<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) RESEARCH FUND
ANNUAL REPORT o SEPTEMBER 30, 2000
-----------------------------------
MUTUAL FUND GIFT KITS (see page 34)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 18
Notes to Financial Statements ............................................. 25
Independent Auditors' Report .............................................. 32
Trustees and Officers ..................................................... 37
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes managers will have when they read the daily notes is, "I could
never perform as well at any other investment company, because nowhere else
could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance by
finding opportunities before they are generally recognized by the market, and by
avoiding mistakes whenever possible. Original Research does, we believe, make a
difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
October 16, 2000
A prospectus containing more complete information on any MFS product, including
all charges and expenses, can be obtained from your investment professional.
Please read it carefully before you invest or send money. Investments in mutual
funds will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Alec C. Murray]
Alec C. Murray
For the 12 months ended September 30, 2000, Class A shares of the fund provided
a total return of 32.45%, Class B shares 31.60%, Class C shares 31.58%, and
Class I shares 32.90%. These returns, which include the reinvestment of any
distributions but exclude the effects of any sales charges, compare to a 13.28%
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 17.78%.
Q. The portfolio held on to its strong returns despite weakness in the
technology and telecommunications sectors during the period. How did you do
it?
A. Our extremely talented and hard-working team of equity analysts deserves
most of the credit. Our process of building a portfolio based on our
analysts' best ideas, analysis, and comprehensive bottom-up research has
helped us weather a volatile market environment. Amid choppy performance
from many technology and telecommunications stocks, our holdings in these
sectors and stocks such as Intel, Sun Microsystems, EMC Corp., and Nortel
Networks generally held up well and provided a positive contribution during
the past few months. In addition, our picks in a broad range of industries
such as insurance, brokerage and asset management firms, oil services, and
aerospace and defense also boosted total return.
Q. Many investors believe technology stocks are still expensive by historical
standards. What's your take on the sector? Are you concerned about
valuations?
A. We've maintained large positions in technology because we have a lot of
confidence in the long-term earnings growth and profit potential of these
companies. A company's stock price is only one variable that factors into
our analysis of each holding in the portfolio. Despite the recent volatility
we've seen in the technology sector, we see exciting growth opportunities.
We've maintained our significant exposure to networking and
telecommunications companies such as Cisco Systems, Inc., Corning, and CIENA
Corporation, which continued to experience robust demand for their products
and services. Also within technology, our focus is on what we believe are
the more stable, predictable growers in the computer systems and data
storage industries, such as EMC Corp. and Sun Microsystems. While some
people might argue that some of these stocks appeared fully valued, we saw
demand for their products and services accelerating, and we believe their
long-term fundamental business prospects remain compelling.
Q. Can you provide some specific examples of business fundamentals that
influence your decision to buy a stock?
A. Our analysis normally involves face-to-face contact with senior management
and frontline workers. During these meetings, we try to get a good grasp of
a company's business plans, its strategies to gain market share, and its
prospects for earnings growth. If we like what we hear, we then dig into the
company's financial statements and balance sheet. Other variables that may
affect our decision to invest in a particular company are our conversations
with current and potential customers and their satisfaction with the
company's products and services. We also like to talk with a company's
competitors to get a complete understanding of the business environment.
Q. Which stocks detracted from the fund's performance?
A. While we're significantly underweighted in stocks such as Intel and
Microsoft compared to the S&P 500, these holdings were still a drag on the
fund's returns. Intel's stock price has fallen dramatically due to concerns
about future earnings. This in turn has pulled down stock prices for much of
the semiconductor group. Despite what we see as an attractive valuation and
positive earnings outlook, Microsoft's stock price continued to languish
under the weight of its ongoing antitrust litigation.
Q. What prompts your decision to sell a stock?
A. Our analysts dissect each company's balance sheet in a number of ways. We
look at things such as a company's debt burden and book value, which is
simply total net assets divided by total outstanding shares. We also like to
see free cash flow, which gives a company the flexibility to pay down debt,
buy back stock, or make an acquisition. If any of the financial and
fundamental business factors we've mentioned begin to deteriorate, or if a
stock price reaches a level we believe is high relative to our earnings
projections, we'll sell.
