<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
MFS(R) RESEARCH FUND
SEMIANNUAL REPORT o MARCH 31, 1999
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 6
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 21
MFS' Year 2000 Readiness Disclosure ....................................... 27
Trustees and Officers ..................................................... 29
MFS CELEBRATES ITS DIAMOND ANNIVERSARY!
MARCH 21, 1999, MARKED THE 75TH ANNIVERSARY OF MFS' INVENTION OF
THE MUTUAL FUND. THE MUTUAL FUND INDUSTRY HAS BROUGHT THE POWER
OF INVESTING TO EVERY AMERICAN, OFFERING THEM THE OPPORTUNITY FOR
COLLEGE DEGREES, HOME OWNERSHIP, AND COMFORTABLE RETIREMENT.
IMAGINE TODAY'S WORLD WITHOUT MUTUAL -------------------------
FUNDS. WE COULDN'T. AND WHILE THE MFS 75 YEARS
YEARS AHEAD WILL BRING A NUMBER OF [graphic omitted]
CHALLENGES, OUR 75 YEARS OF EXPERIENCE -------------------------
WILL HELP GUIDE A NEW GENERATION OF EXPERIENCE THE FUTURE(SM)
INVESTORS INTO THE FUTURE. -------------------------
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
Since we launched Massachusetts Investors Trust, the nation's first mutual
fund, 75 years ago, MFS has weathered numerous market and economic cycles,
from the occasional recession to long periods of growth and prosperity.
Throughout that time, we have tried to give investors a realistic assessment
of the investment markets and, when necessary, to sound a note of caution --
even when market conditions appear quite favorable.
Although the equity markets have overcome last year's volatility, we still
think stocks are overdue for a correction that will rid them of the excesses
that have developed. Perhaps the most glaring measure of those excesses is the
high level of valuations, that is, the amount equity investors are paying for
each dollar of earnings. By mid-March, the price-to-earnings (P/E) ratio of
the average stock in the Standard & Poor's 500 Composite Index, a popular,
unmanaged index of common stock total return performance, was almost 28%
higher than it was a year ago. While P/E ratios keep going up, earnings have
essentially been flat, and we believe they are likely to stay that way, for a
few months at least. This leaves stock prices vulnerable to negative events
such as a domestic or international crisis, a sudden increase in interest
rates, or a slowing economy, any of which could lead to lower corporate
earnings.
While risks in the overall market have increased, one industry calls for
particular attention. For several months, Internet-related stocks have
exhibited extreme price volatility. The Internet's potential impact on the way
individuals and companies communicate and conduct business is certainly great,
but we feel that most of the recent run-up in the share prices of these
companies is unjustified. Many of them have not yet reported any profits, and
there is no way of knowing which of today's "hot" Internet stocks will be
successful -- or even in existence -- a few years from now. Therefore, we
think the frenzy surrounding even the best-known Internet stocks is purely
speculative.
However, there are some established companies offering Internet-related products
and services that may generate revenue. These include companies that provide
networking equipment, that make servers to store information, and that help
customers make better use of Internet services. Because they already have
profitable businesses as well as the potential to use the Internet to increase
their opportunities to generate revenue, these companies have been the focus of
our research efforts.
Although we think valuations for the overall equity market, and especially for
Internet stocks, are excessive, we see this situation as an opportunity for
our portfolio managers to capitalize on MFS(R) Original Research(SM). This is
a fundamental, company-by-company process that helps us find investments that
we believe are most likely to achieve long-term earnings growth, through both
negative and positive market cycles.
We also rely heavily on our research process when investing in the fixed-
income markets. Last year, turmoil in emerging markets and volatility in the
U.S. stock market helped create a "flight to quality," meaning that investors
moved toward U.S. Treasury securities, which are seen as carrying less risk,
and away from almost everything else. As a result, yields on non-Treasury
securities increased, while yields on Treasuries fell. Some of these yield
spreads, or differentials, have narrowed, but they have not returned to the
levels seen before last year's market turmoil. We think this has created
opportunities for our portfolio managers to find attractive yields in
these markets.
Individual investors, meanwhile, should keep in mind that the tremendous
increases in the broad stock market averages of the past several years
are a historical aberration and do not necessarily indicate future market
performance. If they are not already diversified across a range of
investments, including growth stock funds, value-oriented funds, and fixed-
income funds, investors may want to talk to their financial advisers about
developing well-diversified portfolios with greater potential to weather
unexpected changes in the markets. Doing so may help investors more
effectively meet their long-term financial goals. We appreciate your
confidence and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
April 16, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Alec C. Murray]
Alec C. Murray
For the six months ended March 31, 1999, Class A shares of the Fund provided a
total return of 23.85%, Class B shares 23.46%, Class C shares 23.45%, and
Class I shares 24.10%. These returns, which include the reinvestment of
distributions but exclude the effects of any sales charges, compare to a
27.23% return for the Standard & Poor's 500 Composite Index (the S&P 500) for
the same period. The S&P 500 is a popular, unmanaged index of common stock
total return performance. During the same period, the average growth fund as
tracked by Lipper Analytical Services, Inc., an independent firm that reports
mutual fund performance, returned 28.23%.
