<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) RESEARCH FUND
ANNUAL REPORT o SEPTEMBER 30, 1999
----------------------------------------------------
DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 31)
----------------------------------------------------
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 5
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 22
Independent Auditors' Report .............................................. 28
MFS' Year 2000 Readiness Disclosure ....................................... 30
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
The current investment and economic environment bears little resemblance to
last year's. One year ago, global economies were floundering, and the crisis
in Asia threatened an already weak U.S. economy. Corporate earnings were flat,
and economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low.
Many corporations are focused on improving their profitability, and investors
have been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999
will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis
has passed. In fact, Japan's economic woes seem to have reached bottom.
Although the process is in its infancy, some Japanese corporations not only
are talking about restructuring and cost cutting, they also are beginning to
take action, looking within to become more competitive and improve returns on
equity. While still lagging the United States, Europe is beginning to
restructure and consolidate. These signs of international growth have
contributed to concerns that the U.S. economy now may be too strong.
In June, and again in August, the Fed raised rates by one-quarter of a
percentage point to help ward off the specter of inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current
market many investors are taking on additional risk - whether through day
trading or investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago.
We believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top
25 stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged
index of common stock total return performance, are still the most overvalued.
Such extreme overvaluation makes the stock market sensitive to interest-rate
news and any negative earnings surprises. The Year 2000 (Y2K) computer problem
is another factor causing investor concern. While we believe corporate America
is well prepared to address any Y2K situations that may arise at year-end, no
one can predict investor behavior. In our opinion, it is investor behavior
that has the greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is
through our continuing commitment to MFS Original Research(R) and our
fundamental investment tenet of long-term investing. Whether markets
are up or down, MFS analysts focus on analyzing industries and visiting
companies to determine the long-term winners and the prices that will make
them attractive opportunities. Because all companies will not benefit equally
from the improving international environment, bottom-up research remains
critical to identifying those that we believe are successfully restructuring,
consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at
attractive prices. For this reason, we are continuing to expand our domestic
and international capabilities to ensure that MFS has primary, in-house
research on companies worldwide. We believe that we have built the right
investment team, backed by MFS Original Research, to take advantage of those
opportunities for our shareholders.
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)
October 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Alec C. Murray]
Alec C. Murray
For the 12 months ended September 30, 1999, Class A shares of the Fund
provided a total return of 24.09%, Class B shares 23.31%, Class C shares
23.35%, and Class I shares 24.59%. These returns, which include the
reinvestment of distributions but exclude the effects of any sales charges,
compare to a 27.81% return over the same period for the Standard & Poor's 500
Composite Index (the S&P 500). The S&P 500 is a popular, unmanaged index of
common stock total return performance. During the same period, the average
growth fund reported by Lipper Analytical Services, Inc., an independent firm
that tracks mutual fund performance, returned 30.34%.
Q. WHAT ARE SOME OF THE FACTORS THAT CAUSED THE FUND TO UNDERPERFORM ITS INDEX?
A. The Fund's underperformance related to holdings in the consumer products
and retailing sectors. In retailing, CVS and Rite Aid have performed poorly
this year due to the threat of increased sales of pharmaceuticals over the
Internet. Rite Aid also has had accounting issues, which has caused us to
reduce our position. Longer term, we believe a portion of the market will
choose to purchase pharmaceuticals over the Internet just as a portion of
the market has already chosen to use mail order. However, we feel that most
pharmaceutical sales will continue to go through pharmacies given people's
desire to meet with pharmacists and to fill their prescription immediately.
Consumer staples stocks such as Gillette, most of which we sold during the
period, and Clorox were hurt by their exposure in Latin America, especially
Brazil and Argentina, where we thought the economies would rebound more
quickly than they did.
Q. DOES THIS MEAN THE FUND IS SHYING AWAY FROM CONSUMER STOCKS?
A. Yes. We have reduced our position in the consumer products because we have
not seen sector evidence of a recovery in foreign markets. However, we
retain core holdings in the sector with names like Clorox. We also recently
began building a position in Coca-Cola Co., which we think is a
premier consumer products company and is now selling at a more
attractive valuation.
Q. WHAT WERE SOME OF THE TECHNOLOGY STOCKS THAT DID WELL?
A. Our holdings in the semiconductor, infrastructure, and telecommunications
provider markets performed exceptionally well. These companies, such as Cisco,
Motorola, MCI WorldCom, Analog Devices, and LSI Logic, all benefited from the
explosion in communications traffic.
