<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) RESEARCH FUND
SEMIANNUAL REPORT o MARCH 31, 2000
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MUTUAL FUND GIFT KITS (see page 31)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
Trustees and Officers ..................................................... 33
MFS) ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
Historically, there have been two ways that shareholders in stocks and stock
mutual funds could potentially make money: capital gains from share price
appreciation and dividend payments. Over the past decade, however, it appears to
us that dividends have become less and less relevant as a means of profiting
from stock investments. Investors who in the past may have counted on dividend
payments from stocks or stock funds as a source of income are sometimes finding
their payments are no longer meeting their needs. In the balance of this letter,
we'd like to address why that has happened, why this may in some ways be good
for investors, and what investors may want to do to adjust to the new reality of
shrinking dividends.
A FUNDAMENTAL CHANGE
When a company pays a dividend, it is essentially sharing its profits with
stockholders. Until the 1950s, paying a dividend was standard practice for a
majority of American companies; dividend payments were virtually required to
compensate investors for taking on the risks associated with investing in
stocks.
What has happened in the ensuing decades, however, is a fundamental change in
the way investors view the stock market. The tremendous popularity of Individual
Retirement Accounts and 401(k) retirement plans has introduced a flood of new
investors to stocks and stock mutual funds, and a generally rising market
through most of the past decade has made the experience a very positive one for
many of those shareholders.
As a result, investors appear to be focusing much more on share price and on
company earnings -- which we believe are the strongest long-term driver of share
prices -- than on dividend payments. Summing up the trend, The New York Times
commented on January 4, 2000, that "a growing portion of corporate America
appears to be concluding that dividends are no longer needed to attract
investors and are therefore an unnecessary cost of doing business. Fewer
companies are raising dividends, and more and more major companies do not bother
to pay them at all."
BENEFITS FOR INVESTORS
In assessing whether or not this trend is good for investors, it may help to
look at what shareholders have traditionally regarded as the benefits of
dividends. One benefit was that a dividend payment served as an indication that
a company was in good health, because it was generating profits that it could
share with its investors. However, there are other ways for a corporation to use
its profits that over the long term may benefit shareholders more than a
dividend.
As part of the MFS Original Research(R) process that we use in evaluating
potential investments, one thing we look for is companies that are investing
their profits back in their businesses. Profits can be used to fund additional
research, product development, marketing, and other areas that may improve the
earnings of a company and potentially result in higher stock prices. Share
buybacks are another way we like to see a company reinvest its profits. By
buying back its own shares and thus reducing the number of shares outstanding, a
company may increase the value of existing shares. Over the long term, we
believe such actions may benefit shareholders more than a dividend payment. An
additional reason we feel dividends are an inefficient way for a company to use
its profits is that dividend payouts are subject to double taxation: once as
corporate profits and a second time as ordinary income to shareholders.
POTENTIAL DOWNSIDE PROTECTION
"Downside protection" is a second potential benefit that investors have
historically attributed to dividends. The reasoning went that, during a bad
market period, a stockholder could at least count on dividend payments to
somewhat counteract the effect of declining share prices. We believe, however,
that the best long-term protection against market volatility is simply investing
in good businesses -- which is why our research is focused on identifying
companies with the potential to grow earnings over the long haul, taking down
markets in their stride.
And although dividend payments may appear to provide some short-term protection
against volatility, over the past decade stock prices in general have risen much
faster than dividends, making most dividend payments too small to provide
significant protection. In 1999, for example, the average dividend yield of
stocks in the Standard & Poor's 500 Composite Index was only 1.21%(1) -- whereas
yields had averaged in the 3% - 4% range or greater during the decades of the
1960s, '70s, and '80s.(2)
ALTERNATE INCOME STREAMS
A third benefit of stock dividend payments has traditionally been that they may
provide a steady stream of income, allowing an investor to receive money from
stock or stock mutual fund investments without selling shares. This benefit has
often been used to provide retirement income. Over the past decade, however,
many investors have found their dividend checks shrinking while the value of
their holdings may have appreciated considerably.
Intuitively, receiving a stream of dividend income without reducing the
principal in one's account may seem preferable to selling shares to generate
income. But investors should also bear in mind the tax consequences of dividend
income. Dividends are federally taxed as ordinary income, whereas profits from
selling stock or mutual fund shares held more than one year are taxed at the
capital gains rate of 20% -- which for many investors is lower than their
ordinary income tax bracket. Many shareholders may find themselves paying lower
taxes on profits from share appreciation than on dividend income. Given the
current reality of low and declining stock dividends, we would suggest that
investors seeking an income stream from their equity portfolio talk with their
investment professionals about alternate payout methods. Two possible strategies
are systematic withdrawals and bond investing.
With a systematic withdrawal, an investor's account is set up to sell shares in
order to pay out a fixed amount on a regular schedule. The advantage of this
approach is that the payout amount is always the same, regardless of market
fluctuations or variations in dividends paid by the holdings in the account. In
a period when the market is rising, share price appreciation may in fact
compensate for some selling of holdings. Of course, the disadvantage of a
systematic withdrawal is that, depending on the payout amount, the principal
balance in the account will most likely shrink as shares are sold. At some point
an investor can potentially run out of money.
