<PAGE>
[LOGO] M F S(SM) Semiannual Report
INVESTMENT MANAGEMENT May 31, 1997
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MFS(R) VALUE FUND
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[GRAPHICS OMITTED]
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LEARNING FINANCIAL BASICS THE EASY WAY (see page 26)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
Portfolio Manager's Overview ............................................... 2
Portfolio Manager's Profile ................................................ 3
Fund Facts ................................................................. 4
Performance Summary ........................................................ 4
Portfolio Concentration .................................................... 6
Portfolio of Investments ................................................... 7
Financial Statements .......................................................12
Notes to Financial Statements ..............................................19
The ABCs of Investing ......................................................26
It's Easy to Contact Us ....................................................27
The MFS Family of Funds(R) .................................................28
Trustees and Officers ......................................................29
HIGHLIGHTS
o FOR THE SIX MONTHS ENDED MAY 31, 1997, CLASS A SHARES OF THE FUND PROVIDED
A TOTAL RETURN AT NET ASSET VALUE OF 8.89%, CLASS B SHARES 8.49%, CLASS C
SHARES 8.55%, AND CLASS I SHARES 8.97%.
o WHILE THE FUND WAS OVERWEIGHTED IN TECHNOLOGY, WHICH WAS ONE OF THE BEST-
PERFORMING SECTORS OF THE STANDARD & POOR'S 500 COMPOSITE INDEX, IT WAS
UNDERWEIGHTED IN CONSUMER STAPLES AND HEALTH CARE, WHICH WERE ALSO TOP-
PERFORMING SECTORS.
o THE FUND'S TECHNOLOGY HOLDINGS ARE PRIMARILY FRANCHISE SOFTWARE COMPANIES
TRADING AT WHAT WE VIEW AS REASONABLE PRICES RELATIVE TO THEIR EXPECTED
GROWTH RATES.
o IN RETAILING, THE FUND IS FOCUSED ON GROCERY STORES AND DRUG STORE CHAINS
THAT ARE EXPECTED TO BENEFIT FROM CONSOLIDATION.
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
After more than six years of expansion, the U.S. economy is experiencing another
year of growth in 1997, although a few signs point to the possibility of a
modest rise in inflation during the year. On the positive side, the pattern of
moderate growth and inflation set over the past few years now seems fairly well
entrenched in the economy and, short of a major international or domestic
crisis, appears to have enough momentum to remain on track for some time. The
U.S. economy exhibited a great deal of strength in the first quarter of 1997,
growing at an annualized rate of 5.8%. This pace would clearly lead to
inflationary pressures were it to continue, as could the ongoing tightness in
the labor market. Moreover, there is reason for caution as a result of the
continuing high level of consumer debt and rising personal bankruptcies. Given
these somewhat conflicting indicators, we expect real (inflation-adjusted)
growth to revolve around 2% to 2 1/2% in 1997, with the strength of the first
quarter moderating as we move through the balance of the year.
We continue to urge U.S. equity investors to remain cautious for 1997. Just as
the slowdown in corporate earnings growth and the increases in interest rates in
1996 raised some near-term concerns, further interest-rate increases and the
fear of an acceleration of inflation have added some volatility to the stock
market in 1997. However, while the U.S. equity market enjoyed several years
without a major correction, we would like to point out that such downturns are a
natural part of the investment environment and, when they end, they often result
in more attractive valuations for stocks.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
June 12, 1997
<PAGE>
PORTFOLIO MANAGER'S OVERVIEW
[Photo of John F. Brennan, Jr.]
John F. Brennan, Jr.
Dear Shareholders:
For the six months ended May 31, 1997, Class A shares of the Fund provided a
total return of 8.89%, Class B shares 8.49%, Class C shares 8.55%, and Class I
shares 8.97%. These returns, which include the reinvestment of distributions but
exclude the effects of any sales charges, compare to a 13.18% return for the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock total return performance.
Over the past six months, the three best-performing sectors of the S&P 500
were consumer staples, which gained 19.5%; technology, which advanced 18.6%; and
health care, which was up 15.9%. The worst-performing sector was basic
materials, which gained 6.5%. The Fund was significantly underweighted in
consumer staples, with 1.8% of equities invested versus 12.6% for the S&P 500;
overweighted in technology (15.1% versus 12.9%); and significantly underweighted
in health care (7.6% versus 11.2%).
Technology, the Fund's largest sector, is primarily focused on franchise
software companies trading at what we view as reasonable prices relative to
their expected growth rates. We try to take advantage of periods of uncertainty
and establish positions at attractive valuations relative to long-term
prospects. Two recent examples include Synopsys and Computer Associates, both of
which have significant leadership positions in attractive markets but stock
prices that were depressed by short-term earnings concerns. In each case we were
able to establish significant holdings at what we believe are excellent
long-term valuations.