Q. CAN YOU DISCUSS A TECHNOLOGY STOCK THAT YOU SOLD AND WHY?
A. Lucent Technologies, a company spun off by AT&T, designs, develops, and
manufactures communications systems and software. Lucent made a significant
contribution to the Fund's performance earlier in the period. We sold it
because we believed we had captured most of its appreciation, and other
stocks, such as Cisco, showed more growth potential.
Q. WHAT TYPE OF COMPANIES LOOK PROMISING FOR THE FUTURE?
A. Companies that are leaders in their field. Currently, we have large
investments in leading communications companies because we believe this is
where innovation is occurring. However, the Research Fund looks for leading
companies across all industries and has been able to identify leaders in many
industries. BP Amoco in the energy industry, for example, has added value in
a difficult industry through cost reduction and productivity measures.
Wal-Mart has done well in a generally difficult retail market by focusing on
adding value for the consumer. These are just a few examples, but our team of
analysts uncovers companies on a daily basis that we believe may be the next
generation of leaders in their fields.
Respectfully,
/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.
<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: $6.5 BILLION NET ASSETS AS OF SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary for more information.)
It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(FOR THE 10-YEAR PERIOD ENDED SEPTEMBER 30, 1999)
MFS RESEARCH S&P 500
FUND - CLASS A COMPOSITE INDEX
- ------------------------------------------------
9/89 $ 9,430 $10,000
9/91 10,640 11,900
9/93 15,260 14,940
9/95 20,460 20,100
9/97 33,320 33,960
9/99 40,984 47,334
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH SEPTEMBER 30, 1999
<TABLE>
CLASS A
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +24.09% +58.31% +149.39% +334.85%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +24.09% +16.55% + 20.05% + 15.83%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +16.96% +14.27% + 18.64% + 15.15%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
CLASS B
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +23.31% +55.27% +140.93% +322.00%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +23.31% +15.80% + 19.23% + 15.35%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +19.31% +15.05% + 19.03% + 15.35%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
CLASS C
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +23.35% +55.34% +141.26% +321.41%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +23.35% +15.81% + 19.26% + 15.38%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +22.35% +15.81% + 19.26% + 15.38%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
CLASS I
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +24.59% +61.48% +154.38% +343.55%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +24.59% +16.94% + 20.30% + 15.95%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
COMPARATIVE INDICES
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average growth fund* +30.34% +19.37% + 20.00% + 14.35%
- ------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +27.81% +25.09% + 25.03% + 16.82%
- ------------------------------------------------------------------------------------------------------------------
* Source: Lipper Analytical Services, Inc.
+ Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance
Including Sales Charge takes into account the deduction of the applicable
contingent deferred sales charge (CDSC), which declines over six years from 4%
to 0%. Class C Share Performance Including Sales Charge takes into account the
deduction of the 1% CDSC applicable to Class C shares redeemed within 12
months. Class I shares have no sales charge and are only available to certain
institutional investors.
Class B, C, and I share performance include the performance of the Fund's
Class A shares for periods prior to their inception (blended performance).
Class B and C blended performance has been adjusted to take into account the
CDSC applicable to Class B and C shares rather than the initial sales charge
(load) applicable to Class A shares. Class I share blended performance has
been adjusted to account for the fact that Class I shares have no sales
charge. These blended performance figures have not been adjusted to take into
account differences in class-specific operating expenses. Because operating
expenses of Class B and C shares are higher than those of Class A, the blended
Class B and C share performance is higher than it would have been had Class B
and C shares been offered for the entire period. Conversely, because operating
expenses of Class I shares are lower than those of Class A, the blended Class
I share performance is lower than it would have been had Class I shares been
offered for the entire period.
All 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.
Investments in foreign securities may provide superior returns but also
involve greater risk than U.S. investments. Investments in foreign securities
may be favorably or unfavorably affected by changes in interest rates and
currency exchange rates, market conditions, and the economic and political
conditions of the countries where investments are made. These risks may
increase share price volatility. See the prospectus for details.
