<PAGE>
[Logo] M F S (SM) Semiannual Report
THE FIRST NAME IN MUTUAL FUNDS May 31, 1995
MFS(R) VALUE FUND
[Graphic omitted: art work: Silhouette of two men
talking in front of a large window.]
<PAGE>
<TABLE>
<S> <C>
MFS(R) VALUE FUND
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President Investors Bank & Trust Company
Richard B. Bailey* - Private Investor; INVESTOR INFORMATION
Former Chairman and Director (until 1991), For MFS stock and bond market outlooks,
Massachusetts Financial Services Company call toll free: 1-800-637-4458 anytime from
a touch-tone telephone.
Peter G. Harwood - Private Investor
For information on MFS mutual funds,
J. Atwood Ives - Chairman and Chief Executive call your financial adviser or, for an
Officer, Eastern Enterprises information kit, call toll free:
1-800-637-2929 any business day from
Lawrence T. Perera - Partner, Hemenway & Barnes 9 a.m. to 5 p.m. Eastern time (or leave
a message anytime).
William J. Poorvu - Adjunct Professor, Harvard
University Graduate School of Business INVESTOR SERVICE
Administration MFS Service Center, Inc.
P.O. Box 2281
Charles W. Schmidt - Private Investor; Boston, MA 02107-9906
Former Senior Vice President and Group Executive
(until 1990), Raytheon Company For current account service, call toll free:
1-800-225-2606 any business day from
Arnold D. Scott* - Senior Executive Vice President 8 a.m. to 8 p.m. Eastern time.
and Secretary, Massachusetts Financial Services Company
For service to speech- or hearing-impaired,
Jeffrey L. Shames* - President, Massachusetts call toll free: 1-800-637-6576 any business
Financial Services Company day from 9 a.m. to 5 p.m. Eastern time. (To use this
service, your phone must be equipped with a
Elaine R. Smith - Independent Consultant Telecommunications Device for the Deaf.)
David B. Stone - Chairman, North American For share prices, account balances and
Management Corp. (Investment Advisers) exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
INVESTMENT ADVISER telephone.
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116-3741 TOP-RATED SERVICE
(DALBAR Seal) MFS was rated first when securities firms
PORTFOLIO MANAGER evaluated the quality of service they receive from 40
John F. Brennan, Jr.* mutual fund companies. MFS got high marks for answering
calls quickly, processing transactions accurately and
TREASURER sending statements out on time.
W. Thomas London* (Source: 1994 DALBAR Survey)
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
</TABLE>
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
During the past six months, Class A shares of the Fund provided a total return
of +15.26%, while Class B shares had a total return of +14.86%. Both of these
returns underperformed the Standard & Poor's 500 Composite Index (the S&P 500),
a popular, unmanaged index of common stock performance, which returned +19.2%
over the same period. A discussion of the Fund's performance during this period
may be found in the Portfolio Performance and Strategy section of this letter.
Economic Environment
As the U.S. economy enters its fifth year of expansion, it is evidencing a
decidedly decelerating trend from its robust pace of 1994, when gross domestic
product expanded by 4.1%. The Federal Reserve Board's efforts to dampen this
pace by raising short-term interest rates are clearly having their intended
effect, as growth in this year's first quarter diminished to an annual rate of
2.7%. Growth in the second quarter appears to have slowed even further as
employment, consumer spending and industrial production have all evidenced
considerable weakness. The result may be flat or even slightly negative growth
in the second quarter. However, we do not anticipate that the economy will lapse
into recession. Rather, we believe the economy will pursue a moderate growth
path for the remainder of this year, driven by export growth and an improving
consumer sector supported by moderate prevailing interest rates.
Stock Market
The stock market has maintained its upward momentum, as stock prices have
responded to growing confidence that the Federal Reserve has concluded its
tightening initiatives and that gains in corporate earnings may remain
substantial. Although we expect overall economic growth to remain moderate, our
outlook for corporate earnings growth remains favorable.
Portfolio Performance and Strategy
The Fund's performance can be attributed to three factors: relative domestic
equity exposure, relative sector weightings and stock selection. Our exposure to
domestic equities during the past six months averaged 77.5% of total net assets,
cash averaged about 8.1% and international equities comprised the remaining
14.4%. Given the strong performance of the U.S. equity market during this
period, our exposure to cash and international stocks impeded performance.