In retailing, the Fund's second-largest sector at 12.9% of the portfolio, we
are focused on grocery stores and drug store chains. One of our largest
holdings, Smith's Food and Drug, recently agreed to be acquired by Fred Meyer, a
grocery chain located in the Pacific Northwest. We currently plan to hold the
Fred Meyer shares we will receive in this transaction, as we expect the benefits
from consolidation will be significant. Future consolidation is also expected as
aggressive, well-managed operators such as Safeway look for further growth. The
drug stores are also benefiting from consolidation because the larger chains are
better able to deal with the industry trend toward managed health care. While
growth in this area presents lower gross profit margins, the large chains are
able to leverage this greater volume through lower operating expenses and,
therefore, derive higher net margins. Two of our holdings, Rite Aid and CVS, are
in the midst of major consolidations that we expect to yield significant cost
savings.
The Fund's two largest equity holdings, ADT Ltd. and Tyco International,
recently agreed to merge in a pooling transaction. The surviving entity will be
Tyco International, and we expect significant earnings leverage going forward as
cost savings are realized.
Our outlook for the balance of the year is cautious. With stock market
valuations at record levels and with the recent uptick in interest rates, we
believe the market is vulnerable to any negative news. We are, therefore,
positioned conservatively.
Respectfully,
/s/ John F. Brennan, Jr.
John F. Brennan, Jr.
Portfolio Manager
PORTFOLIO MANAGER'S PROFILE
JOHN F. BRENNAN, JR., HAS BEEN A MEMBER OF THE MFS INVESTMENT STAFF
SINCE 1985. A GRADUATE OF THE UNIVERSITY OF RHODE ISLAND AND THE
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, VICE PRESIDENT -
INVESTMENTS IN 1988, AND SENIOR VICE PRESIDENT IN 1995. MR. BRENNAN HAS
BEEN PORTFOLIO MANAGER OF MFS(R) VALUE FUND SINCE 1991.
<PAGE>
FUND FACTS
STRATEGY: THE INVESTMENT OBJECTIVE OF THE FUND IS
TO SEEK CAPITAL APPRECIATION.
COMMENCEMENT OF
INVESTMENT OPERATIONS: CLASS A: JUNE 13, 1983
CLASS B: SEPTEMBER 7, 1993
CLASS C: APRIL 1, 1996
CLASS I: JANUARY 2, 1997
SIZE: $903 MILLION NET ASSETS AS OF MAY 31, 1997
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, Class B, Class C, and Class I shares for the
applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
AS OF MAY 31, 1997
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
6 Months 1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return +8.89% +10.97% +149.77% +256.35%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +10.97% + 20.09% + 13.55%
- -----------------------------------------------------------------------------------------------------------------
SEC Results -- + 4.58% + 18.68% + 12.88%
- -----------------------------------------------------------------------------------------------------------------
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<CAPTION>
<S> <C> <C> <C> <C>
6 Months 1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return +8.49% +10.01% +142.27% +245.51%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +10.01% + 19.36% + 13.20%
- -----------------------------------------------------------------------------------------------------------------
SEC Results -- + 6.01% + 19.16% + 13.20%
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CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<CAPTION>
<S> <C> <C> <C> <C>
6 Months 1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return +8.55% +10.16% +143.08% +246.74%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +10.16% + 19.44% + 13.24%
- -----------------------------------------------------------------------------------------------------------------
SEC Results -- + 9.16% + 19.44% + 13.24%
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CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<CAPTION>
<S> <C> <C> <C> <C>
6 Months 1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return +8.97% +11.05% +149.97% +256.66%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +11.05% + 20.11% + 13.56%
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</TABLE>
All results are historical and assume the reinvestment of dividends and
capital gains. Investment return and principal value will fluctuate, and shares,
when redeemed, may be worth more or less than their original cost.
Past performance is no guarantee of future results.
Class A share SEC results include the maximum 5.75% sales charge. Class B
share SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%.
Class C shares have no initial sales charge but, along with Class B shares, have
higher annual fees and expenses than Class A shares. Class C share purchases are
subject to a 1% CDSC if redeemed within 12 months of purchase. Class I shares,
which became available on January 2, 1997, have no sales charge or Rule 12b-1
fees and are only available to certain institutional investors.
Class B and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods prior
to the commencement of offering of Class B and Class C shares. Because operating
expenses attributable to Class B and Class C shares are higher than those of
Class A shares, Class B and Class C share performance generally would have been
lower than Class A share performance. The Class A share performance included in
the Class B and Class C share SEC performance has been adjusted to reflect the
CDSC generally applicable to Class B and Class C shares rather than the sales
charge generally applicable to Class A shares.
Class I share results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the
commencement of offering of Class I shares. Because operating expenses
attributable to Class A shares are greater than those of Class I shares, Class I
share performance generally would have been higher than Class A share
performance. The Class A share performance included in the Class I share
performance has been adjusted to reflect the fact that Class I shares have no
initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies
and waivers may be discontinued at any time.
<PAGE>
PORTFOLIO CONCENTRATION AS OF MAY 31, 1997
TOP 10 HOLDINGS
ADT LTD. CELLULAR COMMUNICATIONS INTERNATIONAL,
Commercial and residential security INC.
company Cellular telephone company
TYCO INTERNATIONAL LTD.