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 1999
Five Largest Stock Sectors
TECHNOLOGY 27.2%
FINANCIAL SERVICES 14.5%
UTILITIES & COMMUNICATIONS 10.7%
HEALTH CARE 10.0%
LEISURE 7.5%
TOP 10 STOCK HOLDINGS
MICROSOFT CORP. 4.8% LSI LOGIC CORP. 2.1%
Computer software and systems company Semiconductor company
TYCO INTERNATIONAL LTD. 3.3% CISCO SYSTEMS, INC. 2.1%
Security systems, packaging, and electronic Computer network developer
equipment conglomerate
BMC SOFTWARE, INC. 2.0%
ANALOG DEVICES, INC. 2.4% Computer software company
Semiconductor company
BELL ATLANTIC CORP. 2.0%
SPRINT CORP. (PCS GROUP) 2.3% Integrated telecommunications
Long-distance telephone company company
SUN MICROSYSTEMS, INC. 2.2% ORACLE CORP. 1.9%
Computer systems company Database software developer and
manufacturer
This portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- September 30, 1999
Stocks - 95.4%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 88.5%
Aerospace - 3.1%
General Dynamics Corp. 1,140,700 $ 71,222,456
Raytheon Co., "B" 942,900 46,791,412
United Technologies Corp. 1,452,300 86,139,544
--------------
$ 204,153,412
- ------------------------------------------------------------------------------------------------------
Automotive - 0.5%
Federal-Mogul Corp. 1,194,600 $ 32,926,163
- ------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 3.9%
Bank America Corp. 473,000 $ 26,340,188
Bank of New York Co., Inc. 1,276,200 42,672,937
Chase Manhattan Corp. 447,008 33,693,228
PNC Bank Corp. 969,600 51,085,800
Providian Financial Corp. 517,000 40,939,937
US Bancorp 1,433,300 43,267,744
Wells Fargo Co. 470,700 18,651,488
--------------
$ 256,651,322
- ------------------------------------------------------------------------------------------------------
Biotechnology - 1.3%
Guidant Corp. 1,590,200 $ 85,274,475
- ------------------------------------------------------------------------------------------------------
Business Machines - 2.6%
Hewlett-Packard Co. 341,100 $ 31,381,200
Sun Microsystems, Inc.* 1,486,400 138,235,200
--------------
$ 169,616,400
- ------------------------------------------------------------------------------------------------------
Business Services - 0.5%
First Data Corp. 696,300 $ 30,550,163
- ------------------------------------------------------------------------------------------------------
Chemicals - 0.2%
Cambrex Corp. 586,000 $ 15,492,375
- ------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 4.6%
Microsoft Corp.* 3,302,900 $ 299,118,881
- ------------------------------------------------------------------------------------------------------
Computer Software - Services - 1.3%
EMC Corp.* 1,157,700 $ 82,703,194
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 6.8%
BMC Software, Inc.* 1,774,900 $ 127,016,281
Citrix Systems, Inc.* 437,800 27,116,238
Computer Associates International, Inc. 488,875 29,943,594
Compuware Corp.* 1,648,100 42,953,606
Liberate Technologies* 179,300 7,553,013
Oracle Corp.* 2,651,230 120,630,965
Synopsys, Inc.* 591,900 33,238,884
VERITAS Software Corp.* 741,600 56,315,250
--------------
$ 444,767,831
- ------------------------------------------------------------------------------------------------------
Conglomerates - 3.2%
Tyco International Ltd. 1,999,274 $ 206,425,040
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 2.9%
Clorox Co. 1,188,800 $ 45,471,600
Colgate-Palmolive Co. 853,700 39,056,775
Dial Corp. 1,897,100 48,376,050
Gillette Co. 203,100 6,892,706
Newell Rubbermaid, Inc. 147,763 4,220,481
Procter & Gamble Co. 489,300 45,871,875
--------------
$ 189,889,487
- ------------------------------------------------------------------------------------------------------
Containers - 0.8%
Owens Illinois, Inc.* 1,643,100 $ 32,553,919
Smurfit-Stone Container Corp.* 956,538 20,685,134
--------------
$ 53,239,053
- ------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.9%
Honeywell, Inc. 553,100 $ 61,566,944
- ------------------------------------------------------------------------------------------------------
Electronics - 4.8%
Analog Devices, Inc.* 2,973,299 $ 152,381,574
Flextronics International Ltd.* 504,300 29,343,956
LSI Logic Corp.* 2,563,700 132,030,550
--------------
$ 313,756,080
- ------------------------------------------------------------------------------------------------------
Energy - 0.2%
Devon Energy Corp. 323,200 $ 13,392,600
- ------------------------------------------------------------------------------------------------------
Entertainment - 4.4%
Carnival Corp. 836,100 $ 36,370,350
CBS Corp.* 861,800 39,858,250
Comcast Corp., "A" 861,500 34,352,312
Disney (Walt) Co. 1,341,000 34,698,375
Infinity Broadcasting Corp.* 1,574,700 46,158,394
Macromedia, Inc.* 78,400 3,204,600
Time Warner, Inc. 1,506,300 91,507,725
--------------
$ 286,150,006
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 2.8%
Associates First Capital Corp., "A" 1,695,246 $ 61,028,856
Citigroup, Inc. 1,821,350 80,139,400
Morgan Stanley Dean Witter & Co. 333,300 29,726,193
Schwab (Charles) Corp. 292,900 9,867,069
--------------
$ 180,761,518
