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[logo] M F S(SM)
INVESTMENT MANAGEMENT ANNUAL REPORT
We invented the mutual fund(SM) FOR YEAR ENDED
AUGUST 31, 1996
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MFS(R) EQUITY INCOME FUND
MFS(R) RESEARCH GROWTH AND INCOME FUND
MFS(R) CORE GROWTH FUND
MFS(R) AGGRESSIVE GROWTH FUND
MFS(R) SPECIAL OPPORTUNITIES FUND
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MFS(R) INCUBATOR FUNDS
MFS(R) EQUITY INCOME FUND
MFS(R) RESEARCH GROWTH AND INCOME FUND
MFS(R) CORE GROWTH FUND
MFS(R) AGGRESSIVE GROWTH FUND
MFS(R) SPECIAL OPPORTUNITIES FUND
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<C> <C>
TRUSTEES FUND MANAGERS*
A. Keith Brodkin* - Chairman and President John F. Brennan
Christian A. Felipe
Richard B. Bailey* - Private Investor; John D. Laupheimer, Jr.
Former Chairman and Director (until 1991), Robert J. Manning
Massachusetts Financial Services Company; Lisa B. Nurme
Director, Cambridge Bancorp; Director, Kevin R. Parke
Cambridge Trust Company Stephen Pesek
Marshall N. Cohan - Private Investor TREASURER
W. Thomas London*
Lawrence H. Cohn, M.D. - Chief of Cardiac
Surgery, Brigham and Women's Hospital; ASSISTANT TREASURER
Professor of Surgery, Harvard Medical School James O. Yost*
The Hon. Sir J. David Gibbons, KBE - Chief SECRETARY
Executive Officer, Edmund Gibbons Ltd.; Stephen E. Cavan*
Chairman, Bank of N.T. Butterfield & Son Ltd.
ASSISTANT SECRETARY
Abby M. O'Neill - Private Investor; Director, James R. Bordewick, Jr.*
Rockefeller Financial Services, Inc.
(investment advisers) CUSTODIAN
State Street Bank and Trust Company
Walter E. Robb, III - President and
Treasurer, Benchmark Advisors, Inc. AUDITORS
(corporate financial consultants); President, Ernst & Young LLP
Benchmark Consulting Group, Inc. (office
services); Trustee, Landmark Funds (mutual INVESTOR INFORMATION
funds) For MFS stock and bond market outlooks, call
toll free: 1-800-637-4458 anytime from a
Arnold D. Scott* - Senior Executive Vice touch-tone telephone.
President, Director and Secretary,
Massachusetts Financial Services Company For information on MFS mutual funds, call
your financial adviser or, for an information
Jeffrey L. Shames* - President and Director, kit, call toll free: 1-800-637-2929 any
Massachusetts Financial Services Company business day from 9 a.m. to 5 p.m. Eastern
time (or leave a message anytime).
J. Dale Sherratt - President, Insight
Resources, Inc. (acquisition planning INVESTOR SERVICE
specialists) MFS Service Center, Inc.
P.O. Box 2281
Ward Smith - Former Chairman (until 1994), Boston, MA 02107-9906
NACCO Industries; Director, Sundstrand
Corporation For general information, call toll free:
1-800-225-2606 any business day from 8 a.m.
INVESTMENT ADVISER to 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired,
Boston, MA 02116-3741 call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
DISTRIBUTOR
MFS Fund Distributors, Inc. To use this service, your phone must be
500 Boylston Street equipped with a Telecommunications Device for
Boston, MA 02116-3741 the Deaf.
WEB SITE For share prices, account balances, and
http://www.mfs.com exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
*Affiliated with the Investment Adviser telephone.
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders:
MFS Equity Income Fund, MFS Research Growth and Income Fund, MFS Core Growth
Fund, MFS Aggressive Growth Fund, and MFS Special Opportunities Fund, commenced
operations on January 2, 1996. From that date through August 31, 1996, the Funds
Class A shares at net asset value provided the following total returns, all of
which assume the reinvestment of any distributions: MFS EQUITY INCOME FUND,
10.7%; MFS RESEARCH GROWTH AND INCOME FUND, 11.3%; MFS CORE GROWTH FUND, 23.3%;
and MFS SPECIAL OPPORTUNITIES FUND, 13.6%. The returns for these four Funds
compare to a 7.45% return over the same period for the Standard & Poor's 500
Composite Index (the S&P 500), a popular, unmanaged index of common stock
performance. MFS AGGRESSIVE GROWTH FUND'S 22.6% total return compares to a
return of 6.57% for the Russell 2000 Total Return Index (the Russell Index), an
unmanaged index comprised of 2,000 of the smallest U.S.-domiciled company stocks
which are traded on the New York Stock Exchange, the American Stock Exchange,
and the National Association of Security Dealers Automated Quotron System,
NASDAQ. A discussion of each Fund's investments can be found in the Fund
Managers' Overviews section of this report.
Economic Environment
The U.S. economy in 1996 appears to have settled into a pattern of moderate
growth and inflation -- two factors that we think may be important contributors
to a favorable long-term investment climate. During the first quarter of 1996,
real (inflation-adjusted) economic growth was 2.3% on an annualized basis,
followed by a rate of 4.7% in the second quarter. Real growth in gross domestic
product has started the year at a rate exceeding our expectations. While we
continue to believe that growth from quarter to quarter will be uneven, it is
now our expectation that growth for all of 1996 could exceed 2.5%. Although
individual consumers appear to be carrying an excessive debt load, the consumer
sector itself, which represents two-thirds of the economy, continues to be
impressive as the automobile and housing markets remain resilient. Consumer
spending has also been positively impacted by widespread job growth. However,
the economies of Europe and Japan continue to be in the doldrums, weakening the
U.S. export markets while subduing the capital spending plans of American
corporations.
Stock Market
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity market this
year. Although we believe the equity market represents fair value at current
levels, the expected slowdown in the growth of corporate earnings and the
increases in interest rates experienced so far this year have raised some
near-term concerns, as was seen in July's stock market correction. Further
increases in interest rates, and an acceleration of inflation coupled with an
additional slowdown in corporate earnings growth, could have a negative effect
on the stock market. However, to the extent that some earnings disappointments
are taken as a sign that the economy is not overheating, this may prove
beneficial for the longer-term health of the equity market. We continue to
believe that many of the technology-driven productivity gains that U.S.
companies have made in recent years will continue to enhance corporate America's
competitiveness and profitability. Therefore, while we have some near-term
concerns, we remain quite constructive on the long-term viability of the equity
market.
Bond Market
In the bond market, persistent signs of economic weakness led to decreases
in short-term interest rates by the Federal Reserve Board in late 1995 and early
1996. However, should signs of economic growth and, particularly, of higher
inflation continue, we would expect the Fed to maintain its anti-inflationary
stance. In the beginning of the year, the bond market traded in a narrow range
as investors shifted between concern for the lack of a budget resolution in
Washington and hope that sluggish economic reportsand low inflation might lead
to lower interest rates. Later, fixed-income markets began reacting to
conflicting signals regarding the strength of the economy with more volatile
trading patterns marked by an upward bias in interest rates. Interest rates may
move even higher over the coming months, but we believe the current rise in bond
yields is reaching a point where fixed-income markets are fairly valued.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
-----------------------------------
A. Keith Brodkin
Chairman and President
September 19, 1996
<PAGE>
FUND MANAGERS' OVERVIEWS
MFS EQUITY INCOME FUND
The Fund's performance was favorably impacted by significant weightings in four
sectors: financial services, industrial goods and services, energy, and basic
materials. Financial services' performance was led by bank stocks such as
Southern National, Chase, and Bank of Boston, whose strong regional franchises
and merger-related cost cutting supported our outlook for strong earnings
growth. The industrial goods and services sector benefited from strong
performance from such stocks as United Technologies and Honeywell, both took
advantage of the growing global demand for new airplanes. Energy sector
performance was underpinned by significant holdings in British Petroleum and gas
pipeline stocks such as Sonat, PanEnergy, and El Paso. The pipelines have been
helped by higher natural gas commodity pricing as well as by consolidation
within the industry. The basic materials sector contributed to performance with
the help of significant holdings in specialty chemical and material stocks such
as BetzDearborn and Hexcel. These companies typically do well late in the
economic cycle and, in the case of Hexcel, have benefited from the strength of
the emerging commercial airplane trend.
The Fund continues to seek holdings in companies that provide attractive
dividend yields and reasonable valuations, characteristics that we believe could
provide downside support in a volatile market. Additionally, the Fund continues
to favor holdings in companies that we feel have significant opportunities to
improve returns through cyclical improvement as well as through actions specific
to each company. Overall, holdings remain focused on the energy, financial
services, utilities and communications, and industrial goods and services
sectors. The Fund has reduced its exposure somewhat to financial services given
the strong performance of many of these stocks, and has decreased the previous
overweighting in the sector. The Fund increased its exposure to the energy
sector and to the consumer staples sector, given the defensive nature of these
businesses. Within the utilities and communications sector, the Fund's holdings
are focused on low-cost, high-quality electric utilities and local distribution
companies in the natural gas and propane businesses.
/s/ Lisa B. Nurme
------------------------------
Lisa B. Nurme
Fund Manager
MFS RESEARCH GROWTH AND INCOME FUND
The Fund's top holdings are in basic materials, consumer staples, technology,
and health care. Within basic materials, the Fund is invested in the industrial
gas company Praxair. We believe Praxair could outperform other specialty
chemical companies within the gas industry due to higher top line growth, solid
supply/demand fundamentals, and attractive economics. Du Pont & Co., another of
the Fund's top holdings, is another basic materials company that has benefited
from similar trends. We continue to believe both companies could have favorable
performance over the long term.
The Fund retains Microsoft Corp. as one of its top securities. We believe
Microsoft could maintain its market dominance in the software industry through
enhancement of existing offerings and the development of new products. Within
the consumer staples sector, the Fund holds tobacco industry giant Philip
Morris, which has continued to demonstrate steady growth at reasonable
valuations despite the recent negative press on the tobacco industry.
/s/ Kevin R. Parke
--------------------------------
Kevin R. Parke
Director of Research
Certain MFS Research Analysts, acting as a committee, are responsible for the
day-to-day management of the Fund under the general supervision of Mr. Parke.
MFS CORE GROWTH FUND
The Fund's portfolio is built from the bottom up, based on individual stock
selection. Many of the holdings generally fit within four major categories.
