<PAGE>
ANNUAL REPORT FOR
YEAR ENDED
NOVEMBER 30, 1995
[logo] M F S (SM)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) VALUE FUND
Front cover
A photo of computer disks.
<PAGE>
<TABLE>
<S> <C>
MFS(R) VALUE FUND
TRUSTEES SECRETARY
A. Keith Brodkin* - Chairman and President Stephen E. Cavan*
Richard B. Bailey* - Private Investor; ASSISTANT SECRETARY
Former Chairman and Director (until 1991), James R. Bordewick, Jr.*
Massachusetts Financial Services Company; CUSTODIAN
Director, Cambridge Bancorp; Director, Investors Bank & Trust Company
Cambridge Trust Company AUDITORS
Peter G. Harwood - Private Investor Deloitte & Touche LLP
J. Atwood Ives - Chairman and Chief INVESTOR INFORMATION
Executive Officer, Eastern Enterprises For MFS stock and bond market outlooks,
Lawrence T. Perera - Partner, call toll free: 1-800-637-4458 anytime from
Hemenway & Barnes a touch-tone telephone.
William J. Poorvu - Adjunct Professor, For information on MFS mutual funds,
Harvard University Graduate School of call your financial adviser or, for an
Business Administration information kit, call toll free:
Charles W. Schmidt - Private Investor 1-800-637-2929 any business day from
Arnold D. Scott* - Senior Executive Vice 9 a.m. to 5 p.m. Eastern time (or leave
President, Director and Secretary, a message anytime).
Massachusetts Financial Services Company INVESTOR SERVICE
Jeffrey L. Shames* - President and Director, MFS Service Center, Inc.
Massachusetts Financial Services Company P.O. Box 2281
Elaine R. Smith - Independent Consultant Boston, MA 02107-9906
David B. Stone - Chairman, For general information, call toll free:
North American Management Corp. 1-800-225-2606 any business day from
(investment adviser) 8 a.m. to 8 p.m. Eastern time.
INVESTMENT ADVISER For service to speech- or hearing-impaired,
Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business
500 Boylston Street day from 9 a.m. to 5 p.m. Eastern time.
Boston, MA 02116-3741 (To use this service, your phone must be
DISTRIBUTOR equipped with a Telecommunications Device for
MFS Fund Distributors, Inc. the Deaf.)
500 Boylston Street For share prices, account balances and
Boston, MA 02116-3741 exchanges, call toll free: 1-800-MFS-TALK
PORTFOLIO MANAGER (1-800-637-8255) anytime from a touch-tone
John F. Brennan, Jr.* telephone.
TREASURER
W. Thomas London* ----------------------------------------------------
ASSISTANT TREASURER TOP-RATED SERVICE
James O. Yost* DALBAR For the second year in a
row, MFS earned a
MFS #1 MFS #1 ranking in
DALBAR, Inc.'s
DALBAR Broker/Dealer Survey,
Main Office Operations
Service Quality category. The firm achieved a 3.49
overall score - on a scale of 1 to 4 - in the 1995
survey. A total of 71 firms responded, offering input
on the quality of service they receive from 36 mutual
fund companies nationwide. The survey contained
questions about service quality in 17 categories,
including "knowledge of phone service contacts,"
"accuracy of transactions processing," and "overall
ease of doing business with the firm."
*Affiliated with the Investment Adviser ----------------------------------------------------
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
During the past 12 months, Class A shares of the Fund provided a total return
of +41.67%, while Class B shares had a total return of +40.53%. Both of these
returns, which include the reinvestment of distributions but exclude the
effects of any sales charges, outperformed the Standard & Poor's 500 Composite
Index (the S&P 500), a popular, unmanaged index of common stock performance,
which returned +36.93% 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 Outlook
Moderate, but sustainable, growth has been the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy
growing at an annual rate of 4.2% in the third quarter, this surprisingly
strong growth was mainly driven by a pickup in consumer spending and an
increase in business and government outlays. Although impressive, this growth
rate is not expected to continue in coming months. Recent retail sales have
been disappointing, in part because of rising levels of consumer debt. An
extended period of lower mortgage rates seems to have relieved much of the
pent-up demand for housing. Growth is not expected to get much help from the
manu- facturing sector, either, as order flows from manufacturers have
moderated. Export activity, meanwhile, is also expected to remain modest as
continued weakness abroad has limited demand for many U.S. goods. However, the
Federal Reserve Board's consistent and, so far, successful efforts to fight
inflation seem to be giving consumers and businesses enough longer term
confidence to help maintain modest growth in real (adjusted for inflation)
gross domestic product into 1996.