Q. CAN YOU TALK ABOUT THE FUND'S UNDERPERFORMANCE RELATIVE TO THE S&P 500 AND
THE AVERAGE GROWTH FUND DURING THE PERIOD?
A. Let's start by looking at the Fund's strategy and how that strategy relates
to the current market. We rely on MFS(R) Original Research(SM) to
incorporate the best ideas of our more than 35 equity analysts, who cover
small-, mid-, and large-cap companies; therefore, the portfolio is broadly
diversified among companies of all sizes. However, the current equity
market is very narrow, with only 25 to 50 large growth company stocks
outperforming the rest of the stocks in the S&P 500. This Fund is not
designed to outperform in a market favoring a small group of stocks. We
believe that the market will not remain this narrow and that when it
broadens the Fund will benefit.
Q. HOW ARE YOU POSITIONING THE FUND, GIVEN YOUR STRATEGY AND THE NARROWNESS OF
THE MARKET?
A. Right now, the Fund has a lighter position, relative to the S&P 500, in
large-cap growth stocks and heavier positions in small- and mid-cap stocks,
whose long-term opportunities we think are more attractive. Small- and mid-
cap stocks are selling at much cheaper price-to-earnings (P/E) multiples
than the large-cap growth stocks. Stocks with lower P/Es are less
vulnerable to negative events such as earnings disappointments or a broad
downturn in the market. We think the companies we're buying will see higher
growth rates than many of the large-cap stocks. At the same time, we are
avoiding Internet stocks or other companies trading at what we see as
unsustainably high prices relative to their earnings.
Q. COULD YOU TALK ABOUT SOME INDUSTRIES AND STOCKS THAT HAVE HELPED PERFORMANCE?
A. Three sectors have helped: financial services, leisure, and technology. Our
gains in financial services largely came from brokerage and investment
banking stocks. Specifically, we had large holdings in Morgan Stanley Dean
Witter and Merrill Lynch, both of which are well managed and experienced in
the markets they serve. As companies around the world have consolidated,
they have used firms like Morgan Stanley and Merrill Lynch to help arrange
the mergers.
Q. WHAT KINDS OF LEISURE COMPANIES HELPED PERFORMANCE?
A. One of the better-performing sectors has been the restaurant industry,
where an important shift has occurred. The practice of trying to increase
earnings by adding restaurants has been abandoned in favor of a growth
strategy that is proving more profitable. McDonald's began implementing
this strategy last year when it announced that it would effectively stop
domestic growth. Instead the company began allocating resources to its
international business, where earnings are higher, and buying back shares,
making remaining shares more valuable. These steps have resulted in a
greater return on capital and a doubling of McDonald's stock price. The
company's actions affected the rest of the industry. Consequently, supply
and demand are finally moving into balance. This change is occurring
against a backdrop of a strong consumer environment. As a result, we expect
to see stronger sales trends for existing restaurants, more predictable
earnings growth, and higher returns on capital.
Q. AND WHAT ABOUT TECHNOLOGY?
A. The leading contributors to technology performance were semiconductor
companies like LSI Logic and Analog Devices. The semiconductor market had
quite a turnaround late last year because demand, which had been hurt by
the Asian economic slowdown, came back when some Asian economies started to
rebound. Also, because the industry had built up its manufacturing
capability to the point where there was too much supply in some market
segments, prices came down. Now, demand is beginning to catch up with
supply and Asia seems to be recovering, both of which have helped the
portfolio.
Q. WHAT HASN'T WORKED OUT SO WELL?
A. A few of the Fund's retail holdings have underperformed. Although
the retail environment has been very good and Dayton Hudson, the department
store chain, has been a great pick, the Fund was hurt by Rite Aid and
CompUSA. The Fund has had a significant position in Rite Aid because we
believe that as the population ages people will use more prescription
medicines. However, Rite Aid opened too many stores in a short period of
time and underestimated the costs of closing old stores. The company also
had inventory and accounting problems. Over the long term, however, we
believe Rite Aid will continue to benefit from increasing prescription
sales. CompUSA, meanwhile, is losing computer and software sales to
companies that sell over the telephone or on the Internet. Also, some
business customers, who tend to buy more expensive equipment, are cutting
orders to prepare for any Year 2000 (Y2K) computer problems. At some point
next year, we think the Y2K issue will largely be resolved, and the company
should perform better.