First, the Fund seeks companies with high unit growth, whose organic volume
growth helps support above-average revenue growth. The second theme includes
companies which we believe could exhibit accelerated earnings growth driven by
new product cycles and/or acquisitions that contribute to growth. Third, the
Fund seeks companies that appear able to control their destiny via internal
change, such as through cost cutting or consolidation. This encompasses
companies with the potential to make higher-than-average levels of incremental
internal investment. Finally, the Fund seeks companies which, in our opinion,
have the potential to benefit from a fundamental mismatch in the balance between
supply and demand.
/s/ John D. Laupheimer /s/ Stephen Pesek
----------------------------- --------------------------
John D. Laupheimer, Jr. Stephen Pesek
Fund Manager Fund Manager
MFS AGGRESSIVE GROWTH FUND
The Fund's performance versus the Russell Index was a result of favorable stock
selections in two major sectors: telecommunications and media. Both of these
sectors benefited from recent government deregulation of the entire radio,
television and cable, long-distance, and local telephone markets. We anticipate
the result could be a consolidation in the media and telephone markets and major
capital spending increases for the Regional Bell Operating Companies (RBOCs).
Two of the Fund's radio holdings, American Radio and Clear Channel, made major
purchases of media assets, and the anticipated pricing power created by these
combinations has increased the prices of their stocks.
The deregulation of the local and long-distance telephone markets also
benefited many of the Fund's holdings. Companies such as MCI are believed to be
important resellers of long-distance services to the major RBOCs, and their
stock prices have risen on this basis. Also, their need to protect their local
markets from competition from cable companies has led to a massive increase in
capital spending by the RBOCs. Our holdings in Tellabs and U.S. Robotics have
been major beneficiaries of this trend.
Looking ahead, we anticipate an intensified pace to these developments, and
we plan to maintain and add to our holdings in companies we believe will benefit
from these events.
/s/ Christian A. Felipe
--------------------------------
Christian A. Felipe
Fund Manager
MFS SPECIAL OPPORTUNITIES FUND
The favorable performance of the Fund versus the S&P 500 was a result of
significant exposure to several top-performing industries including: industrial
goods, which advanced 12%; gaming and lodging, up 31.1%; radio and television
broadcasting; and retailing, up 21.3%. Our stock selection also aided
performance, with EZ Communications, a radio broadcaster; Promus Hotel Corp., a
hotel franchiser; BE Aerospace, a commercial aerospace company; and New World
Communications, a television broadcaster, having particularly significant
impact.
We continue to use a value-oriented approach to investing. A portion of the
Fund's assets is invested in turnaround situations and bankruptcy workouts,
while the balance is invested in companies with solid growth prospects at what
we believe are reasonable valuations.
/s/ John F. Brennan /s/ Robert J. Manning
---------------------------- -----------------------------
John F. Brennan Robert J. Manning
Fund Manager Fund Manager
<PAGE>
FUND MANAGERS PROFILE
JOHN BRENNAN has been a member of the MFS investment staff since 1985. A
graduate of the University of Rhode Island and Stanford University's 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.
He was named Vice President -- Investments in 1988 and Senior Vice President --
Investments in 1995.
CHRISTIAN FELIPE joined MFS in 1986. A graduate of U.C.L.A. and the University
of Pennsylvania's Wharton School of Finance and Commerce, he was named
Investment Officer in 1987, Assistant Vice President -- Investments in 1988,
Vice President Investments in 1989 and Senior Vice President in 1996.
JOHN LAUPHEIMER joined MFS in 1981 as an industry specialist. A graduate of
Boston University and the Sloan School of Management of the Massachusetts
Institute of Technology, he was named Investment Officer in 1983, Assistant Vice
President -- Investments in 1984, Vice President -- Investments in 1986, and
Senior Vice President in 1995.
ROBERT MANNING began his career at MFS in 1984 as a research analyst in the High
Yield Bond Department. A graduate of the University of Lowell and Boston
College's Graduate School of Management, he was named Vice President --
Investments in 1988 and Senior Vice President in 1993.
LISA NURME joined MFS in 1987 as a research analyst. She was named Investment
Officer in 1990, Assistant Vice President -- Investments in 1991, and Vice
President -- Investments in 1992. Ms. Nurme is a graduate of the University of
North Carolina.
STEPHEN PESEK joined MFS as a research analyst and was named Vice President --
Investments in 1994. He is a graduate of the University of Pennsylvania and
Columbia University.
KEVIN PARKE joined the MFS Research Department in 1985 as an industry
specialist. A graduate of Lehigh University and the Harvard University Graduate
School of Business Administration, he was named Assistant Vice President --
Investments in 1987, Vice President -- Investments in 1988, Senior Vice
President -- Investments in 1993 and Director of Research in 1995. Mr. Parke
became a Fund Manager of Massachusetts Investors Trust in 1992.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Currently each Fund only offers Class A shares for sale, which are available for
purchase at net asset value only by certain retirement plans established for the
benefit of employees of MFS and its affiliates and certain of their family
members who are also residents of the Commonwealth of Massachusetts.
MFS EQUITY INCOME FUND
The objective of the Fund is to achieve a yield that exceeds the yield of the
S&P 500. In selecting investments, the Fund also considers the potential for
capital appreciation. Under normal market conditions, the Fund invests at least
65% of its total assets in income-producing equity securities. The Fund may also
invest up to 35% of its total assets in fixed-income securities, including up to
20% of its net assets in fixed-income securities rated BB or lower by Standard &
Poor's Rating Group or Fitch Investors Service, Inc., or Ba or lower by Moody's
Investors Service, Inc.
MFS RESEARCH GROWTH AND INCOME FUND
The objective of the Fund is long-term growth of capital, current income, and
growth of income. Under normal market conditions, the Fund invests at least 65%
of its total assets in equity securities of companies which offer earnings
growth potential while paying current dividends. The Fund may also invest up to
35% of its total assets in fixed-income securities, which do not pay current
dividends but which offer prospects for growth of capital and future income. In
addition, the Fund may invest up to 35% of its net assets in foreign equity
securities which are not traded on a U.S. exchange.
MFS CORE GROWTH FUND
The objective of the Fund is long-term growth of capital. Under normal market
conditions, the Fund invests at least 65% of its total assets in equity
securities of well-known and established companies who have above-average growth
potential. The Fund may also invest up to 35% of its total assets in equity
securities of companies in the developing stages of their life cycles that offer
the potential for accelerated earnings or revenue growth (emerging growth
companies).
MFS AGGRESSIVE GROWTH FUND
The objective of the Fund is capital appreciation. Under normal market
conditions, the Fund invests substantially all of its assets in equity
securities of companies which have above-average growth potential. The Fund may
invest in companies of any size, including smaller, lesser-known companies in
the developing stages of their life cycles that offer the potential for
accelerated earnings or revenue growth (emerging growth companies). In addition,
the Fund may invest up to 35% of its net assets in foreign equity securities
which are not traded on a U.S. exchange.
MFS SPECIAL OPPORTUNITIES FUND
The objective of the Fund is capital appreciation. Under normal market
conditions, the Fund invests substantially all of its assets in equity and
fixed-income securities which represent uncommon value by having the potential
for significant capital appreciation over a period of 12 months or longer. The
Fund may invest a substantial amount of its assets in U.S. government securities
when, in the judgment of the Investment Adviser, securities with the potential
for significant capital appreciation are not available for purchase by the Fund.
TAX FORM SUMMARY
FEDERAL INCOME TAX INFORMATION
Fund Dividend Received Deduction
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Equity Income Fund 57.79%
Research Growth and Income Fund 11.71%
Core Growth Fund 1.45%
Aggressive Growth Fund 0.78%
Special Opportunities Fund 3.90%
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1996
MFS EQUITY INCOME FUND
Common Stocks - 88.1%
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Issuer Shares Value
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U.S. Stocks - 82.6%
Aerospace - 3.1%
United Technologies Corp. 130 $ 14,658
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Automotive - 2.4%
Ford Motor Co. 120 $ 4,020
Goodrich (B.F.) Co. 200 7,500
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$ 11,520
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Banks and Credit Companies - 8.5%
Bank of Boston Corp. 200 $ 10,550
Chase Manhattan Corp. 60 4,462
Medallion Financial Corp.* 400 5,150
National City Corp. 200 7,525
Southern National Corp. 200 6,250
Union Planters Corp. 200 6,575
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$ 40,512
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Chemicals - 9.3%
Air Products & Chemicals, Inc. 100 $ 5,475
Betz Laboratories, Inc. 300 14,737
Dexter Corp. 500 14,563
Olin Corp. 60 4,755
Witco Corp. 160 4,840
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$ 44,370
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Consumer Goods and Services - 2.3%
Colgate-Palmolive Co. 60 $ 4,875
Philip Morris (Cos.), Inc. 70 6,283
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$ 11,158
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Electrical Equipment - 2.1%
Honeywell, Inc. 100 $ 5,813
Hubbell, Inc. 120 4,335
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$ 10,148
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Electronics - 1.7%
General Electric Co. 100 $ 8,313
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Financial Institutions - 1.0%
Bank United Corp., "A"* 200 $ 4,825
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Food and Beverage Products - 3.2%
General Mills, Inc. 100 $ 5,500
Hormel Foods Corp. 250 5,312
PepsiCo, Inc. 160 4,600
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$ 15,412
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Forest and Paper Products - 1.2%
Schweitzer-Mauduit International, Inc. 180 $ 5,760
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Insurance - 1.0%
CIGNA Corp. 40 $ 4,645
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Machinery - 1.8%
Cooper Industries, Inc. 100 $ 4,050
Manitowoc, Inc. 150 4,706
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$ 8,756
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Medical and Health Products - 3.1%
Abbott Laboratories, Inc. 100 $ 4,513
American Home Products Corp. 90 5,332
Rhone-Poulenc Rorer, Inc. 70 4,926
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$ 14,771
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Metals and Minerals - 0.7%
Century Aluminum Co. 200 $ 3,200
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Oil Services - 1.7%
McDermott International, Inc. 400 $ 8,300
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Oils - 8.6%
Atlantic Richfield Co. 40 $ 4,670
Exxon Corp. 60 4,883
Mobil Corp. 50 5,638
Occidental Petroleum Corp. 300 6,975
Panhandle Eastern Corp. 250 8,281