Manufacturer of fire protection, RITE AID CORP.
packaging, and electronic equipment U.S. drug store chain
WISCONSIN CENTRAL TRANSPORATION CORP. HILTON HOTELS CORP.
Midwestern railroad company U.S. hotel company
SMITH'S FOOD & DRUG CENTER HARRAH'S ENTERTAINMENT, INC.
Supermarket chain in U.S. southwestern Gaming operator in several states
and mountain states
COMPUTER ASSOCIATES INTERNATIONAL
BRISTOL-MYERS SQUIBB CO. Computer software company
Pharmaceutical products company
LARGEST SECTORS
Technology 15.1%
Leisure 10.7%
Financial Services 11.3%
Retail 12.9%
Miscellaneous (Conglomerates, special products/services) 14.5%
Other Sectors 35.5%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - May 31, 1997
Stocks - 77.0%
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Issuer Shares Value
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U.S. Common Stock - 66.6%
Aerospace - 2.8%
Allied Signal, Inc. 156,600 $ 12,019,050
BE Aerospace, Inc.* 133,000 3,225,250
Thiokol Corp. 135,800 9,760,625
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$ 25,004,925
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Agricultural Products - 0.9%
AGCO Corp. 243,600 $ 7,764,750
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Apparel and Textiles - 0.5%
Footstar, Inc.* 60,300 $ 1,341,675
Reebok International Ltd.* 88,000 3,608,000
------------
$ 4,949,675
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Banks and Credit Companies - 0.3%
Wells Fargo & Co. 11,433 $ 3,012,595
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Building - 0.8%
Newport News Shipbuilding Co. 446,500 $ 7,423,062
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Business Machines - 0.7%
Sun Microsystems, Inc.* 206,800 $ 6,669,300
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Business Services - 5.1%
ADT Ltd.* 1,508,000 $ 43,920,500
DST Systems Inc.* 68,400 2,103,300
------------
$ 46,023,800
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Cellular Telephones - 1.0%
Telephone & Data Systems, Inc. 228,600 $ 8,872,537
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Chemicals - 1.8%
Ferro Corp. 290,000 $ 10,838,750
NL Industries Inc.* 422,900 5,391,975
------------
$ 16,230,725
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Computer Software - Personal Computers - 0.8%
First Data Corp.* 191,620 $ 7,664,800
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Computer Software - Systems - 6.3%
Cerner Corp.* 320,300 $ 6,245,850
Compaq Computer Corp.* 108,700 11,766,775
Computer Assoc. Intl.* 258,380 14,146,305
Sybase, Inc.* 706,600 11,261,437
Synopsys Inc.* 355,680 13,293,540
------------
$ 56,713,907
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Consumer Goods and Services - Systems - 4.5%
Hertz Corp. "A"* 7,400 $ 253,450
Philip Morris Companies, Inc. 232,200 10,216,800
Tyco International Ltd. 470,200 29,857,700
------------
$ 40,327,950
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Containers - Systems - 1.2%
Jefferson Smurfit Co.* 232,300 $ 4,181,400
Stone Container Corp.* 508,600 6,993,250
------------
$ 11,174,650
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Electronics - 2.3%
Analog Devices, Inc.* 68,830 $ 1,841,202
Atmel Corp.* 80,700 2,320,125
Intel Corp. 47,300 7,165,950
Kulicke & Soffa Industries* 196,800 6,642,000
Micron Electronics* 156,200 2,372,287
Teredyne, Inc.* 20,250 830,250
------------
$ 21,171,814
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Entertainment - 4.2%
American Radio Systems Corp., "A"* 155,430 $ 5,789,768
Casino America, Inc.* 472,510 1,107,422
Central European Media Enterprises Ltd.* 119,900 2,817,650
Harrah's Entertainment, Inc.* 844,300 15,725,088
Harvey's Casino Resorts 100,000 1,687,500
Lin Television Corp.* 181,300 7,863,888
Showboat, Inc. 145,000 2,863,750
Sodak Gaming, Inc.* 29,800 437,688
------------
$ 38,292,754
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Financial Institutions - 1.5%
Federal Home Loan Mortgage Corp. 302,000 $ 9,966,000
Union Planters Corp. 76,400 3,609,900
------------
$ 13,575,900
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Food and Beverage Products - 2.5%
Smith's Food & Drug Center, "B"* 474,616 $ 22,425,606
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Forest and Paper Products - 0.3%
Unisource Worldwide 144,800 $ 2,515,900
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Insurance - 5.1%
Chubb Corp. 129,300 $ 7,887,300
Cigna Corp. 55,130 9,578,837
Conseco, Inc.* 52,100 2,084,000
Hartford Financial Svcs. 115,600 9,016,800
Hartford Life, Inc., "A"* 6,900 231,150
Penncorp Financial Group, Inc. 290,400 9,909,900
Reliastar Financial Corp. 109,800 7,040,925
------------
$ 45,748,912
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Machinery - 2.2%
Greenfield Indistries, Inc. 203,400 $ 5,288,400
Stewart & Stevenson Services, Inc. 261,400 6,992,450
Keystone International, Inc.* 230,500 7,520,062
------------
$ 19,800,912
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Medical and Health Products - 2.1%
Bristol-Myers Squibb Co.* 264,400 $ 19,400,350
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Medical and Health Technology Services - 1.8%
Regency Health Services, Inc.* 219,800 $ 2,692,550
St. Jude Medical, Inc. 179,500 6,080,562
United Healthcare Corp. 140,200 7,921,300
------------
$ 16,694,412
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Oils - 0.9%
Texaco, Inc. 77,900 $ 8,500,838
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Railroad - 2.9%
Wisconsin Central Transportation Corp.* 712,500 $ 25,739,063
