<PAGE>
[LOGO] M F S(SM) Annual Report
INVESTMENT MANAGEMENT August 31, 1997
MFS(R) RESEARCH GROWTH AND INCOME FUND
[Graphic Omitted]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
A Discussion with the Director of Research ................................ 2
Fund Facts ................................................................ 5
Performance Summary ....................................................... 5
Tax Form Summary .......................................................... 7
Portfolio Concentration ................................................... 8
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 22
Independent Auditors' Report .............................................. 28
Trustees and Officers ..................................................... 29
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HIGHLIGHTS
o FOR THE 12 MONTHS ENDED AUGUST 31, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 36.22%, CLASS B SHARES
35.92%, CLASS C SHARES 35.63%, AND CLASS I SHARES 36.68%. (SEE
PERFORMANCE SUMMARY FOR MORE INFORMATION.)
o THE FUND'S UNDERPERFORMANCE VERSUS THE STANDARD & POOR'S 500 COMPOSITE
INDEX, WHICH RETURNED 40.78% DURING THE PERIOD, CAN BE ATTRIBUTED TO
OVERWEIGHTINGS IN SOME SECTORS THAT HAD FLAT-TO-DOWN PERFORMANCE,
ALTHOUGH SPECIFIC COMPANIES IN THE FUND FROM THESE SECTORS PERFORMED
WELL.
o THE FUND IS OVERWEIGHTED IN FINANCIAL SERVICES, RETAILING, AND CONSUMER
STAPLES, AS THESE SECTORS INCLUDE SEVERAL COMPANIES THE ANALYSTS BELIEVE
CAN BENEFIT FROM A SLOW-GROWTH, LOW-INFLATION ENVIRONMENT AS WELL AS FROM
CONSOLIDATION.
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A.Keith Brodkin]
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still
uncomfortably high. While some lenders are beginning to tighten standards to
address this problem, consumer debt and personal bankruptcies continue to
rise. The rapid pace of growth seen in the first quarter slowed slightly in
the second quarter, to an annual rate of 3.3%. While real (inflation-adjusted)
growth could moderate further in the third quarter, we believe economic
momentum will carry well into the first quarter of 1998. The money supply is
increasing at a rapid rate, the housing and automobile markets are
strengthening, and it now appears that Christmas sales could be quite good.
Because economic growth continues to be impressive, markets are likely to
begin focusing on the Federal Reserve Board's willingness to raise interest
rates.
Although the U.S. equity market has seen increased price volatility of late,
we have been surprised by its overall strength thus far in 1997. Much of this
is the result of continuing gains in corporate earnings. Even as the current
recovery enters its seventh year, more and more U.S. companies have been
exceeding analysts' earnings estimates. In the first quarter of 1997, for
example, two-thirds of all companies met or exceeded analysts' expectations, a
trend that could be an important indicator of the U.S. equity market's future
direction. However, while the near-term outlook for profits is generally
favorable, we believe equity valuations have risen to a point where a cautious
investment approach seems warranted.
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 15, 1997
<PAGE>
A DISCUSSION WITH THE DIRECTOR OF RESEARCH
[Photo of Kevin R. Parke]
Kevin R. Parke
For the 12 months ended August 31, 1997, Class A shares of the Fund provided a
total return of 36.22%, Class B shares 35.92%, Class C shares 35.63%, and Class
I shares 36.68%. These returns, which include the reinvestment of distributions
but exclude the effects of any sales charges, compare to a 40.78% return for the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock total return performance.
Q. WHAT DO YOU THINK WERE SOME OF THE MAJOR REASONS FOR THE FUND'S PERFORMANCE
OVER THE PAST YEAR?
A. The Fund's underperformance versus the S&P 500 can mainly be attributed to
sector weightings that grew out of the individual stock-selection process.
The research analysts selected what they believed were attractive companies
within the financial services, retailing, and consumer staples sectors.
While the Fund's specific companies in these sectors performed well, the
sectors in general underperformed the S&P 500 during the past year.
Conversely, the Fund was underweighted in technology, leisure, utilities
and communications, and the miscellaneous category, which consists mainly
of business services. Our companies from these sectors performed well over
the past 12 months and significantly outperformed the equivalent sectors
within the S&P 500.