USX-Marathon Group 500 10,437
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$ 40,884
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Pharmaceuticals - 1.1%
Pharmacia & Upjohn, Inc. 125 $ 5,250
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Photographic Products - 2.0%
Eastman Kodak Co. 130 $ 9,425
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Printing and Publishing - 1.4%
Gannett Co., Inc. 100 $ 6,700
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Real Estate Investment Trusts - 4.1%
American General Hospitality Corp.* 250 $ 4,406
Hospitality Property Trust 170 4,547
Storage Trust Reality 200 4,375
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$ 13,328
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Restaurants and Lodging - 1.2%
Mandarin Oriental 4,000 $ 5,560
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Special Products and Services - 5.0%
Dimon, Inc. 300 $ 5,513
Sherwin Williams Co. 150 6,562
UST, Inc. 180 5,400
Westpoint Stevens, Inc. 250 6,531
--------
$ 24,006
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Stores - 1.1%
Sears, Roebuck & Co. 120 $ 5,280
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Transportation - 1.0%
Sea Containers Ltd., "A" 250 $ 4,688
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Utilities - Electric - 5.2%
Allegheny Power Systems, Inc. 150 $ 4,444
Cinergy Corp. 150 4,500
FPL Group, Inc. 100 4,425
Pinnacle West Capital Corp. 200 5,750
Portland General Corp. 150 5,437
--------
$ 24,556
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Utilities - Gas - 3.8%
El Paso Natural Gas Co. 150 $ 6,244
Sonat, Inc. 250 11,031
UGI Corp. 300 7,013
--------
$ 24,288
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Utilities - Telephone - 5.0%
Ameritech Corp. 50 $ 2,581
BellSouth Corp. 120 4,350
Carolina Power & Light Co. 100 3,488
GTE Corp. 150 5,906
MCI Communications Corp. 300 7,537
--------
$ 23,862
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Total U.S. Stocks $394,175
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Foreign Stocks - 5.5%
Canada - 1.0%
Canadian National Railway Co. 250 $ 4,781
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New Zealand - 1.1%
Lion Nathan Ltd. (Food and Beverage Products) 2,000 $ 5,284
- ------------------------------------------------------------------------------
United Kingdom - 2.9%
British Petroleum PLC, ADR (Oils) 70 $ 8,242
SmithKline Beecham PLC, ADR (Pharmaceuticals) 100 5,825
--------
$ 14,067
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Peru - 0.5%
Telefonica Delaware Peru S.A., ADR (Utilities - Telephone) 100 $ 2,338
- ------------------------------------------------------------------------------
Total Foreign Stocks $ 26,470
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Total Common Stocks (Identified Cost, $398,978) $420,645
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Convertible Preferred Stocks - 2.9%
- ------------------------------------------------------------------------------
Matewan Bancshares, Inc., 7.5s (Banks and
Credit Companies) 150 $ 3,862
Unocal Corp., 7s (Oil Services) 100 5,750
Williams Cos., Inc., 3.5s (Pipelines) 50 4,000
- ------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified
Cost, $12,881) $ 13,612
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Preferred Stocks - 4.4%
- ------------------------------------------------------------------------------
Case Corp. (Machinery) 50 $ 5,762
Merrill Lynch & Co Inc. (Financial Institutions) 100 4,300
MCN Corp. (Utilities - Gas) 200 5,550
Penncorp Financial Group Inc.## (Insurance) 100 5,438
- ------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $19,921) $ 21,050
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Convertible Bonds - 4.1%
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Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------
Fieldcrest Cannon Industries, 6s, 3/15/2012
(Textiles) $10,000 $ 7,350
Midcom Communications Inc, 8.25s, 8/15/2003
(Telecommunications)
(Identified Cost, $5,000) 5,000 5,625
Hexcel Corp New, 7s, 8/1/2003 (Diversified
Manufacturer)
(Identified Cost, $5,000) 5,000 6,519
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Total Convertible Bonds (Identified Cost, $17,052) $ 19,494
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $448,832) $474,801
Other Assets, Less Liabilities - 0.5% 2,579
- ------------------------------------------------------------------------------
Net Assets - 100.0% $477,380
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See portfolio footnotes and notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1996
MFS RESEARCH GROWTH AND INCOME FUND
Common Stocks - 95.4%
- ------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------
U.S. Stocks - 83.3%
Aerospace - 4.1%
General Dynamics Corp. 100 $ 6,412
Lockheed-Martin Corp. 50 4,206
McDonnell Douglas Corp. 80 4,010
United Technologies Corp. 50 5,638
--------
$ 20,266
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Agricultural Products - 1.0%
Case Corp. 110 $ 5,005
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Apparel and Textiles - 0.8%
Nike, Inc., "B" 35 $ 3,780
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Automotive - 1.5%
Goodrich (B.F.) Co. 190 $ 7,125
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Banks and Credit Companies - 3.2%
Bank of Boston Corp. 110 $ 5,802
Chase Manhattan Corp. 52 3,868
Fleet/Norstar Financial Group, Inc. 150 6,262
--------
$ 15,932
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Business Machines - 0.9%
Gateway 2000, Inc.* 100 $ 4,456
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Business Services - 1.5%
Alco Standard Corp. 100 $ 4,363
DST Systems, Inc.* 100 3,075
--------
$ 7,438
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Chemicals - 5.7%
Air Products & Chemicals, Inc. 100 $ 5,475
du Pont (E. I.) de Nemours & Co. 120 9,855
Grace (W. R.) & Co. 70 4,594
Praxair, Inc. 200 8,225
--------
$ 28,149
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Computer Software - Personal Computers - 2.3%
First Data Corp. 50 $ 3,900
Microsoft Corp.* 60 7,350
--------
$ 11,250
- ------------------------------------------------------------------------------
Computer Software - Systems - 2.1%
Digital Equipment Corp.* 100 $ 3,863
Oracle Systems Corp.* 180 6,345
--------
$ 10,208
- ------------------------------------------------------------------------------
Consumer Goods and Services - 10.3%
Colgate-Palmolive Co. 80 $ 6,500
Estee Lauder Cos., "A"* 100 4,300
Gillette Co. 90 5,737
Philip Morris Cos., Inc. 120 10,770
Procter & Gamble Co. 50 4,444
Revlon, Inc., "A"* 100 2,988
Sherwin-Williams Co. 100 4,375
Tyco International Ltd. 100 4,225
UST, Inc. 240 7,200
--------
$ 50,539
- ------------------------------------------------------------------------------
Electrical Equipment - 0.7%
Honeywell, Inc. 60 $ 3,488
- ------------------------------------------------------------------------------
Electronics - 1.3%
Analog Devices, Inc.* 150 $ 3,619
Atmel Corp.* 100 2,587
--------
$ 6,206
- ------------------------------------------------------------------------------
Entertainment - 0.4%
Showboat, Inc. 100 $ 1,988
- ------------------------------------------------------------------------------
Financial Institutions - 2.4%
Advanta Corp., "B" 100 $ 4,450
Bank United Corp., "A"* 100 2,413
Corestates Financial Corp. 120 4,965
--------
$ 11,828
- ------------------------------------------------------------------------------
Financial Services - 1.0%
Medallion Financial Corp.* 400 $ 5,150
- ------------------------------------------------------------------------------
Food and Beverage Products - 1.4%
Chiquita Brands International, Inc. 200 $ 2,525
McCormick & Co., Inc. 100 2,050
Tyson Foods Inc. 100 2,425
--------
$ 7,000
- ------------------------------------------------------------------------------
Forest and Paper Products - 1.1%
Kimberly-Clark Corp. 70 $ 5,486
- ------------------------------------------------------------------------------
Insurance - 3.9%
Chartwell Realty Corp. 100 $ 2,525
CIGNA Corp. 50 5,806
IPC Holdings Ltd. 100 2,063
LaSalle Reassurance Holdings Ltd. 20 465
Penncorp Financial Group, Inc. 140 4,270
Transamerica Corp. 60 4,087
--------
$ 19,216
- ------------------------------------------------------------------------------
Machinery - 1.1%
Deere & Co., Inc. 130 $ 5,168
- ------------------------------------------------------------------------------
Medical and Health Products - 5.3%
Baxter International, Inc. 195 $ 8,702
Guidant Corp. 100 5,075
Lilly (Eli) & Co. 60 3,435
Rhone-Poulenc Rorer, Inc. 100 7,037
Ventritex, Inc.* 150 2,044
--------
$ 26,293
- ------------------------------------------------------------------------------
Medical and Health Technology and Services - 4.2%
Coventry Corp.* 200 $ 2,637
Pacificare Health Systems, Inc., "A"* 30 2,288
Riscorp, Inc., "A"* 100 1,375
Safeguard Health Enterprises, Inc.* 100 1,850
St. Jude Medical, Inc.* 200 7,175
United Healthcare Corp. 140 5,407
--------
$ 20,732
- ------------------------------------------------------------------------------
Metals and Minerals - 0.6%
Aluminum Company of America 50 $ 3,106
- ------------------------------------------------------------------------------
Oils - 3.7%
Belco Oil & Gas Corp.* 80 $ 2,200
Exxon Corp. 60 4,882
Mobil Corp. 60 6,765
Newfield Exploration Co.* 100 4,462
--------
$ 18,309
- ------------------------------------------------------------------------------
Pharmaceuticals - 0.9%
Pharmacia & Upjohn, Inc. 100 $ 4,200
- ------------------------------------------------------------------------------
Printing and Publishing - 2.0%
Gannett Co., Inc. 80 $ 5,360
Scripps (E.W.) Co., "A" 100 4,450
--------
$ 9,810
- ------------------------------------------------------------------------------
Railroads - 2.2%
Burlington Northern Santa Fe 60 $ 4,800
CSX Corp. 120 6,075
--------
$ 10,875
- ------------------------------------------------------------------------------
Real Estate Investment Trusts - 4.2%
American General Hospitality Corp.* 250 $ 4,406
Equity Inns, Inc. 300 3,750
Public Storage, Inc. 200 4,300
Storage Trust Reality 200 4,375
Winston Hotels 300 3,712
--------
$ 20,543
- ------------------------------------------------------------------------------
Restaurants and Lodging - 2.1%
HFS, Inc.* 100 $ 5,988
Host Marriott Corp. 300 4,125
--------
$ 10,113
- ------------------------------------------------------------------------------
Stores - 2.8%
CompUSA, Inc.* 100 $ 4,012
Lowes Co., Inc. 150 5,419
Sears, Roebuck & Co. 100 4,400
--------
$ 13,831
- ------------------------------------------------------------------------------
Supermarkets - 0.7%
Safeway, Inc.* 100 $ 3,625
- ------------------------------------------------------------------------------
Telecommunications - 1.5%
Glenayre Technologies, Inc.* 100 $ 3,675
Lucent Technologies, Inc. 100 3,688
--------
$ 7,363
- ------------------------------------------------------------------------------
Utilities - Electric - 1.7%
CMS Energy Corp. 100 $ 2,987
Illinova Corp. 100 2,613
Pinnacle West Capital Corp. 100 2,875
--------
$ 8,475
- ------------------------------------------------------------------------------
Utilities - Gas - 1.9%
Coastal Corp. 150 $ 5,944
Panenergy Corp. 100 3,313
--------
$ 9,257
- ------------------------------------------------------------------------------
Utilities - Telephone - 2.8%
BellSouth Corp. 100 $ 3,625
GTE Corp. 100 3,937
MCI Communications Corp. 250 6,281
--------
$ 13,843
- ------------------------------------------------------------------------------
Total U.S. Stocks $410,053
- ------------------------------------------------------------------------------
Foreign Stocks - 12.1%
Denmark - 0.5%
ISS International Service System, "B"
(Special Products and Services) 100 $ 2,605
- ------------------------------------------------------------------------------
Finland - 0.8%
Huhtamaki Oy (Conglomerates) 100 $ 3,846
- ------------------------------------------------------------------------------
France - 0.3%
Union des Assurances Federales S.A.