- ------------------------------------------------------------------------------------------------------
Financial Services - 0.8%
AXA Financial, Inc. 914,100 $ 51,018,206
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - 2.6%
Coca-Cola Co. 1,776,900 $ 85,402,256
Nabisco Holdings Corp., "A" 994,070 34,357,545
Ralston-Ralston Purina Group 1,705,840 47,443,675
--------------
$ 167,203,476
- ------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.6%
Bowater, Inc. 774,400 $ 40,656,000
- ------------------------------------------------------------------------------------------------------
Insurance - 4.6%
American International Group, Inc. 808,850 $ 70,319,397
CIGNA Corp. 1,071,500 83,309,125
Hartford Financial Services Group, Inc. 1,192,800 48,755,700
Lincoln National Corp. 1,224,700 46,002,794
Nationwide Financial Services, Inc., "A" 538,500 19,049,437
ReliaStar Financial Corp. 965,863 32,114,945
--------------
$ 299,551,398
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Internet - 0.5%
Phone.com, Inc.* 50,300 $ 7,620,450
VeriSign, Inc.* 212,370 22,617,405
--------------
$ 30,237,855
- ------------------------------------------------------------------------------------------------------
Machinery - 1.1%
Danaher Corp. 1,355,100 $ 71,396,831
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - 4.9%
American Home Products Corp. 2,827,800 $ 117,353,700
Boston Scientific Corp.* 1,206,400 29,783,000
Bristol-Myers Squibb Co. 1,235,100 83,369,250
Pharmacia & Upjohn, Inc. 1,858,700 92,237,987
--------------
$ 322,743,937
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.5%
Cardinal Health, Inc. 971,950 $ 52,971,275
Medtronic, Inc. 1,523,400 54,080,700
United Healthcare Corp. 1,067,900 51,993,381
VISX, Inc.* 53,030 4,194,342
--------------
$ 163,239,698
- ------------------------------------------------------------------------------------------------------
Oil Services - 0.2%
Cooper Cameron Corp.* 427,400 $ 16,134,350
- ------------------------------------------------------------------------------------------------------
Oils - 2.6%
Atlantic Richfield Co. 267,300 $ 23,689,463
Coastal Corp. 118,900 4,867,469
Conoco, Inc. 2,333,500 63,879,562
EOG Resources, Inc. 459,600 9,766,500
Mobil Corp. 688,800 69,396,600
--------------
$ 171,599,594
- ------------------------------------------------------------------------------------------------------
Photographic Products - 0.3%
Polaroid Corp. 759,725 $ 19,752,850
- ------------------------------------------------------------------------------------------------------
Printing and Publishing - 1.0%
Tribune Co. 1,282,000 $ 63,779,500
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.5%
McDonald's Corp. 2,339,600 $ 100,602,800
- ------------------------------------------------------------------------------------------------------
Special Products and Services - 0.5%
SPX Corp.* 94,400 $ 8,566,800
Xerox Corp. 518,700 21,752,981
--------------
$ 30,319,781
- ------------------------------------------------------------------------------------------------------
Stores - 4.1%
CVS Corp. 1,613,900 $ 65,867,294
Dayton Hudson Corp. 371,900 22,337,244
Office Depot, Inc.* 2,557,450 26,054,022
Rite Aid Corp. 1,572,100 21,714,631
TJX Cos., Inc. 1,236,200 34,690,862
Wal-Mart Stores, Inc. 2,105,900 100,161,869
--------------
$ 270,825,922
- ------------------------------------------------------------------------------------------------------
Supermarkets - 1.8%
Kroger Co.* 2,747,700 $ 60,621,131
Safeway, Inc.* 1,461,600 55,632,150
--------------
$ 116,253,281
- ------------------------------------------------------------------------------------------------------
Telecommunications - 12.7%
Bell Atlantic Corp. 1,882,700 $ 126,729,244
Cisco Systems, Inc.* 1,887,750 129,428,859
GTE Corp. 323,600 24,876,750
MCI WorldCom, Inc.* 1,558,974 112,051,256
Motorola, Inc. 1,204,800 106,022,400
Nortel Networks Corp. 796,300 40,611,300
SBC Communications, Inc. 1,014,800 51,818,225
Sprint Corp. 1,054,926 57,229,736
Sprint Corp. (PCS Group)* 1,893,300 141,169,181
Tellabs, Inc.* 710,675 40,464,058
--------------
$ 830,401,009
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 1.1%
CMS Energy Corp. 764,200 $ 25,935,038
MidAmerican Energy Holdings Co.* 988,600 29,163,700
Texas Utilities Co. 403,700 15,063,056
--------------
$ 70,161,794
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.3%
Columbia Energy Group 419,450 $ 23,227,044
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $5,785,540,270
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 6.9%
Canada - 0.1%
Abitibi-Consolidated, Inc. (Forest and Paper Products) 582,600 $ 7,027,612
- ------------------------------------------------------------------------------------------------------
France - 0.9%
Total Fina S.A., ADR (Oils) 126,800 $ 8,043,875
Total S.A., "B" (Oils) 427,385 53,648,974
--------------
$ 61,692,849
- ------------------------------------------------------------------------------------------------------
Germany - 0.9%
Mannesmann AG (Machinery) 358,085 $ 57,139,643