Q. WHAT'S YOUR OUTLOOK FOR THE REST OF THE YEAR?
A. All of our evidence points to the continuation of a low-inflation, low-
interest-rate environment, which would mean steady economic growth and a
strong consumer sector. The downside is that we expect the U.S. economy to
slow from its rapid pace of the past few quarters and the S&P 500's average
growth to fall to single digits this year. Given that earnings growth is
falling while stock prices are rising, we don't believe prices of many
companies, particularly the big ones, are particularly attractive. So, the
Fund is avoiding companies with declining earnings and, instead, is
focusing on companies with flat or accelerating earnings growth. Gillette
is a great example. It had troubles in Asia and missed its earnings
estimates for a couple of quarters. Now, with Asia turning around, we think
the company should grow at 11% this year and 15% next year. We think
companies like that provide good opportunities for the Fund.
/s/ Alec C. Murray
Alec C. Murray
Associate Director of Equity Research
The committee of MFS research analysts is responsible for the day-to-day
management of the Fund under the general supervision of Mr. Murray.
The opinions expressed in this report are those of the Associate Director of
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.
It is not possible to invest directly in an index.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS 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: $6.71 BILLION NET ASSETS AS OF MARCH 31, 1999
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PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes to
Performance Summary for more information.)
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH MARCH 31, 1999
CLASS A
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +23.85% +7.77% +74.79% +165.21% +410.23%
- --------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.77% +20.46% + 21.54% + 17.70%
- --------------------------------------------------------------------------------------------------------------
SEC Results -- +1.57% +18.10% + 20.11% + 17.00%
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</TABLE>
<TABLE>
CLASS B
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +23.46% +7.11% +71.38% +155.96% +390.63%
- --------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.11% +19.67% + 20.68% + 17.24%
- --------------------------------------------------------------------------------------------------------------
SEC Results -- +3.11% +18.97% + 20.49% + 17.24%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
CLASS C
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +23.45% +7.06% +71.46% +156.39% +391.89%
- --------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.06% +19.69% + 20.72% + 17.27%
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SEC Results -- +6.06% +19.69% + 20.72% + 17.27%
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</TABLE>
<PAGE>
<TABLE>
CLASS I
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +24.10% +8.17% +76.24% +167.40% +414.14%
- --------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +8.17% +20.79% + 21.74% + 17.79%
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</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
B and C results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of A for periods prior to the inception of B and C.
Because operating expenses of B and C are higher than those of A, B and C
performance generally would have been lower than A performance. The A
performance included in the B and C SEC performance has been adjusted to
reflect the CDSC generally applicable to B and C rather than the initial sales
charge generally applicable to A.
I results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of I. Because operating
expenses of A are greater than those of I, I performance generally would have
been higher than A performance. The A performance included in the
I performance has been adjusted to reflect the fact that I have no initial
sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.
All results are historical and assume the reinvestment of 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.
<PAGE>
PORTFOLIO CONCENTRATION AS OF MARCH 31, 1999
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 23.0%
FINANCIAL SERVICES 16.6%
HEALTH CARE 13.1%
CONSUMER STAPLES 9.1%
UTILITIES & COMMUNICATIONS 8.2%
TOP 10 STOCK HOLDINGS
MICROSOFT CORP. 6.1% PFIZER, INC. 2.2%
Computer software and systems company Pharmaceutical products company
MCI WORLDCOM, INC. 3.6% ORACLE CORP. 2.1%
Telecommunications company Database software developer
and manufacturer
TYCO INTERNATIONAL LTD. 3.1%
Security systems, packaging, and electronic MCDONALD'S CORP. 1.8%
equipment conglomerate Fast-food restaurant
owner/franchiser
UNITED TECHNOLOGIES CORP. 2.7%
Aerospace, defense, and building equipment MOBIL CORP. 1.7%
company International oil and gas company
AMERICAN HOME PRODUCTS CORP. 2.5% BRISTOL-MYERS SQUIBB CO. 1.6%
Pharmaceutical and home products company Pharmaceutical products company
This portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- March 31, 1999
Stocks - 98.4%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 93.9%
Aerospace - 2.8%
Gulfstream Aerospace Corp.* 190,750 $ 8,273,781
United Technologies Corp. 1,331,300 180,307,944
--------------
$ 188,581,725
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Airlines - 0.2%
AMR Corp.* 191,900 $ 11,238,144