For investors who feel more comfortable not drawing down their account
principal, bond funds may present an attractive alternative for providing an
income stream. High-yield bond funds, in particular, may offer the potential for
higher dividend yields than many stock funds are offering today. A disadvantage
is that, historically, bond funds have not tended to offer as much potential for
long-term share price appreciation as have stock funds. Investors should also
understand that, although investments in lower-rated securities such as
high-yield bonds may provide greater returns, they are also associated with
greater than average risk.(3) We suggest that investors work with their
investment professionals to determine whether a bond fund or systematic
withdrawal plan may meet their needs within their expected time frame.
As with most major changes in the financial markets, the overall decline in
stock dividend payments presents a combination of challenges and potential
benefits for investors. We feel that most investors will be best served by
working with their investment professionals to continually monitor such changes
in the financial markets, as well as changes in their own situations, and
adjusting their portfolios accordingly. As always, we appreciate your confidence
in MFS and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
April 18, 2000
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(1)Source: Standard & Poor's. The Standard & Poor's 500 Composite Index (the
S&P 500) is a popular, unmanaged index of common stock total return
performance. It is not possible to invest directly in an index.
(2)Source: FactSet Research. The dividend yield of a stock is calculated by
dividing the dividend per share by the current market price per share.
(3)These risks may increase share price volatility. Please see a prospectus
for details.
A prospectus containing more complete information on any MFS product, including
charges and expenses, can be obtained from your investment professional. Please
read it carefully before you invest or send money. Investments in mutual funds
will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Alec C. Murray]
Alec C. Murray
For the six months ended March 31, 2000, Class A shares of the Fund provided a
total return of 32.62%, Class B shares 32.17%, Class C shares 32.14%, and Class
I shares 32.82%. These returns, which include the reinvestment of any
distributions but exclude the effects of any sales charges, compare to a 17.50%
return over the same period for the Fund's benchmark 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
large-cap core fund tracked by Lipper Inc., an independent firm that reports
mutual fund performance, returned 21.66%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE DURING THE PERIOD?
A. Favorable stock selection, including significant exposure to technology and
telecommunications stocks, helped the Fund outperform its benchmark and its
Lipper peer group. Our bottom-up research approach resulted in significant
exposure to companies such as Cisco, LSI Logic, Sun Microsystems, Analog
Devices, Nortel Networks, Oracle, and EMC. The dominant industry positions
and innovative product lines of these companies allowed them to capitalize on
the dramatic growth of the Internet and strong demand for new technologies.
As a result, each of these companies produced consistently strong earnings
and profit gains that translated into impressive stock performance during the
period.
Q. ARE YOU CONCERNED ABOUT THE HIGH VALUATIONS OF MANY TECHNOLOGY AND
COMMUNICATIONS STOCKS?
A. Yes. Despite the recent volatility and weakness in technology stocks,
valuations remain high. Although the Fund has recently reduced its exposure
to technology in response to some price concerns, it remains overweighted
versus the S&P 500. The reason is that our technology analysts believe that
the projected growth rates for many of the companies we hold in the portfolio
are accelerating. Therefore, despite some historically high valuations, we
continue to own significant positions in technology and telecommunications.
More specifically, we're focused on semiconductor producers, telecom
equipment manufacturers, computer network developers, and software companies.
Q. ARE YOU FINDING ATTRACTIVE OPPORTUNITIES OUTSIDE TECHNOLOGY AND
TELECOMMUNICATIONS?
A. The S&P 500 significantly underperformed the technology-laden NASDAQ
Composite Index (a widely used measure of over-the-counter common stock
performance) during the first quarter of 2000, which gave our analysts an
opportunity to buy stocks in nontechnology industries at attractive prices.
Specifically, we added to the portfolio's positions in pharmaceutical and
energy stocks when those stocks reached historically low valuations relative
to the average stock in the S&P 500. Pharmaceutical companies such as
Bristol-Myers Squibb and Pharmacia & Upjohn are now top positions in the
Fund. On the energy side, the large integrated oil companies, such as Exxon
Mobil and BP Amoco, have not performed well during the past six months,
despite the dramatic increase in oil prices. We believe the outlook for
accelerating earnings growth for these companies is favorable; therefore, we
have taken advantage of their price weakness during the period to increase
our exposure to these stocks.
Q. UNTIL VERY RECENTLY, THE MARKET HAS NOT BEEN KIND TO FINANCIAL SERVICES
STOCKS. WHAT'S YOUR OUTLOOK FOR THIS SECTOR?
A. We believe financial services stocks currently are exhibiting two favorable
characteristics: strong growth potential and depressed valuations. Our
research indicates that many of these financial services stocks may be poised
to produce consistent earnings growth, which could translate into stronger
stock performance. In addition, we believe the strong franchises, dominant
industry positions, and compelling long-term growth prospects of companies
such as Citigroup and Merrill Lynch should benefit their stock performance.
Q. HOW HAS INCREASED MARKET VOLATILITY AFFECTED THE STRATEGY OF THE FUND?
A. It hasn't significantly affected our strategy; however, we believe the
tremendous volatility we've experienced could create opportunities for
long-term investors who do their homework. The objective of the portfolio is
to outperform the S&P 500 over the long term by owning the best ideas of our
research analysts. In our view, many investors have been selling stocks
regardless of their long-term growth and profit prospects. As a result, our
analysts have often been able to increase our positions in companies that we
believe exhibit strong business fundamentals and compelling long-term growth
potential. The result is a diversified portfolio that we believe will serve
our shareholders well over time.