(Broadcasting) 15 $ 1,720
- ------------------------------------------------------------------------------
Hong Kong - 3.3%
Cafe De Coral Holding (Electrical Equipment) 18,000 $ 5,005
Giordano International Ltd. (Financial Institutions) 2,000 1,655
Liu Chong Hing Bank (Financial Institutions) 4,000 5,639
Wharf Holdings (Real Estate) 1,000 3,777
--------
$ 16,076
- ------------------------------------------------------------------------------
Italy - 0.3%
Telecom Italia S.p.A. - RNC (Utilities - Telephone) 1,300 $ 1,584
- ------------------------------------------------------------------------------
Philippines - 0.2%
Pilipino Telephone (Telecommunications) 900 $ 1,187
- ------------------------------------------------------------------------------
Singapore - 0.7%
Hong Leong Finance (Financial Services)+ 1,000 $ 3,370
- ------------------------------------------------------------------------------
Sweden - 2.2%
Astra AB, Free Shares, "B" (Pharmaceuticals) 100 $ 4,138
Ericsson AB (Telecommunications) 100 2,333
Sparbanken Sverige AB (Banking) 350 4,360
--------
$ 10,831
- ------------------------------------------------------------------------------
Switzerland - 1.3%
Ciba Geigy AG (Medical and Health Products) 5 $ 6,307
- ------------------------------------------------------------------------------
United Kingdom - 2.5%
Jarvis Hotels PLC (Lodging)*+ 1,300 $ 3,288
Kwik-Fit Holdings PLC (Auto Repair Centers) 700 2,765
Lloyds TSB Group PLC (Finance) 400 2,338
PowerGen - 195 (Utilities - Electric) 500 3,950
--------
$ 12,341
- ------------------------------------------------------------------------------
Total Foreign Stocks $ 59,867
- ------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $463,265) $469,920
- ------------------------------------------------------------------------------
Short Term Obligation - 4.1%
- ------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/03/96
at Amortized Cost $ 20 $ 19,994
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $483,259) $489,914
Other Assets, Less Liabilities - 0.5% 2,399
- ------------------------------------------------------------------------------
Net Assets - 100.0% $492,313
- ------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1996
MFS CORE GROWTH FUND
Common Stocks - 85.4%
- ------------------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------------
U.S. Stocks - 81.9%
Aerospace - 1.2%
United Technologies Corp. 75 $ 8,456
- ------------------------------------------------------------------------------
Automotive - 2.1%
Goodrich (B.F.) Co. 200 $ 7,500
Harley-Davidson, Inc. 175 7,175
--------
$ 14,675
- ------------------------------------------------------------------------------
Business Machines - 2.5%
Gateway 2000, Inc.* 200 $ 8,913
Sun Microsystems, Inc.* 150 8,156
--------
$ 17,069
- ------------------------------------------------------------------------------
Business Services - 10.9%
Alco Standard Corp. 225 $ 9,816
Barret Business Services, Inc.* 400 7,900
Ceridian Corp.* 150 6,394
Computer Sciences Corp.* 150 10,500
CUC International, Inc.* 200 6,875
DST Systems, Inc.* 250 7,688
Loewen Group, Inc. 325 9,587
Registry, Inc.* 100 3,325
RemedyTemp, Inc.* 100 1,875
Technology Solutions Co.* 375 11,062
--------
$ 75,022
- ------------------------------------------------------------------------------
Chemicals - 1.2%
Praxair, Inc. 200 $ 8,225
- ------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.6%
Electronic Arts, Inc.* 250 $ 7,719
First Data Corp. 130 10,140
--------
$ 17,859
- ------------------------------------------------------------------------------
Computer Software - Systems - 6.8%
Adobe Systems, Inc. 200 $ 6,975
BMC Software, Inc.* 150 11,175
Computer Associates International, Inc. 200 10,500
Informix Corp.* 250 5,625
Oracle Systems Corp.* 200 7,050
System Software Associates, Inc. 500 5,250
--------
$ 46,575
- ------------------------------------------------------------------------------
Consumer Goods and Services - 4.6%
Colgate-Palmolive Co. 75 $ 6,094
Philip Morris Cos., Inc. 75 6,731
Schweitzer-Mauduit International, Inc. 300 9,600
Tyco International Ltd. 225 9,506
--------
$ 31,931
- ------------------------------------------------------------------------------
Electronics - 7.9%
Altera Corp.* 200 $ 8,800
Analog Devices, Inc. 400 9,650
Atmel Corp.* 125 3,234
DuPont Photomasks, Inc.* 100 2,300
Intel Corp. 125 9,977
LSI Logic Corp.* 175 3,828
Microchip Technology, Inc.* 200 7,350
Xilinx, Inc.* 250 8,750
--------
$ 53,889
- ------------------------------------------------------------------------------
Entertainment - 1.4%
American Radio Systems Corp., "A"* 25 $ 888
Golden Bear Golf, Inc.* 100 2,025
Jacor Communications, Inc.* 200 6,700
--------
$ 9,613
- ------------------------------------------------------------------------------
Financial Institutions - 2.6%
Beneficial Corp. 100 $ 5,637
Finova Group, Inc. 100 5,500
Green Tree Financial Corp. 200 6,950
--------
$ 18,087
- ------------------------------------------------------------------------------
Food and Beverage Products - 1.8%
Interstate Bakeries Corp. 200 $ 6,050
McCormick & Co., Inc. 300 6,150
--------
$ 12,200
- ------------------------------------------------------------------------------
Forest and Paper Products - 1.1%
Kimberly-Clark Corp. 100 $ 7,838
- ------------------------------------------------------------------------------
Insurance - 1.1%
Equitable of Iowa Cos. 200 $ 7,350
- ------------------------------------------------------------------------------
Machinery - 1.1%
Idex Corp. 200 $ 7,425
- ------------------------------------------------------------------------------
Medical and Health Products - 3.6%
Lilly (Eli) & Co. 100 $ 5,725
Rhone-Poulenc Rorer, Inc. 150 10,556
Ventritex, Inc.* 600 8,175
--------
$ 24,456
- ------------------------------------------------------------------------------
Medical and Health Technology and Services - 7.1%
Coventry Corp.* 600 $ 7,913
Healthsouth Corp.* 300 9,712
Pacificare Health Systems, Inc., "B"* 130 10,465
Safeguard Health Enterprises, Inc.* 300 5,550
St. Jude Medical, Inc.* 150 5,381
United Healthcare Corp. 250 9,656
--------
$ 48,677
- ------------------------------------------------------------------------------
Metals and Minerals - 0.6%
Oregon Metallurgical Corp.* 50 $ 1,488
Titanium Metals Corp.* 100 2,387
--------
$ 3,875
- ------------------------------------------------------------------------------
Oils - 1.0%
Panhandle Eastern Corp. 200 $ 6,625
- ------------------------------------------------------------------------------
Printing and Publishing - 2.4%
Harte-Hanks Communications, Inc. 200 $ 5,100
Scripps (E.W.) Co., "A" 150 6,675
Tribune Co. 70 5,031
--------
$ 16,806
- ------------------------------------------------------------------------------
Railroads - 2.2%
Burlington Northern Santa Fe Railway Co. 75 $ 6,000
Wisconsin Central Transportation Corp.* 250 8,812
--------
$ 14,812
- ------------------------------------------------------------------------------
Restaurants and Lodging - 1.3%
HFS, Inc.* 150 $ 8,981
- ------------------------------------------------------------------------------
Special Products and Services - 0.9%
YES! Entertainment Corp.* 500 $ 6,188
- ------------------------------------------------------------------------------
Stores - 5.9%
AutoZone, Inc.* 200 $ 5,450
Dollar Tree Stores, Inc.* 200 6,400
Gymboree Corp.* 400 11,550
Payless ShoeSource, Inc.* 100 3,512
Sears, Roebuck & Co. 100 4,400
Staples, Inc.* 300 5,925
Talbots, Inc. 100 3,425
--------
$ 40,662
- ------------------------------------------------------------------------------
Supermarkets - 1.6%
Safeway, Inc.* 300 $ 10,875
- ------------------------------------------------------------------------------
Telecommunications - 5.3%
3Com Corp.* 100 $ 4,675
Cable Design Technologies Corp.* 200 7,100
Cabletron Systems, Inc.* 100 6,100
Cisco Systems, Inc.* 200 10,550
U.S. Robotics Corp.* 150 7,875
--------
$ 36,300
- ------------------------------------------------------------------------------
Utilities - Telephone - 1.1%
MCI Communications Corp. 300 $ 7,538
- ------------------------------------------------------------------------------
Total U.S. Stocks $562,009
- ------------------------------------------------------------------------------
Foreign Stocks - 3.5%
Germany - 0.6%
Adidas AG (Consumer Goods and Services) 50 $ 4,298
- ------------------------------------------------------------------------------
Sweden - 1.8%
Astra AB, ADR "A", (Medical and Health Products) 100 $ 4,188
Astra AB, Free Shares, "B" (Medical and Health Products) 100 4,137
Nobel Biocare AB (Medical and Health Products) 200 3,805
--------
$ 12,130
- ------------------------------------------------------------------------------
United Kingdom - 1.1%
Danka Business Systems PLC, ADR (Business Services) 250 $ 7,281
- ------------------------------------------------------------------------------
Total Foreign Stocks $ 23,709
- ------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $567,763) $585,718
- ------------------------------------------------------------------------------
Short Term Obligation - 13.8%
- ------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/03/96
at Amortized Cost $ 95 $ 94,973
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $662,736) $680,691
Other Assets, Less Liabilities - 0.8% 5,459
- ------------------------------------------------------------------------------
Net Assets - 100.0% $686,150
- ------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1996
MFS AGGRESSIVE GROWTH FUND