Q. Where have MFS' analysts found their best investment ideas?
A. We have found opportunities in a wide range of areas, but some holdings that
we've maintained large positions in and that have performed well for the
portfolio were energy stocks, insurance companies, and conglomerates such as
General Electric and Tyco International. Drug store operators and
supermarket chains such as CVS and Safeway have also remained prominent
holdings in the portfolio. The reliable earnings and sales growth at these
companies have generally aided stock performance during a highly volatile
period for the equity market. In the energy sector, exploration and
production companies have rallied dramatically due to the spike in oil and
natural gas prices. Higher prices have spurred demand for drilling services,
resulting in strong revenue and earnings growth at many energy services
companies. In the insurance sector, we have concentrated on commercial
property and casualty insurers and diversified financial services companies.
Early in the year, we felt that many of these companies' stock prices had
fallen below their intrinsic values. We also saw signs that they had gained
more power to raise premiums and had gathered more assets.
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: $8.2 BILLION NET ASSETS AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including the reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary.) It is not possible to
invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended September 30, 2000)
MFS Research S&P 500
Fund - Class A Composite Index
-----------------------------------------
9/90 $ 9,425 $10,000
9/92 13,282 14,566
9/94 18,352 17,066
9/96 28,911 26,644
9/98 36,883 40,807
9/00 60,621 59,081
TOTAL RATES OF RETURN THROUGH SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.45% +62.90% +165.33% +543.19%
--------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +32.45% +17.66% + 21.55% + 20.46%
--------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +24.83% +15.36% + 20.12% + 19.75%
--------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +31.60% +59.79% +156.64% +512.73%
--------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +31.60% +16.91% + 20.74% + 19.87%
--------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +27.60% +16.17% + 20.55% + 19.87%
--------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative Total Return Excluding Sales Charge +31.58% +59.84% +156.87% +514.54%
--------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales
Charge +31.58% +16.92% + 20.77% + 19.91%
--------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales
Charge +30.58% +16.92% + 20.77% + 19.91%
--------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +32.90% +64.67% +168.92% +551.89%
--------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +32.90% +18.09% + 21.88% + 20.62%
--------------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average large-cap core fund+ +17.78% +15.77% + 19.82% + 17.89%
--------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index# +13.28% +16.44% + 21.69% + 19.44%
--------------------------------------------------------------------------------------------------------
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class B, 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 in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
Investments in foreign 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, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 33.3%
FINANCIAL SERVICES 13.4%
ENERGY 10.7%
UTILITIES & COMMUNICATIONS 9.7%
INDUSTRIAL GOODS & SERVICES 8.3%
<TABLE>
<CAPTION>
TOP 10 STOCK HOLDINGS
<S> <C>
GENERAL ELECTRIC CO. 4.1% CVS CORP. 2.3%
Diversified manufacturing and financial Drug store chain
services conglomerate
PHARMACIA CORP. 2.2%
CISCO SYSTEMS, INC. 3.5% Pharmaceutical, health care, and agricultural
Networking equipment developer products company
SUN MICROSYSTEMS, INC. 3.3% CORNING, INC. 2.2%
Computer systems company Optical equipment and cable supplier to
communications industries
EMC CORP. 3.2%
Manufacturer of hardware and software for NORTEL NETWORKS CORP. 2.1%
storage applications Manufacturer of telecom infrastructure and
optical equipment
TYCO INTERNATIONAL LTD. 2.7%
Security systems, packaging, and electronic EXXONMOBIL CORP. 2.0%
equipment conglomerate International oil and gas company
</TABLE>
This portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Stocks - 96.1%
--------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 87.1%
Aerospace - 2.7%
Boeing Co. 1,414,200 $ 89,094,600
United Technologies Corp. 1,929,500 133,617,875
--------------
$ 222,712,475
--------------------------------------------------------------------------------------------------
Banks and Credit Companies - 3.0%