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Restaurants and Lodging - 4.5%
Hilton Hotels Corp 609,400 $ 17,215,550
Host Marriott Corp.* 197,100 3,473,887
La Quinta Inns, Inc. 175,460 4,035,580
Promus Hotel Corp.* 336,950 12,172,318
Servico, Inc.* 229,500 3,413,812
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$ 40,311,147
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Stores - 4.6%
Arbor Drugs, Inc.* 138,500 $ 2,718,062
CVS Corp. 187,300 8,966,987
Gymboree Corp.* 96,300 2,407,500
Rite Aid Corp. 385,800 17,939,700
Viking Office Products* 498,300 9,405,413
------------
$ 41,437,662
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Supermarkets - 0.9%
Safeway, Inc.* 172,463 $ 7,760,813
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Telecommunications - 3.3%
3Com Corp.* 218,200 $ 10,582,700
Cellular Communications International, Inc.*++ 716,400 19,074,150
------------
$ 29,656,850
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Utilities - 0.8%
Sprint Corp.* 141,730 $ 6,927,053
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Total U.S. Common Stocks $601,792,662
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Foreign Stocks - 10.4%
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Finland - 0.2%
Huhtamaki Oy (Consumer Goods) 48,410 $ 2,126,874
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France - 0.7%
Union des Assurances Federales S.A. (Insurance)* 47,900 $ 5,824,214
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Hong Kong - 0.9%
Cafe de Coral Group (Restaurants) 10,850,000 $ 3,009,790
Wing Hang Bank Ltd. (Finance) 1,035,000 4,929,188
------------
$ 7,938,978
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Japan - 1.8%
Canon, Inc. (Office Equipment)* 335,000 $ 8,501,061
Sony Corp. ADR (Electronics) 13,500 1,150,875
Sony Corp (Electronics) 76,000 6,413,412
------------
$ 16,065,348
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Korea - 0.5%
Korea Electric Power (Utilities-Electric) 59,500 $ 1,839,517
SK Telecom (Telecommunications) 4,666 2,878,940
------------
$ 4,718,457
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Malasia - 0.4%
UMW Holdings Berhad (Conglomerate) 716,000 $ 3,676,159
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Netherlands - 0.4%
Akzo Nobel (Chemicals) 24,500 $ 3,265,049
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New Zealand - 0.9%
Sky City (Entertainment) 100,100 $ 455,327
Tranz-Rail Holdings ADR (Railroads)* 430,700 7,483,413
------------
$ 7,938,740
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Portugal - 0.4%
Banco Totta & Acores, "B" (Banks and Credit Cos.) 254,400 $ 3,631,128
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Switzerland - 1.2%
Novartis AG (Pharmaceuticals) 7,887 $ 10,720,736
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United Kingdom - 3.0%
Asda Group PLC (Retail)* 3,763,700 $ 7,403,198
British Petroleum PLC, ADR (Oils) 76,271 11,049,761
Kwik-Fit Holdings (Retail) 600,000 2,498,100
PowerGen PLC (Utilities - Electric)* 315,128 3,600,400
Storehouse PLC (Retail)* 822,500 2,932,377
------------
$ 27,483,836
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Total Foreign Stocks $ 93,389,519
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Total Stocks (Identified Cost, $600,293,081) $695,182,181
Preferred Stock
- -------------------------------------------------------------------------------
Harvard Industries, Inc., 14.25% EXC,
(Identified cost, $4,214,700) 468,300 $ 351,225
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Bonds - 1.9%
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Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------
Harvard Industries, Inc., 11.125s, 2005** $ 875 $ 306,250
Harrahs Jazz Co., 14.25s, 2001** 35,036 16,641,863
- -------------------------------------------------------------------------------
(Identified cost, $17,772,448) $ 16,948,113
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U.S. Treasury Obligations - 13.7%
- -------------------------------------------------------------------------------
U.S. Treasury Bond, 6.5s, 2026 $ 86,747 $ 81,785,939
Stripped Prior Payments, 0s, 2017 173,360 41,928,850
- -------------------------------------------------------------------------------
(Identified cost, $122,777,992) $123,714,789
- -------------------------------------------------------------------------------
Short-Term Obligations - 3.9%
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 6/19/97 $ 8,600 $ 8,576,845
Federal Home Loan Mortgage Corp., due 6/13/97 7,000 6,987,237
Federal National Mortgage Assn., due 6/25/97 4,600 4,583,501
Federal Farm Credit Corp., due 6/02/97-6/04/97 14,645 14,640,618
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Total Short-Term Obligations, at Amortized Cost $ 34,788,201
- -------------------------------------------------------------------------------
Equity Put Options Purchased - 1.6%
- -------------------------------------------------------------------------------
Issuer/Expiration Date/Strike Price
- -------------------------------------------------------------------------------
Standard & Poor's 500 Index / 19 Dec 97 / 900 $ 1,020 $ 6,196,500
Standard & Poor's 500 Index / 19 Mar 98 / 950 928 8,584,000
- -------------------------------------------------------------------------------
Total Puts (Premiums paid, $17,294,944) $ 14,780,500
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $797,141,366) $885,765,008
Other Assets, Less Liabilities - 1.9% 17,263,080
- -------------------------------------------------------------------------------
Net Assets - 100.0% $903,028,088