Common Stocks - 96.1%
- --------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------
U.S. Stocks - 94.9%
Advertising - 0.1%
Lamar Advertising Co., "A" 100 $ 2,800
Universal Outdoor Holdings, Inc.* 100 3,050
-----------
$ 5,850
- --------------------------------------------------------------------------
Apparel and Textiles - 0.3%
Nike, Inc., "B" 250 $ 27,000
- --------------------------------------------------------------------------
Business Machines - 4.5%
Affiliated Computer Services, Inc., "A"* 500 $ 27,125
Sun Microsystems, Inc.* 7,900 429,562
-----------
$ 456,687
- --------------------------------------------------------------------------
Business Services - 3.2%
Alco Standard Corp. 1,000 $ 43,625
Ceridian Corp.* 1,000 42,625
Computer Sciences Corp.* 500 35,000
CUC International, Inc.* 1,000 34,375
DST Systems, Inc.* 3,000 92,250
First USA Paymentech, Inc.* 100 3,775
Interim Services, Inc. 1,760 71,720
National Processing, Inc. 100 1,713
-----------
$ 325,083
- --------------------------------------------------------------------------
Cellular Telephones - 0.3%
AirTouch Communications, Inc.* 1,000 $ 27,500
- --------------------------------------------------------------------------
Computer Software - Personal Computers - 5.3%
First Data Corp. 1,000 $ 78,000
Microsoft Corp.* 3,750 459,375
-----------
$ 537,375
- --------------------------------------------------------------------------
Computer Software - Systems - 21.1%
Adobe Systems, Inc. 500 $ 17,438
BMC Software, Inc.* 6,900 514,050
Cadence Design Systems, Inc.* 6,000 177,750
CCC Information Services Group, Inc.* 100 1,850
Computer Associates International, Inc. 10,000 525,000
Compuware Corp.* 3,100 133,300
Informix Corp.* 3,000 67,500
Netscape Communications Corp. 1,500 53,062
Oracle Systems Corp.* 9,000 317,250
Softquad International, Inc.* 7,500 35,508
Spyglass, Inc. 3,000 49,875
Sterling Software, Inc. 300 20,362
Sybase, Inc.* 8,000 128,875
Synopsys, Inc.* 1,500 57,000
USCS International, Inc.* 2,000 38,750
-----------
$ 2,137,570
- --------------------------------------------------------------------------
Consumer Goods and Services - 2.5%
Consolidated Cigar Holdings, Inc.* 100 $ 3,150
Revlon, Inc., "A"* 5,000 149,375
Service Corp. International 1,000 56,375
Tyco International Ltd. 1,000 42,250
-----------
$ 251,150
- --------------------------------------------------------------------------
Electronics - 3.5%
Atmel Corp.* 2,000 $ 51,750
Intel Corp. 2,000 159,625
LSI Logic Corp.* 4,500 98,437
Xilinx, Inc.* 1,400 49,000
-----------
$ 358,812
- --------------------------------------------------------------------------
Entertainment - 7.3%
American Radio Systems Corp., "A"* 500 $ 17,750
Chancellor Broadcast Corp., "A"* 100 3,750
Clear Channel Communications, Inc.* 1,300 107,087
Disney (Walt) Co. 500 28,500
Harrah's Entertainment, Inc.* 10,000 190,000
Infinity Broadcasting Corp., "A"* 3,250 88,969
Jacor Communications, Inc.* 1,000 33,500
LIN Television Corp.* 5,000 178,750
Mirage Resorts, Inc.* 2,000 46,500
Renaissance Communications Corp. 1,000 35,250
Viacom, Inc., "B"* 345 10,868
-----------
$ 740,924
- --------------------------------------------------------------------------
Financial Institutions - 4.3%
Associates First Capital Corp., "A" 400 $ 15,800
Federal Home Loan Mortgage Corp. 250 22,094
Franklin Resources, Inc. 6,000 357,000
Hambrecht & Quist Group, Inc.* 100 1,675
MBNA Corp. 1,000 30,375
Merrill Lynch & Co., Inc. 100 6,125
Schwab (Charles) Corp. 250 6,250
-----------
$ 439,319
- --------------------------------------------------------------------------
Food and Beverage Products - 0.1%
PepsiCo, Inc. 500 $ 14,375
- --------------------------------------------------------------------------
Insurance - 0.5%
Equitable of Iowa Cos. 1,500 $ 55,125
- --------------------------------------------------------------------------
Medical and Health Products - 3.5%
Boston Scientific Corp. 1,000 $ 45,875
Guidant Corp. 500 25,375
Johnson & Johnson 1,000 49,250
Pfizer, Inc. 1,000 71,000
Rhone-Poulenc Rorer, Inc. 1,500 105,563
Schering Plough Corp. 1,000 55,875
-----------
$ 352,938
- --------------------------------------------------------------------------
Medical and Health Technology and Services - 7.8%
Cardinal Health, Inc. 500 $ 36,688
Genesis Health Ventures, Inc.* 2,000 51,000
Health Management Associates, Inc., "A"* 2,000 45,500
Healthsouth Corp.* 5,500 178,062
Lincare Holdings, Inc.* 1,500 55,969
Oxford Health Plans, Inc.* 500 22,875
Pacificare Health Systems, Inc., "B"* 3,000 241,500
St. Jude Medical, Inc.* 1,000 35,875
United Healthcare Corp. 2,000 77,250
Vivra, Inc.* 1,500 45,187
-----------
$ 789,906
- --------------------------------------------------------------------------
Oil Services - 0.2%
Schlumberger Ltd. 250 $ 21,094
- --------------------------------------------------------------------------
Pollution Control - 0.2%
Sanifill, Inc.* 500 $ 23,188
- --------------------------------------------------------------------------
Printing and Publishing - 4.0%
Gannett Co., Inc. 5,000 $ 335,000
Tribune Co. 1,000 71,875
-----------
$ 406,875
- --------------------------------------------------------------------------
Restaurants and Lodging - 3.7%
HFS, Inc.* 2,000 $ 119,750
Interstate Hotels Co. 200 4,725
Marriot International, Inc. 1,000 54,875
McDonalds Corp. 250 11,594
Outback Steakhouse, Inc.* 1,000 28,250
Promus Hotel Corp.* 5,100 153,637
-----------
$ 372,831
- --------------------------------------------------------------------------
Stores - 7.7%
AutoZone, Inc.* 1,000 $ 27,250
General Nutrition Cos., Inc.* 4,000 59,000
Gymboree Corp.* 2,000 57,750
Home Depot, Inc. 2,000 106,250
Micro Warehouse, Inc.* 5,500 147,812
Office Depot, Inc.* 7,500 119,062
Officemax, Inc.* 3,750 52,500
Sunglass Hut International, Inc. 500 7,875
Talbots, Inc. 250 8,563
Thrifty Payless Holdings, Inc., "B"* 6,000 96,750
Travis Boats and Motors, Inc.* 10,000 94,688
-----------
$ 777,500
- --------------------------------------------------------------------------
Telecommunications - 12.7%
Bay Networks, Inc.* 500 $ 13,750
Cabletron Systems, Inc.* 5,500 335,500
Cisco Systems, Inc.* 5,000 263,750
Glenayre Technologies, Inc.* 2,500 91,875
Lucent Technologies, Inc. 2,000 73,750
McLeod, Inc., "A"* 200 5,775
MFS Communications, Inc. 500 21,187
Rogers Cantel Mobile Co., "B"* 1,000 20,500
Shiva Corp.* 1,000 50,500
Sterling Commerce, Inc.* 100 3,100
Tellabs, Inc.* 200 12,675
U.S. Robotics Corp.* 7,500 393,750
U.S. Satellite Broadcasting Co., Inc., "A"* 100 2,900
-----------
$ 1,289,012
- --------------------------------------------------------------------------
Utilities - Telephone - 2.1%
MCI Communications Corp. 8,500 $ 213,563
- --------------------------------------------------------------------------
Total U.S. Stocks $ 9,623,677
- --------------------------------------------------------------------------
Foreign Stocks - 1.2%
France
Dassault Systems S.A., ADR (Computer
Software - Systems) 100 $ 3,875
- --------------------------------------------------------------------------
Germany - 1.5%
Sap AG, Preferred (Computer Software - Systems) 750 $ 122,898
Sap Aktiengesellschsft, ADR##
(Computer Software - Systems) 600 32,550
-----------
$ 155,448
- --------------------------------------------------------------------------
Italy - 0.5%
Fila Holdings S.p.A., ADR (Apparel
and Textiles) 500 $ 48,500
- --------------------------------------------------------------------------
Sweden - 0.4%
Astra AB, Free, "B" (Medical and Health Products) 1,000 $ 41,374
- --------------------------------------------------------------------------
Total Foreign Stocks $ 249,197
- --------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $9,587,379) $ 9,872,874
- --------------------------------------------------------------------------
Warrant - 1.9%
- --------------------------------------------------------------------------
Intel Corp. (Electronics) (Identified
Cost, $188,912) 4,500 $ 188,437
- --------------------------------------------------------------------------
Convertible Preferred Stock - 0.3%
- --------------------------------------------------------------------------
American Radio Systems Corp., 7s##
(Entertainment) (Identified Cost, $30,000) 600 $ 31,500
- --------------------------------------------------------------------------
Short Term Obligation - 1.5%
- --------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- --------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/3/96
at Amortized Cost $150 $ 149,957
- --------------------------------------------------------------------------
Total Investments (Identified Cost, $9,956,248) $10,242,768
Other Assets, Less Liabilities - (1.0)% (98,085)
- --------------------------------------------------------------------------
Net Assets - 100.0% $10,144,683
- --------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1996
MFS SPECIAL OPPORTUNITIES FUND
Common Stocks - 90.0%
- --------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------
U.S. Stocks - 86.9%
Advertising - 0.1%
Lamar Advertising Co., "A" 100 $ 2,800
- --------------------------------------------------------------------------
Aerospace - 3.8%
B.E. Aerospace, Inc.* 4,000 $ 66,000
Raytheon Co. 300 15,450
Rockwell International Corp. 100 5,200
----------
$ 86,650
- --------------------------------------------------------------------------
Agricultural Products - 0.8%
Case Corp. 400 $ 18,200
- --------------------------------------------------------------------------
Airlines - 0.5%
Midwest Express Holdings, Inc. 400 $ 12,100