Interest Rates
Given the recent signs of economic weakness, prospects for the Fed's further
decreasing short-term interest rates are good. Long-term rates, meanwhile,
have moved noticeably downward in recent months in anticipation of more modest
fourth-quarter growth with continued low inflation. While there were some
increases in commodity prices early in the year, companies found it difficult
to pass these on at the consumer level as they continue to fight for market
share. Additionally, unit labor costs remain under control and seem to be
growing at a pace that is near or below the ongoing inflation rate. Thus, with
long-term government bonds yielding approximately 6% in an environment of 2%
to 3% inflation, real rates of return in the fixed-income markets remain
relatively attractive.
Stock Market
After some volatility late in the third quarter, the stock market continued to
strengthen. Although many companies reported solid third-quarter results,
there was some weakness in the earnings of retail, financial services and even
some technology companies. However, a slowdown in earnings may be a positive
development if it is an indication that the economy is not overheating and
that inflation is under control. While we see a deceleration of corporate
earnings as the inevitable consequence of traditional business cycles, we
remain encouraged by the high absolute level of profitability among U.S.
companies. Also, many companies' increasing emphasis on cost containment and
growing use of technology have helped keep them highly competitive and
reasonably profitable. Looking ahead, we believe that a stablizing interest
rate environment, coupled with reasonable earnings reports, could justify
current market valuations.
Portfolio Performance and Strategy
The Fund's strong performance over the past year relative to the S&P 500 was
primarily due to stock selection; sector weightings were a less significant
factor.
The top three performing sectors of the S&P 500 over the past year were
financial services (+54.8%), health care (+51.7%) and technology (+49.3%). The
financial services sector was slightly overweighted in the portfolio, with
both First Interstate Bancorp, a West Coast banking company, and Federal Home
Loan Mortgage Corp., a provider of mortgage-backed securities, making strong
contributions. While the Fund's relative performance was impeded by an
underweighting in the health care sector, our holding in Pacificare Health
Systems, a health maintenance organization, was increased at mid-year, which
did benefit performance in the second half. While the technology sector was
also slightly underweighted, the Fund did benefit from strong performance from
a number of holdings, particularly in the second half of the year. These
included Intel (microprocessors), and Kulicke and Soffa and LTX Corp. (semi-
conductor test equipment). Several computer software companies in the
portfolio also reported strong results, including Adobe Systems, Sybase and
BMC Software.
Retailing was by far the worst performing sector in the S&P 500, gaining
6.5%, and the Fund was slightly underweighted in this area. However, two
holdings -- Federated Department Stores and National Convenience Stores --
contributed strongly to overall results. Federated's cost-cutting program has
begun to increase earnings, while the share price of National Convenience
Stores increased dramatically -- up more than 200% -- with the acquisition
offer from Diamond Shamrock.
International markets underperformed those in the United States during the
past year. Strong individual performance by such holdings as Sydney Harbour
and Sky City (casino operators), Nokia (telecommunications equipment), and
Telecom Italia Mobile and Korea Mobile (cellular telephone services) more than
compensated for this overall market sluggishness.
Our current outlook remains optimistic. The U.S. economic trends pre- sent
a rare mix of favorable growth and low expectations for inflation. Foreign
trade balances are also expected to improve as the relatively weak dollar
begins to impact the flow of goods and services. We believe the Fed is likely
to continue lowering interest rates and successfully maintain positive
economic growth. While we believe this economic backdrop could be rewarding
for equity investors, our enthusiasm is tempered by the exceptional
performance of the equity markets in 1995.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
- ---------------------- ------------------------
A Photo of A Photo of
A. Keith Brodkin, John F. Brennan, Jr.,
Chairman and President Portfolio Manager
- ---------------------- ------------------------
/s/ A. Keith Brodkin /s/ John F. Brennan, Jr.
Chairman and President Portfolio Manager
December 13, 1995
PORTFOLIO MANAGER PROFILE
A graduate of the University of Rhode Island and Stanford University Graduate
School of Business Administration, John Brennan began his career at MFS in
1985 as an industry specialist and was promoted to Assitant Vice President -
Investments in 1987. He was named Vice President - Investments in 1988 and
Senior Vice President - Investments in February 1995. Mr. Brennan has been
Portfolio Manager of MFS Value Fund since 1991.
<PAGE>
OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation. The selection
of portfolio securities is made solely on the basis of potential for 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.
PERFORMANCE
The information below and on the following page illustrates the historical
performance of MFS Value Fund Class A shares in comparison to various market
indicators. Fund results in the graph reflect the deduction of the 5.75%
maximum sales charge; benchmark comparisons are unmanaged and do not reflect
any fees or expenses. You cannot invest in an index. All results reflect the
reinvestment of all dividends and capital gains.
Please note that effective September 7, 1993, Class B shares were offered.