However, we remain committed to a moderate exposure to international equities
because we believe that many overseas markets remain undervalued. For example,
two international investments, Nokia, a Finnish telecommunications equipment
supplier, and Sydney Harbour Casino, a monopoly- licensed casino in Sydney,
Australia, added significantly to the Fund's performance during this period.
The best performing sector of the S&P 500 during the past six months was
technology, which returned 30.8%. In this sector the Fund was approximately
market weighted (equivalent to the S&P 500) at about 10% of total net assets.
Three technology companies contributed significantly to the Fund's results:
Intel (microprocessors), Kulicke & Soffa (semiconductor equipment) and LTX
(semiconductor equipment). The recent appreciation in technology stocks does
present some cause for concern, however, and we are likely to reduce some of our
holdings over the next few months.
Financial service companies also provided strong performance during the
period. The Fund was slightly underweighted in this sector at 9.8% versus 11.8%
for the S&P 500, and this underweighting modestly hurt performance. However, two
of our holdings, First Interstate (a West Coast bank) and FHLMC (mortgage-backed
securities), were major contributors to the Fund's total return. The recent
flattening of the yield curve, where long-term interest rates approximate
short-term interest rates, could begin to hurt general bank profitability and,
thus, we expect the outlook for most banks to deteriorate.
Finally, the worst performing sector of the S&P 500 was the retail sector,
which returned only 2.3%. Our relative underweighting in this sector (4% versus
6.3%) helped the Fund's performance. We believe the underperformance in this
sector has created an opportunity to search for potential investments. One of
our current favorites is Federated Department Stores, which should provide
dramatic earnings growth in the future because of positive same-store sales and
cost-cutting programs.
Our current outlook remains optimistic. We believe the Federal Reserve has
significantly reduced the threat of inflation and that business prospects should
remain positive. This environment of low inflation, low interest rates and
steady economic growth should prove rewarding for investors in equity
securities.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
------------------ ------------------
[A 1 1/2" x 1 5/8" photo of [A 1 1/2" x 1 5/8" photo of
A. Keith Brodkin, John F. Brennan, Jr.
Chairman and President] Portfolio Manager]
/S/ A. Keith Brodkin /S/ John F. Brennan, Jr.
A. Keith Brodkin John F. Brennan, Jr.
Chairman and President Portfolio Manager
June 23, 1995
PORTFOLIO MANAGER PROFILE
John Brennan has been a member of the MFS investment staff since 1985. A
graduate of the University of Rhode Island and Stanford University Graduate
School of Business Administration, he began his career at MFS as an Industry
Specialist and was promoted to Assistant Vice President - Investments in 1987.
In 1988, he was named Vice President - Investments and Senior Vice President -
Investments in February 1995. In 1991 he became Portfolio Manager of MFS Value
Fund.
<PAGE>
PERFORMANCE SUMMARY
Because mutual funds like MFS Value Fund are designed for investors with long-
term goals, we have provided cumulative results as well as the average annual
total returns for Class A and Class B shares for the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
------------------------------------------------------------------------------
Cumulative Total Return* +15.26% +11.94% +80.10% +263.44%
------------------------------------------------------------------------------
Average Annual Total Return* -- +11.94% +12.49% + 13.77%
------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the
most recent calendar quarter as required by the Securities and Exchange
Commission (the SEC), with all distributions reinvested and reflecting the
maximum sales charge of 5.75% on the initial investment for the 1-, 5- and 10-
year periods ended March 31, 1995, were -0.02%, +10.62% and +13.26%,
respectively.
Class B Investment Results
(net asset value change including reinvested distributions)
9/07/93** -
6 Months 1 Year 5/31/95
------------------------------------------------------------------------------
Cumulative Total Return*** +14.86% +11.05% +18.15%
------------------------------------------------------------------------------
Average Annual Total Return*** -- +11.05% +10.13%
------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the
most recent calendar quarter as required by the SEC, with all distributions
reinvested and reflecting the current maximum contingent deferred sales charge
(CDSC) of 4% for the 1-year period ended March 31, 1995 and for the period
from September 7, 1993** to March 31, 1995, were +1.24% and +5.31%,
respectively.
All results represent past performance and are not necessarily an indication
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost. All
Class A share results reflect the applicable expense subsidy which is
explained in the Notes to Financial Statements. Had the subsidy not been in
effect, the results would have been less favorable. The subsidy may be
rescinded by MFS at any time.
* These results do not include the sales charge. If the charge had been
included, the results would have been lower.
** Commencement of offering of this class of shares.
*** These results do not include any CDSC. If the charge had been included, the
results would have been lower.
OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation. Dividend
income, if any, is incidental to the investment objective.
The Fund's investment policy is to invest primarily in common stocks, but when
relative values make it appear attractive, the Fund may seek appreciation in
other types of securities such as fixed-income securities (which may be
unrated), convertible bonds, convertible preferred stocks and warrants. The
Fund may also hold cash, commercial paper or other forms of debt securities.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - May 31, 1995
Common Stocks - 93.1%
-----------------------------------------------------------------------------
Issuer Shares Value
-----------------------------------------------------------------------------
Agricultural Products - 1.0%
AGCO Corp. 50,000 $ 1,893,750
-----------------------------------------------------------------------------
Airlines - 1.6%
Southwest Airlines Co. 145,000 $ 3,208,125
-----------------------------------------------------------------------------
Apparel and Textiles - 0.2%
Team Rent Group, Inc.* 66,000 $ 503,250
-----------------------------------------------------------------------------
Automotive - 5.0%
General Motors Corp. 74,600 $ 3,580,800
Harvard Industries, Inc., "B"*++ 360,000 6,210,000
--------------
$ 9,790,800
-----------------------------------------------------------------------------
Banks and Credit Companies - 2.6%
AGRIUM, Inc. 30,000 $ 845,625
First Interstate Bancorp 50,000 4,200,000
------------
$ 5,045,625
-----------------------------------------------------------------------------
Business Machines - 1.1%
Affiliated Computer Co.* 80,300 $ 2,228,325
-----------------------------------------------------------------------------
Business Services - 0.5%
Bell & Howell Holdings* 48,400 $ 895,400
-----------------------------------------------------------------------------
Cellular Telephones - 1.5%
AirTouch Communications, Inc.* 111,400 $ 3,035,650
-----------------------------------------------------------------------------
Chemicals - 2.3%
Methanex Corp.* 96,200 $ 805,675
Sterling Chemicals, Inc. 182,700 1,941,187
Uniroyal Chemical Co.* 150,000 1,706,250
------------
$ 4,453,112
-----------------------------------------------------------------------------
Computer Software - Systems - 4.2%
BMC Software, Inc.* 42,200 $ 2,711,350
Compuware Corp.* 87,800 2,612,050
Sybase, Inc.* 118,700 2,492,700
Wang Laboratories, Inc.* 23,322 303,186
------------
$ 8,119,286
-----------------------------------------------------------------------------
Consumer Goods and Services - 7.9%
Philip Morris Cos., Inc. 50,000 $ 3,643,750
RJR Nabisco Holdings, Inc. 123,000 3,505,500
Tyco International Ltd. 150,000 8,118,750
------------
$ 15,268,000
-----------------------------------------------------------------------------
Defense Electronics - 1.1%
Loral Corp. 45,000 $ 2,154,375
-----------------------------------------------------------------------------
Electrical Equipment - 1.5%
Honeywell, Inc. 75,000 $ 2,971,875
-----------------------------------------------------------------------------
Electronics - 6.6%
Cypress Semiconductor Corp.* 50,000 $ 1,618,750
Intel Corp. 45,000 5,051,250
Kulicke & Soffa Industries, Inc.* 75,000 3,187,500
LTX Corp.* 400,000 2,875,000
------------
$ 12,732,500
-----------------------------------------------------------------------------
Entertainment - 9.5%
Argosy Gaming Corp.* 47,200 $ 619,500
Bally Gaming International, Inc.* 140,000 1,242,500
Casino America, Inc.* 191,200 2,891,900
Central European Media Enterprises Ltd.* 150,000 2,212,500
International Family Entertainment,
Inc., "B"* 89,800 1,470,475
Promus Cos., Inc.* 125,000 5,234,375
Rio Hotel & Casino, Inc.* 57,300 823,688
Showboat, Inc. 230,000 3,852,500
------------
$ 18,347,438
-----------------------------------------------------------------------------
Financial Institutions - 6.3%
Federal Home Loan Mortgage Corp. 100,000 $ 6,812,500
Student Loan Corp. 120,000 3,105,000
Student Loan Marketing Assn. 50,000 2,375,000
------------
$ 12,292,500
-----------------------------------------------------------------------------
Food and Beverage Products - 3.1%
CPC International, Inc. 30,000 $ 1,822,500
Kellogg Co. 30,000 2,013,750
PepsiCo, Inc. 45,000 2,205,000
------------
$ 6,041,250
-----------------------------------------------------------------------------
Forest and Paper Products - 1.9%
Boise Cascade Corp. 50,000 $ 1,650,000
Willamette Industries, Inc. 40,000 2,010,000
------------
$ 3,660,000