- --------------------------------------------------------------------------
Automotive - 1.3%
Goodrich (B.F.) Co. 300 $ 11,250
Harvard Industries, Inc. 2,200 17,050
----------
$ 28,300
- --------------------------------------------------------------------------
Banks and Credit Companies - 0.7%
Wells Fargo & Co. 66 $ 16,418
- --------------------------------------------------------------------------
Building - 5.3%
Eljer Industries, Inc. 3,000 $ 31,125
Nortek, Inc. 3,000 41,250
Walter Industries, Inc. 3,500 46,812
----------
$ 119,187
- --------------------------------------------------------------------------
Business Services - 3.6%
ADT Ltd.* 1,675 $ 32,872
Alco Standard Corp. 1,100 47,987
----------
$ 80,859
- --------------------------------------------------------------------------
Cellular Telephones - 0.6%
Telephone & Data Systems, Inc. 300 $ 12,788
- --------------------------------------------------------------------------
Chemicals - 2.1%
Dexter Corp. 500 $ 14,562
NL Industries, Inc. 3,000 33,000
----------
$ 47,562
- --------------------------------------------------------------------------
Computer Software - Systems - 2.3%
Adobe Systems, Inc. 600 $ 20,925
Cerner Corp. 900 12,600
Sybase, Inc.* 1,100 17,720
----------
$ 51,245
- --------------------------------------------------------------------------
Conglomerates - 1.3%
Insilco Corp. 800 $ 28,800
- --------------------------------------------------------------------------
Consumer Goods and Services - 7.4%
Darling International, Inc. 1,300 $ 34,450
Philip Morris Cos., Inc. 190 17,053
Thermadyne Industries Holdings Corp. 2,000 41,750
Tyco International Ltd. 700 29,575
UST, Inc. 530 15,900
Westpoint Stevens, Inc. 1,100 28,737
----------
$ 167,465
- --------------------------------------------------------------------------
Containers - 1.2%
Atlantis Plastics, Inc. 3,000 $ 16,125
Sea Containers Ltd., "A" 600 11,250
----------
$ 27,375
- --------------------------------------------------------------------------
Defense Electronics - 0.2%
Loral Space & Communications Corp.* 400 $ 5,600
- --------------------------------------------------------------------------
Electrical Equipment - 0.5%
Honeywell, Inc. 200 $ 11,625
- --------------------------------------------------------------------------
Electronics - 1.8%
Altera Corp.* 100 $ 4,400
Analog Devices, Inc. 200 4,825
Atmel Corp.* 400 10,350
Intel Corp. 270 21,549
----------
$ 41,124
- --------------------------------------------------------------------------
Entertainment - 16.8%
American Radio Systems Corp., "A"* 200 $ 7,100
Chancellor Broadcast Corp., "A"* 1,300 48,750
Evergreen Media Corp., "A" 150 4,725
EZ Communications, Inc., "A" 2,000 83,500
Golden Bear Golf, Inc.* 100 2,025
Harrah's Entertainment, Inc.* 2,000 38,000
Harveys Casino Resorts 700 12,075
Jacor Communications, Inc.* 400 13,400
LIN Television Corp.* 700 25,025
New World Communications, "A" 2,000 46,125
Osborn Communications Corp. 3,300 49,500
Showboat, Inc. 400 7,950
Viacom, Inc., "B"* 400 12,600
Young Broadcasting, Inc., "A" 800 27,700
----------
$ 378,475
- --------------------------------------------------------------------------
Financial Institutions - 2.7%
Beneficial Corp. 300 $ 16,912
Federal Home Loan Mortgage Corp. 300 26,512
Union Planters Corp. 500 16,438
----------
$ 59,862
- --------------------------------------------------------------------------
Food and Beverage Products - 0.7%
Interstate Bakeries Corp. 500 $ 15,125
- --------------------------------------------------------------------------
Forest and Paper Products - 1.0%
Kimberly-Clark Corp. 300 $ 23,513
- --------------------------------------------------------------------------
Insurance - 0.5%
PennCorp Financial Group, Inc. 400 $ 12,200
- --------------------------------------------------------------------------
Medical and Health Products - 0.7%
Lilly (Eli) & Co. 100 $ 5,725
Uromed Corp. 900 9,338
----------
$ 15,063
- --------------------------------------------------------------------------
Medical and Health Technology and Services - 2.8%
OrNda Healthcorp., Inc. 800 $ 20,600
Pacificare Health Systems, Inc., "B"* 100 8,050
St. Jude Medical, Inc.* 700 25,112
United Healthcare Corp. 230 8,884
----------
$ 62,646
- --------------------------------------------------------------------------
Oil Services - 1.8%
Mesa, Inc. 6,500 $ 26,812
Pennzoil Co. 200 10,675
Tidewater, Inc. 100 3,838
----------
$ 41,325
- --------------------------------------------------------------------------
Oils - 0.2%
Seacor Holdings, Inc. 100 $ 4,550
- --------------------------------------------------------------------------
Photographic Products - 1.3%
Anacomp, Inc. 1,975 $ 15,677
Eastman Kodak Co. 200 14,500
----------
$ 30,177
- --------------------------------------------------------------------------
Printing and Publishing - 1.5%
Pulitzer Publishing Co. 300 $ 16,275
Scripps (E.W.) Co., "A" 400 17,800
----------
$ 34,075
- --------------------------------------------------------------------------
Railroads - 2.1%
Burlington Northern Santa Fe Railway Co. 200 $ 16,000
Wisconsin Central Transportation Corp.* 900 31,725
----------
$ 47,725
- --------------------------------------------------------------------------
Real Estate Investment Trusts - 0.5%
Equity Inns, Inc. 900 $ 11,250
- --------------------------------------------------------------------------
Restaurants and Lodging - 4.0%
Felcor Suite Hotels, Inc. 500 $ 15,250
Host Marriott Corp. 600 8,250
Promus Hotel Corp.* 2,200 66,275
----------
$ 89,775
- --------------------------------------------------------------------------
Special Products and Services - 2.9%
Gillette Holdings, Inc.+ 531 $ 16,461
IMO Industries, Inc. 8,500 42,500
Stanley Works 200 5,500
----------
$ 64,461
- --------------------------------------------------------------------------
Stores - 6.6%
Carr-Gottstein Foods Co. 7,500 $ 30,937
Carson Pirie Scott & Co. 900 22,725
Gantos, Inc. 15,000 60,937
Office Depot, Inc.* 700 11,113
Penney (J.C.), Inc. 200 10,575
Sears, Roebuck & Co. 300 13,200
----------
$ 149,487
- --------------------------------------------------------------------------
Telecommunications - 5.7%
C-Tec Corp. 1,500 $ 38,625
Cabletron Systems, Inc.* 400 24,400
Granite Broadcasting Corp. 2,800 33,950
Silver King Communications, Inc. 775 20,150
U.S. Robotics Corp.* 240 12,600
----------
$ 129,725
- --------------------------------------------------------------------------
Utilities - Electric - 1.6%
Cinergy Corp. 400 $ 12,000
CMS Energy Corp. 300 8,963
Illinova Corp. 400 10,450
Nipsco Industries, Inc. 100 3,700
----------
$ 35,113
- --------------------------------------------------------------------------
Total U.S. Stocks $1,962,645
- --------------------------------------------------------------------------
Foreign Stocks - 3.1%
Hong Kong - 2.0%
Liu Chong Hing Bank (Financial Institutions) 2,000 $ 2,819
Semi-Tech (Global) Ltd. (Electronics) 21,000 35,444
Wharf Holdings (Real Estate) 2,000 7,553
----------
$ 45,816
- --------------------------------------------------------------------------
New Zealand - 0.6%
Tranz Rail Holdings Ltd., ADR (Railroads) 900 $ 13,500
- --------------------------------------------------------------------------
United Kingdom - 0.5%
British Petroleum PLC, ADR (Oils) 100 $ 11,775
- --------------------------------------------------------------------------
Total Foreign Stocks $ 71,091
- --------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $1,992,527) $2,033,736
- --------------------------------------------------------------------------
Bonds - 5.5%
- --------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- --------------------------------------------------------------------------
Financial Services - 1.3%
Tiphook Finance Corp., 8s, 2000 $ 40 $ 28,000
- --------------------------------------------------------------------------
Industrials - 4.2%
Atlantis Group, Inc., 11s, 2003 $ 20 $ 19,900
CHC Helicopter Corp., 11.5s, 2002 26 25,350
Fleming Cos., Inc., 10.625s, 2001 10 9,500
Grand Union Co., 12s, 2004 20 19,850
Harrah's Jazz Co., 14.25s, 2001 40 20,800
----------
$ 95,400
- --------------------------------------------------------------------------
Total Bonds (Identified Cost, $119,462) $ 123,400
- --------------------------------------------------------------------------
Preferred Stocks - 3.4%
- --------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
Mesa, Inc. (Oil Services) 5,928 $ 30,381
Renaissance Cosmetics, Inc. (Consumer
Goods and Services)+ 20 20,000
Supermarkets General Holdings Corp. (Supermarkets) 1,100 26,400
- --------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $61,497) $ 76,781
- --------------------------------------------------------------------------
Short Term Obligation - 3.5%
- --------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/03/96
at Amortized Cost $ 80 $ 79,977
- --------------------------------------------------------------------------
Total Investments (Identified Cost, $2,253,463) $2,313,894
- --------------------------------------------------------------------------
Short Sells - (1.9)%
- --------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
ValuJet, Inc. (Proceeds, $24,501) (3,500) $ (43,750)
- --------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.5)% (11,509)
- --------------------------------------------------------------------------
Net Assets - 100.0% $2,258,635
- --------------------------------------------------------------------------
Portfolio Footnotes:
*Non-income producing security.
+Restricted security.
##SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
- ------------------------------------------------------------------------------
Equity Research Core
Income Growth and Growth
August 31, 1996 Fund Income Fund Fund
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost,
$448,832, $483,259 and
$662,736, respectively) $474,801 $489,914 $680,691
Cash 1,140 1,473 --
Foreign currency, at value (identified
cost, $0, $208 and $132,
respectively) -- 211 136
Receivable for investments sold -- -- 27,091
Net receivable for forward foreign
currency exchange contracts sold -- -- 1
Interest and dividends receivable 1,490 760 366
Deferred organization expenses 1,885 1,885 1,885
-------- -------- --------
Total assets $479,316 $494,243 $710,170
-------- -------- --------
Liabilities:
Payable for investments purchased $ -- $ -- $ 19,677
Net payable for forward foreign currency
exchange contracts purchased -- -- 13
Accrued expenses and other liabilities 1,936 1,930 4,330
-------- -------- --------
Total liabilities $ 1,936 $ 1,930 $ 24,020
-------- -------- --------
Net assets $477,380 $492,313 $686,150
======== ======== ========
Net assets consist of:
Paid-in capital $439,287 $453,853 $601,673
Unrealized appreciation on investments and
translation of assets and
liabilities in foreign currencies 25,969 6,658 17,950
Accumulated undistributed net realized
gain on investments and
foreign currency transactions 7,246 30,033 66,540
Accumulated undistributed net investment
income (loss) 4,878 1,769 (13)
-------- -------- --------
Total $477,380 $492,313 $686,150
======== ======== ========
Shares of beneficial interest outstanding 43,125 44,240 55,662
====== ====== ======
Class A shares:
Net asset value and redemption price per
share (net assets / shares of beneficial
interest outstanding) $11.07 $11.13 $12.33
====== ====== ======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Assets and Liabilities - continued
- ------------------------------------------------------------------------------
Aggressive Special
Growth Opportunities
August 31, 1996 Fund Fund
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost,
$9,956,248 and $2,253,463,
respectively) $10,242,768 $2,313,894
Cash 4,808 --
Deposits with banks for securities sold short -- 40,425
Foreign currency, at value (identified cost, $0
and $815, respectively) -- 815
Receivable for Fund shares sold 225 --
Receivable for investments sold 16,199 39,211
Interest and dividends receivable 1,337 4,172
Deferred organization expenses 1,885 1,885
----------- ----------
Total assets $10,267,222 $2,400,402
----------- ----------
Liabilities:
Cash overdraft $ -- $ 16,982
Securities sold short, at value (proceeds, $0
and $24,501, respectively) -- 43,750
Payable for investments purchased 95,587 78,963
Accrued expenses and other liabilities 26,952 2,072
----------- ----------
Total liabilities $ 122,539 $ 141,767
----------- ----------
Net assets $10,144,683 $2,258,635
=========== ==========
Net assets consist of:
Paid-in capital $ 8,696,282 $2,038,950
Unrealized appreciation on investments and
translation of assets and liabilities
in foreign currencies 286,520 41,182
Accumulated undistributed net realized gain on
investments and foreign currency transactions 1,148,697 168,487
Accumulated undistributed net investment income 13,184 10,016
----------- ----------
Total $10,144,683 $2,258,635
=========== ==========
Shares of beneficial interest outstanding 827,742 198,827
======= =======
Class A shares:
Net asset value and redemption price per share
(net assets / shares of beneficial interest
outstanding) $12.26 $11.36
====== ======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Operations
- ------------------------------------------------------------------------------
Equity Research Core
Income Growth and Growth
Period Ended August 31, 1996* Fund Income Fund Fund
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 7,846 $ 5,213 $ 1,918
Interest 1,004 771 2,442
------- ------- -------
Total investment income $ 8,850 $ 5,984 $ 4,360
------- ------- -------
Expenses -
Management fee $ 1,986 $ 2,082 $ 2,361
Shareholder servicing agent fee 397 416 472
Distribution and service fee 1,324 1,388 1,574
Registration fees 665 670 737
Auditing fees 5,000 5,000 5,000
Printing 549 538 586
Legal fees 1,884 1,884 1,884
Amortization of organization expenses 286 286 286
Custodian fee 143 302 160
Postage -- -- 128
Miscellaneous 135 144 283
------- ------- -------
Total expenses $12,369 $12,710 $13,471
Fees paid indirectly (108) (130) (118)
Reduction of expenses by investment
adviser (8,289) (8,417) (8,631)
------- ------- -------
Net expenses $ 3,972 $ 4,163 $ 4,722
------- ------- -------
Net investment income (loss) $ 4,878 $ 1,821 $ (362)
------- ------- -------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions $ 7,246 $30,033 $66,902
Foreign currency transactions -- (52) (13)
------- ------- -------
Net realized gain on investments and
foreign currency transactions $ 7,246 $29,981 $66,889
------- ------- -------
Change in unrealized appreciation on
investments and translation of assets
and liabilities in foreign currencies $25,969 $ 6,658 $17,950
------- ------- -------
Net realized and unrealized gain on
investments and foreign currency $33,215 $36,639 $84,839
------- ------- -------
Increase in net assets from
operations $38,093 $38,460 $84,477
======= ======= =======
*For the period from the commencement of investment operations, January 2,
1996 to August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Operations - continued
- ------------------------------------------------------------------------------
Aggressive Special
Growth Opportunities
Period Ended August 31, 1996* Fund Fund
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 12,981 $ 8,807
Interest 25,327 20,441
---------- --------
Total investment income $ 38,308 $ 29,248
---------- --------
Expenses -
Management fee $ 43,311 $ 9,616
Shareholder servicing agent fee 8,675 1,923
Distribution and service fee 28,914 6,410
Registration fees 6,498 3,779
Auditing fees 5,000 5,000
Postage 577 168
Printing 6,652 5,622
Legal fees 2,284 3,975
Amortization of organization expenses 286 286
Custodian fee 3,210 755
Miscellaneous 895 497
---------- --------
Total expenses $ 106,302 $ 38,031
Fees paid indirectly (343) (350)
Reduction of expenses by investment adviser and
distributor (80,900) (18,449)
---------- --------
Net expenses $ 25,059 $ 19,232
---------- --------
Net investment income $ 13,249 $ 10,016
---------- --------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $1,148,697 $168,487
Foreign currency transactions (65) --
---------- --------
Net realized gain on investments and foreign
currency transactions $1,148,632 $168,487
---------- --------
Change in unrealized appreciation on investments
and translation of assets and liabilities in
foreign currencies $ 286,520 $ 41,182
---------- --------
Net realized and unrealized gain on
investments and foreign currency $1,435,152 $209,669
---------- --------
Increase in net assets from operations $1,448,401 $219,685
========== ========
*For the period from the commencement of investment operations, January 2,
1996 to August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------
Equity Research Core
Income Growth and Growth
Period Ended August 31, 1996* Fund Income Fund Fund
- ------------------------------------------------------------------------------
Increase in net assets:
From operations -
Net investment income (loss) $ 4,878 $ 1,821 $ (362)
Net realized gain on investments and
foreign currency
transactions 7,246 29,981 66,889
Net unrealized gain on investments and
foreign currency
translation 25,969 6,658 17,950
-------- -------- --------
Increase in net assets from operations $ 38,093 $ 38,460 $ 84,477
-------- -------- --------
Fund shares (principal) transactions -
Net proceeds from sale of shares $449,397 $453,853 $605,756
Cost of shares reacquired (10,110) -- (4,083)
-------- -------- --------
Increase in net assets from Fund
shares transactions $439,287 $453,853 $601,673
-------- -------- --------
Total increase in net assets $477,380 $492,313 $686,150
Net assets:
At beginning of period $ -- $ -- $ --
-------- -------- --------
At end of period (including accumulated
undistributed net investment income
(loss) of $4,878, $1,769 and ($13),
respectively) $477,380 $492,313 $686,150
======== ======== ========
*For the period from the commencement of investment operations, January 2,
1996 to August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets - continued
- ------------------------------------------------------------------------------
Aggressive Special
Growth Opportunities
Period Ended August 31, 1996* Fund Fund
- ------------------------------------------------------------------------------
Increase in net assets:
From operations -
Net investment income $ 13,249 $ 10,016
Net realized gain on investments and foreign
currency transactions 1,148,632 168,487
Net unrealized gain on investments and foreign
currency translation 286,520 41,182
----------- ----------
Increase in net assets from operations $ 1,448,401 $ 219,685
----------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 9,192,182 $2,038,964
Cost of shares reacquired (495,900) (14)
----------- ----------
Increase in net assets from Fund shares
transactions $ 8,696,282 $2,038,950
----------- ----------
Total increase in net assets $10,144,683 $2,258,635
Net assets:
At beginning of period $ -- $ --
----------- ----------
At end of period (including accumulated
undistributed net investment
income of $13,184 and $10,016, respectively) $10,144,683 $2,258,635
=========== ==========
*For the period from the commencement of investment operations, January 2,
1996 to August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Equity Research Core Aggressive Special
Income Growth and Growth Growth Opportunities
Period Ended August 31, 1996* Fund Income Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income (loss)(S) $ 0.13 $ 0.05 $ (0.01) $ 0.02 $ 0.06
Net realized and unrealized gain on
investments and foreign currency
transactions 0.94 1.08 2.34 2.24 1.30
------- ------- ------- ------- -------
Total from investment operations $ 1.07 $ 1.13 $ 2.33 $ 2.26 $ 1.36
------- ------- ------- ------- -------
Net asset value - end of period $ 11.07 $ 11.13 $ 12.33 $ 12.26 $ 11.36
======= ======= ======= ======= =======
Total return 10.70%++ 11.30%++ 23.30%++ 22.60%++ 13.60%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+ 1.50%+ 0.44%+ 1.50%+
Net investment income (loss) 1.83%+ 0.65%+ (0.11)%+ 0.23%+ 0.78%+
Portfolio turnover 56% 58% 204% 104% 108%
Average commission rate $0.0331 $0.0113 $ 0.411 $0.0555 $0.0361
Net assets at end of period (000 omitted) $ 477 $ 492 $ 686 $10,145 $ 2,259
<FN>
*For the period from the commencement of investment operations, January 2, 1996 to August 31, 1996.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
(S)The investment adviser voluntarily agreed to maintain the expenses of the Funds at not more than 1.50% of each Fund's
average daily net assets. In the case of the Aggressive Growth Fund, the investment adviser and distributor
voluntarily waived their management fee and distribution fee, respectively. To the extent actual expenses were
over/under these limitations or, if these fees had been incurred by the Aggressive Growth Fund, the net investment
loss per share and the ratios would have been:
Net investment loss $(0.06) $(0.13) $(0.18) $ (0.05) $ (0.01)
Ratios (to average net assets):
Expenses 4.67%+ 4.58%+ 4.28%+ 1.84%+ 2.97%+
Net investment loss (0.78)%+ (1.86)%+ (2.34)%+ (0.66)%+ (0.16)%+
The reduction of expenses by fees paid indirectly, as a percentage of net assets, amounted to:
(0.03)%+ (0.03)%+ (0.02)%+ -- (0.02)%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Series Trust I (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. The Trust presently consists of eight
Funds, as follows: MFS Managed Sectors Fund, MFS Cash Reserve Fund, MFS World
Asset Allocation Fund, MFS Equity Income Fund* (the Equity Income Fund), MFS
Research Growth and Income Fund* (the Research Growth and Income Fund), MFS Core
Growth Fund* (the Core Growth Fund), MFS Aggressive Growth Fund* (the Aggressive
Growth Fund) and MFS Special Opportunities Fund* (the Special Opportunities
Fund). Each Fund, except MFS Managed Sectors Fund, MFS World Asset Allocation
Fund and the Special Opportunities Fund, is diversified.