- ------------------------------------------------------------------------------------------------------
Ireland - 0.9%
Bank of Ireland (Banks and Credit Cos.)* 6,707,620 $ 54,587,100
Trintech Group PLC, ADR (Computer Software - Products)* 250,200 3,283,875
--------------
$ 57,870,975
- ------------------------------------------------------------------------------------------------------
Japan - 0.7%
Hitachi Ltd. (Electronics) 2,399,000 $ 26,520,705
Orix Corp. (Financial Services) 160,300 19,658,301
--------------
$ 46,179,006
- ------------------------------------------------------------------------------------------------------
Spain - 0.2%
Repsol S.A. (Oils) 532,487 $ 10,417,197
- ------------------------------------------------------------------------------------------------------
Sweden - 0.3%
Ericsson LM, "B" (Telecommunications) 606,260 $ 18,806,795
- ------------------------------------------------------------------------------------------------------
Switzerland - 0.7%
UBS AG (Banks and Credit Cos.) 157,900 $ 44,465,548
- ------------------------------------------------------------------------------------------------------
United Kingdom - 2.2%
BP Amoco PLC, ADR (Oils) 867,575 $ 96,138,155
AstraZeneca Group PLC (Medical and Health Products) 1,214,700 50,978,428
--------------
$ 147,116,583
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 450,716,208
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $5,019,914,913) $6,236,256,478
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.4%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Associates Corp. of North America, due 10/01/99 $ 20,000 $ 20,000,000
Federal Home Loan Bank, due 10/22/99 50,000 49,850,084
Federal National Mortgage Assn., due
10/04/99 - 10/27/99 115,870 115,635,096
Student Loan Marketing Assn., due 10/01/99 32,500 32,500,000
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 217,985,180
- ------------------------------------------------------------------------------------------------------
Other Short-Term Obligations - 3.7%
- ------------------------------------------------------------------------------------------------------
SHARES
- ------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio
(Identified Cost, $243,402,501) 243,402,501 $ 243,402,501
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $5,481,302,594) $6,697,644,159
Other Assets, Less Liabilities - (2.5)% (162,842,584)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $6,534,801,575
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $5,481,302,594) $6,697,644,159
Cash 230,801
Foreign currency, at value (identified cost, $29) 29
Receivable for Fund shares sold 39,507,275
Receivable for investments sold 96,101,244
Dividends and interest receivable 3,862,217
Other assets 66,587
--------------
Total assets $6,837,412,312
--------------
Liabilities:
Payable for Fund shares reacquired $ 15,320,872
Payable for investments purchased 42,484,077
Collateral for securities loaned, at value 243,402,501
Payable to affiliates -
Management fee 76,743
Shareholder servicing agent fee 17,847
Distribution and service fee 123,569
Administrative fee 1,028
Accrued expenses and other liabilities 1,184,100
--------------
Total liabilities $ 302,610,737
--------------
Net assets $6,534,801,575
==============
Net assets consist of:
Paid-in capital $4,736,320,143
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 1,216,368,465
Accumulated undistributed net realized gain on
investments and foreign currency transactions 582,534,965
Accumulated net investment loss (421,998)
--------------
Total $6,534,801,575
==============
Shares of beneficial interest outstanding 260,017,695
===========
Class A shares:
Net asset value per share
(net assets of $3,061,563,357 / 119,675,882 shares of
beneficial interest outstanding) $25.58
======
Offering price per share (100 / 94.25 of net asset
value per share) $27.14
======
Class B shares:
Net asset value and offering price per share
(net assets of $2,753,934,617 / 111,314,753 shares of
beneficial interest outstanding) $24.74
======
Class C shares:
Net asset value and offering price per share
(net assets of $699,815,876 / 28,270,737 shares of
beneficial interest outstanding) $24.75
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $19,487,725 / 756,323 shares of
beneficial interest outstanding) $25.77
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 51,985,219
Interest 8,531,357
Foreign taxes withheld (691,288)
--------------
Total investment income $ 59,825,288
--------------
Expenses -
Management fee $ 27,850,677
Trustees' compensation 167,517
Shareholder servicing agent fee 6,971,173
Distribution and service fee (Class A) 10,928,906
Distribution and service fee (Class B) 27,421,229
Distribution and service fee (Class C) 6,943,247
Administrative fee 313,503
Custodian fee 1,297,480
Printing 227,106
Postage 700,355
Auditing fees 35,726
Legal fees 37,690
Miscellaneous 4,123,535
--------------
Total expenses $ 87,018,144
Fees paid indirectly (744,545)
--------------
Net expenses $ 86,273,599
--------------