- ------------------------------------------------------------------------------------------------------
Automotive - 0.8%
Federal-Mogul Corp. 1,260,200 $ 54,188,600
- ------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 3.0%
Bank of New York, Inc. 1,535,000 $ 55,164,063
Chase Manhattan Corp. 458,608 37,290,563
PNC Bank Corp. 637,200 35,404,425
US Bancorp 950,100 32,362,781
Wells Fargo Co. 1,148,000 40,251,750
--------------
$ 200,473,582
- ------------------------------------------------------------------------------------------------------
Business Machines - 1.8%
Sun Microsystems, Inc.* 507,700 $ 63,494,231
Xerox Corp. 1,092,100 58,290,838
--------------
$ 121,785,069
- ------------------------------------------------------------------------------------------------------
Business Services - 0.1%
Modis Professional Services, Inc.* 984,100 $ 8,918,406
- ------------------------------------------------------------------------------------------------------
Chemicals - 0.2%
Cambrex Corp. 616,800 $ 13,646,700
- ------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 6.0%
Microsoft Corp.* 4,504,600 $ 403,724,775
- ------------------------------------------------------------------------------------------------------
Computer Software - Services - 0.8%
EMC Corp.* 433,500 $ 55,379,625
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 6.7%
BMC Software, Inc.* 1,838,400 $ 68,135,700
Cadence Design Systems, Inc.* 2,568,250 66,132,438
Computer Associates International, Inc. 1,684,475 59,904,142
Compuware Corp.* 2,742,000 65,465,250
Oracle Corp.* 5,174,830 136,486,141
Synopsys, Inc.* 973,100 52,304,125
--------------
$ 448,427,796
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 10.3%
Black & Decker Corp. 721,500 $ 39,998,156
Clorox Co. 625,500 73,300,781
Colgate-Palmolive Co. 390,300 35,907,600
Dial Corp. 2,088,300 71,785,313
Gillette Co. 1,444,700 85,869,356
Newell Rubbermaid, Inc. 731,200 34,732,000
Philip Morris Cos., Inc. 1,260,220 44,343,991
Procter & Gamble Co. 1,027,200 100,601,400
Tyco International Ltd. 2,830,074 203,057,810
--------------
$ 689,596,407
- ------------------------------------------------------------------------------------------------------
Containers - 0.7%
Smurfit-Stone Container Corp.* 2,320,638 $ 44,817,321
- ------------------------------------------------------------------------------------------------------
Electrical Equipment - 1.0%
Cooper Industries, Inc. 815,400 $ 34,756,425
Emerson Electric Co. 577,800 30,587,287
--------------
$ 65,343,712
- ------------------------------------------------------------------------------------------------------
Electronics - 3.6%
Analog Devices, Inc.* 2,958,799 $ 88,024,270
Intel Corp. 364,100 43,282,388
Lattice Semiconductor Corp.* 623,600 28,412,775
LSI Logic Corp.* 2,697,800 84,137,637
--------------
$ 243,857,070
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Entertainment - 5.2%
CBS Corp.* 2,054,800 $ 84,118,375
Disney (Walt) Co. 2,980,500 92,768,063
MediaOne Group, Inc.* 1,117,800 70,980,300
Time Warner, Inc. 1,411,000 100,269,187
--------------
$ 348,135,925
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Financial Institutions - 6.0%
Associates First Capital Corp., "A" 1,443,146 $ 64,941,570
CIT Group, Inc., "A" 1,128,500 34,489,781
Citigroup, Inc. 1,582,100 101,056,637
Federal Home Loan Mortgage Corp. 1,222,600 69,841,025
Federal National Mortgage Assn 889,700 61,611,725
Merrill Lynch & Co., Inc. 433,300 38,319,969
Morgan Stanley Dean Witter & Co. 348,900 34,868,194
--------------
$ 405,128,901
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Food and Beverage Products - 2.2%
Anheuser-Busch Cos., Inc. 438,700 $ 33,423,456
Bestfoods Co. 1,133,900 53,293,300
Ralston-Ralston Purina Co. 2,394,400 63,900,550
--------------
$ 150,617,306
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Forest and Paper Products - 0.5%
Bowater, Inc. 841,100 $ 33,328,588
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Insurance - 6.4%
CIGNA Corp. 972,600 $ 81,516,038
Conseco, Inc. 990,957 30,595,797
Equitable Cos., Inc. 1,356,700 94,969,000
Hartford Financial Services Group, Inc. 1,105,300 62,794,856
Lincoln National Corp. 875,850 86,599,669
Nationwide Financial Services, Inc., "A" 657,000 27,594,000
ReliaStar Financial Corp. 1,031,963 43,987,423
--------------
$ 428,056,783
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Manufacturing - 0.3%
Illinois Tool Works, Inc. 269,300 $ 16,662,938
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - 7.7%
American Home Products Corp. 2,533,000 $ 165,278,250
Bristol-Myers Squibb Co. 1,616,500 103,961,156
Pfizer, Inc. 1,026,100 142,371,375
Pharmacia & Upjohn, Inc. 1,645,000 102,606,875
--------------
$ 514,217,656
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 5.2%
Cardinal Health, Inc. 704,150 $ 46,473,900
Guidant Corp. 1,672,000 101,156,000
HealthSouth Corp.* 3,572,268 37,062,281
McKesson HBOC, Inc. 430,119 28,387,854
Medtronic, Inc. 510,800 36,649,900
United Healthcare Corp. 1,876,500 98,750,812
--------------
$ 348,480,747
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Oils - 1.9%
Exxon Corp. 203,300 $ 14,345,356
Mobil Corp. 1,252,100 110,184,800
--------------
$ 124,530,156
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Pollution Control - 0.4%
Browning Ferris Industries, Inc. 755,816 $ 29,146,155
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 2.7%
Cendant Corp.* 1,252,170 $ 19,721,678
CKE Restaurants, Inc. 1,303,550 25,745,112
McDonald's Corp. 2,549,300 115,515,156