Information on Class B share performance appears on the next page.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-Year Period Ended November 30, 1995)
Line graph representing the growth of a $10,000 investment for the five-year
period ended November 30, 1995. The graph is scaled from $5,000 to $30,000 in
$5,000 segments. The years are marked in 12-month segments from 1990 to 1995.
There are three lines drawn to scale. One is a solid line representing MFS Value
Fund (Class A), a second line of short dashes represents the S&P 500, a third
line of medium-short dashes represents the Consumer Price Index.
MFS Value Fund (Class A) $24,466
S&P 500 $21,700
Consumer Price Index $11,480
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-Year Period Ended November 30, 1995)
Line graph representing the growth of a $10,000 investment for the ten-year
period ended November 30, 1995. The graph is scaled from $0 to $50,000 in
$10,000 segments. The years are marked in 12-month segments from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing MFS Value
Fund (Class A), a second line of short dashes represents the S&P 500, a third
line of medium-short dashes represents the Consumer Price Index.
MFS Value Fund (Class A) $40,308
S&P 500 $41,096
Consumer Price Index $14,089
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
MFS Value Fund (Class A) including
5.75% sales charge +33.47% +18.44% +19.60% +14.96%
- -------------------------------------------------------------------------------
MFS Value Fund (Class A) at net asset
value +41.67% +20.80% +21.03% +15.64%
- ------------------------------------------------------------------------------
MFS Value Fund (Class B) with CDSC+ +36.53% -- -- +16.87%*
- ------------------------------------------------------------------------------
MFS Value Fund (Class B) without CDSC +40.53% -- -- +17.97%*
- ------------------------------------------------------------------------------
Average capital appreciation fund** +30.28% +13.56% +17.38% +12.53%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite
Index** +36.93% +15.05% +16.76% +15.18%
- ------------------------------------------------------------------------------
Consumer Price Index(S)** + 2.61% + 2.65% + 2.80% + 3.49%
- ------------------------------------------------------------------------------
+ These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
* For the period from the commencement of offering of Class B shares,
September 7, 1993 to November 30, 1995.
(S) The Consumer Price Index is a popular measure of change in prices.
** Source: Lipper Analytical Services, Inc.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS - continued
In the table on the preceding page, we have included the average annual total
returns of all capital appreciation funds (including the Fund) tracked by
Lipper Analytical Services, Inc. (an independent firm which rates mutual fund
performance) for the applicable time periods. Because these returns do not
reflect any applicable sales charges, we have also included the Fund's results
at net asset value (no sales charge) for comparison.
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value of an investment in a
mutual fund will vary with changes in market conditions, and shares, when
redeemed, may be worth more or less than their original cost. All Class A
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.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
The Fund has designated $11,885,698 as a long-term capital gain distribution
for tax purposes. This distribution was made to shareholders of record as of
December 29, 1994, payable December 30, 1994.
For the year ended November 30, 1995, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to
6.67%.
<PAGE>
PORTFOLIO OF INVESTMENTS - November 30, 1995
Common Stocks - 91.0%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Agricultural Products - 1.8%
AGCO Corp. 50,000 $ 2,156,250
Case Corp. 65,000 2,713,750
------------
$ 4,870,000
- -----------------------------------------------------------------------------
Airlines - 2.3%
Midwest Express Holding Co.* 143,100 $ 4,221,450
Southwest Airlines Co. 85,100 2,127,500
------------
$ 6,348,950
- -----------------------------------------------------------------------------
Apparel and Textiles - 0.5%
Nike, Inc., "B" 25,000 $ 1,450,000
- -----------------------------------------------------------------------------