Q. WHAT'S YOUR INVESTMENT STRATEGY FOR THE PORTFOLIO IN THE COMING MONTHS?
A. Although investors have recently started to gain more confidence in the
depressed stocks outside the technology and telecommunications sectors, it is
difficult to predict whether these stocks can produce a sustained upturn. On
the other hand, we don't believe this extremely narrow market strength can
last forever. In this uncertain and volatile market environment, we believe
it is best to position the portfolio to benefit from the long-term growth
potential of technology companies while at the same time taking advantage of
favorable long-term prospects for what we see as attractively valued stocks
in the financial services, energy, and health care sectors.
/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: $8.2 BILLION NET ASSETS AS OF MARCH 31, 2000
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.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH MARCH 31, 2000
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.62% +32.88% +105.61% +219.75% +486.88%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +32.88% + 27.16% + 26.17% + 19.36%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +25.24% + 24.67% + 24.69% + 18.65%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.17% +32.01% +101.60% +209.13% +460.79%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +32.01% + 26.33% + 25.32% + 18.82%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +28.01% + 25.70% + 25.16% + 18.82%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.14% +32.04% +101.64% +209.58% +462.44%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +32.04% + 26.34% + 25.36% + 18.85%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -- +31.04% + 26.34% + 25.36% + 18.85%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.82% +33.33% +107.76% +223.46% +493.69%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -- +33.33% + 27.60% + 26.46% + 19.50%
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</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. MORE RECENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
PORTFOLIO CONCENTRATION AS OF MARCH 31, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 38.1%
UTILITIES & COMMUNICATIONS 10.4%
FINANCIAL SERVICES 9.9%
ENERGY 8.7%
HEALTH CARE 7.3%
TOP 10 STOCK HOLDINGS
CISCO SYSTEMS, INC. 4.1% SUN MICROSYSTEMS, INC. 2.7%
Computer network developer Computer systems company
MICROSOFT CORP. 3.6% GENERAL ELECTRIC CO. 2.6%
Computer software and systems company Diversified manufacturing and
financial services conglomerate
LSI LOGIC CORP. 3.4%
Semiconductor company BRISTOL-MYERS SQUIBB CO. 2.1%
Pharmaceutical products company
ANALOG DEVICES, INC. 3.3%
Semiconductor company NORTEL NETWORKS CORP. 2.0%
Designer and developer of data
TYCO INTERNATIONAL LTD. 2.8% and telephony networks
Security systems, packaging, and
electronic equipment conglomerate BP AMOCO PLC, ADR 2.0%
British oil and petrochemical
company
This portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- March 31, 2000
Stocks - 99.0%
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ISSUER SHARES VALUE
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U.S. Stocks - 91.8%
Aerospace - 1.1%
General Dynamics Corp. 901,100 $ 44,829,725
United Technologies Corp. 711,700 44,970,544
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$ 89,800,269
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Banks and Credit Companies - 2.2%
Bank of America Corp. 742,600 $ 38,940,087
Capital One Financial Corp. 755,200 36,202,400
Chase Manhattan Corp. 740,308 64,545,604
Providian Financial Corp. 486,600 42,151,725
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$ 181,839,816
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Business Machines - 4.7%
Hewlett-Packard Co. 321,000 $ 42,552,563
International Business Machines Corp. 619,700 73,124,600
Seagate Technology, Inc.* 884,300 53,279,075
Sun Microsystems, Inc.* 2,345,100 219,743,198
--------------
$ 388,699,436
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Business Services - 2.1%
Automatic Data Processing, Inc. 1,443,100 $ 69,629,575
Bea Systems, Inc.* 111,500 8,181,313
Computer Sciences Corp.* 705,500 55,822,687
Digimarc Corp.* 66,720 2,935,680
Fiserv, Inc.* 981,900 36,514,406
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$ 173,083,661
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Cellular Telephones - 1.5%
Sprint Corp. (PCS Group)* 1,892,400 $ 123,597,375
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Chemicals - 0.3%
Cambrex Corp. 527,200 $ 22,933,200
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Computer Hardware - Systems - 0.3%
Dell Computer Corp.* 491,300 $ 26,499,494
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Computer Software - Personal Computers - 4.1%
America Online, Inc.* 634,700 $ 42,683,575
Microsoft Corp.* 2,742,500 291,390,625
--------------
$ 334,074,200
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Computer Software - Services - 1.6%
EMC Corp.* 1,088,800 $ 136,100,000
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Computer Software - Systems - 4.4%
BMC Software, Inc.* 786,900 $ 38,853,187
Citrix Systems, Inc.* 297,940 19,738,525
Computer Associates International, Inc. 939,675 55,617,014
I2 Technologies, Inc.* 132,700 16,205,988
Liberate Technologies* 302,100 18,956,775
Oracle Corp.* 1,522,560 118,854,840
Rational Software Corp.* 189,700 14,512,050
Siebel Systems, Inc.* 106,200 12,684,263