Wendy's International, Inc. 731,700 20,807,719
--------------
$ 181,789,665
- ------------------------------------------------------------------------------------------------------
Special Products and Services - 0.8%
Newport News Shipbuilding, Inc. 1,622,500 $ 51,412,969
- ------------------------------------------------------------------------------------------------------
Stores - 4.3%
CompUSA, Inc.* 1,366,800 $ 9,567,600
CVS Corp. 1,543,700 73,325,750
Dayton Hudson Corp. 1,156,100 77,025,163
Office Depot, Inc.* 1,168,900 43,030,131
Rite Aid Corp. 2,844,500 71,112,500
TJX Cos., Inc. 490,100 16,663,400
--------------
$ 290,724,544
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Supermarkets - 2.4%
Meyer (Fred), Inc.* 1,444,750 $ 85,059,656
Safeway, Inc.* 1,480,300 75,957,894
--------------
$ 161,017,550
- ------------------------------------------------------------------------------------------------------
Telecommunications - 8.7%
3Com Corp.* 1,497,800 $ 34,917,463
Bell Atlantic Corp. 1,740,600 89,967,262
Cisco Systems, Inc.* 590,225 64,666,527
Intermedia Communications, Inc.* 723,100 19,252,538
Lucent Technologies, Inc. 658,700 70,974,925
MCI WorldCom, Inc.* 2,656,774 235,290,547
Sprint Corp. 669,963 65,740,119
--------------
$ 580,809,381
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.4%
Midamerica Energy Holdings Co. 1,044,500 $ 29,246,000
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.8%
Coastal Corp. 927,000 $ 30,591,000
Columbia Energy Group 424,250 22,167,062
--------------
$ 52,758,062
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Total U.S. Stocks $6,296,042,258
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 4.5%
Germany - 0.7%
Mannesmann AG (Conglomerate) 376,285 $ 48,111,265
- ------------------------------------------------------------------------------------------------------
Sweden - 1.1%
Ericsson LM, "B" (Telecommunication Equipment) 2,620,800 $ 63,900,909
Ericsson LM, ADR (Telecommunication Equipment) 290,400 6,915,150
--------------
$ 70,816,059
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Switzerland - 0.9%
UBS AG (Banks and Credit Cos.) 197,500 $ 62,165,775
- ------------------------------------------------------------------------------------------------------
United Kingdom - 1.8%
BP Amoco PLC, ADR (Oils) 912,475 $ 92,102,945
British Aerospace PLC (Aerospace and Defense)* 4,228,672 28,252,338
--------------
$ 120,355,283
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Total Foreign Stocks $ 301,448,382
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $4,953,552,887) $6,597,490,640
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.3%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 4/14/99 - 4/22/99 $ 8,983 $ 8,982,584
General Electric Capital Corp., due 4/01/99 9,500 9,500,000
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 18,482,584
- ------------------------------------------------------------------------------------------------------
Other Short-Term Obligations - 1.2%
- ------------------------------------------------------------------------------------------------------
SHARES
- ------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at
Cost 83,727,270 $ 83,727,270
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $5,055,762,741) $6,699,700,494
Other Assets, Less Liabilities - 0.1% 6,037,278
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $6,705,737,772
- ------------------------------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
MARCH 31, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $5,055,762,741) $6,699,700,494
Cash 77,403
Receivable for investments sold 140,395,540
Receivable for Fund shares sold 11,988,710
Dividends and interest receivable 5,053,824
Other assets 66,575
--------------
Total assets $6,857,282,546
--------------
Liabilities:
Payable for investments purchased $ 38,495,727
Payable for Fund shares reacquired 28,245,599
Collateral for securities loaned, at value 83,727,270
Payable to affiliates -
Management fee 80,129
Shareholder servicing agent fee 20,964
Distribution and service fee 127,870
Administrative fee 1,027
Accrued expenses and other liabilities 846,188
--------------
Total liabilities $ 151,544,774
--------------
Net assets $6,705,737,772
==============
Net assets consist of:
Paid-in capital $4,916,644,672
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 1,643,922,154
Accumulated undistributed net realized gain on
investments and foreign currency transactions 157,084,284
Accumulated net investment loss (11,913,338)
--------------
Total $6,705,737,772
==============
Shares of beneficial interest outstanding 266,883,320
===========
Class A shares:
Net asset value per share
(net assets of $3,162,055,198 / 123,861,095 shares of
beneficial interest outstanding) $25.53
======
Offering price per share (100 / 94.25 of net asset
value per share) $27.09
======
Class B shares:
Net asset value and offering price per share
(net assets of $2,802,070,772 / 113,127,288 shares of
beneficial interest outstanding) $24.77
======
Class C shares:
Net asset value and offering price per share
(net assets of $721,099,401 / 29,095,739 shares of
beneficial interest outstanding) $24.78
======
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets of $20,512,401 / 799,198 shares of
beneficial interest outstanding) $25.67
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 1999
- -------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 25,144,807
Interest 4,575,190