-----------------------------------------------------------------------------
Insurance - 0.7%
MBIA, Inc. 20,000 $ 1,262,500
-----------------------------------------------------------------------------
Medical and Health Products - 1.0%
Sofamor/Danek Group, Inc.* 89,100 $ 1,871,100
-----------------------------------------------------------------------------
Medical and Health Technology and Services - 7.0%
Beverly Enterprises, Inc.* 103,400 $ 1,176,175
Genesis Health Ventures, Inc.* 70,000 2,073,750
Living Centers of America* 100,000 3,100,000
Mid-Atlantic Medical Services, Inc.* 145,700 3,023,275
Pacificare Health Systems, Inc., "B"* 55,000 3,643,750
St. Jude Medical, Inc. 12,200 552,050
------------
$ 13,569,000
-----------------------------------------------------------------------------
Oils - 0.3%
Newfield Exploration Co.* 18,900 $ 515,025
-----------------------------------------------------------------------------
Photographic Products - 1.6%
Eastman Kodak Co. 50,000 $ 3,018,750
-----------------------------------------------------------------------------
Printing and Publishing - 1.3%
Pulitzer Publishing Co. 58,500 $ 2,493,563
-----------------------------------------------------------------------------
Railroads - 2.4%
Wisconsin Central Transportation Corp.* 93,800 $ 4,713,450
-----------------------------------------------------------------------------
Restaurants and Lodging - 5.2%
Apple South, Inc. 100,500 $ 1,746,188
Brinker International, Inc.* 130,000 2,193,750
Servico, Inc.* 284,800 2,705,600
Showbiz Pizza Time, Inc.* 300,000 3,337,500
------------
$ 9,983,038
-----------------------------------------------------------------------------
Special Products and Services - 1.4%
Gillett Holdings, Inc.* 37,656 $ 828,432
StanleyWorks 45,000 1,800,000
------------
$ 2,628,432
-----------------------------------------------------------------------------
Stores - 3.0%
Dayton-Hudson Corp. 25,000 $ 1,771,875
Federated Department Stores, Inc.* 90,000 2,070,000
National Convenience Stores* 193,100 1,979,275
------------
$ 5,821,150
-----------------------------------------------------------------------------
Telecommunications - 3.0%
Korea Mobile Telecom*## 57,500 $ 1,804,350
Rogers Communications, Inc.* 350,000 3,994,690
------------
$ 5,799,040
-----------------------------------------------------------------------------
Foreign - 8.3%
Australia - 3.3%
Sydney Harbor Casino Ltd.
(Entertainment)*+++ 7,101,000 $ 6,377,585
-----------------------------------------------------------------------------
Finland - 1.9%
Nokia AB (Telecommunications)* 80,000 $ 3,656,248
-----------------------------------------------------------------------------
Italy - 0.8%
Telecom Italia (Telecommunications) 750,000 $ 1,532,475
-----------------------------------------------------------------------------
Sweden - 1.4%
Hennes & Mauritz AB (Retail) 10,000 $ 578,960
Svenska Handelsbank, "A" (Banks
and Credit Companies) 127,500 1,867,136
TV 4 AB (Telecommunications)* 10,800 222,157
------------
$ 2,668,253
-----------------------------------------------------------------------------
United Kingdom - 0.9%
Takare PLC (Medical and Health
Technology and Services)## 535,150 $ 1,785,260
-----------------------------------------------------------------------------
Total Foreign Stocks $ 16,019,821
-----------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $153,339,482) $180,336,130
-----------------------------------------------------------------------------
Bond - 0.1%
-----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
-----------------------------------------------------------------------------
Continental Airlines, Inc., 11.75s, 1995**
(Identified Cost, $183,750) $3,000 $ 183,750
-----------------------------------------------------------------------------
Short-Term Obligations - 6.2%
-----------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 6/01/95 $4,200 $ 4,199,288
Federal National Mortgage Assn.,
due 6/02/95 3,360 3,351,754
Philip Morris Cos., Inc., due 6/05/95 4,500 4,490,380
-----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost and Value $ 12,041,422
-----------------------------------------------------------------------------
Total Investments (Identified Cost, $165,564,654) $192,561,302
Other Assets, Less Liabilities - 0.6% 1,232,633
-----------------------------------------------------------------------------
Net Assets - 100.0% $193,793,935
-----------------------------------------------------------------------------
* Non-income producing security.