Q. COULD YOU TALK ABOUT HOW THE SYSTEM OF USING A COMMITTEE OF MFS RESEARCH
ANALYSTS TO SELECT STOCKS IS USED FOR THIS PARTICULAR FUND?
A. The Fund is based upon the research analysts' best ideas within their
industries. Stocks are selected after careful, in-depth fundamental
analysis of companies' earnings outlooks. Although each analyst
incorporates general economic forecasts into his or her decision-making
process, ultimately, stocks selected for the Fund represent companies that
the analysts believe offer the best possibilities for capital appreciation
within a conservative growth and income framework regardless of the
economic outlook. These companies typically demonstrate dominant and/or
growing market share, quality new and existing products, superior
management teams, and strong financial statements. Sector and industry
weightings in the Fund are a result of the "best ideas" stock-selection
process. However, the committee of analysts review weightings regularly in
light of any changes to the outlook for specific companies.
Q. CAN YOU TALK ABOUT SOME SECTORS THE FUND IS EMPHASIZING?
A. The Fund continues to be overweighted in the financial services, retailing,
and consumer staples sectors. Given the current economic backdrop, the
analysts believe many of the companies in these sectors are well positioned
for a slow-growth, low-inflation environment. Companies such as Rite Aid,
CVS, and Safeway have benefited from improving margins, cost savings
resulting from continued consolidation, and volume growth resulting from a
robust economy. Banking and insurance companies have benefited from similar
trends.
Q. WHAT ABOUT INDIVIDUAL STOCKS? WHAT CAN YOU TELL US ABOUT SOME
OF THE FUND'S TOP HOLDINGS?
A. The Fund's largest holding is Coca-Cola. The company has an approximate 43%
share of the U.S. soft drink market and a 49% share of the international
market, and the analysts believe its ability to increase prices, diversify
geographically, and leverage its global brand image should continue to
drive volume growth in the months ahead. Another top holding is British
Petroleum, one of the largest petroleum and petrochemical groups in the
world. It appears to have the most profitable growth profile among the
integrated oil companies and a superior management team that has
successfully focused on cost controls and long-term earnings growth. In
addition, the company's ability to generate large cash flow enables it to
either strengthen its existing business through reinvestment or to boost
stock performance through share repurchasings.
Q. COULD YOU DISCUSS SOME OF THE FUND'S HOLDINGS THAT HAVE PERFORMED BETTER
THAN EXPECTED OVER THE PAST YEAR?
A. The Fund's eighth-largest holding, Tyco International, surprised us during
the past year. The company announced two acquisitions from which the
analysts expect cost and revenue synergies to contribute significant
earnings growth in the years ahead. As a result, the company's stock price
has performed even better than expected.
Q. NOW, WHAT ABOUT SOME STOCKS OR SECTORS THAT DID NOT PERFORM AS WELL AS YOU
WOULD HAVE LIKED?
A. Waste Management has not lived up to our expectations, in spite of industry
fundamentals that have been improving in recent years and an upward bias in
both collection pricing and recycled materials. Another company the Fund
owns, Browning Ferris Industries, has benefited from these new industry
dynamics while Waste Management has not. However, Waste Management recently
hired a new CEO who has announced several strategic initiatives, including
increased cost-reduction efforts and increased return on investment. Also,
senior management's compensation now is directly linked to the company's
performance, which should help in the turnaround.
Q. LOOKING BACK, HOW WOULD YOU CHARACTERIZE THE BUSINESS AND ECONOMIC
ENVIRONMENT OF THE PAST YEAR, PARTICULARLY AS IT RELATES TO THE FUND?
A. It has been a favorable environment for the companies in the Fund. In
general, corporate profits, which have exceeded inflation in a slow-growth
economic environment, continue to be the story driving stock prices,
including prices of many of the stocks in the Fund.
Q. LOOKING AHEAD, WHAT CHANGES DO YOU SEE IN THE ECONOMIC AND BUSINESS
CLIMATE, PARTICULARLY AS IT RELATES TO THE FUND, AND HOW IS THE FUND
POSITIONED FOR THOSE CHANGES?
A. The short-term outlook appears to call for more modest returns than we've
seen in the recent past. In this environment individual stock-picking,
rather than a focus on the overall market, has become the key to long-term
investment performance. It appears that selected companies in the financial
services, health care, and consumer staples industries still have
reasonable valuations and favorable opportunities for long-term growth and
superior investment returns.