Foreign taxes withheld (223,992)
--------------
Total investment income $ 29,496,005
--------------
Expenses -
Management fee $ 13,044,546
Trustees' compensation 72,942
Shareholder servicing agent fee 3,527,886
Distribution and service fee (Class A) 5,253,557
Distribution and service fee (Class B) 12,976,711
Distribution and service fee (Class C) 3,272,845
Administrative fee 125,490
Custodian fee 643,349
Printing 170,937
Postage 412,687
Auditing fees 19,057
Legal fees 21,472
Miscellaneous 2,074,130
--------------
Total expenses $ 41,615,609
Fees paid indirectly (312,747)
--------------
Net expenses $ 41,302,862
--------------
Net investment loss $ (11,806,857)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 179,982,433
Foreign currency transactions (171,460)
--------------
Net realized gain on investments and foriegn
currency transactions $ 179,810,973
--------------
Change in unrealized appreciation (depreciation) -
Investments $1,125,752,380
Translation of assets and liabilities in foreign
currencies (17,586)
--------------
Net unrealized gain on investments and foreign
currency translation $1,125,734,794
--------------
Net realized and unrealized gain on investments
and foreign currency $1,305,545,767
--------------
Increase in net assets from operations $1,293,738,910
==============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (11,806,857) $ (5,532,906)
Net realized gain on investments and foreign currency
transactions 179,810,973 257,290,588
Net unrealized gain (loss) on investments and foreign
currency translation 1,125,734,794 (379,649,249)
-------------- --------------
Increase (decrease) in net assets from operations $1,293,738,910 $ (127,891,567)
-------------- --------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (116,922,157) $ (104,270,556)
From net realized gain on investments and foreign
currency transactions (Class B) (103,235,324) (78,726,547)
From net realized gain on investments and foreign
currency transactions (Class C) (25,969,747) (19,503,877)
From net realized gain on investments and foreign
currency transactions (Class I) (767,888) (848,087)
-------------- --------------
Total distributions declared to shareholders $ (246,895,116) $ (203,349,067)
-------------- --------------
Net increase in net assets from Fund share transactions $ 228,402,175 $1,220,544,995
-------------- --------------
Total increase in net assets $1,275,245,969 $ 889,304,361
Net assets:
At beginning of period 5,430,491,803 4,541,187,442
-------------- --------------
At end of period (including accumulated net investment
loss of $11,913,338 and $106,481, respectively) $6,705,737,772 $5,430,491,803
============== ==============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED -------------------------------------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value -
beginning of period $21.45 $22.69 $18.53 $15.61 $12.59 $14.47
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ -- $ 0.05 $ 0.04 $ 0.06 $ 0.08 $ 0.02
Net realized and unrealized
gain (loss) on investments and
foreign currency 5.03 (0.30) 5.07 3.88 2.99 1.01
------ ------ ------ ------ ------ ------
Total from investment operations $ 5.03 $(0.25) $ 5.11 $ 3.94 $ 3.07 $ 1.03
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.01) $(0.05) $(0.02) $(0.03)
From net realized gain on
investments and foreign
currency transactions (0.95) (0.99) (0.92) (0.97) (0.03) (2.87)
In excess of net investment income -- -- (0.02) -- -- (0.01)
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.95) $(0.99) $(0.95) $(1.02) $(0.05) $(2.91)
------ ------ ------ ------ ------ ------
Net asset value - end of period $25.53 $21.45 $22.69 $18.53 $15.61 $12.59
====== ====== ====== ====== ====== ======
Total return(+) 23.85%++ (0.89)% 28.72% 26.54% 24.49% 7.72%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.99%+ 0.91% 0.96% 0.91% 0.95% 0.91%
Net investment income
(loss) (0.04)%+ 0.23% 0.18% 0.36% 0.58% 0.14%
Portfolio turnover 47% 81% 79% 81% 94% 79%
Net assets at end of period
(000 omitted) $3,162,055 $2,611,866 $2,201,849 $972,353 $507,784 $318,170
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained by
the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this expense
offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
(S) The distributor did not impose a portion of its distribution fee for the periods indicated. If these fees 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%
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ------------------------------------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value -
beginning of period $20.90 $22.16 $18.19 $15.40 $12.50 $14.47
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.08) $(0.10) $(0.10) $(0.06) $(0.03) $(0.08)
Net realized and
unrealized gain (loss) on
investments and foreign currency 4.90 (0.28) 4.97 3.82 2.96 1.00
------ ------ ------ ------ ------ ------
Total from investment operations $ 4.82 $(0.38) $ 4.87 $ 3.76 $ 2.93 $ 0.92
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $(0.00)+++ $(0.02)
From net realized gain on
investments and foreign currency
transactions (0.95) (0.88) (0.90) (0.97) (0.03) (2.87)
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.95) $(0.88) $(0.90) $(0.97) $(0.03) $(2.89)
------ ------ ------ ------ ------ ------
Net asset value - end of period $24.77 $20.90 $22.16 $18.19 $15.40 $12.50
====== ====== ====== ====== ====== ======
Total return 23.46%++ (1.54)% 27.88% 25.59% 23.55% 6.91%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.64%+ 1.56% 1.63% 1.66% 1.78% 1.82%