VERITAS Software Corp.* 483,573 63,348,063
--------------
$ 358,770,705
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Conglomerates - 2.8%
Tyco International Ltd. 4,560,248 $ 227,442,369
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Consumer Goods and Services - 2.4%
Clorox Co. 1,119,000 $ 36,367,500
Colgate-Palmolive Co. 1,080,500 60,913,187
Monsanto Co. 1,134,500 58,426,750
Procter & Gamble Co. 698,400 39,285,000
--------------
$ 194,992,437
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Containers - 0.2%
Owens Illinois, Inc.* 997,700 $ 16,836,188
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Electrical Equipment - 2.6%
General Electric Co. 1,368,200 $ 212,327,537
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Electronics - 10.5%
Analog Devices, Inc.* 3,328,798 $ 268,176,289
DII Group, Inc.* 281,800 31,861,013
E Tek Dynamics, Inc.* 103,200 24,277,800
Fairchild Semiconductor International Co.* 545,800 19,921,700
Flextronics International Ltd.* 664,700 46,819,806
Intel Corp. 408,900 53,949,244
LSI Logic Corp.* 3,829,400 278,110,175
Micron Technology, Inc.* 412,000 51,912,000
Novellus Systems, Inc.* 815,500 45,769,937
SCI Systems, Inc.* 310,000 16,681,875
Solectron Corp.* 655,700 26,268,981
--------------
$ 863,748,820
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Energy - 0.2%
Devon Energy Corp. 304,600 $ 14,792,138
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Entertainment - 3.1%
Carnival Corp. 1,366,300 $ 33,901,319
CBS Corp.* 811,900 45,973,837
Infinity Broadcasting Corp., "A"* 1,719,875 55,680,953
Macromedia, Inc.* 336,300 30,372,094
Time Warner, Inc. 894,708 89,470,800
--------------
$ 255,399,003
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Financial Institutions - 4.1%
Associates First Capital Corp., "A" 2,495,246 $ 53,491,836
Citigroup, Inc. 1,487,950 88,254,034
Federal Home Loan Mortgage Corp. 971,500 42,928,156
Lehman Brothers Holdings, Inc. 210,200 20,389,400
Merrill Lynch & Co., Inc. 821,800 86,289,000
Morgan Stanley Dean Witter & Co. 517,800 42,233,063
State Street Corp. 27,900 2,702,813
--------------
$ 336,288,302
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Financial Services - 0.5%
AXA Financial, Inc. 1,267,900 $ 45,485,913
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Food and Beverage Products - 1.3%
Anheuser-Busch Cos., Inc. 1,050,800 $ 65,412,300
Quaker Oats Co. 727,400 44,098,625
--------------
$ 109,510,925
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Forest and Paper Products - 0.7%
Bowater, Inc. 489,800 $ 26,143,075
Weyerhaeuser Co. 507,400 28,921,800
--------------
$ 55,064,875
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Insurance - 2.6%
American International Group, Inc. 694,650 $ 76,064,175
Hartford Financial Services Group, Inc. 820,900 43,302,475
Marsh & McLennan Cos., Inc. 303,500 33,479,844
ReliaStar Financial Corp. 773,563 26,204,446
Travelers Property Casualty Corp. 951,500 39,249,375
--------------
$ 218,300,315
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Internet - 0.8%
FreeMarkets, Inc.* 2,830 $ 342,430
InterWorld Corp.* 74,900 4,231,850
Selectica, Inc.* 69,250 6,111,312
VeriSign, Inc.* 399,540 59,731,230
--------------
$ 70,416,822
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Machinery - 1.1%
Deere & Co., Inc. 1,222,400 $ 46,451,200
Ingersoll Rand Co. 919,400 40,683,450
--------------
$ 87,134,650
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Medical and Health Products - 5.7%
American Home Products Corp. 1,385,300 $ 74,286,712
Bausch & Lomb, Inc. 573,600 29,934,750
Bristol-Myers Squibb Co. 2,920,300 168,647,325
Pharmacia & Upjohn, Inc. 2,055,300 121,776,525
Warner-Lambert Co. 738,900 72,042,750
--------------
$ 466,688,062
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Medical and Health Technology and Services - 1.2%
Biogen, Inc.* 250,500 $ 17,503,687
Medtronic, Inc. 1,568,000 80,654,000
--------------
$ 98,157,687
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Oil Services - 1.7%
BJ Services Co.* 329,600 $ 24,349,200
Cooper Cameron Corp.* 449,700 30,073,687
Global Marine, Inc.* 821,900 20,855,713
Halliburton Co. 495,700 20,323,700
Noble Drilling Corp.* 1,072,200 44,429,287
--------------
$ 140,031,587
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Oils - 4.1%
Atlantic Richfield Co. 252,200 $ 21,437,000
Conoco, Inc. 3,744,400 95,950,250
EOG Resources, Inc. 1,087,600 23,043,525
Exxon Mobil Corp. 1,697,169 132,060,963
Transocean Sedco Forex, Inc.* 1,306,000 67,014,125
--------------
$ 339,505,863
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Printing and Publishing - 0.5%
Tribune Co. 1,208,200 $ 44,174,813
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Restaurants and Lodging - 0.1%
Cendant Corp.* 303,400 $ 5,612,900
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Special Products and Services - 0.3%
SPX Corp.* 229,800 $ 26,182,838
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Stores - 4.7%
Costco Wholesale Corp.* 768,700 $ 40,404,794
CVS Corp. 3,740,900 140,517,556
Gap, Inc. 392,600 19,556,388
Office Depot, Inc.* 3,757,750 43,448,984
Tandy Corp. 1,027,300 52,135,475
TJX Cos., Inc. 1,159,200 25,719,750
Wal-Mart Stores, Inc. 1,115,200 61,893,600
--------------
$ 383,676,547
- ------------------------------------------------------------------------------
Supermarkets - 1.7%
Safeway, Inc.* 3,071,300 $ 138,976,325
- ------------------------------------------------------------------------------