Capital One Financial Corp. 712,100 $ 49,891,506
Chase Manhattan Corp. 1,047,762 48,393,508
PNC Financial Services Group 965,700 62,770,500
Providian Financial Corp. 458,800 58,267,600
U.S. Bancorp 1,043,800 23,746,450
--------------
$ 243,069,564
--------------------------------------------------------------------------------------------------
Biotechnology - 2.1%
Pharmacia Corp. 2,897,806 $ 174,411,699
--------------------------------------------------------------------------------------------------
Business Machines - 6.0%
Hewlett-Packard Co. 674,100 $ 65,387,700
International Business Machines Corp. 1,009,000 113,512,500
Seagate Technology, Inc.* 832,700 57,456,300
Sun Microsystems, Inc.* 2,211,000 258,134,250
--------------
$ 494,490,750
--------------------------------------------------------------------------------------------------
Business Services - 3.2%
Automatic Data Processing, Inc. 1,403,100 $ 93,832,312
Computer Sciences Corp.* 1,390,100 103,214,925
VeriSign, Inc.* 310,344 62,864,057
--------------
$ 259,911,294
--------------------------------------------------------------------------------------------------
Cellular Telephones - 1.3%
Motorola, Inc. 1,150,930 $ 32,513,773
Sprint Corp. (PCS Group)* 2,046,500 71,755,406
--------------
$ 104,269,179
--------------------------------------------------------------------------------------------------
Communication Services - 0.4%
SBA Communications Corp.* 824,800 $ 34,590,050
--------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.6%
Compaq Computer Corp. 1,054,900 $ 29,094,142
Dell Computer Corp.* 608,100 18,737,081
--------------
$ 47,831,223
--------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.6%
America Online, Inc.* 1,226,400 $ 65,919,000
Microsoft Corp.* 2,458,100 148,254,156
--------------
$ 214,173,156
--------------------------------------------------------------------------------------------------
Computer Software - Services - 3.1%
EMC Corp.* 2,545,300 $ 252,302,862
--------------------------------------------------------------------------------------------------
Computer Software - Systems - 2.8%
Comverse Technology, Inc.* 739,100 $ 79,822,800
E.piphany, Inc.* 161,400 12,437,888
Extreme Networks, Inc.* 54,800 6,274,600
I2 Technologies, Inc.* 125,900 23,551,169
Oracle Corp.* 512,860 40,387,725
Siebel Systems, Inc.* 200,600 22,329,287
VERITAS Software Corp.* 332,773 47,253,766
--------------
$ 232,057,235
--------------------------------------------------------------------------------------------------
Conglomerates - 2.6%
Tyco International Ltd. 4,082,848 $ 211,797,740
--------------------------------------------------------------------------------------------------
Containers
Owens Illinois, Inc.* 70,410 $ 651,293
--------------------------------------------------------------------------------------------------
Electrical Equipment - 4.1%
General Electric Co. 5,624,700 $ 324,474,881
QLogic Corp.* 112,515 9,901,320
--------------
$ 334,376,201
--------------------------------------------------------------------------------------------------
Electronics - 4.8%
Analog Devices, Inc.* 551,398 $ 45,524,797
Atmel Corp.* 1,659,000 25,196,063
Flextronics International Ltd.* 897,398 73,698,811
Intel Corp. 3,151,800 130,996,687
Lam Research Corp.* 1,034,700 21,664,031
SCI Systems, Inc.* 939,100 38,503,100
Solectron Corp.* 908,800 41,918,400
Teradyne, Inc.* 546,300 19,120,500
--------------
$ 396,622,389
--------------------------------------------------------------------------------------------------
Energy - 0.2%
Devon Energy Corp. 286,700 $ 17,245,005
--------------------------------------------------------------------------------------------------
Entertainment - 2.4%
Infinity Broadcasting Corp., "A"* 1,065,075 $ 35,147,475
Macromedia, Inc.* 306,100 24,736,706
Time Warner, Inc. 844,008 66,043,626
Viacom, Inc., "B"* 1,181,956 69,144,426
--------------
$ 195,072,233
--------------------------------------------------------------------------------------------------
Financial Institutions - 5.4%
Associates First Capital Corp., "A" 2,199,146 $ 83,567,548
Citigroup, Inc. 2,189,933 118,393,253
Federal National Mortgage Assn. 368,200 26,326,300
Freddie Mac Corp. 1,896,800 102,545,750
Goldman Sachs Group, Inc. 188,930 21,526,212
Lehman Brothers Holdings, Inc. 105,100 15,528,525
Merrill Lynch & Co., Inc. 724,400 47,810,400
Morgan Stanley Dean Witter & Co. 288,000 26,334,000
--------------
$ 442,031,988
--------------------------------------------------------------------------------------------------
Financial Services - 0.7%
AXA Financial, Inc. 1,199,200 $ 61,084,250
--------------------------------------------------------------------------------------------------
Food and Beverage Products - 1.2%
Anheuser-Busch Co., Inc. 1,288,400 $ 54,515,425
