENT ADVISER WORLD WIDE WEB
Massachusetts Financial Services www.mfs.com
Company
500 Boylston Street
Boston, MA 02116-3741 [DALBAR For the fourth year in a row,
LOGO] MFS earned a #1 ranking in the
DISTRIBUTOR DALBAR, Inc. Broker/Dealer Survey,
MFS Fund Distributors, Inc. Main Office Operations Service Quality
500 Boylston Street Category. The firm achieved a 3.42
Boston, MA 02116-3741 overall score on a scale of 1 to 4 in
the 1997 survey. A total of 111 firms
DIRECTOR OF RESEARCH responded, offering input on the
Kevin R. Parke* quality of service they received from
29 mutual fund companies nationwide.
TREASURER The survey contained questions about
W. Thomas London* service quality in 11 categories,
including "knowledge of operations
ASSISTANT TREASURERS contact," "keeping you informed,"
Mark E. Bradley* "ease of doing business" with the firm.
Ellen Moynihan*
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
<PAGE>
MFS(R) RESEARCH --------------
FUND Bulk Rate
U.S. Postage
500 Boylston Street Paid
Boston, MA 02116-3741 MFS
--------------
[LOGO] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[DALBAR LOGO]
TOP-RATED SERVICE
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MTR-2 11/97 360M 14/214/314/814