** Non-income producing security - in default.
++ Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer.
## SEC Rule 144A restriction.
+++ Security valued by or at the direction of the Trustees.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
------------------------------------------------------------------------------
May 31, 1995
------------------------------------------------------------------------------
Assets:
Investments, at value -
Unaffiliated issuers (identified cost, $161,540,111) $186,351,302
Affiliated issuers (identified cost, $4,024,543) 6,210,000
------------
Total investments, at value (identified cost,
$165,564,654) $192,561,302
Cash 49,952
Net receivable for forward foreign currency exchange
contracts sold 80,876
Receivable for Fund shares sold 2,415,015
Interest and dividends receivable 183,633
Other assets 2,368
------------
Total assets $195,293,146
------------
Liabilities:
Payable for investments purchased $ 1,170,043
Payable for Fund shares reacquired 147,655
Payable to affiliates -
Management fee 3,910
Shareholder servicing agent fee 833
Distribution fee 61,376
Accrued expenses and other liabilities 115,394
------------
Total liabilities $ 1,499,211
------------
Net assets $193,793,935
------------
Net assets consist of:
Paid-in capital $164,134,428
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 27,077,527
Accumulated undistributed net realized gain on investments
and foreign currency transactions 2,241,371
Accumulated undistributed net investment income 340,609
------------
Total $193,793,935
------------
Shares of beneficial interest outstanding 19,264,716
------------
Class A shares:
Net asset value and redemption price per share
(net assets of $166,430,938 / 16,508,003 shares of
beneficial interest outstanding) $10.08
------
Offering price per share (100/94.25) $10.69
------
Class B shares:
Net asset value and offering price per share
(net assets of $27,362,997 / 2,756,713 shares of beneficial
interest outstanding) $ 9.93
------
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
and Class B shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
------------------------------------------------------------------------------
Six Months Ended May 31, 1995
------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 936,282
Dividends 514,851
Foreign taxes withheld (39,342)
-----------
Total investment income $ 1,411,791
-----------
Expenses -
Management fee $ 647,548
Trustees' compensation 11,006
Shareholder servicing agent fee (Class A) 113,153
Shareholder servicing agent fee (Class B) 23,990
Distribution and service fee (Class A) 264,738
Distribution and service fee (Class B) 109,038
Custodian fee 47,912
Printing 29,929
Postage 15,438
Auditing fees 5,613
Legal fees 1,327
Miscellaneous 85,338
-----------
Total expenses $ 1,355,030
Preliminary reduction of expenses by distributor (75,408)
-----------
Net expenses $ 1,279,622
-----------
Net investment income $ 132,169
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 3,462,107
Foreign currency transactions and forward foreign currency
exchange contracts and other transactions denominated in
foreign currency (193,136)
-----------
Net realized gain on investments $ 3,268,971
-----------
Change in unrealized appreciation -
Investments $21,614,185
Forward foreign currency exchange contracts and translation
of assets and liabilities in foreign currencies 22,215
-----------
Net unrealized gain on investments $21,636,400
-----------
Net realized and unrealized gain on investments and
foreign currency $24,905,371
-----------
Increase in net assets from operations $25,037,540
-----------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
-----------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended
May 31, 1995 Year Ended
(Unaudited) November 30, 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ 132,169 $ (160,932)
Net realized gain on investments and
foreign currency transactions 3,268,971 12,000,871
Net unrealized gain (loss) on investments
and foreign currency transactions 21,636,400 (10,647,522)
------------ ------------
Increase in net assets from operations $ 25,037,540 $ 1,192,417
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ -- $ (344,329)
From net investment income (Class B) -- (5,242)
From net realized gain on investments and
foreign currency transactions (Class A) (10,491,076) (19,570,480)
From net realized gain on investments and
foreign currency transactions (Class B) (1,394,622) (318,610)
------------ ------------