Quaker Oats Co. 524,200 41,477,325
--------------
$ 95,992,750
--------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.2%
Bowater, Inc. 370,400 $ 17,200,450
--------------------------------------------------------------------------------------------------
Insurance - 3.3%
AFLAC, Inc. 587,005 $ 37,605,008
American International Group, Inc. 983,275 94,087,127
Hartford Financial Services Group, Inc. 773,000 56,380,687
Marsh & McLennan Cos., Inc. 286,100 37,979,775
St. Paul Cos., Inc. 838,400 41,343,600
--------------
$ 267,396,197
--------------------------------------------------------------------------------------------------
Internet - 0.3%
Akamai Technologies, Inc.* 345,000 $ 18,117,890
InterWorld Corp.* 70,400 268,400
Selectica, Inc.* 65,850 2,625,769
--------------
$ 21,012,059
--------------------------------------------------------------------------------------------------
Machinery - 1.0%
Deere & Co., Inc. 1,550,200 $ 51,544,150
Ingersoll Rand Co. 864,400 29,281,550
--------------
$ 80,825,700
--------------------------------------------------------------------------------------------------
Medical and Health Products - 4.1%
American Home Products Corp. 1,433,600 $ 81,088,000
Bristol-Myers Squibb Co. 2,391,000 136,585,875
Pfizer, Inc. 2,626,625 118,033,961
--------------
$ 335,707,836
--------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.5%
Medtronic, Inc. 820,200 $ 42,496,613
--------------------------------------------------------------------------------------------------
Metals and Minerals - 0.2%
Alcoa, Inc. 567,300 $ 14,359,781
--------------------------------------------------------------------------------------------------
Oil Services - 2.3%
Baker Hughes, Inc. 831,400 $ 30,865,725
Global Marine, Inc.* 2,341,200 72,284,550
Noble Drilling Corp.* 1,010,400 50,772,600
Weatherford International, Inc.* 815,400 35,062,200
--------------
$ 188,985,075
--------------------------------------------------------------------------------------------------
Oils - 5.0%
Conoco, Inc. 3,531,100 $ 95,119,006
EOG Resources, Inc. 914,200 35,539,525
ExxonMobil Corp. 1,745,269 155,547,100
Santa Fe International Corp. 1,122,000 50,560,125
Transocean Sedco Forex, Inc. 1,233,000 72,284,625
--------------
$ 409,050,381
--------------------------------------------------------------------------------------------------
Retail - 4.6%
CVS Corp. 3,847,456 $ 178,185,306
RadioShack Corp. 1,270,500 82,106,063
Wal-Mart Stores, Inc. 2,441,500 117,497,187
--------------
$ 377,788,556
--------------------------------------------------------------------------------------------------
Special Products and Services - 0.4%
SPX Corp.* 216,300 $ 30,701,081
--------------------------------------------------------------------------------------------------
Supermarkets - 1.9%
Safeway, Inc.* 3,320,000 $ 155,002,500
--------------------------------------------------------------------------------------------------
Telecommunications - 11.6%
Allegiance Telecom, Inc.* 140,800 $ 5,244,800
American Tower Corp., "A"* 735,323 27,712,486
Cabletron Systems, Inc.* 1,187,400 34,879,875
CIENA Corp.* 1,078,400 132,441,000
Cisco Systems, Inc.* 4,992,000 275,808,000
Corning, Inc. 582,811 173,094,867
EchoStar Communications Corp.* 1,445,700 76,260,675
Emulex Corp.* 36,600 4,483,500
Level 3 Communications, Inc.* 692,000 53,370,500
Metromedia Fiber Network, Inc., "A"* 3,135,000 76,219,687
Qwest Communications International, Inc.* 1,671,600 80,341,275
Time Warner Telecom, Inc.* 138,900 6,710,606
Winstar Communications, Inc.* 132,200 2,049,100
--------------
$ 948,616,371
--------------------------------------------------------------------------------------------------
Telecommunications and Cable - 0.5%
Comcast Corp., "A"* 1,025,200 $ 41,969,125
--------------------------------------------------------------------------------------------------
Utilities - Electric - 1.0%
AES Corp.* 1,223,200 $ 83,789,200
--------------------------------------------------------------------------------------------------
Utilities - Gas - 1.0%
Enron Corp. 587,500 $ 51,479,688
Williams Cos., Inc. 684,100 28,903,225
--------------
$ 80,382,913
--------------------------------------------------------------------------------------------------
Total U.S. Stocks $7,129,977,174
--------------------------------------------------------------------------------------------------
Foreign Stocks - 9.0%
Bermuda - 1.9%
FLAG Telecom Holdings Ltd. (Telecommunications)* 1,956,190 $ 21,518,090
Global Crossing Ltd. (Telecommunications)* 2,821,100 87,454,100
Tycom Ltd. (Telecommunications)* 1,204,000 46,203,500
--------------
155,175,690
--------------------------------------------------------------------------------------------------
Canada - 2.0%
Nortel Networks Corp. (Telecommunications) 2,721,600 162,105,300