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*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.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
May 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments, at value -
Unaffiliated issuers (identified cost, $776,348,666) $866,690,858
Affiliated issuers (identified cost, $20,792,700) 19,074,150
Total investments, at value (identified cost, $797,141,366) 885,765,008
Cash 6,760
Receivable for Fund shares sold 3,481,461
Receivable for investments sold 16,193,595
Interest and dividends receivable 642,372
Other assets 121,033
------------
Total assets $906,210,229
------------
Liabilities:
Payable for Fund shares reacquired $ 1,159,309
Payable for investments purchased 1,205,435
Net payable for foreign currency contracts closed or
subject to masternetting agreements 101,607
Payable to affiliates -
Management fee 37,065
Administrative fee 741
Shareholder servicing agent fee 6,425
Distribution fee 13,243
Accrued expenses and other liabilities 658,316
------------
Total liabilities $ 3,182,141
------------
Net assets $903,028,088
============
Net assets consist of:
Paid-in capital $772,425,059
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 88,525,401
Accumulated undistributed net realized gain on investments
and foreign currency transactions 41,987,203
Accumulated undistributed net investment income 90,425
------------
Total $903,028,088
============
Shares of beneficial interest outstanding 68,788,082
==========
Class A shares:
Net asset value per share
(net assets of $505,728,197 / 38,090,887 shares of
beneficial interest outstanding) $13.28
======
Offering price per share (100 / 94.25) $14.09
======
Class B shares:
Net asset value and offering price per share
(net assets of $322,431,553 / 24,952,611 shares of
beneficial interest outstanding) $12.92
======
Class C shares:
Net asset value and offering price per share
(net assets of $49,629,982 / 3,846,028 shares of
beneficial interest outstanding) $12.90
======
Class I shares:
Net asset value per share
(net assets of $25,238,356 / 1,898,556 shares of
beneficial interest outstanding) $13.29
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares. See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
Six Months Ended May 31, 1997
- -------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 3,313,737
Dividends 3,737,647
Foreign taxes withheld (153,399)
-----------
Total investment income $ 6,897,985
-----------
Expenses -
Management fee $ 2,954,980
Trustees' compensation 23,044
Administrative fee 31,598
Shareholder servicing agent fee 428,347
Shareholder servicing agent fee (Class A) 55,682
Shareholder servicing agent fee (Class B) 50,466
Shareholder servicing agent fee (Class C) 4,569
Distribution and service fee (Class A) 562,198
Distribution and service fee (Class B) 1,388,569
Distribution and service fee (Class C) 201,031
Custodian fee 154,933
Postage 77,337
Printing 36,726
Auditing fees 16,739
Legal fees 2,939
Miscellaneous 400,165
-----------
Total expenses $ 6,389,323
Fees paid indirectly (45,000)
-----------
Net expenses $ 6,344,323
-----------
Net investment income $ 553,662
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $40,133,107
Foreign currency transactions 88,592
-----------
Net realized gain on investments and foreign currency
transactions $40,221,699
-----------
Change in unrealized appreciation (depreciation) -
Investments $29,123,159
Translation of assets and liabilities in foreign currencies (101,171)
-----------
Net unrealized gain on investments and foreign currency
translation $29,021,988
-----------
Net realized and unrealized gain on investments and
foreign currency $69,243,687
-----------
Increase in net assets from operations $69,797,349
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Six Months Ended
May 31, 1997 Year Ended
(Unaudited) November 30, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 553,662 $ 931,441
Net realized gain on investments and foreign
currency transactions 40,221,699 62,206,828
Net unrealized gain on investments and foreign
currency translation 29,021,988 8,276,740
------------ ------------
Increase in net assets from operations $ 69,797,349 $ 71,415,009
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (946,436) $ --
From net investment income (Class C) (28,491) --
From net realized gain on investments and
foreign currency transactions (Class A) (36,139,797) (21,105,160)
From net realized gain on investments and
foreign currency transactions (Class B) (21,106,896) (4,429,633)
From net realized gain on investments and
foreign currency transactions (Class C) (2,868,778) --
------------ ------------
Total distributions declared to shareholders $(61,090,398) $(25,534,793)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $254,044,089 $484,011,550
Net asset value of shares issued to shareholders
in reinvestment of distributions 52,745,143 23,866,258
Cost of shares reacquired (116,112,122) (123,736,751)
------------ ------------
Increase in net assets from Fund share
transactions $190,677,110 $384,141,057
------------ ------------
Total increase in net assets $199,384,061 $430,021,273
Net assets:
At beginning of period 703,644,027 273,622,754
------------ ------------
At end of period (including accumulated
undistributed net investment income of $90,425 and
$511,690, respectively) $903,028,088 $703,644,027
============ ============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended November 30,
May 31, 1997 -----------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