Net investment loss $ (26,448,311)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 633,041,760
Foreign currency transactions (1,355,241)
--------------
Net realized gain on investments and foreign
currency transactions $ 631,686,519
--------------
Change in unrealized appreciation -
Investments $ 698,156,192
Translation of assets and liabilities in foreign
currencies 24,913
--------------
Net unrealized gain on investments and foreign
currency translation $ 698,181,105
--------------
Net realized and unrealized gain on investments
and foreign currency $1,329,867,624
--------------
Increase in net assets from operations $1,303,419,313
==============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- ---------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (26,448,311) $ (5,532,906)
Net realized gain on investments and foreign currency
transactions 631,686,519 257,290,588
Net unrealized gain (loss) on investments and foreign
currency translation 698,181,105 (379,649,249)
-------------- --------------
Increase (decrease) in net assets from operations $1,303,419,313 $ (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) (25,969,746) (19,503,877)
From net realized gain on investments and foreign
currency transactions (Class I) (767,888) (848,087)
-------------- --------------
Total distributions declared to shareholders $ (246,895,115) $ (203,349,067)
-------------- --------------
Net increase in net assets from Fund share transactions $ 47,785,574 $1,220,544,995
-------------- --------------
Total increase in net assets $1,104,309,772 $ 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 $421,998 and $106,481, respectively) $6,534,801,575 $5,430,491,803
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.02) $ 0.05 $ 0.04 $ 0.06 $ 0.08
Net realized and unrealized gain
(loss) on investments and foreign
currency 5.10 (0.30) 5.07 3.88 2.99
------ ------ ------ ------ ------
Total from investment operations $ 5.08 $(0.25) $ 5.11 $ 3.94 $ 3.07
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $(0.01) $(0.05) $(0.02)
From net realized gain on investments
and foreign currency transactions (0.95) (0.99) (0.92) (0.97) (0.03)
In excess of net investment income -- -- (0.02) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.95) $(0.99) $(0.95) $(1.02) $(0.05)
------ ------ ------ ------ ------
Net asset value - end of period $25.58 $21.45 $22.69 $18.53 $15.61
====== ====== ====== ====== ======
Total return(+) 24.09% (0.89)% 28.72% 26.54% 24.49%
Ratios (to average net assets)/Supplemental
data(S):
Expenses## 0.98% 0.91% 0.96% 0.91% 0.95%
Net investment income (loss) (0.06)% 0.23% 0.18% 0.36% 0.58%
Portfolio turnover 93% 81% 79% 81% 94%
Net assets at end of period (000
omitted) $3,061,563 $2,611,866 $2,201,849 $972,353 $507,784
(S) The distributor did not impose a portion of its distribution fee for the period 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
Ratios (to average net assets):
Expenses## 1.05%
Net investment income 0.48%
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.18) $(0.10) $(0.10) $(0.06) $(0.03)
Net realized and unrealized gain
(loss) on investments and foreign
currency 4.97 (0.28) 4.97 3.82 2.96
------ ------ ------ ------ ------
Total from investment operations $ 4.79 $(0.38) $ 4.87 $ 3.76 $ 2.93
------ ------ ------ ------ ------
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) (0.90) (0.97) (0.03)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.95) $(0.88) $(0.90) $(0.97) $(0.03)
------ ------ ------ ------ ------
Net asset value - end of period $24.74 $20.90 $22.16 $18.19 $15.40
====== ====== ====== ====== ======
Total return 23.31% (1.54)% 27.88% 25.59% 23.55%
Ratios (to average net assets)/Supplemental
data:
Expenses## 1.63% 1.56% 1.63% 1.66% 1.78%
Net investment loss (0.71)% (0.42)% (0.49)% (0.37)% (0.21)%
Portfolio turnover 93% 81% 79% 81% 94%
Net assets at end of period (000
omitted) $2,753,935 $2,237,570 $1,860,130 $680,456 $178,117
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.18) $(0.10) $(0.09) $(0.06) $(0.02)
Net realized and unrealized gain (loss)
on investments and foreign currency 4.96 (0.27) 4.96 3.83 2.96
------ ------ ------ ------ ------
Total from investment operations $ 4.78 $(0.37) $ 4.87 $ 3.77 $ 2.94
------ ------ ------ ------ ------
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)
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)
------ ------ ------ ------ ------
Net asset value - end of period $24.75 $20.92 $22.17 $18.22 $15.42
====== ====== ====== ====== ======
Total return 23.35% (1.51)% 27.87% 25.67% 23.58%
Ratios (to average net assets)/Supplemental
data:
Expenses## 1.63% 1.56% 1.62% 1.67% 1.71%
Net investment loss (0.71)% (0.42)% (0.47)% (0.38)% (0.15)%
Portfolio turnover 93% 81% 79% 81% 94%
Net assets at end of period (000 omitted) $699,816 $563,505 $459,809 $136,032 $25,737
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1999 1998 1997*
- ----------------------------------------------------------------------------------------------------------------
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 $ 0.07 $ 0.13 $ 0.07