--------------------------------------------------------------------------------------------------
France - 0.2%
Total Fina Elf SA (Oils) 92,900 $ 13,606,852
--------------------------------------------------------------------------------------------------
Ireland - 0.1%
Trintech Group PLC, ADR (Computer Software - Products)* 426,200 $ 8,577,275
--------------------------------------------------------------------------------------------------
Israel - 0.3%
Check Point Software Technologies Ltd. (Computer
Software - Services)* 165,700 $ 26,097,750
--------------------------------------------------------------------------------------------------
Japan - 1.0%
Fast Retailing - New (Retail)* 78,900 $ 16,097,560
Fast Retailing Co. (Retail) 78,900 16,097,561
Nippon Telegraph & Telephone Co. (Utilities - Telephone) 3,449 33,904,664
Sony Corp. (Electronics) 159,000 16,160,994
--------------
$ 82,260,779
--------------------------------------------------------------------------------------------------
Netherlands - 1.2%
KPN N.V. (Telecommunications)* 1,013,137 $ 22,088,730
Royal Dutch Petroleum Co. (Oils) 1,191,300 72,078,496
--------------
$ 94,167,226
--------------------------------------------------------------------------------------------------
United Kingdom - 2.3%
BAE Systems PLC (Aerospace)* 4,492,375 $ 24,246,482
BP Amoco PLC, ADR (Oils) 1,910,378 101,250,034
HSBC Holdings PLC (Banks and Credit Cos.)* 2,807,800 39,941,201
Vodafone Group PLC (Telecommunications) 7,111,433 26,552,070
--------------
$ 191,989,787
--------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 733,980,659
--------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $5,870,943,614) $7,863,957,833
--------------------------------------------------------------------------------------------------
Short-Term Obligations - 5.1%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
--------------------------------------------------------------------------------------------------
American Express Credit Corp., due 10/02/00 $ 45,661 $ 45,652,515
Associates Corp. of North America, due 10/02/00 32,443 32,436,971
General Electric Capital Corp., due 10/02/00 86,183 86,167,080
General Motors Acceptance Corp., due 10/02/00 5,922 5,920,894
Gillette Co., due 10/02/00 82,890 82,874,619
Goldman Sachs Group LP, due 10/02/00 47,384 47,375,221
Morgan Stanley Dean Witter, due 10/02/00 42,363 42,355,175
Salomon Smith Barney Holdings, Inc., due 10/02/00 22,241 22,236,885
Aig Funding, Inc., due 10/02/00 4,952 4,951,085
Federal Farm Credit Bank Discount Notes, due 10/02/00 605 604,896
Federal National Mortgage Assn., due 10/02/00 10,773 10,771,109
Sbc Communications, Inc., due 10/02/00 - 10/03/00 36,523 36,514,725
--------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 417,861,175
--------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $6,288,804,789) $8,281,819,008
Other Assets, Less Liabilities - (1.2)% (100,226,043)
--------------------------------------------------------------------------------------------------
Net Assets - 100.0% $8,181,592,965
--------------------------------------------------------------------------------------------------
* Non-income producing security.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $6,288,804,789) $8,281,819,008
Investments of cash collateral for securities loaned,
at identified cost and value 389,528,141
Foreign currency, at value (identified cost, $25) 22
Receivable for fund shares sold 23,837,109
Receivable for investments sold 117,006,912
Net receivable for forward currency exchange contracts
to sell 1,824,290
Dividends and interest receivable 3,532,523
Other assets 66,587
--------------
Total assets $8,817,614,592
--------------
Liabilities:
Cash overdraft $ 13,599,630
Payable for fund shares reacquired 145,395,162
Payable for investments purchased 86,047,499
Collateral for securities loaned, at value 389,528,141
Payable to affiliates -
Management fee 196,043
Shareholder servicing agent fee 45,592
Distribution and service fee 317,523
Administrative fee 3,778
Accrued expenses and other liabilities 888,259
--------------
Total liabilities $ 636,021,627
--------------
Net assets $8,181,592,965
==============
Net assets consist of:
Paid-in capital $5,298,751,551
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 1,994,816,946
Accumulated undistributed net realized gain on
investments and foreign currency transactions 890,019,152
Accumulated net investment loss (1,994,684)
--------------
Total $8,181,592,965
==============
Shares of beneficial interest outstanding 266,586,988
===========
Class A shares:
Net asset value per share
(net assets of $3,795,327,245 / 120,857,817 shares of
beneficial interest outstanding) $31.40
======
Offering price per share (100 / 94.25 of net asset
value per share) $33.32
======