Net investment loss (0.69)%+ (0.42)% (0.49)% (0.37)% (0.21)% (0.65)%
Portfolio turnover 47% 81% 79% 81% 94% 79%
Net assets at end of period
(000 omitted) $2,802,071 $2,237,570 $1,860,130 $680,456 $178,117 $25,672
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained by
the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this expense
offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED -------------------------------------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period
$20.92 $22.17 $18.22 $15.42 $12.51 $13.18
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.08) $(0.10) $(0.09) $(0.06) $(0.02) $(0.04)
Net realized and unrealized gain
(loss) on investments and
foreign currency 4.89 (0.27) 4.96 3.83 2.96 0.62
------ ------ ------ ------ ------ ------
Total from investment operations $ 4.81 $(0.37) $ 4.87 $ 3.77 $ 2.94 $ 0.58
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $ -- $ -- $(0.00)+++ $ -- $ -- $ --
From net realized gain on
investments and foreign
currency transactions (0.95) (0.88) (0.92) (0.97) (0.03) (1.25)
In excess of net investment income -- -- (0.00)+++ (0.00)+++ -- --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.95) $(0.88) $(0.92) $(0.97) $(0.03) $(1.25)
------ ------ ------ ------ ------ ------
Net asset value - end of period $24.78 $20.92 $22.17 $18.22 $15.42 $12.51
====== ====== ====== ====== ====== ======
Total return 23.45%++ (1.51)% 27.87% 25.67% 23.58% 4.43%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.64%+ 1.56% 1.62% 1.67% 1.71% 1.74%+
Net investment loss (0.69)%+ (0.42)% (0.47)% (0.38)% (0.15)% (0.54)%+
Portfolio turnover 47% 81% 79% 81% 94% 79%
Net assets at end of period
(000 omitted) $721,099 $563,505 $459,809 $136,032 $25,737 $ 4,821
* For the period from the inception of Class C, January 3, 1994, through September 30, 1994.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained by
the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for this expense
offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ----------------------------------
MARCH 31, 1999 1998 1997*
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $21.52 $22.75 $18.34
------ ------ ------
Income from investment operations# -
Net investment income $ 0.04 $ 0.13 $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency 5.06 (0.31) 4.34
------ ------ ------
Total from investment operations $ 5.10 $(0.18) $ 4.41
------ ------ ------
Less distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions $(0.95) $(1.05) $ --
------ ------ ------
Net asset value - end of period $25.67 $21.52 $22.75
====== ====== ======
Total return 24.10%++ (0.55)% 24.05%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.64%+ 0.56% 0.63%+
Net investment income 0.31%+ 0.57% 0.51%+
Portfolio turnover 47% 81% 79%
Net assets at end of period (000 omitted) $20,512 $17,551 $19,400
* For the period from the inception of Class I, January 2, 1997, through September 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated
without reduction for this expense offset arrangement.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(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. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there are
no such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Security Loans - The Fund may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by
the Fund. The loans are collateralized at all times by cash and U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street provides the Fund with indemnification against Borrower
default. The Fund bears the risk of loss with respect to the investment of
cash collateral.
At March 31, 1999, the value of securities loaned was $84,657,787. These loans
were collateralized by cash of $83,727,270 and U.S. Treasury securities of
$3,775,054. Cash collateral is invested in short-term securities, which are
included in the Portfolio of Investments. A portion of the income generated
upon investment of the collateral is remitted to the Borrowers, and the
remainder is allocated between the Fund and State Street in its capacity as
lending agent. On loans that are collateralized by U.S. Treasury securities, a
fee is received from the Borrower and is allocated between the Fund and State
Street. 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.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its 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 distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. Effective
November 1, 1998, the management fee is computed daily and paid monthly at an
annual rate of 0.43% of the Fund's average daily net assets. Prior to this
date the management fee was computed daily and paid monthly, using a
percentage of the Fund's average daily net assets plus a percentage of the
Fund's gross income equivalent, on a annualized basis, to 0.33% of the Fund's
average daily net assets.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of
$23,842 for the six months ended March 31, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$586,116 for the six months ended March 31, 1999, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.10% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $220,202
for the six months ended March 31, 1999. Fees incurred under the distribution
plan during the six months ended March 31, 1999, were 0.35% of average daily
net assets attributable to Class A shares on an annualized basis.