Net realized and unrealized gain (loss) on investments
and foreign currency 5.13 (0.31) 4.34
------ ------ ------
Total from investment operations $ 5.20 $(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 $25.77 $21.52 $22.75
====== ====== ======
Total return 24.59% (0.55)% 24.05%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.63% 0.56% 0.63%+
Net investment income 0.29% 0.57% 0.51%+
Portfolio turnover 93% 81% 79%
Net assets at end of period (000 omitted) $19,488 $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.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<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. 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 the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Security Loans - State Street Bank and Trust Company ("State Street"), as
agent, may loan the securities of the Fund to certain brokers (the
"Borrowers") approved by the Fund. The loans are collateralized at all times
by cash and/or U.S. Treasury securities in an amount at least equal to the
market value of the securities loaned. State Street provides the Fund with
indemnification against Borrower default. The Fund bears the risk of loss with
respect to the investment of cash collateral.
At September 30, 1999, the value of securities loaned was $235,255,811. These
loans were collateralized by cash of $243,402,501. 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 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. During the period, the Fund's custodian fees were reduced by
$598,393 under this arrangement.
The Fund has also entered into a directed brokerage agreement, under which the
broker will credit the Fund a portion of the commissions generated, to offset
certain expenses of the Fund. For the period, the Fund's custodian fees were
reduced by $146,152 under this agreement. These amounts are shown as a
reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provision 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.
During the year ended September 30, 1999, $26,132,794 and $292,072 were
reclassified to accumulated net investment loss and paid-in capital,
respectively, from accumulated undistributed net realized gain on investments
and foreign currency transactions due to differences between book and tax
accounting for foreign currency transactions and net investment losses. 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, 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. Differences in per share
dividend rates are generally due to differences in separate class expenses.
Class B shares will convert to Class A shares approximately eight years after
purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.43%
of the Fund's average daily net assets. Prior to November 1, 1998, 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,
at an effective annual rate of 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
$67,812 for the year ended September 30, 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
$1,049,533 for the year ended September 30, 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 $429,799
for the year ended September 30, 1999. Fees incurred under the distribution
plan during the year ended September 30, 1999, were 0.35% of average daily net
assets attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $70,562 and $11,122 for
Class B and Class C shares, respectively, for the year ended September 30,
1999. Fees incurred under the distribution plan during the year ended
September 30, 1999, were 1.00% of average daily net assets attributable to
Class B and Class C shares, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended September 30,
1999, were $107,044, $4,640,836, and $115,983 for Class A, Class B, and Class
C shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
Prior to April 1, 1999, the fee was calculated as a percentage of the Fund's
average daily net assets at an annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $5,949,172,470 and $6,379,229,167,
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 $ 5,507,020,155
---------------
Gross unrealized appreciation $ 1,470,172,819
Gross unrealized depreciation (279,548,815)
---------------
Net unrealized appreciation $ 1,190,624,004
===============
(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>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 129,694,128 $3,288,673,034 83,102,457 $1,939,622,831
Shares issued to
shareholders in
reinvestment of
distributions 4,369,992 102,711,201 4,489,534 91,779,609
Shares reacquired (136,162,282) (3,464,307,738) (62,877,919) (1,467,034,354)
------------ -------------- ----------- --------------
Net increase (decrease) (2,098,162) $ (72,923,503) 24,714,072 $ 564,368,086
============ ============== =========== ==============
</TABLE>
<TABLE>
Class B Shares
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 23,402,859 $ 566,979,055 39,061,924 $ 885,791,000
Shares issued to
shareholders in
reinvestment of
distributions 3,755,718 85,672,274 3,258,962 65,159,056