Telecommunications - 15.3%
Ancor Communications, Inc.* 218,300 $ 8,977,588
Bell Atlantic Corp. 744,300 45,495,337
CIENA Corp.* 521,600 65,786,800
Cisco Systems, Inc.* 4,355,100 336,703,669
Corning, Inc. 618,911 120,068,734
GTE Corp. 304,200 21,598,200
Intermedia Communications, Inc.* 180,500 8,720,406
JDS Uniphase Corp.* 236,000 28,452,750
Level 3 Communications, Inc.* 134,200 14,191,650
MCI WorldCom, Inc.* 2,199,611 99,669,873
Metromedia Fiber Network, Inc., "A"* 272,700 26,383,725
Motorola, Inc. 852,310 121,347,636
Nortel Networks Corp. 1,273,700 160,486,200
Qwest Communications International, Inc.* 1,307,000 63,389,500
Sprint Corp. 1,530,726 96,435,738
Time Warner Telecom, Inc.* 67,700 5,382,150
Williams Communications Group, Inc.* 557,900 28,906,194
Winstar Communications, Inc.* 138,900 8,334,000
--------------
$1,260,330,150
- ------------------------------------------------------------------------------
Telecommunications and Cable - 0.6%
Comcast Corp., "A"* 1,088,900 $ 47,231,038
- ------------------------------------------------------------------------------
Utilities - Electric - 0.3%
AES Corp.* 367,200 $ 28,917,000
- ------------------------------------------------------------------------------
Utilities - Gas - 0.4%
Williams Cos., Inc. 725,700 $ 31,885,444
- ------------------------------------------------------------------------------
Total U.S. Stocks $7,554,508,704
- ------------------------------------------------------------------------------
Foreign Stocks - 7.2%
Bermuda - 1.1%
FLAG Telecom Holdings Ltd.
(Telecommunications)* 808,790 $ 18,298,874
Global Crossing Ltd. (Telecommunications)* 1,701,800 69,667,437
--------------
$ 87,966,311
- ------------------------------------------------------------------------------
France - 0.7%
Business Objects S.A., ADR
(Computer Software - Systems)* 64,000 $ 6,368,000
Total S.A., "B" (Oils) 361,300 54,123,378
--------------
$ 60,491,378
- ------------------------------------------------------------------------------
Ireland - 0.5%
Bank of Ireland (Banks and Credit Cos.)* 2,873,560 $ 20,629,282
Trintech Group PLC, ADR (Computer
Software - Products)* 452,800 17,659,200
--------------
$ 38,288,482
- ------------------------------------------------------------------------------
Japan - 0.9%
Hitachi Ltd. (Electronics) 1,473,000 $ 17,494,028
Nippon Telegraph & Telephone Co.
(Utilities - Telephone) 3,549 56,360,776
--------------
$ 73,854,804
- ------------------------------------------------------------------------------
Netherlands - 0.5%
KPN N.V. (Telecommunications)* 372,500 $ 42,662,035
- ------------------------------------------------------------------------------
United Kingdom - 3.5%
BP Amoco PLC, ADR (Oils) 2,996,050 $ 158,977,903
British Aerospace PLC (Aerospace)* 6,896,874 38,419,700
Vodafone AirTouch PLC
(Telecommunications)* 10,595,933 59,025,664
Zeneca Group PLC (Medical and
Health Products) 760,400 30,498,345
--------------
$ 286,921,612
- ------------------------------------------------------------------------------
Total Foreign Stocks $ 590,184,622
- ------------------------------------------------------------------------------
Total Stocks (Identified Cost, $5,607,181,337) $8,144,693,326
- ------------------------------------------------------------------------------
Short-Term Obligations - 0.3%
- ------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------
Associates Corp. of North America,
due 4/03/00 $ 6,100 $ 6,097,889
Federal Home Loan Mortgage Corp.,
due 4/18/00 14,900 14,858,346
- ------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 20,956,235
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $5,628,137,572) $8,165,649,561
Other Assets, Less Liabilities - 0.7% 60,951,763
- ------------------------------------------------------------------------------
Net Assets - 100.0% $8,226,601,324
- ------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -----------------------------------------------------------------------------
MARCH 31, 2000
- -----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $5,628,137,572) $8,165,649,561
Investments of cash collateral for securities loaned,
at value (identified cost, $567,185,515) 567,185,515
Cash 86,831
Foreign currency, at value (identified cost, $11,642) 12,405
Receivable for Fund shares sold 78,362,168
Receivable for investments sold 176,133,831
Dividends and interest receivable 4,174,996
Other assets 66,587
--------------
Total assets $8,991,671,894
--------------
Liabilities:
Payable for Fund shares reacquired $ 80,267,321
Payable for investments purchased 114,351,341
Collateral for securities loaned, at value 567,185,515
Net payable for forward foreign currency exchange
contracts to sell 2,221,190
Payable to affiliates -
Management fee 95,556
Shareholder servicing agent fee 22,222
Distribution and service fee 154,534
Administrative fee 1,884
Accrued expenses and other liabilities 771,007
--------------
Total liabilities $ 765,070,570
--------------
Net assets $8,226,601,324
==============
Net assets consist of:
Paid-in capital $4,898,327,334
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 2,535,208,257
Accumulated undistributed net realized gain on
investments and foreign currency transactions 809,433,432
Accumulated net investment loss (16,367,699)
--------------
Total $8,226,601,324
==============
Shares of beneficial interest outstanding 267,204,155
===========
Class A shares:
Net asset value per share
(net assets of $3,819,593,981 / 121,465,183 shares of