Class B shares:
Net asset value and offering price per share
(net assets of $3,455,141,954 / 114,838,981 shares of
beneficial interest outstanding) $30.09
======
Class C shares:
Net asset value and offering price per share
(net assets of $910,204,598 / 30,231,564 shares of
beneficial interest outstanding) $30.11
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $20,919,168 / 658,626
shares of beneficial interest outstanding) $31.76
======
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, 2000
-------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 51,655,657
Interest 10,185,245
Foreign taxes withheld (881,790)
--------------
Total investment income $ 60,959,112
--------------
Expenses -
Management fee $ 33,268,765
Trustees' compensation 107,641
Shareholder servicing agent fee 7,736,922
Distribution and service fee (Class A) 12,640,800
Distribution and service fee (Class B) 32,668,458
Distribution and service fee (Class C) 8,370,742
Administrative fee 481,060
Custodian fee 1,773,636
Printing 203,295
Postage 570,088
Auditing fees 33,529
Legal fees 18,967
Miscellaneous 3,112,081
--------------
Total expenses $ 100,985,984
Fees paid indirectly (1,373,019)
--------------
Net expenses $ 99,612,965
--------------
Net investment loss $ (38,653,853)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $1,307,116,374
Foreign currency transactions 2,793,649
--------------
Net realized gain on investments and foreign
currency transactions $1,309,910,023
--------------
Change in unrealized appreciation -
Investments $ 776,672,654
Translation of assets and liabilities in foreign
currencies 1,775,827
--------------
Net unrealized gain on investments and foreign
currency translation $ 778,448,481
--------------
Net realized and unrealized gain on investments
and foreign currency $2,088,358,504
--------------
Increase in net assets from operations $2,049,704,651
==============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (38,653,853) $ (26,448,311)
Net realized gain on investments and foreign currency
transactions 1,309,910,023 631,686,519
Net unrealized gain on investments and foreign
currency translation 778,448,481 698,181,105
-------------- --------------
Increase in net assets from operations $2,049,704,651 $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 $ 143,683,650 $ 47,785,574
-------------- --------------
Total increase in net assets $1,646,791,390 $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 $1,994,684 and $421,998, respectively) $8,181,592,965 $6,534,801,575
============== ==============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
Financial Highlights
----------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $(0.05) $(0.02) $ 0.05 $ 0.04 $ 0.06
Net realized and unrealized gain
(loss) on investments and
foreign currency 8.01 5.10 (0.30) 5.07 3.88
------ ------ ------ ------ ------
Total from investment operations $ 7.96 $ 5.08 $(0.25) $ 5.11 $ 3.94
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.01) $(0.05)
From net realized gain on
investments and foreign
currency transactions (2.14) (0.95) (0.99) (0.92) (0.97)
In excess of net investment income -- -- -- (0.02) --
------ ------ ------ ------ ------
Total distributions declared
to shareholders $(2.14) $(0.95) $(0.99) $(0.95) $(1.02)
------ ------ ------ ------ ------
Net asset value - end of period $31.40 $25.58 $21.45 $22.69 $18.53
====== ====== ====== ====== ======
Total return(+) 32.45% 24.09% (0.89)% 28.72% 26.54%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.96% 0.98% 0.91% 0.96% 0.91%
Net investment income (loss) (0.16)% (0.06)% 0.23% 0.18% 0.36%
Portfolio turnover 95% 93% 81% 79% 81%
Net assets at end of period (000 Omitted) $3,795,327 $3,061,563 $2,611,866 $2,201,849 $972,353
# 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 - continued
----------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------
Class B
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $24.74 $20.90 $22.16 $18.19 $15.40
------ ------ ------ ------ ------
Income (loss) from investment operations# -
Net investment loss $(0.23) $(0.18) $(0.10) $(0.10) $(0.06)
Net realized and unrealized gain
(loss) on investments and
foreign currency 7.72 4.97 (0.28) 4.97 3.82
------ ------ ------ ------ ------
Total from investment operations $ 7.49 $ 4.79 $(0.38) $ 4.87 $ 3.76
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on
investments and foreign
currency transactions $(2.14) $(0.95) $(0.88) $(0.90) $(0.97)
------ ------ ------ ------ ------
Total distributions declared
to shareholders $(2.14) $(0.95) $(0.88) $(0.90) $(0.97)
------ ------ ------ ------ ------
Net asset value - end of period $30.09 $24.74 $20.90 $22.16 $18.19
====== ====== ====== ====== ======
Total return 31.60% 23.31% (1.54)% 27.88% 25.59%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.61% 1.63% 1.56% 1.63% 1.66%