Shares reacquired (22,892,519) (560,012,591) (19,219,913) (433,712,058)
------------ -------------- ----------- --------------
Net increase 4,266,058 $ 92,638,738 23,100,973 $ 517,237,998
============ ============== =========== ==============
</TABLE>
<TABLE>
Class C Shares
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 10,513,546 $ 257,451,695 11,258,935 $ 255,375,767
Shares issued to
shareholders in
reinvestment of
distributions 769,872 17,576,582 630,442 12,602,429
Shares reacquired (9,954,748) (245,373,049) (5,685,657) (128,214,722)
------------ -------------- ----------- --------------
Net increase 1,328,670 $ 29,655,228 6,203,720 $ 139,763,474
============ ============== =========== ==============
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 78,641 $ 1,967,225 118,387 $ 2,814,464
Shares issued to
shareholders in
reinvestment of
distributions 28,878 680,655 38,865 793,621
Shares reacquired (166,608) (4,232,769) (194,599) (4,432,648)
------------ -------------- ----------- --------------
Net decrease (59,089) $ (1,584,889) (37,347) $ (824,563)
============ ============== =========== ==============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended September 30, 1999, was $44,010. The Fund had no
significant borrowings during the year.
<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, 1999, the related
statement of operations for the year then ended, the statement of changes in
net assets for the years ended September 30, 1999 and 1998, and the financial
highlights for each of the years in the five-year period ended September 30,
1999. 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, 1999, 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, 1999, 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
November 4, 1999
----------------------------------------
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>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1999.
THE FUND HAS DESIGNATED $246,895,115 AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED SEPTEMBER 30, 1999.
- --------------------------------------------------------------------------------
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers
and software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking
steps to ascertain the Y2K readiness of MFS' internal systems and is working
with our external systems vendors to determine whether they expect their
systems to be ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness. Each year, MFS' research analysts and portfolio managers conduct
more than 1,000 on-site meetings with companies whose securities are, or may be,
held in fund and client portfolios, and host an additional 1,500 meetings at
MFS' headquarters. When assessing the Y2K readiness of these companies, MFS'
research analysts and portfolio managers may rely upon discussions at these
meetings as well as SEC disclosure documents and third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on MFS, shareholders of MFS funds, participants in
retirement plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program,
please visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston
Street, Boston, MA 02116-3741.
<PAGE>
<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.*
J. Atwood Ives - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified CUSTODIAN
services company) State Street Bank and Trust Company
Lawrence T. Perera - Partner, Hemenway AUDITORS
& Barnes (attorneys) Deloitte & Touche LLP
William J. Poorvu - Adjunct Professor, Harvard INVESTOR INFORMATION
University Graduate School of Business For MFS stock and bond market outlooks, call
Administration toll free: 1-800-637-4458 anytime from a
touch-tone telephone.
Charles W. Schmidt - Private Investor
For information on MFS mutual funds, call your
Arnold D. Scott* - Senior Executive financial consultant or, for an information
Vice President, Director, and Secretary, kit, call toll free: 1-800-637-2929 any
MFS Investment Management business day from 9 a.m. to 5 p.m. Eastern time
(or leave a message anytime).
Jeffrey L. Shames* - Chairman, Chief
Executive Officer, and Director, INVESTOR SERVICE
MFS Investment Management MFS Service Center, Inc.
P.O. Box 2281
Elaine R. Smith - Independent Consultant Boston, MA 02107-9906
David B. Stone - Chairman and Director, For general information, call toll free:
North American Management Corp. 1-800-225-2606 any business day from 8 a.m. to
(investment advisers) 8 p.m. Eastern time.
INVESTMENT ADVISER For service to speech- or hearing-impaired,
Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business day
500 Boylston Street from 9 a.m. to 5 p.m. Eastern time. (To use
Boston, MA 02116-3741 this service, your phone must be equipped with
a Telecommunications Device for the Deaf.)
DISTRIBUTOR
MFS Fund Distributors, Inc. 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.
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames* WORLD WIDE WEB
www.mfs.com
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
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MFR-2 11/99 472M 14/214/314/814