Automotive - 4.9%
General Motors Corp. 74,600 $ 3,618,100
Harvard Industries,
Inc.++* 360,000 9,720,000
------------
$ 13,338,100
- -----------------------------------------------------------------------------
Banks and Credit Companies - 2.5%
First Interstate Bancorp 50,000 $ 6,700,000
- -----------------------------------------------------------------------------
Business Services - 1.9%
ADT Ltd.* 185,000 $ 2,590,000
DST Systems, Inc.* 6,500 187,688
Technology Solutions Co.* 134,600 2,288,200
------------
$ 5,065,888
- -----------------------------------------------------------------------------
Cellular Telephones - 0.6%
AirTouch Communications, Inc.* 58,900 $ 1,715,463
- -----------------------------------------------------------------------------
Chemicals - 0.4%
Uniroyal Chemical Co.* 150,000 $ 1,200,000
- -----------------------------------------------------------------------------
Computer Software - Systems - 5.3%
Adobe Systems, Inc. 73,800 $ 4,990,725
BMC Software, Inc.* 144,000 6,084,000
Compuware Corp.* 30,000 615,000
Sybase, Inc.* 80,200 2,817,025
------------
$ 14,506,750
- -----------------------------------------------------------------------------
Consumer Goods and Services - 7.0%
Philip Morris Cos., Inc. 50,000 $ 4,387,500
RJR Nabisco Holdings Corp. 123,000 3,582,375
Tyco International Ltd. 360,000 11,295,000
------------
$ 19,264,875
- -----------------------------------------------------------------------------
Defense Electronics - 1.1%
Loral Corp. 90,000 $ 3,048,750
- -----------------------------------------------------------------------------
Electrical Equipment - 1.3%
Honeywell, Inc. 75,000 $ 3,571,875
- -----------------------------------------------------------------------------
Electronics - 2.7%
Cypress Semiconductor Corp.* 50,000 $ 781,250
Intel Corp. 107,700 6,556,238
------------
$ 7,337,488
- -----------------------------------------------------------------------------
Entertainment - 10.9%
Argosy Gaming Corp.* 191,400 $ 1,626,900
Aztar Corp.* 221,200 1,935,500
Casino America, Inc.* 146,200 858,925
Central European Media Enterprises Ltd.* 15,300 336,600
Harrah's Entertainment, Inc.* 471,300 11,723,588
Harveys Casino Resorts 180,000 2,700,000
Heritage Media Corp.* 80,000 2,090,000
Rio Hotel & Casino, Inc.* 185,300 2,316,250
Showboat, Inc. 230,000 6,210,000
------------
$ 29,797,763
- -----------------------------------------------------------------------------
Financial Institutions - 7.8%
Federal Home Loan Mortgage Corp. 175,000 $ 13,475,000
Student Loan Corp. 120,000 4,245,000
Student Loan Marketing Assn. 50,000 3,506,250
------------
$ 21,226,250
- -----------------------------------------------------------------------------
Food and Beverage Products - 1.8%
Interstate Bakeries Corp. 115,100 $ 2,575,363
PepsiCo, Inc. 45,000 2,486,250
------------
$ 5,061,613
- -----------------------------------------------------------------------------
Foreign Stocks - 10.8%
Australia - 0.9%
Sydney Harbour Casino Holdings Ltd., Pfd.
(Entertainment)* 1,765,600 $ 2,373,472
- -----------------------------------------------------------------------------
Canada - 2.2%
Canadian National Railway Co.*
(Railroads) 10,100 $ 151,500
Potash Corp. of Saskatchewan, Inc.
(Precious Metals and Minerals) 35,300 2,440,113
Rogers Communications, Inc.
(Telecommunications) 350,000 3,672,931
------------
$ 6,264,544
- -----------------------------------------------------------------------------
Hong Kong - 0.8%
Giordano International Ltd. (Clothing) 2,369,000 $ 2,128,309
- -----------------------------------------------------------------------------
Italy - 1.9%
Olivetti & C., S.P.A. (Office Equipment) 3,500,000 $ 2,319,450
Telecom Italia (Telecommunications) 2,180,300 2,126,446
Telecom Italia (Telecommunications) 389,000 627,457
------------
$ 5,073,353
- -----------------------------------------------------------------------------
Korea - 0.7%
Korea Mobile Telecom
(Telecommunications)##* 28,500 $ 1,115,205
Korea Mobile Telecom (Telecommunications) 1,070 938,923
------------
$ 2,054,128
- -----------------------------------------------------------------------------
Malaysia - 1.0%
New Straits Times Press, BHD (Publishing) 808,000 $ 2,692,256
- -----------------------------------------------------------------------------
Netherlands - 0.1%
Giessen de Noord (Van der), N.V.