beneficial interest outstanding) $31.45
======
Offering price per share (100 / 94.25 of net asset
value per share) $33.37
======
Class B shares:
Net asset value and offering price per share
(net assets of $3,492,154,772 / 115,528,453 shares of
beneficial interest outstanding) $30.23
======
Class C shares:
Net asset value and offering price per share
(net assets of $892,515,265 / 29,506,926 shares of
beneficial interest outstanding) $30.25
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $22,337,306 / 703,593 shares of
beneficial interest outstanding) $31.75
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2000
- ------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 26,526,360
Interest 5,131,965
Foreign taxes withheld (206,430)
--------------
Total investment income $ 31,451,895
--------------
Expenses -
Management fee $ 15,925,860
Trustees' compensation 51,459
Shareholder servicing agent fee 3,703,688
Distribution and service fee (Class A) 6,062,371
Distribution and service fee (Class B) 15,638,072
Distribution and service fee (Class C) 3,970,745
Administrative fee 136,357
Custodian fee 1,038,983
Printing 112,785
Postage 355,664
Auditing fees 16,396
Legal fees 2,491
Miscellaneous 1,110,487
--------------
Total expenses $ 48,125,358
Fees paid indirectly (727,762)
--------------
Net expenses $ 47,397,596
--------------
Net investment loss $ (15,945,701)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 771,279,060
Foreign currency transactions 2,216,318
--------------
Net realized gain on investments and foreign
currency transactions $ 773,495,378
--------------
Change in unrealized appreciation (depreciation) -
Investments $1,321,170,424
Translation of assets and liabilities in foreign
currencies (2,330,632)
--------------
Net unrealized gain on investments and
foreign currency translation $1,318,839,792
--------------
Net realized and unrealized gain on investments
and foreign currency $2,092,335,170
--------------
Increase in net assets from operations $2,076,389,469
==============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (15,945,701) $ (26,448,311)
Net realized gain on investments and foreign currency
transactions 773,495,378 631,686,519
Net unrealized gain on investments and foreign
currency translation 1,318,839,792 698,181,105
-------------- ---------------
Increase in net assets from operations $2,076,389,469 $ 1,303,419,313
-------------- ---------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (249,638,542) $ (116,922,157)
From net realized gain on investments and foreign
currency transactions (Class B) (235,896,495) (103,235,324)
From net realized gain on investments and foreign
currency transactions (Class C) (59,513,382) (25,969,746)
From net realized gain on investments and foreign
currency transactions (Class I) (1,548,492) (767,888)
-------------- ---------------
Total distributions declared to shareholders $ (546,596,911) $ (246,895,115)
-------------- ---------------
Net increase in net assets from Fund share transactions $ 162,007,191 $ 47,785,574
-------------- ---------------
Total increase in net assets $1,691,799,749 $ 1,104,309,772
Net assets:
At beginning of period 6,534,801,575 5,430,491,803
-------------- ---------------
At end of period (including accumulated net investment
loss of $16,367,699 and $421,998, respectively) $8,226,601,324 $ 6,534,801,575
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED -------------------------------------------------------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
(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 $25.58 $21.45 $22.69 $18.53 $15.61 $12.59
------ ------ ------ ------ ------ ------
Income (loss) from
investment operations# -
Net investment income
(loss)(S) $(0.01) $(0.02) $ 0.05 $ 0.04 $ 0.06 $ 0.08
Net realized and
unrealized gain
(loss) on
investments and
foreign currency 8.02 5.10 (0.30) 5.07 3.88 2.99
------ ------ ------ ------ ------ ------
Total from
investment
operations $ 8.01 $ 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 (2.14) (0.95) (0.99) (0.92) (0.97) (0.03)
In excess of net
investment income -- -- -- (0.02) -- --
------ ------ ------ ------ ------ ------
Total
distributions
declared to
shareholders $(2.14) $(0.95) $(0.99) $(0.95) $(1.02) $(0.05)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $31.45 $25.58 $21.45 $22.69 $18.53 $15.61
====== ====== ====== ====== ====== ======
Total return(+) 32.62%++ 24.09% (0.89)% 28.72% 26.54% 24.49%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.96%+ 0.98% 0.91% 0.96% 0.91% 0.95%
Net investment income
(loss) (0.09)%+ (0.06)% 0.23% 0.18% 0.36% 0.58%
Portfolio turnover 57% 93% 81% 79% 81% 94%
Net assets at end of
period (000 Omitted) $3,819,594 $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 this fee had been incurred by
the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.07
Ratios (to average net assets):
Expenses## 1.05%
Net investment income 0.48%
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ---------------------------------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 24.74 $ 20.90 $ 22.16 $ 18.19 $ 15.40 $ 12.50
---------- ---------- ---------- ---------- -------- --------
Income (loss) from investment operations# -
Net investment loss $ (0.10) $ (0.18) $ (0.10) $ (0.10) $ (0.06) $ (0.03)
Net realized and unrealized gain (loss)
on investments and foreign currency 7.73 4.97 (0.28) 4.97 3.82 2.96
---------- ---------- ---------- ---------- -------- --------