The Funds denoted with an asterisk (*) above are included within these financial
statements.
(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. 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, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses -- Costs incurred by the Funds in connection with
their organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
operations of each Fund.
Forward Foreign Currency Exchange Contracts -- The Funds 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 Funds will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Funds may enter into contracts to deliver or receive
foreign currency they will receive from or require for their normal investment
activities. They 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 Funds may enter into
contracts with the intent of changing the relative exposure of each 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.
Short Sales -- The Special Opportunities Fund may enter into short sales. A
short sale transaction involves selling a security which the Fund does not own
with the intent of purchasing it later at a lower price. The Fund will realize a
gain if the security price decreases and a loss if the security price increases
between the date of the short sale and the date on which the Fund must replace
the borrowed security. Possible losses from short sales can be greater than
losses from the actual purchase of a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of the premium,
dividends or interest the Fund may be required to pay in connection with a short
sale. Whenever the Fund engages in short sales, its custodian segregates cash or
U.S. government securities in an amount that, when combined with the amount of
collateral deposited with the broker in connection with the short sale, at least
equals the current market value of the security sold short.
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.
The Special Opportunities Fund can invest up to 100% of its portfolio in
high-yield securities rated below investment grade. Investments in high-yield
securities involve greater degrees of credit and market risk than investments in
higher-rated securities, and tend to be more sensitive to economic conditions.
The Special Opportunities Fund uses the effective interest method for reporting
interest income on payment-in-kind (PIK) bonds, whereby interest income on PIK
bonds is recorded ratably by the Fund at a constant yield to maturity. Legal
fees and other related expenses incurred to preserve and protect the value of a
security owned are added to the cost of the security; other legal fees are
expensed. Capital infusions, which are generally non-recurring, incurred to
protect or enhance the value of high-yield debt securities, are reported as an
addition to the cost basis of the security. Costs that are incurred to negotiate
the terms or conditions of capital infusions or that are expected to result in a
plan of reorganization are reported as realized losses. Ongoing costs incurred
to protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are reported as operating expenses.
Fees Paid Indirectly -- The Trust's custodian bank calculates its fee based on
each Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by each
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions -- The Trust'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. Each 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 each 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.
Each 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.
During the period ended August 31, 1996, the following amounts were reclassified
due to differences between book and tax accounting for currency transactions.
These changes had no effect on the net assets or net asset value per share.
<TABLE>
<CAPTION>
Research Growth Core Aggressive
and Income Growth Growth
Increase (decrease): Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated undistributed net realized
gains on investments and foreign
currency transactions $52 $(349) $65
Accumulated undistributed net investment
income (loss) (52) 349 (65)
</TABLE>
(3) Transactions with Affiliates
Investment Adviser -- Each 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 each Fund's average daily net assets. For the period ended August 31,
1996 the investment adviser did not impose any of its fee, which is reflected as
a reduction of expenses in the Statement of Operations.
Under a temporary expense reimbursement agreement with MFS, MFS has voluntarily
agreed to pay all of each Fund's operating expenses, exclusive of management and
distribution and service fees. Each Fund in turn will pay MFS an expense
reimbursement fee not greater than 1.50% of the average daily net assets of its
Class A shares. To the extent that the expense reimbursement fee exceeds each
Fund's actual expenses, the excess will be applied to amounts paid by MFS in
prior years. At August 31, 1996, the aggregate unreimbursed expenses owed to MFS
by each Fund amounted to:
Equity Research Growth Core Aggressive Special
Income and Income Growth Growth Opportunities
Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------
$4,582 $4,531 $4,224 $ -- $500
Each Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of each Fund, all of whom receive
remuneration for their services to each Fund from MFS. Certain of the officers
and Trustees of each Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trustees are
currently not receiving any payments for their services to the Funds.
Distributor -- MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales of Class A shares of the Funds for the period
ended August 31, 1996.
The Trustees have adopted a distribution plan for Class A shares of each Fund
pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that each Fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of each 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 each 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 0.25% per annum of each 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 each Fund. Distribution and
service fees under the Class A distribution plan are currently being waived.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within 12 months following such purchase. There were
no contingent deferred sales charges imposed during the period ended August 31,
1996 on Class A shares of each Fund.
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 Fund at an effective annual
rate of up to 0.15% attributable to Class A shares. MFSC is currently waiving
its fee for an indefinite period.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
<TABLE>
<CAPTION>
Research
Equity Growth and Core Aggressive Special
Income Income Growth Growth Opportunities
Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------
Purchases
<S> <C> <C> <C> <C> <C>
U.S. government securities $ -- $ -- $ -- $ -- $ 18,788
======== ======== ========== =========== ==========
Investments (non-U.S.
government securities) $660,739 $670,061 $1,355,824 $17,675,238 $3,989,576
======== ======== ========== =========== ==========
Sales
U.S. government securities -- -- -- -- $ 18,360
======== ======== ========== =========== ==========
Investments (non-U.S.
government securities) $218,619 $236,830 $ 854,960 $ 9,017,486 $2,012,685
======== ======== ========== =========== ==========
</TABLE>
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Funds, as computed on a federal income tax basis, are as follows:
<TABLE>
<CAPTION>
Research
Equity Growth and Core Aggressive Special
Income Income Growth Growth Opportunities
Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate cost $448,974 $483,305 $666,084 $10,029,011 $2,255,731
======== ======== ======== =========== ==========
Gross unrealized
appreciation $ 33,745 $ 23,919 $ 29,764 $ 798,892 $ 187,895
Gross unrealized
depreciation (7,918) (17,310) (15,157) (585,135) (129,732)
-------- -------- -------- ----------- ----------
Net unrealized
appreciation $ 25,827 $ 6,609 $ 14,607 $ 213,757 $ 58,163
======== ======== ======== =========== ==========
</TABLE>
(5) Shares of Beneficial Interest
The 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>
Research Growth and
Equity Income Fund Income Fund Core Growth Fund
Period Ended ------------------- ------------------ ------------------
August 31, 1996* Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 44,072 $449,397 44,240 $453,853 56,000 $605,756
Shares reacquired (947) (10,110) -- -- (338) (4,083)
------ -------- ------ -------- ------ --------
Net increase 43,125 $439,287 44,240 $453,853 55,662 $601,673
====== ======== ====== ======== ====== ========
</TABLE>
Aggressive Special
Growth Fund Opportunities Fund
--------------------- ---------------------
Period Ended August 31, 1996* Shares Amount Shares Amount
- ------------------------------------------------------------------------------
Shares sold 868,195 $9,192,182 198,828 $2,038,964
Shares reacquired (40,453) (495,900) (1) (14)
------- ---------- ------- ----------
Net increase 827,742 $8,696,282 198,827 $2,038,950
======= ========== ======= ==========
*For the period from the commencement of investment operations, January 2, 1996
to August 31, 1996.
(6) Line of Credit
The Trust entered into an agreement which enables each of the Funds 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 each of the Funds for the
period ended August 31, 1996 ranged from $3 to $74.
(7) Financial Instruments
The Funds trade financial instruments with off-balance sheet risk in the normal
course of their 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 each Fund has in particular classes of financial
instruments and do not necessarily represent the amounts potentially subject to
risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
Core Growth Fund
<TABLE>
<CAPTION>
Contracts to In Net Unrealized
Settlement Deliver/ Exchange Contracts Appreciation
Transactiontion Date Receive For at Value (Depreciation)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sell 9/04/96 SEK 42,728 $6,448 $6,453 $ 1
Buy 9/03/96 DEM 6,354 $4,305 $4,292 $(13)
====== ====== ====
DEM = German Marks
SEK = Swedish Kronor
</TABLE>
At August 31, 1996, the Core Growth Fund had sufficient cash and/or securities
to cover any commitments under these contracts.
(8) Restricted Securities
The Funds may invest not more than 15% of each Fund's net assets in securities
which are subject to legal or contractual restrictions on resale. At August 31,
1996, the Research Growth and Income Fund and the Special Opportunities Fund
owned the following restricted securities (consisting 1.4% and 1.6% of net
assets, respectively). The Research Growth and Income Fund and the Special
Opportunities Fund do not have the right to demand that such securities be
registered. The value of these securities is determined by valuations supplied
by a pricing service or brokers or, if not available, in good faith by or at the
direction of the Trustees.
<TABLE>
<CAPTION>
Date of
Description Acquisition Shares Cost Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Research Growth and Jarvis Hotels 6/21/96 - 7/02/96 1,300 $ 3,557 $ 3,288
Income Fund Hong Leong Finance 1/15/96 1,000 3,847 3,370
-------
$ 6,658
=======
Special Opportunities Gillette Holdings, Inc. 1/05/96 531 $10,221 $16,461
Fund Renaissance Cosmetics, Inc. 8/08/96 20 20,000 20,000
------
$36,461
=======
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust I and Shareholders of MFS Equity Income
Fund, MFS Research Growth and Income Fund, MFS Core Growth Fund, MFS Aggressive
Growth Fund and MFS Special Opportunities Fund:
We have audited the accompanying statements of assets and liabilities of MFS
Equity Income Fund, MFS Research Growth and Income Fund, MFS Core Growth Fund,
MFS Aggressive Growth Fund and MFS Special Opportunities Fund, (the Funds) (five
of the portfolios constituting MFS Series Trust I) including the schedules of
portfolio investments, as of August 31, 1996, and the related statements of
operations and the statements of changes in net assets and the financial
highlights for the period from January 2, 1996 (commencement of operations) to
August 31, 1996. These financial statements and financial highlights are the
responsibility of the Funds' 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 audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. As audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies form brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Equity Income Fund, MFS Research Growth and Income Fund, MFS Core Growth Fund,
MFS Aggressive Growth Fund and MFS Special Opportunities Fund at August 31,
1996, and the results of their operations, the changes in their net assets and
financial highlights for the period from January 2, 1996 (commencement of
operations) to August 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
October 4, 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) EQUITY INCOME FUND
MFS(R) RESEARCH GROWTH AND INCOME FUND
MFS(R) CORE GROWTH FUND
MFS(R) AGGRESSIVE GROWTH FUND
MFS(R) SPECIAL OPPORTUNITIES FUND
500 Boylston Street
Boston, MA 02116
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INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
(C)1996 MFS Fund Distributors, Inc., 500 Boylston Street Boston, MA 02110
INC-3-4/10/96/390