The Trustees have adopted a distribution plan relating solely to Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $34,131 and $4,387 for
Class B and Class C shares, respectively, for the six months ended March 31,
1999. Fees incurred under the distribution plan during the six months ended
March 31, 1999, were 1.00% of average daily net assets for both Class B and
Class C on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended March
31, 1999, were $59,076, $2,214,705, and $61,623 for Class A, Class B, and
Class C shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$2,888,522,424 and $2,931,881,241, 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 $5,055,762,741
--------------
Gross unrealized appreciation $1,833,709,514
Gross unrealized depreciation (189,771,761)
--------------
Net unrealized appreciation $1,643,937,753
==============
(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>
Class A Shares
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------------- -------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 62,193,771 $ 1,509,472,629 83,102,457 $ 1,939,622,831
Shares issued to
shareholders in
reinvestment of
distributions 4,370,095 102,713,908 4,489,534 91,779,609
Shares reacquired (64,476,815) (1,572,808,764) (62,877,919) (1,467,034,354)
----------- --------------- ----------- ---------------
Net increase 2,087,051 $ 39,377,773 24,714,072 $ 564,368,086
=========== =============== =========== ===============
</TABLE>
<TABLE>
Class B Shares
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------------- -------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 13,870,618 $ 323,157,243 39,061,924 $ 885,791,000
Shares issued to
shareholders in
reinvestment of
distributions 3,754,559 85,642,135 3,258,962 65,159,056
Shares reacquired (11,546,583) (270,069,686) (19,219,913) (433,712,058)
----------- --------------- ----------- ---------------
Net increase 6,078,594 $ 138,729,692 23,100,973 $ 517,237,998
=========== =============== =========== ===============
</TABLE>
<TABLE>
Class C Shares
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------------- -------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,064,374 $ 143,492,379 11,258,935 $ 255,375,767
Shares issued to
shareholders in
reinvestment of
distributions 769,543 17,568,516 630,442 12,602,429
Shares reacquired (4,680,245) (110,310,625) (5,685,657) (128,214,722)
----------- --------------- ----------- ---------------
Net increase 2,153,672 $ 50,750,270 6,203,720 $ 139,763,474
=========== =============== =========== ===============
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
------------------------------------- -------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 41,765 $ 985,161 118,387 $ 2,814,464
Shares issued to
shareholders in
reinvestment of
distributions 28,878 680,655 38,865 793,621
Shares reacquired (86,857) (2,121,376) (194,599) (4,432,648)
----------- --------------- ----------- ---------------
Net decrease (16,214) $ (455,560) (37,347) $ (824,563)
=========== =============== =========== ===============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $720 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the six
months ended March 31, 1999, was $19,318. The Fund had no significant borrowings
during the period.
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
<TABLE>
MFS(R) RESEARCH FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Peter G. Harwood - Private Investor
CUSTODIAN
J. Atwood Ives - Chairman and Chief Executive State Street Bank and Trust Company
Officer, Eastern Enterprises (diversified
services company) INVESTOR INFORMATION
For MFS stock and bond market outlooks, call
Lawrence T. Perera - Partner, Hemenway & Barnes toll free: 1-800-637-4458 anytime from a
(attorneys) touch-tone telephone.
William J. Poorvu - Adjunct Professor, Harvard For information on MFS mutual funds, call your
University Graduate School of Business financial adviser or, for an information kit,
Administration call toll free: 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time (or leave a
Charles W. Schmidt - Private Investor message anytime).
Arnold D. Scott* - Senior Executive INVESTOR SERVICE
Vice President, Director, and Secretary, MFS Service Center, Inc.
MFS Investment Management P.O. Box 2281
Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman, Chief
Executive Officer, and Director, For general information, call toll free:
MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Elaine R. Smith - Independent Consultant
For service to speech- or hearing-impaired,
David B. Stone - Chairman and Director, call toll free: 1-800-637-6576 any business day
North American Management Corp. from 9 a.m. to 5 p.m. Eastern time. (To use
(investment advisers) this service, your phone must be equipped with
a Telecommunications Device for the Deaf.)
INVESTMENT ADVISER
Massachusetts Financial Services Company For share prices, account balances, and
500 Boylston Street exchanges, call toll free: 1-800-MFS-TALK
Boston, MA 02116-3741 (1-800-637-8255) anytime from a touch-tone
telephone.
DISTRIBUTOR
MFS Fund Distributors, Inc. WORLD WIDE WEB
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
ASSOCIATE DIRECTOR OF EQUITY RESEARCH
Alec C. Murray*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
------------
MFS(R) RESEARCH FUND Bulk Rate
U.S. Postage
Paid
[Logo] M F S (R) MFS
INVESTMENT MANAGEMENT ------------
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MFR-3 5/99 463M 14/214/314/814