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 $13.34 $12.39 $ 9.44 $10.82 $10.17 $ 8.73 $ 7.46
------ ------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income
(loss) $ 0.03 $ 0.05 $ 0.01 $(0.01) $ 0.02 $ -- $ 0.14
Net realized and
unrealized gain on
investments and foreign
currency transactions 1.06 2.04 3.64 0.26 1.96 2.03 1.21
------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.09 $ 2.09 $ 3.65 $ 0.25 $ 1.98 $ 2.03 $ 1.35
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.03) $ -- $ -- $(0.03) $ -- $(0.07) $(0.08)
From net realized gain
on investments and
foreign currency
transactions (1.12) (1.14) (0.70) (1.60) (1.33) (0.52) --
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(1.15) $(1.14) $(0.70) $(1.63) $(1.33) $(0.59) $(0.08)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of
period $13.28 $13.34 $12.39 $ 9.44 $10.82 $10.17 $ 8.73
====== ====== ====== ====== ====== ====== ======
Total return(+) 8.89%++ 18.50% 41.67% 1.92% 22.10% 24.60% 18.26%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.33%+ 1.32% 1.35% 1.37% 1.42% 1.53% 1.50%
Net investment income
(loss) 0.44%+ 0.43% 0.06% (0.05)% 0.09% -- 1.65%
Portfolio turnover 78% 112% 109% 91% 95% 111% 132%
Average commission rate### $0.0318 $0.0304 $ -- $ -- $ -- $ -- $ --
Net assets at end of
period (000 omitted) $505,728 $427,478 $227,555 $141,790 $132,207 $112,958 $104,600
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to November 30, 1993, is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended May 31,
November 30, -----------------------------------------------------------
1990 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.09 $ 0.33 $ 0.21 $ 0.10 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (1.38) 0.17 2.17 (0.86) 1.60
------ ------ ------ ------ ------
Total from investment operations $(1.29) $ 0.50 $ 2.38 $(0.76) $ 1.64
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.11) $(0.34) $(0.17) $(0.03) $(0.04)
From net realized gain on investments and
foreign currency transactions (0.05) (1.69) (0.39) (0.11) (1.81)
From paid-in capital (0.08) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.24) $(2.03) $(0.56) $(0.14) $(1.85)
------ ------ ------ ------ ------
Net asset value - end of period $ 7.46 $ 8.99 $10.52 $ 8.70 $ 9.60
====== ====== ====== ====== ======
Total return(+) (29.48)%+ 5.13% 28.47% (7.63)% 17.95%
Ratios (to average net assets)/Supplemental data:
Expenses 1.51%+ 1.26% 1.41% 1.33% 1.31%
Net investment income 2.30%+ 3.38% 2.29% 1.12% 0.38%
Portfolio turnover 36% 88% 80% 99% 135%
Net assets at end of period (000 omitted) $100,398 $125,191 $133,219 $116,218 $148,227
+ Annualized.
(+) 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
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended November 30,
May 31, 1997 --------------------------------------------------------
(Unaudited) 1996 1995 1994 1993*
- -----------------------------------------------------------------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.01 $12.15 $ 9.34 $10.79 $10.61
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.02) $(0.04) $(0.08) $(0.09) $(0.01)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.02 2.00 3.59 0.27 0.19
------ ------ ------ ------ ------
Total from investment operations $ 1.00 $ 1.96 $ 3.51 $ 0.18 $ 0.18
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions
$(1.09) $(1.10) $(0.70) $(1.60) $ --
In excess of net investment income -- -- -- (0.03) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.09) $(1.10) $(0.70) $(1.63) $ --
------ ------ ------ ------ ------
Net asset value - end of period $12.92 $13.01 $12.15 $ 9.34 $10.79
====== ====== ====== ====== ======
Total return 8.49%++ 17.50% 40.53% 1.15% 1.70%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.09%+ 2.16% 2.17% 2.25% 2.46%+
Net investment loss (0.32)%+ (0.33)% (0.77)% (0.96)% (1.37)%+
Portfolio turnover 78% 112% 109% 91% 95%
Average commission rate### $0.0318 $0.0304 $ -- $ -- $ --
Net assets at end of period (000 omitted) $322,432 $244,247 $46,068 $17,189 $ 1,097
* For the period from the commencement of offering of Class B shares, September 7, 1993, to November 30, 1993.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to November 30, 1993, is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Period Ended
Six Months Ended Period Ended May 31,
May 31, 1997 November 30, 1997**
(Unaudited) 1996* (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
Class C Class I
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.03 $12.00 $12.22
------ ------ ------
Income from investment operations -
Net investment income (loss) $(0.02) $(0.01) $ 0.04
Net realized and unrealized gain on investments
and foreign currency transactions 1.02 1.04 1.03
------ ------ ------
Total from investment operations $ 1.00 $ 1.03 $ 1.07
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.01) $ -- $ --
From net realized gain on investments and
foreign currency transactions (1.12) -- --
------ ------ ------
Total distributions declared to shareholders $(1.13) $ -- $ --
------ ------ ------
Net asset value - end of period $12.90 $13.03 $13.29
====== ====== ======
Total return 8.55%++ 7.95%++ 8.76%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.08%+ 2.11%+ 1.08%+
Net investment income (loss) (0.31)%+ (0.17)%+ 0.79%+
Portfolio turnover 78% 112% 78%
Average commission rate### $0.0318 $0.0304 $0.0318
Net assets at end of period (000 omitted) $49,630 $31,919 $25,238
* For the period from the commencement of offering of Class C shares, April 1, 1996, to November 30, 1996.