/s/ Kevin R. Parke
Kevin R. Parke
Director of Research
The committee of MFS research analysts is responsible for the day-to-day
management of the Fund under the general supervision of Mr. Parke.
<PAGE>
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FUND FACTS
OBJECTIVE: THE INVESTMENT OBJECTIVE OF THE FUND IS LONG-TERM
GROWTH OF CAPITAL, CURRENT INCOME, AND GROWTH OF
INCOME.
COMMENCEMENT OF
INVESTMENT OPERATIONS: CLASS A: JANUARY 2, 1996
CLASS B: JANUARY 2, 1997
CLASS C: JANUARY 2, 1997
CLASS I : JANUARY 2, 1997
SIZE: $84.9 MILLION NET ASSETS AS OF AUGUST 31, 1997
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS(R)
Research Growth and Income Fund - Class A shares in comparison to various
market indicators. Class A share performance results reflect the deduction of
the 5.75% maximum sales charge; benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown, based on the differences in charges
and fees paid by shareholders investing in different classes. It is not
possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1996, through August 31, 1997)
MFS Research
Growth and S&P 500 Consumer
Income Fund - Composite Price
Class A Index Index - U.S.
-------------- --------- ------------
1/96 $ 9,425 $10,000 $10,000
8/96 $10,490 $10,745 $10,253
8/97 $14,290 $15,112 $10,476
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
1 Year Life of Fund#
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS Research Growth and Income Fund (Class A)
including 5.75% sales charge (SEC results) +29.70% +24.72%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Research Growth and Income Fund (Class A)
at net asset value +36.22% +28.44%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Research Growth and Income Fund (Class B)
with CDSC (SEC results) +31.92% +26.21%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Research Growth and Income Fund (Class B)
at net asset value +35.92% +28.26%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Research Growth and Income Fund (Class C)
with CDSC (SEC results) +34.63% +28.10%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Research Growth and Income Fund (Class C)
at net asset value +35.63% +28.10%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Research Growth and Income Fund (Class I)
at net asset value +36.68% +28.69%
- -----------------------------------------------------------------------------------------------------------------------------
Average growth and income fund+ +35.03% +19.84%
- -----------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index++ +40.78% +28.29%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index*++ + 2.19% + 2.85%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
# For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1997.
+ Source: Lipper Analytical Services, Inc.
++ Source: CDA/Wiesenberger.
* The Consumer Price Index is published by the U.S. Bureau of Labor
Statistics and measures the cost of living (inflation).
All results are historical and assume the reinvestment of dividends and
capital gains. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Past performance is no guarantee of future results.
Class A share SEC results include the maximum 5.75% sales charge. Class B
share SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%.
Class C shares have no initial sales charge but, along with Class B shares,
have higher annual fees and expenses than Class A shares. Class C share
purchases are subject to a 1% CDSC if redeemed within 12 months of purchase.
Class I shares, which became available on January 2, 1997, have no sales
charge or Rule 12b-1 fees and are only available to certain institutional
investors.
Class B and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods
prior to the commencement of offering of Class B and Class C shares. Because
operating expenses attributable to Class B and Class C shares are higher than
those of Class A shares, Class B and Class C share performance generally would
have been lower than Class A share performance. The Class A share performance
included within the Class B and Class C share SEC performance has been
adjusted to reflect the CDSC generally applicable to Class B and Class C
shares rather than the initial sales charge generally applicable to Class A
shares.
Class I share results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the
commencement of offering of Class I shares. Because operating expenses
attributable to Class A shares are greater than those of Class I shares, Class
I share performance generally would have been higher than Class A share
performance. The Class A share performance included within the Class I share
performance has been adjusted to reflect the fact that Class I shares have no
initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies
and waivers may be discontinued at any time.
- --------------------------------------------------------------------------------
TAX FORM SUMMARY
IN JANUARY 1998, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1997.
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED AUGUST 31, 1997, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 19.1%.
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 1997
TOP 10 EQUITY HOLDINGS
COCA-COLA CO. MICROSOFT CORP.
International food and beverage Computer software and systems company
company
SPRINT CORP.