(Transportation) 5,100 $ 265,154
- -----------------------------------------------------------------------------
New Zealand - 1.5%
Sky City Ltd. (Entertainment) 195,000 $ 4,070,352
- -----------------------------------------------------------------------------
Foreign Stocks - continued
Sweden - 0.8%
Hennes & Mauritz (Retail) 8,000 $ 496,644
TV 4, AB (Telecommunications)* 92,000 1,794,009
------------
$ 2,290,653
- -----------------------------------------------------------------------------
United Kingdom - 0.9%
PowerGen PLC, ADR (Electricity) 700,000 $ 2,366,070
- -----------------------------------------------------------------------------
Total Foreign Stocks $ 29,575,291
- -----------------------------------------------------------------------------
Forest and Paper Products - 3.1%
Fort Howard Corp.* 297,400 $ 5,910,825
Kimberly Clark Corp. 35,000 2,690,625
------------
$ 8,601,450
- -----------------------------------------------------------------------------
Insurance - 2.5%
MBIA, Inc. 30,000 $ 2,310,000
Prudential Reinsurance Holdings, Inc. 222,300 4,640,513
------------
$ 6,950,513
- -----------------------------------------------------------------------------
Machinery - 1.1%
Ingersoll Rand Co. 65,000 $ 2,494,375
York International Corp. 13,600 608,600
------------
$ 3,102,975
- -----------------------------------------------------------------------------
Medical and Health Products - 0.9%
Medisense, Inc.* 100,000 $ 2,575,000
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 3.7%
Beverly Enterprises, Inc.* 136,200 $ 1,583,325
Genesis Health Ventures, Inc.* 59,100 1,928,138
Pacificare Health Systems, Inc., "B"* 55,000 4,771,250
Regency Health Services, Inc.* 170,000 1,827,500
------------
$ 10,110,213
- -----------------------------------------------------------------------------
Oil Services - 0.1%
Nuevo Energy Co.* 10,000 $ 222,500
- -----------------------------------------------------------------------------
Oils - 1.0%
Union Pacific Resources Group, Inc.* 115,600 $ 2,687,700
- -----------------------------------------------------------------------------
Photographic Products - 1.2%
Eastman Kodak Co. 50,000 $ 3,400,000
- -----------------------------------------------------------------------------
Printing and Publishing - 1.0%
Pulitzer Publishing Co. 58,500 $ 2,691,000
- -----------------------------------------------------------------------------
Railroads - 2.0%
Wisconsin Central Transportation Corp.* 93,800 $ 5,440,400
- -----------------------------------------------------------------------------
Restaurants and Lodging - 4.7%
Hometown Buffet, Inc.* 41,300 $ 449,138
Promus Hotel Corp.* 306,050 6,771,356
Servico, Inc.* 125,700 1,696,950
Showbiz Pizza Time, Inc.* 300,000 3,825,000
------------
$ 12,742,444
- -----------------------------------------------------------------------------
Special Products and Services - 1.1%
Gillett Holdings, Inc.* 37,656 $ 790,776
Stanley Works 45,000 2,278,125
------------
$ 3,068,901
- -----------------------------------------------------------------------------
Stores - 2.9%
Federated Department Stores, Inc.* 90,000 $ 2,621,250
National Convenience Stores, Inc.* 193,100 5,189,563
------------
$ 7,810,813
- -----------------------------------------------------------------------------
Telecommunications - 1.1%
Cabletron Systems, Inc.* 25,100 $ 2,083,300
Cellular Communications International,
Inc.* 28,400 979,800
------------
$ 3,063,100
- -----------------------------------------------------------------------------
Utilities - Telephone - 1.0%
MCI Communications Corp. 100,000 $ 2,675,000
- -----------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $197,865,506) $249,224,065
- -----------------------------------------------------------------------------
Bonds - 0.1%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Continental Airlines, Inc., 11.75s, 1995** $ 3,000 $ 300
Wang-Talon, 0s, 2000 1 720
Woodward & Lothrop, Inc., 14.75s, 1995** 500 250,000
- -----------------------------------------------------------------------------
Total Bonds (Identified Cost, $87,500) $ 251,020
- -----------------------------------------------------------------------------
Short-Term Obligations - 10.7%
- -----------------------------------------------------------------------------
Abbott Laboratories, due 12/04/95 $ 3,790 $ 3,779,781
Federal Home Loan Mortgage Corp.,
due 12/01/95 11,430 11,428,159
Federal Home Loan Mortgage Corp.,
due 12/06/95 5,000 4,992,888
Federal National Mortgage Assn.,
due 12/14/95 9,100 9,058,436
- -----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized
Cost and Value $ 29,259,264
- -----------------------------------------------------------------------------
Total Investments (Identified Cost,
$227,212,270) $278,734,349
Other Assets, Less Liabilities - (1.8)% (5,111,595)
=============================================================================
Net Assets - 100.0% $273,622,754
- -----------------------------------------------------------------------------
* Non-income producing security.