Total distributions declared to shareholders $(11,885,698) $(20,238,661)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 40,305,144 $ 72,178,204
Net asset value of shares issued to shareholders
in reinvestment of distributions 11,166,573 19,162,794
Cost of shares reacquired (29,808,772) (46,619,111)
------------ ------------
Increase in net assets from Fund share
transactions $ 21,662,945 $ 44,721,887
------------ ------------
Total increase in net assets $ 34,814,787 $ 25,675,643
Net assets:
At beginning of period 158,979,148 133,303,505
------------ ------------
At end of period (including accumulated
undistributed net investment income of
$340,609 and $208,440, respectively) $193,793,935 $158,979,148
------------ ------------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Ended Year Ended November 30,
May 31, 1995 --------------------------------------------------------
(Unaudited) 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------
Class A
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.44 $10.82 $10.17 $ 8.73 $ 7.46
------ ------ ------ ------ ------
Income from investment operations<F3> -
Net investment income (loss)<F5> $ 0.01 $ (0.01) $ 0.02 $ -- $ 0.14
Net realized and unrealized gain
on investment transactions 1.33 0.26 1.96 2.03 1.21
------ ------ ------ ------ ------
Total from investment
operations $ 1.34 $ 0.25 $ 1.98 $ 2.03 $ 1.35
------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $ -- $(0.03) $ -- $(0.07) $(0.08)
From net realized gain on
investments (0.70) (1.60) (1.33) (0.52) --
------ ------ ------ ------ ------
Total distributions
declared to shareholders $(0.70) $(1.63) $(1.33) $(0.59) $(0.08)
------ ------ ------ ------ ------
Net asset value - end of period $10.08 $ 9.44 $10.82 $10.17 $ 8.73
------ ------ ------ ------ ------
Total return<F4> 15.26%<F1> 1.92% 22.10% 24.60% 18.26%
Ratios (to average net assets)/Supplemental data<F5>:
Expenses 1.38%<F2> 1.37% 1.42% 1.53% 0%
Net investment income (loss) 0.26%<F2> (0.05)% 0.09% 0.00% 0%
Portfolio turnover 58% 91% 95% 111% 132%
Net assets at end of period
(000 omitted) $166,431 $141,790 $132,207 $112,958 $104,600
<FN>
-----------
<F1> Not annualized.
<F2> Annualized.
<F3> Per share data for the periods subsequent to November 30, 1993 are based on
average shares outstanding.
<F4> Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to October 1, 1989). If the charge
had been included, the results would have been lower.
<F5> The distributor did not impose a portion of its Class A distribution fee
for the periods indicated. If this fee had been incurred by the Fund, the
net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.01 $ (0.03) $ 0.02 -- --
Ratios (to average net assets):
Expenses 1.48%<F2> 1.47% 1.45% -- --
Net investment income (loss) 0.16%<F2> (0.15)% 0.07% -- --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Ended Year Ended May 31,
November 30, -------------------------------------------------------------------------------------
1990 1990 1989 1988 1987 1986 1985
-------------------------------------------------------------------------------------------------------------------------
Class A
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 8.99 $10.52 $ 8.70 $ 9.60 $ 9.81 $ 7.59 $ 6.45
------ ------ ------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.09 $ 0.33 $ 0.21 $ 0.10 $ 0.04 $ 0.03 $ 0.12
Net realized and unrealized
gain (loss) on investment
transactions (1.38) 0.17 2.17 (0.86) 1.60 2.79 1.16
------ ------ ------ ------ ------ ------ ------
Total from investment
operations $(1.29) $ 0.50 $ 2.38 $(0.76) $ 1.64 $ 2.82 $ 1.28
------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.11) $(0.34) $(0.17) $(0.03) $(0.04) $(0.04) $(0.14)
From net realized gain on
investments (0.05) (1.69) (0.39) (0.11) (1.81) (0.53) --
From paid-in capital (0.08) -- -- -- -- (0.03) --
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(0.24) $(2.03) $(0.56) $(0.14) $(1.85) $(0.60) $(0.14)
------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $ 7.46 $ 8.99 $10.52 $ 8.70 $ 9.60 $ 9.81 $ 7.59
------ ------ ------ ------ ------ ------ ------
Total return<F2> (29.48)%<F1> 5.13% 28.47% (7.63)% 17.95% 37.15% 20.04%
Ratios (to average net assets)/Supplemental data:
Expenses 1.51%<F1> 1.26% 1.41% 1.33% 1.31% 1.39% 1.25%
Net investment income 2.30%<F1> 3.38% 2.29% 1.12% 0.38% 0.44% 1.54%
Portfolio turnover 36% 88% 80% 99% 135% 156% 125%
Net assets at end of period
(000 omitted) $100,398 $125,191 $133,219 $116,218 $148,227 $128,135 $92,044
<FN>
-------------
<F1> Annualized.