BRITISH PETROLEUM PLC Long-distance telephone company
Oil exploration and production
company TYCO INTERNATIONAL LTD.
Manufacturer of fire protection,
DU PONT (E.I.) DE NEMOURS & CO., packaging, and electronic equipment
INC.
Diversified chemical company BRISTOL-MYERS SQUIBB CO.
Pharmaceutical products company
COMPAQ COMPUTER CORP.
Personal computer company UNITED TECHNOLOGIES CORP.
Aerospace, defense, and building
INTEL CORP. equipment company
Semiconductor manufacturer
LARGEST SECTORS
Financial Services 25.7%
Miscellaneous (Conglomerates, 33.2%
special services/sevices)
Consumer Staples 12.9%
Health Care 10.9%
Technology 9.5%
Utilities & Communications 7.8%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
Stocks - 97.1%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------------------------
U.S. Stocks - 88.4%
Aerospace - 2.9%
<S> <C> <C>
Lockheed-Martin Corp. 9,980 $1,034,801
United Technologies Corp. 18,300 1,428,544
----------
$2,463,345
- -------------------------------------------------------------------------------------------------
Agricultural Products - 0.9%
Case Corp. 11,800 $ 791,338
- -------------------------------------------------------------------------------------------------
Apparel and Textiles - 0.5%
Reebok International Ltd. 10,200 $ 448,163
- -------------------------------------------------------------------------------------------------
Banks and Credit Companies - 6.4%
BankBoston Corp. 8,570 $ 712,381
Chase Manhattan Corp. 10,750 1,195,266
Comerica, Inc. 9,600 679,800
Compass Bancshares, Inc. 35,290 1,257,206
Fleet/Norstar Financial Group, Inc. 10,300 663,706
PNC Bank Corp. 10,300 445,475
Wells Fargo & Co. 1,800 457,650
----------
$5,411,484
- -------------------------------------------------------------------------------------------------
Building - 0.2%
Newport News Shipbuilding, Inc. 7,700 $ 149,188
- -------------------------------------------------------------------------------------------------
Business Machines - 0.3%
Sun Microsystems, Inc.* 6,010 $ 288,480
- -------------------------------------------------------------------------------------------------
Business Services - 0.3%
Storage Trust Realty 9,510 $ 241,316
- -------------------------------------------------------------------------------------------------
Cellular Telephones - 1.2%
Century Telephone Enterprises, Inc. 28,000 $1,016,750
- -------------------------------------------------------------------------------------------------
Chemicals - 4.5%
Air Products & Chemicals, Inc. 15,800 $1,288,687
du Pont (E.I.) de Nemours & Co., Inc. 31,840 1,984,030
Praxair, Inc. 9,700 518,344
----------
$3,791,061
- -------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.9%
First Data Corp. 20,875 $ 857,180
Microsoft Corp.* 12,000 1,586,250
---------------
$2,443,430
- -------------------------------------------------------------------------------------------------
Computer Software - Systems - 3.1%
Compaq Computer Corp.* 30,100 $1,971,550
Oracle Systems Corp.* 18,100 690,063
----------
$2,661,613
- -------------------------------------------------------------------------------------------------
Consumer Goods and Services - 8.7%
Colgate-Palmolive Co. 14,200 $ 891,050
Estee Lauder Cos., "A"* 11,650 553,375
Gillette Co. 14,250 1,180,078
Hertz Corp., "A"* 500 17,281
Philip Morris Cos., Inc. 31,700 1,382,912
Procter & Gamble Co. 6,900 918,131
Revlon, Inc., "A"* 11,200 544,600
Sherwin Williams Co. 12,600 345,713
Tyco International Ltd.* 19,311 1,514,707
----------
$7,347,847
- -------------------------------------------------------------------------------------------------
Electronics - 2.2%
Intel Corp. 20,600 $1,897,775
- -------------------------------------------------------------------------------------------------
Entertainment - 1.2%
Clear Channel Communications, Inc.* 9,300 $ 631,819
Jacor Communications, Inc., "A"* 8,300 365,200
----------
$ 997,019
- -------------------------------------------------------------------------------------------------
Financial Institutions - 3.5%
Advanta Corp., "B" 12,250 $ 388,938
American Express Co. 5,900 458,725
ARM Financial Group, Inc., "A"* 300 5,831
Associates First Capital Corp., "A" 8,600 499,337
Federal National Mortgage Assn. 26,500 1,166,000
Kilroy Realty Corp. 16,800 429,450
----------
$2,948,281
- -------------------------------------------------------------------------------------------------