Total from investment operations $ 7.63 $ 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 (2.14) (0.95) (0.88) (0.90) (0.97) (0.03)
---------- ---------- ---------- ---------- -------- --------
Total distributions declared to shareholders $ (2.14) $ (0.95) $ (0.88) $ (0.90) $ (0.97) $ (0.03)
---------- ---------- ---------- ---------- -------- --------
Net asset value - end of period $ 30.23 $ 24.74 $ 20.90 $ 22.16 $ 18.19 $ 15.40
========== ========== ========== ========== ======== ========
Total return 32.17%++ 23.31% (1.54)% 27.88% 25.59% 23.55%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.61%+ 1.63% 1.56% 1.63% 1.66% 1.78%
Net investment loss (0.74)%+ (0.71)% (0.42)% (0.49)% (0.37)% (0.21)%
Portfolio turnover 57% 93% 81% 79% 81% 94%
Net assets at end of period (000 Omitted) $3,492,155 $2,753,935 $2,237,570 $1,860,130 $680,456 $178,117
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED -----------------------------------------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 24.75 $ 20.92 $ 22.17 $ 18.22 $ 15.42 $ 12.51
-------- -------- --------- -------- -------- -------
Income (loss) from investment operations# -
Net investment loss $ (0.10) $ (0.18) $ (0.10) $ (0.09) $ (0.06) $ (0.02)
Net realized and unrealized
gain (loss) on investments
and foreign currency 7.74 4.96 (0.27) 4.96 3.83 2.96
-------- -------- --------- -------- -------- -------
Total from investment operations $ 7.64 $ 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 (2.14) (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 $ (2.14) $ (0.95) $ (0.88) $ (0.92) $ (0.97) $ (0.03)
-------- -------- --------- -------- -------- -------
Net asset value - end of period $ 30.25 $ 24.75 $ 20.92 $ 22.17 $ 18.22 $ 15.42
======== ======== ========= ======== ======== =======
Total return 32.14%++ 23.35% (1.51)% 27.87% 25.67% 23.58%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.61%+ 1.63% 1.56% 1.62% 1.67% 1.71%
Net investment loss (0.74)%+ (0.71)% (0.42)% (0.47)% (0.38)% (0.15)%
Portfolio turnover 57% 93% 81% 79% 81% 94%
Net assets at end of period (000 Omitted) $892,515 $699,816 $ 563,505 $459,809 $136,032 $25,737
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED -----------------------------------------------
MARCH 31, 2000 1999 1998 1997*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $25.77 $21.52 $22.75 $18.34
------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income $ 0.04 $ 0.07 $ 0.13 $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency 8.08 5.13 (0.31) 4.34
------ ------ ------ ------
Total from investment operations $ 8.12 $ 5.20 $(0.18) $ 4.41
------ ------ ------ ------
Less distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions $(2.14) $(0.95) $(1.05) $ --
------ ------ ------ ------
Net asset value - end of period $31.75 $25.77 $21.52 $22.75
====== ====== ====== ======
Total return 32.82%++ 24.59% (0.55)% 24.05%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.61%+ 0.63% 0.56% 0.63%+
Net investment income 0.26%+ 0.29% 0.57% 0.51%+
Portfolio turnover 57% 93% 81% 79%
Net assets at end of period (000 Omitted) $22,337 $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.
</TABLE>
See notes to financial statements.
<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. The Fund can
invest in foreign securities. Investments in foreign securities are vulnerable
to the effects of changes in the relative values of the local currency and the
U.S. dollar and to the effects of changes in each country's legal, political,
and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including forward contracts, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Securities
for which there are no such quotations or valuations are valued in good faith,
at fair value, by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Trustee Compensation - Effective July 24, 1999, under a Deferred
Compensation Plan (the Plan) independent Trustees may elect to defer receipt of
all or a portion of their annual compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the Fund or
other MFS funds selected by the Trustee. Deferred amounts represent an unsecured
obligation of the Fund until distributed in accordance with the Plan.
Security Loans - State Street Bank and Trust Company ("State Street") and Chase
Manhattan Bank ("Chase"), as lending agents, may loan the securities of the Fund
to certain qualified institutions (the "Borrowers") approved by the Fund. The
loans are collateralized at all times by cash and/or U.S. Treasury securities in
an amount at least equal to the market value of the securities loaned. State
Street and Chase provide the Fund with indemnification against Borrower default.
The Fund bears the risk of loss with respect to the investment of cash
collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the Fund and the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the Fund and the lending agents. Income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for in
the same manner as other dividend and interest income.
At March 31, 2000, the value of securities loaned was $550,314,829. These loans
were collateralized by U.S. Treasury securities of $2,586 and cash of
$567,185,515 which was invested in the following short-term obligation:
AMORTIZED
SHARES COST AND VALUE
- -------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 567,185,515 $567,185,515
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the security
on such date.