** For the period from the commencement of offering of Class I shares, January 2, 1997, to May 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
</TABLE>
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
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are 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.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result 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 into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund 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. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded 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 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 tax 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,
Class B, Class C, and Class I shares. The four 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 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 effective 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 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 $4,780 for the period ended
May 31, 1997.
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal,
compliance, shareholder communications, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee up to 0.015% per annum of the Fund's average daily net
assets, provided that the administrative fee is not assessed on Fund assets that
exceed $3 billion.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$187,473 for the period ended May 31, 1997, as its portion of the sales charge
on sales of Class A shares of the Fund. The Trustees have adopted a distribution
plan for Class A, Class B, and Class C shares pursuant to Rule 12b-1 of the
Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35 %
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
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 $89,180 for the period
ended May 31, 1997. Payment of the 0.10% per annum Class A distribution fee will
commence on such date as the Trustees of the Trust may determine. Fees incurred
under the distribution plan during the period ended May 31, 1997, were 0.25% of
average daily net assets attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B and Class C shares. MFD
will pay to securities dealers that enter into a sales agreement with MFD all or
a portion of the service fee attributable to Class B and Class C shares, and
will pay to such securities dealers all of the distribution fee attributable to
Class C shares. The service fee is intended to be additional consideration for
services rendered by the dealer with respect to Class B and Class C shares. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $73,955 and $1,064 for Class B and Class C shares,
respectively, for the period ended May 31, 1997. Fees incurred under the
distribution plan during the period ended May 31, 1997, were 1.00% of average
daily net assets attributable to Class B and Class C shares on an annualized
basis.
Purchases over $1 million of Class A shares and certain purchases by retirement
plans are subject to a contingent deferred sales charge in the event of a
shareholder redemption within 12 months following such purchases. 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. A contingent
deferred sales charge is imposed on shareholder redemptions of Class C shares in
the event of a shareholder redemption within twelve months of purchases made on
or after April 1, 1996. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the period ended May 31, 1997,
were $12,864, $210,679, and $15,795 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the fund's average daily net assets at an effective annual rate of
0.13%. Prior to January 1, 1997, the fee was 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%, up to 0.22%, and up to 0.15% attributable to Class A, Class B, and
Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
Purchases Sales
- ------------------------------------------------------------------------------
U.S. Government securities $122,289,030 $ --
============ ============
Investments (non-U.S. government
securities) $563,023,775 $527,264,112
============ ============
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 $797,141,366
============
Gross unrealized appreciation $107,429,495
Gross unrealized depreciation (18,805,853)
------------
Net unrealized appreciation $ 88,623,642
============
(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 May 31, 1997 Year Ended November 30, 1996
---------------------------- ------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 11,619,564 $146,182,816 19,830,731 $247,848,654
Shares issued to shareholders in
reinvestment of distributions 2,784,358 33,774,238 1,739,061 19,947,385
Shares transferred to Class I (1,547,626) (18,911,993) -- --
Shares reacquired (6,798,406) (85,741,162) (7,905,513) (98,473,592)
--------- ------------ ---------- ------------
Net increase 6,057,890 $ 75,303,899 13,664,279 $169,322,447
========= ============ ========== ============
<CAPTION>
Class B Shares
Six Months Ended May 31, 1997 Year Ended November 30, 1996
---------------------------- ------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,707,366 $ 82,201,221 16,436,561 $202,564,032
Shares issued to shareholders in
reinvestment of distributions 1,482,341 17,550,922 348,040 3,918,873
Shares reacquired (2,009,903) (24,682,469) (1,804,198) (22,222,748)
--------- ------------ ---------- ------------
Net increase 6,179,804 $ 75,069,674 14,980,403 $184,260,157
========= ============ ========== ============
<CAPTION>
Class C Shares
Six Months Ended May 31, 1997 Year Ended November 30, 1996
---------------------------- ------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,561,267 $ 19,095,352 2,695,641 $ 33,598,864
Shares issued to shareholders in
reinvestment of distributions 120,134 1,419,983 -- --
Shares reacquired (285,769) (3,519,598) (245,245) (3,040,411)
--------- ------------ ---------- ------------
Net increase 1,395,632 $ 16,995,737 2,450,396 $ 30,558,453
========= ============ ========== ============
<CAPTION>
Class I Shares
Period Ended May 31, 1997*
-----------------------------
Shares Amount
- ---------------------------------------------------------------------
<S> <C> <C>
Shares sold 526,948 $ 6,564,700
Shares transferred from Class A 1,547,626 18,911,993
Shares reacquired (176,018) (2,168,893)
--------- ------------
Net increase 1,898,556 $ 23,307,800
========= ============
</TABLE>
* For the period from commencement of offering of Class I shares, January 2,
1997, to May 31, 1997.