<F2> Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to October 1, 1989). If the charge
had been included, the results would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
------------------------------------------------------------------------------
Six Months Year Ended
Ended November 30,
May 31, 1995 --------------------
(Unaudited) 1994 1993*
------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.34 $10.79 $10.61
------ ------ ------
Income from investment operations++ -
Net investment loss $(0.03) $(0.09) $(0.01)
Net realized and unrealized gain on
investment transactions 1.32 0.27 0.19
------ ------ ------
Total from investment operations $ 1.29 $ 0.18 $ 0.18
------ ------ ------
Less distributions declared to shareholders -
In excess of net investment income $ -- $(0.03) $ --
From net realized gain on investments (0.70) (1.60) --
------ ------ ------
Total distributions declared to
shareholders $(0.70) $(1.63) $ --
------ ------ ------
Net asset value - end of period $ 9.93 $ 9.34 $10.79
------ ------ ------
Total return 14.86%(S) 1.15% 1.70%(S)
Ratios (to average net assets)/Supplemental data:
Expenses 2.20%+ 2.25% 2.46%+
Net investment loss (0.56)%+ (0.96)% (1.37)%+
Portfolio turnover 58% 91% 95%
Net assets at end of period (000 omitted) $27,363 $17,189 $1,097
(S) Not annualized.
+ Annualized.
++ Per share data for the periods subsequent to November 30, 1993 are based
on average shares outstanding.
* For the period from the commencement of offering of Class B shares,
September 7, 1993 to November 30, 1993.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Business and Organization
MFS Value Fund (the Fund) is a diversified series of MFS Series Trust VII (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
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed issues
and forward contracts, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates value. Futures contracts, options and options on
futures contracts listed on commodities exchanges are valued at closing
settlement prices. Over-the-counter options are valued by brokers through the
use of a pricing model which takes into account closing bond valuations, implied
volatility and short-term repurchase rates. Securities for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the Fund to obtain those securities in the
event of a default under the repurchase agreement. The Fund monitors, on a daily
basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
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 and 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.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities, currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit either in cash or securities an amount equal to a certain percentage
of the contract amount. Subsequent payments are made or received by the Fund
each day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. The Fund's investment in futures contracts is designed to
hedge against anticipated future changes in exchange rates or securities prices.
The Fund may also invest in futures contracts for non-hedging purposes. For
example, interest rate futures may be used in modifying the duration of the
portfolio without incurring the additional transaction costs involved in buying
and selling the underlying securities. Should exchange rates or securities
prices move unexpectedly, the Fund may not achieve the anticipated benefits of
the futures contracts and may realize a loss.
Security Loans - The Fund may lend its securities to member banks of the Federal
Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The loans are collateralized at all times by cash or
securities with a market value at least equal to the market value of securities
loaned. As with other extensions of credit, the Fund may bear the risk of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Fund receives compensation for lending its
securities in the form of fees or from all or a portion of the income from
investment of the collateral. At May 31, 1995, the Fund had no securities on
loan.
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 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 will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Fund will enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized until the
contract settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend and interest payments received in additional securities are
recorded on the ex-dividend or ex-interest date in an amount equal to the value
of the security on such date.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A and
Class B shares. The two classes of shares differ in their shareholder servicing
agent, distribution and service fees. Shareholders of each class also bear
certain expenses that pertain only to that particular class. All shareholders
bear the common expenses of the Fund pro rata, based on the average daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses, including distribution and shareholder service fees.
(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, computed daily and paid monthly at an annual rate of 0.75% of
average daily net assets, amounted to $647,548.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $3,616 for the six months
ended May 31, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$20,567 as its portion of the sales charge on sales of Class A shares of the
Fund.
The Trustees have adopted separate distribution plans for Class A and Class B
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.10% per annum of the Fund's average daily net assets attributable
to Class A shares, commissions to dealers and payments to MFD wholesalers for
sales at or above a certain dollar level, and other such distribution-related
expenses that are approved by the Fund. MFD is not imposing the 0.10%
distribution fee (amounting to $75,408 for the six months ended May 31, 1995)
for an indefinite period. Fees incurred under the distribution plan during the
six months ended May 31, 1995, net of waiver, were 0.25% of average daily net
assets attributable to Class A shares on an annualized basis and amounted to
$189,330 (of which MFD retained $38,136).
The Class B Distribution Plan provides that the Fund will pay MFD a monthly
distribution fee, equal to 0.75% per annum, and a quarterly service fee of up to
0.25% per annum, of the Fund's average daily net assets attributable to Class B
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 shares. The
service fee is intended to be additional consideration for services rendered by
the dealer with respect to Class B shares. Fees incurred under the distribution
plan during the six months ended May 31, 1995 were 1.00% of average daily net
assets attributable to Class B shares on an annualized basis and amounted to
$109,038 (of which MFD retained $1,761).