Food and Beverage Products - 4.3%
Coca-Cola Co. 47,400 $2,716,612
Wrigley (Wm) Junior Co. 12,660 917,850
----------
$3,634,462
- -------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.9%
Kimberly-Clark Corp. 17,020 $ 807,386
- -------------------------------------------------------------------------------------------------
Insurance - 7.9%
Allstate Corp. 11,800 $ 862,137
Chubb Corp. 12,300 822,563
CIGNA Corp. 7,700 1,411,987
Conseco, Inc. 16,900 726,700
Frontier Insurance Group, Inc. 1,000 35,000
New Hartford Financial Services Group, Inc. 11,760 937,860
Lincoln National Corp. 7,200 481,950
Nationwide Financial Services, Inc., "A" 2,700 74,925
Reliastar Financial Corp. 6,877 514,056
Travelers Group, Inc. 12,800 812,800
----------
$6,679,978
- -------------------------------------------------------------------------------------------------
Medical and Health Products - 5.5%
Bristol-Myers Squibb Co. 19,900 $1,512,400
Cardinal Health, Inc. 18,000 1,192,500
Columbia/HCA Healthcare Corp. 12,800 404,000
HEALTHSOUTH Corp.* 8,500 211,969
Horizon CMS Healthcare Corp.* 23,800 489,387
Lilly (Eli) & Co. 8,000 837,000
----------
$4,647,256
- -------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 4.1%
Medtronic, Inc. 12,400 $1,120,650
St. Jude Medical, Inc.* 26,610 1,012,843
United Healthcare Corp. 27,600 1,342,050
----------
$3,475,543
- -------------------------------------------------------------------------------------------------
Metals and Minerals - 1.0%
Aluminum Cos. of America 10,730 $ 882,543
- -------------------------------------------------------------------------------------------------
Office Equipment - 0.3%
Office Depot, Inc.* 16,300 $ 300,531
- -------------------------------------------------------------------------------------------------
Oil Services - 3.7%
Baker Hughes, Inc. 11,400 $ 483,075
Burlington Resources, Inc. 17,800 901,125
Chevron Corp. 10,500 813,094
USX-Marathon Group 29,900 973,619
----------
$3,170,913
- -------------------------------------------------------------------------------------------------
Pollution Control - 1.0%
Browning Ferris Industries, Inc. 13,300 $ 464,669
Waste Management, Inc. 12,100 387,200
----------
$ 851,869
- -------------------------------------------------------------------------------------------------
Printing and Publishing - 1.2%
Tribune Co. 20,200 $ 998,638
- -------------------------------------------------------------------------------------------------
Railroads - 0.8%
Burlington Northern Santa Fe Railway Co. 7,500 $ 687,656
- -------------------------------------------------------------------------------------------------
Real Estate - 4.6%
Arden Realty, Inc. 17,100 $ 493,762
Boston Properties, Inc.* 13,500 402,469
Cornerstone Properties, Inc. 35,800 635,450
Mid-America Apartment Communities, Inc. 25,200 691,425
Sl Green Realty Corp. 18,200 433,388
Sovran Self Storage, Inc. 18,900 574,087
TriNet Corporate Realty Trust, Inc. 19,700 700,581
----------
$3,931,162
- -------------------------------------------------------------------------------------------------
Restaurants and Lodging - 2.7%
Hilton Hotels Corp. 12,900 $ 395,869
Host Marriott Corp.* 15,470 301,665
Host Marriott Financial Trust## 10,820 665,430
Innkeepers USA Trust 61,270 934,367
----------
$2,297,331
- -------------------------------------------------------------------------------------------------
Stores - 3.7%
CVS Corp. 15,000 $ 845,625
Lowes Co., Inc. 15,030 519,474
Penney (J.C.), Inc. 12,000 720,000
Rite Aid Corp. 20,700 1,036,294
----------
$3,121,393
- -------------------------------------------------------------------------------------------------
Supermarkets - 0.8%
Safeway, Inc.* 12,960 $ 660,150
- -------------------------------------------------------------------------------------------------
Telecommunications - 2.4%
Cincinnati Bell, Inc. 46,000 $1,239,125
Lucent Technologies, Inc. 10,560 822,360
----------
$2,061,485
- -------------------------------------------------------------------------------------------------
Utilities - Electric - 1.5%
CMS Energy Corp. 15,710 $ 564,578
Sierra Pacific Resources 22,700 709,375
----------
$1,273,953
- -------------------------------------------------------------------------------------------------
Utilities - Gas - 1.4%
Coastal Corp. 12,580 $ 726,495
Utilicorp United, Inc. 14,600 434,350