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the six
months ended May 31, 1997, was $3,309.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include 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 May 31, 1997, is
as follows.
Forward foreign currency exchange contracts purchases and sales under master
netting arrangements and closed forward foreign currency exchange contracts
excluded above amounted to a net payable of $88,880 with Deutschebank and
$12,727 with Merrill Lynch at May 31, 1997.
At May 31, 1997, 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 period ended May 31,
1997, is set forth below.
<TABLE>
<CAPTION>
Acquisitions Disposition
Beginning --------------------------- --------------------------- Ending
Share Share Share Share Realized
Affiliate Amount Amount Cost Amount Cost Amount Ending Value Gain (loss)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cellular
Communications
International 623,100 93,300 $2,369,675 -- $ -- 716,400 $19,074,150 $ --
Harvard
Industries Inc. 378,400 292,400 1,403,374 670,800 5,565,812 -- -- (4,334,952)
</TABLE>
--------------------------------------
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.
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MFS(R) Value Fund
Trustees
A. Keith Brodkin* - Chairman and Investor Information
President For MFS stock and bond market
outlooks, call toll free:
Richard B. Bailey* - Private Investor; 1-800-637-4458 anytime from a
Former Chairman and Director (until touch-tone telephone.
1991), Massachusetts Financial
Services Company; Director, Cambridge For information on MFS mutual funds,
Bancorp; Director, Cambridge Trust call your financial adviser or, for an
Company information kit, call toll free:
1-800-637-2929 any business day from 9
Peter G. Harwood - Private Investor a.m. to 5 p.m. Eastern time (or leave
a message anytime).
J. Atwood Ives - Chairman and Chief
Executive Officer, Eastern Enterprises Investor Service
MFS Service Center, Inc.
Lawrence T. Perera - Partner, Hemenway P.O. Box 2281
& Barnes Boston, MA 02107-9906
William J. Poorvu - Adjunct Professor, For general information, call toll free
Harvard University Graduate School of 1-800-225-2606 any business day from
Business Administration 8 a.m. to 8 p.m. Eastern time.
Charles W. Schmidt - Private Investor For service to speech- or
hearing-impaired, call toll free:
Arnold D. Scott* - Senior Executive 1-800-637-6576 any business day from 9
Vice President, Director and a.m. to 5 p.m. Eastern time. (To use
Secretary, Massachusetts Financial this service, your phone must be
Services Company equipped with a Telecommunications
Device for the Deaf.)
Jeffrey L. Shames* - President and
Director, Massachusetts Financial For share prices, account balances,
Services Company and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255)
Elaine R. Smith - Independent anytime from a touch-tone telephone.
Consultant
World Wide Web
David B. Stone - Chairman, North www.mfs.com
American Management Corp. (investment
advisers)
[DALBAR For the third year in a row,
Investment Adviser LOGO] MFS earned a #1 ranking in the
Massachusetts Financial Services DALBAR, Inc. Broker/Dealer Survey,
Company Main Office Operations Service Quality
500 Boylston Street Category. The firm achieved a 3.48
Boston, MA 02116-3741 overall score on a scale of 1 to 4 in
the 1996 survey. A total of 110 firms
Distributor responded, offering input on the
MFS Fund Distributors, Inc. quality of service they received from
500 Boylston Street 29 mutual fund companies nationwide.
Boston, MA 02116-3741 The survey contained questions about
service quality in 15 categories,
Portfolio Manager including "knowledge of phone service
John F. Brennan, Jr.* contacts," "accuracy of transaction
processing," and "overall ease of
Treasurer doing business with the firm."
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
Investors Bank & Trust Company
*Affiliated with the Investment Adviser
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MFS(R) VALUE [DALBAR logo] ------------
FUND BULK RATE
U.S. POSTAGE
500 Boylston Street PAID
Boston, MA 02116-3741 MFS
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[MFS logo]
INVESTMENT MANAGEMENT
We invented the mutual fund(TM)
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MVF-3 7/97 83M 23/223/323/823