** Non-income producing security - in default.
## SEC Rule 144A restriction.
++ 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.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
November 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value -
Unaffiliated issuers (identified cost, $223,187,687) $ 269,014,349
Affiliated issuer (identified cost, $4,024,583) 9,720,000
-------------
Total investments, at value (identified cost,
$227,212,270) $ 278,734,349
Cash 2,432
Foreign currency, at value (identified cost, $3,446) 5,318
Receivable for investments sold 375,055
Receivable for Fund shares sold 907,758
Interest and dividends receivable 270,298
Other assets 2,230
-------------
Total assets $ 280,297,440
-------------
Liabilities:
Payable for investments purchased $ 5,871,989
Payable for Fund shares reacquired 223,660
Net payable for forward foreign currency exchange
contracts purchased and sold 300,723
Payable to affiliates -
Management fee 5,580
Shareholder servicing agent fee 1,201
Distribution fee 126,369
Accrued expenses and other liabilities 145,164
-------------
Total liabilities $ 6,674,686
-------------
Net assets $ 273,622,754
=============
Net assets consist of:
Paid-in capital $ 197,606,892
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 51,226,673
Accumulated undistributed net realized gain on
investments and foreign currency transactions 24,593,940
Accumulated undistributed net investment income 195,249
-------------
Total $ 273,622,754
=============
Shares of beneficial interest outstanding 22,161,122
=============
Class A shares:
Net asset value and redemption price per share
(net assets of $227,554,766 / 18,368,718 shares of
beneficial interest outstanding) $12.39
======
Offering price per share (100/94.25) $13.15
======
Class B shares:
Net asset value and offering price per share
(net assets of $46,067,988 / 3,792,404 shares of
beneficial interest outstanding) $12.15
======
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
- ------------------------------------------------------------------------------
Year Ended November 30, 1995
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 1,087,992
Dividends 1,834,267
Foreign taxes withheld (53,392)
-----------
Total investment income $ 2,868,867
-----------
Expenses -
Management fee $ 1,526,502
Trustees' compensation 24,817
Shareholder servicing agent fee (Class A) 261,888
Shareholder servicing agent fee (Class B) 63,669
Distribution and service fee (Class A) 618,508
Distribution and service fee (Class B) 290,172
Custodian fee 96,397
Printing 68,666
Postage 43,420
Auditing fees 41,113
Legal fees 5,302
Miscellaneous 136,400
-----------
Total expenses $ 3,176,854
Reduction of expenses by distributor (174,497)
Fees paid indirectly (24,091)
-----------
Net expenses $ 2,978,266
-----------
Net investment loss $ (109,399)
===========
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $26,160,495
Foreign currency transactions (427,409)
-----------
Net realized gain on investments $25,733,086
-----------
Change in unrealized appreciation (depreciation) -
Investments $46,139,612
Translation of assets and liabilities in foreign currencies (354,066)
-----------
Net unrealized gain on investments $45,785,546
-----------
Net realized and unrealized gain on investments and
foreign currency $71,518,632
-----------
Increase in net assets from operations $71,409,233
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended November 30, 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (109,399) $ (160,932)
Net realized gain on investments and foreign currency
transactions 25,733,086 12,000,871
Net unrealized gain (loss) on investments and foreign
currency 45,785,546 (10,647,522)
------------ ------------
Increase in net assets from operations $ 71,409,233 $ 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) (10,491,130) (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 $(11,885,752) $(20,238,661)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $112,728,051 $ 72,178,204
Net asset value of shares issued to shareholders in
reinvestment of distributions 11,168,786 19,162,794
Cost of shares reacquired (68,776,712) (46,619,111)
------------ ------------
Increase in net assets from Fund share transactions $ 55,120,125 $ 44,721,887
------------ ------------
Total increase in net assets $114,643,606 $ 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 $195,249 and $208,440,
respectively) $273,622,754 $158,979,148
============ ============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Year Ended November 30, Ended Ended
-------------------------------------------------------------------- November 30, May 31,
1995 1994 1993 1992 1991 1990 1990
- -----------------------------------------------------------------------------------------------------------------------------------
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 $ 9.44 $10.82 $10.17 $ 8.73 $ 7.46 $ 8.99 $10.52
------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F3> -
Net investment income
(loss) $ 0.01 $(0.01) $ 0.02 $ -- $ 0.14 $ 0.09 $ 0.33
Net realized and
unrealized gain (loss)
on investments 3.64 0.26 1.96 2.03 1.21 (1.38) 0.17
------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 3.65 $ 0.25 $ 1.98 $ 2.03 $ 1.35 $(1.29) $ 0.50
------ ------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders -
From net investment income $ -- $(0.03) $ -- $(0.07) $(0.08) $(0.11) $(0.34)
From net realized gain on
investments (0.70) (1.60) (1.33) (0.52) -- (0.05) (1.69)
From paid-in capital -- -- -- -- -- (0.08) --
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.70) $(1.63) $(1.33) $(0.59) $(0.08) $(0.24) $(2.03)
------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $12.39 $ 9.44 $10.82 $10.17 $ 8.73 $ 7.46 $ 8.99
====== ====== ====== ====== ====== ====== ======
Total return<F2> 41.67% 1.92% 22.10% 24.60% 18.26% (29.48)%<F1> 5.13%
Ratios (to average net assets)/Supplemental data<F5>:
Expenses<F4> 1.35% 1.37% 1.42% 1.53% 1.50% 1.51%<F1> 1.26%
Net investment income
(loss) 0.06% (0.05)% 0.09% -- 1.65% 2.30%<F1> 3.38%
Portfolio turnover 109% 91% 95% 111% 132% 36% 88%
Net assets at end of period
(000 omitted) $227,555 $141,790 $132,207 $112,958 $104,600 $100,398 $125,191
<FN>
<F1> Annualized.