Net investment loss (0.81)% (0.71)% (0.42)% (0.49)% (0.37)%
Portfolio turnover 95% 93% 81% 79% 81%
Net assets at end of period (000 Omitted) $3,455,142 $2,753,935 $2,237,570 $1,860,130 $680,456
# 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, 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------
Class C
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $24.75 $20.92 $22.17 $18.22 $15.42
------ ------ ------ ------ ------
Income (loss) from investment operations# -
Net investment loss $(0.23) $(0.18) $(0.10) $(0.09) $(0.06)
Net realized and unrealized gain (loss)
on investments and foreign currency 7.73 4.96 (0.27) 4.96 3.83
------ ------ ------ ------ ------
Total from investment operations $ 7.50 $ 4.78 $(0.37) $ 4.87 $ 3.77
------ ------ ------ ------ ------
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)
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)
------ ------ ------ ------ ------
Net asset value - end of period $30.11 $24.75 $20.92 $22.17 $18.22
====== ====== ====== ====== ======
Total return 31.58% 23.35% (1.51)% 27.87% 25.67%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.61% 1.63% 1.56% 1.62% 1.67%
Net investment loss (0.81)% (0.71)% (0.42)% (0.47)% (0.38)%
Portfolio turnover 95% 93% 81% 79% 81%
Net assets at end of period (000 Omitted) $910,205 $699,816 $563,505 $459,809 $136,032
+++ 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, 2000 1999 1998 1997*
----------------------------------------------------------------------------------------------------------------------------
Class I
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $25.77 $21.52 $22.75 $18.34
------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income $ 0.06 $ 0.07 $ 0.13 $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency 8.07 5.13 (0.31) 4.34
------ ------ ------ ------
Total from investment operations $ 8.13 $ 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 $31.76 $25.77 $21.52 $22.75
====== ====== ====== ======
Total return 32.90% 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 0.20% 0.29% 0.57% 0.51%+
Portfolio turnover 95% 93% 81% 79%
Net assets at end of period (000 Omitted) $20,919 $19,488 $17,551 $19,400
* For the period from the inception of Class I shares, 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
(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 listed issues, forward contracts, and swap agreements,
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 provides the fund with indemnification against Borrower
default. The fund bears the risk of loss with respect to the investment of cash
collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending 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 September 30, 2000, the value of securities loaned was $368,738,004. These
loans were collateralized by U.S. Treasury securities of $676,708 and cash of
$389,528,141 which was invested in the following short-term obligations:
Shares/ Amortized Cost
Principal Amount and Value
--------------------------------------------------------------------------------
Navigator Securities Lending Prime
Portfolio 365,261,555 $365,261,555
GNMA REPO 6.65% OCT 2, 2000 MD 24,266,586 24,266,586
------------
Total investments of cash collateral for
securities loaned $389,528,141
============
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 $726,300
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 $646,719 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 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, 2000, $37,081,167 and $418,747,758 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 the offset of net investment loss against short-term capital
gains. This change had no effect on the net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that differ in their respective distribution and service fees.
All shareholders bear the common expenses of the fund based on daily net assets
of each class, without distinction between share classes. Dividends are declared
separately for each class. Differences in per share dividend rates are generally
due to differences in separate class expenses. Class B shares will convert to
Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 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 $23,495 for the year ended September 30, 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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$769,507 for the year ended September 30, 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 $460,498 for the year ended September 30,
2000. Fees incurred under the distribution plan during the year ended September
30, 2000, were 0.35% of average daily net assets attributable to Class A shares
on an annualized basis.