----------
$1,160,845
- -------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.8%
Sprint Corp. 32,500 $1,527,500
- -------------------------------------------------------------------------------------------------
Total U.S. Stocks $75,067,684
- -------------------------------------------------------------------------------------------------
Foreign Stocks - 8.7%
Hong Kong - 0.2%
Hong Kong Electric Holdings Ltd. (Utilities - Electric) 5,500 $ 19,235
Wharf Holdings Ltd. (Real Estate) 50,000 180,991
-----------
$ 200,226
- -------------------------------------------------------------------------------------------------
Italy - 0.5%
Gucci Group Designs NV (Apparel and Textiles) 6,700 $ 407,862
- -------------------------------------------------------------------------------------------------
Japan - 0.7%
Sony Corp. (Electronics) 7,000 $ 609,453
- -------------------------------------------------------------------------------------------------
Sweden - 0.7%
Sparbanken Sverige AB (Banks and Credit Cos.) 27,490 $ 594,954
- -------------------------------------------------------------------------------------------------
Switzerland - 1.1%
Novartis AG (Pharmaceuticals) 630 $ 889,690
- -------------------------------------------------------------------------------------------------
United Kingdom - 5.5%
British Aerospace PLC (Aerospace and Defense) 25,110 $ 587,575
British Petroleum PLC, ADR (Oil and Gas) 24,009 2,031,762
Grand Metropolitan (Food and Beverage Products) 82,100 753,689
Lloyds TSB Group PLC (Banks and Credit Cos.) 35,600 410,175
PowerGen PLC (Utilities - Electric)* 70,423 890,140
-----------
$ 4,673,341
- -------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 7,375,526
- -------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $76,869,399) $82,443,210
- -------------------------------------------------------------------------------------------------
Short-Term Obligations - 3.4%
- -------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 9/02/97 $ 1,500 $ 1,499,547
Federal National Mortgage Assn., due 9/03/97 1,409 1,408,791
- -------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 2,908,338
- -------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $79,777,737) $85,351,548
Other Assets, Less Liabilities - (0.5)% (457,164)
- -------------------------------------------------------------------------------------------------
Net Assets - 100.0% $84,894,384
- -------------------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
##SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
AUGUST 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $79,777,737) $ 85,351,548
Cash 144,590
Foreign currency, at value (identified cost, $1,418) 1,381
Receivable for Fund shares sold 616,705
Dividends and interest receivable 88,691
Deferred organization expenses 1,450
Other assets 439
------------
Total assets $ 86,204,804
------------
Liabilities:
Payable for investments purchased $ 1,222,542
Payable for Fund shares reacquired 30,305
Payable to affiliates -
Management fee 4,553
Distribution and service fee 46,462
Accrued expenses and other liabilities 6,558
------------
Total liabilities $ 1,310,420
------------
Net assets $ 84,894,384
============
Net assets consist of:
Paid-in capital $77,170,529
Unrealized appreciation on investments and translation of
assets and liabilities
in foreign currencies 5,573,782
Accumulated undistributed net realized gain on investments
and foreign
currency transactions 2,183,301
Accumulated net investment loss (33,228)
------------
Total $ 84,894,384
============
Total shares of beneficial interest outstanding 6,015,872
=========
Class A shares:
Net asset value per share
(net assets of $33,567,266 / 2,377,727 shares of
beneficial interest outstanding) $14.12
======
Offering price per share (100 / 94.25) $14.98
======
Class B shares:
Net asset value and offering price per share
(net assets of $43,069,091 / 3,051,983 shares of
beneficial interest outstanding) $14.11
======
Class C shares:
Net asset value and offering price per share
(net assets of $7,433,005 / 527,914 shares of beneficial
interest outstanding) $14.08
======
Class I shares:
Net asset value and offering price per share
(net assets of $825,022 / 58,248 shares of beneficial
interest outstanding) $14.16
======
On sales of $50,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, and Class C shares.