<F2> Total returns for Class A shares do not include the applicable sales charge
(except for reinvestment dividends prior to October 1, 1989). If the charge
had been included, the results would have been lower.
<F3> Per share data for the periods subsequent to November 30, 1993 is based on
average shares outstanding.
<F4> For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
<F5> The distributor did not impose a portion of its distribution fee
attributable to Class A shares for the periods indicated. If this fee had
been incurred by the Fund, the net investment income per share and the
ratios would have been:
Net investment income $(0.01) $(0.03) $ 0.02 -- -- -- --
Ratios (to average net assets):
Expenses<F4> 1.46% 1.47% 1.45% -- -- -- --
Net investment
income (0.04)% (0.15)% 0.07% -- -- -- --
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31, Year Ended November 30,
----------------------------------------- -----------------------------------------------------------
1989 1988 1987 1986 1995 1994 1993<F1>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 8.70 $ 9.60 $ 9.81 $ 7.59 $ 9.34 $10.79 $10.61
------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F4> -
Net investment income
(loss) $ 0.21 $ 0.10 $ 0.04 $ 0.03 $(0.08) $(0.09) $(0.01)
Net realized and
unrealized gain
(loss) on investments 2.17 (0.86) 1.60 2.79 3.59 0.27 0.19
------ ------ ------ ------ ------ ------ ------
Total from
investment
operations $ 2.38 $(0.76) $ 1.64 $ 2.82 $ 3.51 $ 0.18 $ 0.18
------ ------ ------ ------ ------ ------ ------
Less distributions
declared to
shareholders -
From net investment
income $(0.17) $(0.03) $(0.04) $(0.04) $ -- $ -- $ --
In excess of net
investment income -- -- -- -- -- (0.03) --
From net realized
gain on investments (0.39) (0.11) (1.81) (0.53) (0.70) (1.60) --
From paid-in capital -- -- -- (0.03) -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.56) $(0.14) $(1.85) $(0.60) $(0.70) $(1.63) $ --
------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $10.52 $ 8.70 $ 9.60 $ 9.81 $12.15 $ 9.34 $10.79
====== ====== ====== ====== ====== ====== ======
Total return<F3> 28.47% (7.63)% 17.95% 37.15% 40.53% 1.15% 1.70%
Ratios (to average net assets)/Supplemental data:
Expenses<F5> 1.41% 1.33% 1.31% 1.39% 2.17% 2.25% 2.46%<F2>
Net investment
income (loss) 2.29% 1.12% 0.38% 1.44% (0.77)% (0.96)% (1.37)%<F2>
Portfolio turnover 80% 99% 135% 156% 109% 91% 95%
Net assets at end of
period
(000 omitted) $133,219 $116,218 $148,227 $128,135 $46,068 $17,189 $1,097
<FN>
<F1> For the period from the commencement of offering of Class B shares,
September 7, 1993 to November 30, 1993.
<F2> Annualized.
<F3> Total returns for Class A shares do not include the applicable sales charge
(except for reinvestment dividends prior to October 1, 1989). If the charge
had been included, the results would have been lower.
<F4> Per share data for the periods subsequent to November 30, 1993 is based on
average shares outstanding.
<F5> For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(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 market 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.
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.
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 may 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. 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 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 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.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on
the Fund's average daily net assets. This fee is reduced according to an
expense offset arrangement with State Street Bank, the dividend disbursing
agent, which provides for partial reimbursement of custody fees based on a
formula developed to measure the value of cash deposited by the Fund with the
custodian and with the dividend disbursing agent. This amount is shown as a
reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net 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. During the year ended November 30, 1995, $15,284 was
reclassified from accumulated net realized gain on investments and paid-in
capital to accumulated undistributed net investment income ($111,498 and
$96,208, respectively), due to differences between book and tax accounting
for foreign currency and reflecting the inability to use operating losses
incurred. 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 both Class
A and Class B shares. The two classes of shares differ in their respective
shareholder servicing agent, distribution and service fees. 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.
(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 0.75%
of 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 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 of its independent Trustees and Mr.
Bailey. Included in Trustees' compensation is a net periodic pension expense
of $7,317 for the year ended November 30, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$61,017 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 retains the
service fee for accounts not attributable to a securities dealer, which
amounted to $75,049 for the year ended November 30, 1995. MFD is currently
waiving the 0.10% distribution fee for an indefinite period. Fees incurred
under the distribution plan during the year ended November 30, 1995 were 0.25%
of average daily net assets attributable to Class A shares on an annualized
basis.