Fees Paid Indirectly - The Fund's custody fee is 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 $373,441
under this arrangement. The Fund has entered into a directed brokerage
agreement, under which the broker will credit the Fund a portion of the
commissions generated, to offset certain expenses of the Fund. For the period,
the Fund's custodian fees were reduced by $354,321 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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. Distributions to
shareholders are recorded on the ex-dividend date. The Fund distinguishes
between distributions on a tax basis and a financial reporting basis and
requires that only distributions in excess of tax basis earnings and profits be
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 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.
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. Included in Trustees' compensation is a net
periodic pension expense of $8,714 for the six months ended March 31, 2000.
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
$368,544 for the six months ended March 31, 2000, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $223,184 for the six months ended March 31,
2000. Fees incurred under the distribution plan during the six months ended
March 31, 2000, 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 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 $39,809 and $8,268 for Class B and Class C shares, respectively, for
the six months ended March 31, 2000. Fees incurred under the distribution plan
during the six months ended March 31, 2000, 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 six months ended March 31,
2000, were $34,502, $2,108,277, and $51,371 for Class A, Class B, and Class C
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $4,072,938,560 and $4,256,490,849,
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 $5,628,137,572
--------------
Gross unrealized appreciation $2,734,803,453
Gross unrealized depreciation (197,291,464)
--------------
Net unrealized appreciation $2,537,511,989
==============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 83,070,477 $ 2,346,749,893 129,694,128 $ 3,288,673,034
Shares issued to shareholders in
reinvestment of distributions 8,095,936 219,346,033 4,369,992 102,711,201
Shares reacquired (89,377,112) (2,538,974,840) (136,162,282) (3,464,307,738)
--------------- --------------- --------------- ---------------
Net increase (decrease) 1,789,301 $ 27,121,086 (2,098,162) $ (72,923,503)
=============== =============== =============== ===============
<CAPTION>
Class B Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,253,144 $ 251,989,543 23,402,859 $ 566,979,055
Shares issued to shareholders in
reinvestment of distributions 7,499,579 195,663,523 3,755,718 85,672,274
Shares reacquired (12,539,023) (342,559,628) (22,892,519) (560,012,591)
--------------- --------------- --------------- ---------------
Net increase 4,213,700 $ 105,093,438 4,266,058 $ 92,638,738
=============== =============== =============== ===============
<CAPTION>
Class C Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,223,867 $ 142,478,333 10,513,546 $ 257,451,695
Shares issued to shareholders in
reinvestment of distributions 1,621,911 42,347,981 769,872 17,576,582
Shares reacquired (5,609,589) (153,418,043) (9,954,748) (245,373,049)
--------------- --------------- --------------- ---------------
Net increase 1,236,189 $ 31,408,271 1,328,670 $ 29,655,228
=============== =============== =============== ===============
<CAPTION>
Class I Shares
SIX MONTHS ENDED MARCH 31, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 38,090 $ 1,049,020 78,641 $ 1,967,225
Shares issued to shareholders in
reinvestment of distributions 52,829 1,443,289 28,878 680,655
Shares reacquired (143,649) (4,107,913) (166,608) (4,232,769)
--------------- --------------- --------------- ---------------
Net decrease (52,730) $ (1,615,604) (59,089) $ (1,584,889)
=============== =============== =============== ===============
</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 six months ended March 31, 2000, was $26,411. The Fund had no
significant borrowings during the period.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange contracts. The notional or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
SETTLEMENT CONTRACTS TO CONTRACTS AT NET UNREALIZED
DATE DELIVER IN EXCHANGE FOR VALUE DEPRECIATION
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 6/16/2000 JPY 6,519,479,220 $64,311,468 $62,090,278 $(2,221,190)
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below.
JPY = Japanese Yen
At March 31, 2000, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
--------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) RESEARCH FUND
TRUSTEES SECRETARY
J. Atwood Ives+ - Chairman and Chief Stephen E. Cavan*
Executive Officer, Eastern Enterprises
(diversified services company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner,
Hemenway & Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct
Professor, Harvard University INVESTOR INFORMATION
Graduate School of Business For information on MFS mutual funds,
Administration call your investment professional or,
for an information kit, call toll
Charles W.Schmidt+ - Private Investor free: 1-800-637-2929 any business
day from 9 a.m. to 5 p.m. Eastern
Arnold D. Scott* - Senior Executive time (or leave a message anytime).
Vice President, Director, and
Secretary, MFS Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Jeffrey L. Shames* - Chairman and P.O. Box 2281
Chief Executive Officer, MFS Boston, MA 02107-9906
Investment Management
For general information, call toll
Elaine R. Smith+ - Independent free: 1-800-225-2606 any business
Consultant day from 8 a.m. to 8 p.m. Eastern
time.
David B. Stone+ - Chairman,
North American Management Corp. For service to speech- or
(investment adviser) hearing-impaired, call toll free:
1-800-637-6576 any business day from
INVESTMENT ADVISER 9 a.m. to 5 p.m. Eastern time. (To
Massachusetts Financial Services Company use this service, your phone must be
500 Boylston Street equipped with a Telecommunications
Boston, MA 02116-3741 Device for the Deaf.)
DISTRIBUTOR For share prices, account balances,
MFS Fund Distributors, Inc. exchanges, or stock and bond
500 Boylston Street outlooks, call toll free:
Boston, MA 02116-3741 1-800-MFS-TALK (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*
+ Independent Trustee
* MFS Investment Management33
<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)2000 MFS iNVESTMENT mANAGEMENT(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MFR-3 5/00 497M 14/214/314/814