The fund's distribution plan provides that the fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be consideration for services
rendered by the dealer with respect to Class B and Class C shares. MFD retains
the service fee for accounts not attributable to a securities dealer, which
amounted to $79,597 and $16,189 for Class B and Class C shares, respectively,
for the year ended September 30, 2000. Fees incurred under the distribution plan
during the year ended September 30, 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 year ended September 30,
2000, were $72,803, $4,042,957, and $80,073 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 $7,156,546,287 and $7,612,172,481,
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 $6,314,379,259
--------------
Gross unrealized appreciation $2,287,562,095
Gross unrealized depreciation (320,122,346)
--------------
Net unrealized appreciation $1,967,439,749
==============
(5) Shares of Beneficial Interest
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 207,627,738 $ 6,195,572,700 129,694,128 $ 3,288,673,034
Shares issued to shareholders in
reinvestment of distributions 8,096,928 219,374,714 4,369,992 102,711,201
Shares reacquired (214,542,731) (6,407,383,015) (136,162,282) (3,464,307,738)
----------- --------------- ----------- ---------------
Net increase (decrease) 1,181,935 $ 7,564,399 (2,098,162) $ (72,923,503)
=========== =============== =========== ===============
<CAPTION>
CLASS B SHARES
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 17,762,301 $ 502,832,616 23,402,859 $ 566,979,055
Shares issued to shareholders in
reinvestment of distributions 7,500,422 195,687,919 3,755,718 85,672,274
Shares reacquired (21,738,495) (612,700,615) (22,892,519) (560,012,591)
----------- --------------- ----------- ---------------
Net increase 3,524,228 $ 85,819,920 4,266,058 $ 92,638,738
=========== =============== =========== ===============
<CAPTION>
CLASS C SHARES
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,799,241 $ 277,998,234 10,513,546 $ 257,451,695
Shares issued to shareholders in
reinvestment of distributions 1,621,617 42,340,404 769,872 17,576,582
Shares reacquired (9,460,031) (267,054,410) (9,954,748) (245,373,049)
----------- --------------- ----------- ---------------
Net increase 1,960,827 $ 53,284,228 1,328,670 $ 29,655,228
=========== =============== =========== ===============
<CAPTION>
CLASS I SHARES
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 722,976 $ 22,454,823 78,641 $ 1,967,225
Shares issued to shareholders in
reinvestment of distributions 52,829 1,443,289 28,878 680,655
Shares reacquired (873,502) (26,883,009) (166,608) (4,232,769)
----------- --------------- ----------- ---------------
Net decrease (97,697) $ (2,984,897) (59,089) $ (1,584,889)
=========== =============== =========== ===============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. Interest 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, 2000, was $59,660. The fund had no significant borrowings during the year.
(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>
NET
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS UNREALIZED
DATE DELIVER/RECEIVE FOR AT VALUE APPRECIATION
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 12/15/00 JPY 6,519,479,220 $63,051,056 $61,226,766 $1,824,290
</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 September 30, 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>
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 of MFS
Research Fund (one of the series comprising MFS Series Trust V), including the
portfolio of investments, as of September 30, 2000, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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
securities owned as of September 30, 2000, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Research Fund as of September 30, 2000, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 2, 2000
<PAGE>
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
--------------------------------------------------------------------------------
In January 2001, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2000.
The fund has designated $546,596,911 as a capital gain dividend for the year
ended September 30, 2000.
--------------------------------------------------------------------------------
<PAGE>
MFS(R) RESEARCH FUND
<TABLE>
<S> <C>
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 Graduate School of AUDITORS
Business Administration Deloitte & Touche LLP
Charles W. Schmidt+ - Private Investor INVESTOR INFORMATION
Arnold D. Scott* - Senior Executive For information on MFS mutual funds, call
Vice President, Director, and Secretary, your investment professional or, for an
MFS Investment Management information kit, call toll free: 1-800-637-2929
any business day from 9 a.m. to 5 p.m.
Jeffrey L. Shames* - Chairman and Chief Eastern time (or leave a message anytime).
Executive Officer, MFS Investment
Management INVESTOR SERVICE
MFS Service Center, Inc.
Elaine R. Smith+ - Independent Consultant P.O. Box 2281
Boston, MA 02107-9906
David B. Stone+ - Chairman, North American
Management Corp. (investment adviser) For general information, call toll free:
1-800-225-2606 any business day from
INVESTMENT ADVISER 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired,
Boston, MA 02116-3741 call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use
DISTRIBUTOR this service, your phone must be equipped with
MFS Fund Distributors, Inc. a Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges,
or stock and bond outlooks, call toll free:
CHAIRMAN AND PRESIDENT 1-800-MFS-TALK (1-800-637-8255) anytime
Jeffrey L. Shames* from a touch-tone telephone.
ASSOCIATE DIRECTOR OF EQUITY RESEARCH WORLD WIDE WEB
Alec C. Murray* www.mfs.com
TREASURER
James O. Yost*
ASSISTANT TREASURERS
Mark E. Bradley*
Robert R. Flaherty*
Laura F. Healy*
Ellen Moynihan*
</TABLE>
+ Independent Trustee
*MFS Investment Management
<PAGE>
MFS(R) RESEARCH FUND ------------
PRSRT STD
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-2 11/00 502M 14/214/314/814