The Class B distribution plan provides that the Fund will pay MFD a monthly
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 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. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $3,994 for
Class B shares for the year ended November 30, 1995. Fees incurred under the
distribution plan during the year ended November 30, 1995 were 1.00% of
average daily net assets attributable to Class B shares on an annualized
basis.
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 12 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. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended November 30, 1995 were
$336 and $59,989 for Class A and Class B 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 average daily net assets of each class of shares 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, were as follows:
Purchases Sales
- ------------------------------------------------------------------------------
Investments (non-U.S. government securities) $242,244,480 $204,867,026
============ ============
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 $227,212,270
============
Gross unrealized appreciation $ 56,593,962
Gross unrealized depreciation (5,071,883)
------------
Net unrealized appreciation $ 51,522,079
============
(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:
Class A Shares
1995 1994
-------------------------- --------------------------
Year Ended November 30, Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold 7,410,621 $79,382,430 5,051,409 $50,268,216
Shares issued to
shareholders in
reinvestment of
distributions 1,133,703 9,953,735 1,944,505 18,861,697
Shares reacquired (5,202,592) (54,439,794) (4,191,439) (41,654,028)
---------- ----------- ---------- -----------
Net increase 3,341,732 $34,896,371 2,804,475 $27,475,885
========== =========== ========== ===========
Class B Shares
1995 1994
-------------------------- --------------------------
Year Ended November 30, Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold 3,211,010 $33,345,621 2,212,735 $21,909,988
Shares issued to
shareholders in
reinvestment of
distributions 139,959 1,215,051 31,137 301,097
Shares reacquired (1,399,842) (14,336,918) (504,229) (4,965,083)
---------- ----------- --------- -----------
Net increase 1,951,127 $20,223,754 1,739,643 $17,246,002
========== =========== ========= ===========
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by 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 year ended November
30, 1995 was $2,847.
(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 written options, forward foreign currency
exchange contracts and futures 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 November 30, 1995 is as
follows:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive In Exchange for at Value (Depreciation)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 12/07/95 AUD 3,932,879 $ 2,935,402 $ 2,919,985 $ 15,417
12/15/95 FIM 11,836,250 2,754,538 2,755,018 (480)
12/07/95 ITL 3,264,770,000 2,017,550 2,041,172 (23,622)
12/01/95 MLR 144,418 56,786 56,924 (138)
12/21/95 SEK 16,641,000 2,307,628 2,534,285 (226,657)
----------- ----------- ---------
$10,071,904 $10,307,384 $(235,480)
=========== =========== =========
Purchases 12/07/95 AUD 1,875,984 $ 1,400,000 $ 1,392,833 $ (7,167)
12/15/95 FIM 11,836,250 2,813,095 2,755,019 (58,076)
----------- ----------- ---------
$ 4,213,095 $ 4,147,852 $ (65,243)
=========== =========== =========
</TABLE>
AUD = Australian Dollars MLR = Malaysian Ringgit
FIM = Finnish Markkaa SEK = Swedish Kronor
ITL = Italian Lire
At November 30, 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 year ended November
30, 1995 is set forth below.
<TABLE>
<CAPTION>
Acquisitions Dispositions Interest
Beginning ----------------------- --------------------- Ending Realized and
Share/Par Share/Par Share/Par Share/Par Gain Dividend Ending
Affiliate Amount Amount Cost Amount Cost Amount (Loss) Income Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Harvard Industries,
Inc. 360,000 -- $ -- -- $ -- 360,000 $ -- $ -- $9,720,000
</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 November 30,
1995, the Fund owned the following restricted security (constituting 0.4% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). The Fund does not have the right to
demand that such security be registered. The value of this security 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. This security
may be offered and sold to "qualified institutional buyers" under Rule 144A of
the 1933 Act.
Share
Description Date of Acquisition Amount Cost Value
- ------------------------------------------------------------------------------
Korea Mobile
Telecom 3/24/95 - 3/31/95 28,500 $741,827 $1,115,205
==========
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust VII and Shareholders of MFS Value Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Value Fund (a separate series
of MFS Series Trust VII) as of November 30, 1995, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended November 30, 1995 and 1994, and the financial highlights for
each of the years in the eleven-year period ended November 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at November 30, 1995 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Value Fund at
November 30, 1995, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 5, 1996
---------------------------------------------
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 [LOGO: NUMBER 1 DALBAR BULK RATE
FUND TOP RATED SERVICE] U.S. POSTAGE
PAID
PERMIT #55638
500 Boylston Street BOSTON, MA
Boston, MA 02116 -------------
[LOGO: M F S(R)
THE FIRST NAME IN MUTUAL FUNDS]
MVF-2 1/96/30M 23/223