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within twelve months following the share 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.
Contingent deferred sales charges imposed during the six months ended May 31,
1995 were $199 and $35,535 for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
$113,153 and $23,990 for Class A and Class B shares, respectively, for its
services as shareholder servicing agent. The fee is calculated as a percentage
of the average daily net assets of each class of share at an effective annual
rate of up to 0.15% and up to 0.22% attributable to Class A and Class B shares,
respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, aggregated $109,225,741 and $93,549,031, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $ 165,564,654
--------------
Gross unrealized appreciation $ 31,770,382
Gross unrealized depreciation (4,773,734)
--------------
Net unrealized appreciation $ 26,996,648
--------------
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares Six Months Ended Year Ended
May 31, 1995 November 30, 1994
-------------------------------- ---------------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,894,777 $27,120,247 5,051,409 $ 50,268,216
Shares issued to shareholders in
reinvestment of distributions 1,133,681 9,953,515 1,944,505 18,861,697
Shares reacquired (2,547,442) (23,824,093) (4,191,439) (41,654,028)
---------- ----------- ---------- ------------
Net increase 1,481,016 $13,249,669 2,804,475 $ 27,475,885
---------- ----------- ---------- ------------
Class B Shares Six Months Ended Year Ended
May 31, 1995 November 30, 1994
-------------------------------- ---------------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------
Shares sold 1,422,590 $13,184,897 2,212,735 $21,909,988
Shares issued to shareholders in
reinvestment of distributions 139,773 1,213,058 31,137 301,097
Shares reacquired (646,926) (5,984,679) (504,229) (4,965,083)
---------- ----------- ---------- -----------
Net increase 915,437 $ 8,413,276 1,739,643 $17,246,002
---------- ----------- ---------- -----------
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $350 million, collectively.
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 May 31, 1995 was $1,368.
(7) Financial Instruments
The Fund regularly 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. A summary of obligations
under these financial instruments at May 31, 1995, is as follows:
Forward Foreign Currency Exchange Contracts
In Net Unrealized
Settlement Contracts to Exchange Contracts Appreciation
Date Deliver/Receive for at Value (Depreciation)
--------------------------------------------------------------------------------
Sales 6/09/95 AUD 3,932,879 $2,915,836 $2,824,712 $ 91,124
7/20/95 FIM 11,836,250 2,759,033 2,733,819 25,214
7/20/95 ITL 1,637,900,000 945,724 994,304 (48,580)
6/21/95 SEK 16,641,000 2,279,589 2,266,471 13,118
---------- ---------- --------
$8,900,182 $8,819,306 $ 80,876
---------- ---------- --------
AUD = Australian dollar ITL = Italian Lire
FIM = Finnish Markkaa SEK = Swedish Kronor
At May 31, 1995, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Transactions in Securities of Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the six months ended May
31, 1995 is set forth below:
<TABLE>
<CAPTION>
Acquisitions Dispositions
Beginning ------------------ ------------------ Ending
Share Share Share Share Realized Dividend Ending
Affiliate Amount Amount Cost Amount Cost Amount Gain (Loss) Income Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Harvard Industries,
Inc., "B" 360,000 -- $ -- -- $ -- 360,000 $ -- $ -- $6,210,000
----- ----- ----- ----- ------------
</TABLE>
(9) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At May 31, 1995, the
Fund owned the following restricted securities (constituting 1.85% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations supplied
by a pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees. Certain of these securities may be offered and sold
to "qualified institutional buyers" under Rule 144A of the 1933 Act.
Description Date of Acquisition Shares Cost Value
-------------------------------------------------------------------------------
Korea Mobile Telecom 3/24/95 - 3/31/95 57,500 $1,509,285 $1,804,350
Takare PLC 9/30/91 - 10/25/93 535,150 1,469,470 1,785,260
----------
$3,589,610
----------
---------------------------------------------
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) VALUE FUND [LOGO: NUMBER 1 DALBAR BULK RATE
TOP RATED SERVICE] U.S. POSTAGE
500 Boylston Street PAID
Boston, MA 02116 PERMIT #55638
BOSTON, MA
-------------
[LOGO: M F S
THE FIRST NAME IN MUTUAL FUNDS]
MFV-3 7/95 23M 23/223