See notes to financial statements
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1997
- --------------------------------------------------------------------------------------------
Net investment income:
Income -
<S> <C>
Dividends $ 547,288
Interest 100,569
----------
Total investment income $ 647,857
----------
Expenses -
Management fee $ 210,333
Shareholder servicing agent fee 37,101
Distribution and service fee (Class A) 32,439
Distribution and service fee (Class B) 153,833
Distribution and service fee (Class C) 26,443
Registration fee 68,550
Printing 29,773
Custodian fee 24,276
Postage 8,524
Auditing fee 6,501
Legal fee 3,707
Amortization of organization expenses 434
Miscellaneous 23,746
----------
Total expenses $ 625,660
Fees paid indirectly (13,508)
Reduction of expenses by investment adviser (3,379)
----------
Net expenses $ 608,773
----------
Net investment income $ 39,084
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $2,189,288
Foreign currency transactions (1,538)
----------
Net realized gain on investments and foreign currency transactions $2,187,750
----------
Change in unrealized appreciation (depreciation) -
Investments $5,567,156
Translation of assets and liabilities in foreign currencies (32)
----------
Net unrealized gain on investments and foreign currency $5,567,124
----------
Net realized and unrealized gain on investments and foreign currency $7,754,874
----------
Increase in net assets from operations $7,793,958
==========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets:
From operations -
Net investment income $ 39,084
Net realized gain on investments and foreign currency transactions 2,187,750
Net unrealized gain on investments and foreign currency translation 5,567,124
-----------
Increase in net assets from operations $ 7,793,958
-----------
Distributions declared to shareholders -
From net investment income (Class A) $ (56,344)
From net investment income (Class B) (12,053)
From net investment income (Class C) (2,170)
From net investment income (Class I) (1,976)
From net realized gain on investments (Class A) (36,020)
-----------
Total distributions declared to shareholders $ (108,563)
-----------
Fund share (principal) transactions -
Net proceeds from sale of shares $81,508,083
Net asset value of shares issued to shareholders in reinvestment of
distributions 101,498
Cost of shares reacquired (4,892,905)
-----------
Increase in net assets from Fund share transactions $76,716,676
-----------
Total increase in net assets $84,402,071
Net assets:
At beginning of period 492,313
-----------
At end of period (including accumulated undistributed net investment
loss of $33,228 respectively) $84,894,384
===========
</TABLE>
See notes to financial statements
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PERIOD ENDED AUGUST 31, 1996*
- -----------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets:
From operations -
Net investment income $ 1,821
Net realized gain (loss) on investments and foreign currency
transactions 29,981
Net unrealized gain on investments and foreign currency translation 6,658
----------
Increase in net assets from operations $ 38,460
----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 453,853
Increase in net assets from Fund share transactions 453,853
----------
Total increase in net assets $ 492,313
Net assets:
At beginning of period --
----------
At end of period (including accumulated undistributed net investment
income of $1,769 respectively) $ 492,313
==========
</TABLE>
*For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31,
1997 1996*
- ----------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $11.13 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.07 $ 0.05
Net realized and unrealized gain on investments and foreign
currency transactions 3.02 1.08
------ ------
Total from investment operations $ 3.09 $ 1.13
------ ------
Less distributions declared to shareholders -
From net investment income (0.06) --
From net realized gain on investments and foreign
currency transactions (0.04) --
------ ------
Total distributions declared to shareholders (0.10) --
------ ------
Net asset value - end of period $14.12 $11.13
====== ======
Total return(+) 36.22% 11.30%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.50% 1.50%+
Net investment income 0.56% 0.65%+
Portfolio turnover 106% 58%
Average commission rate $0.0423 $0.0113
Net assets at end of period (000 omitted) $33,567 $ 492
* For the period from the commencement of the Fund's investment operations, January 2, 1996, through
August 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
(S) The investment advisor voluntarily agreed to maintain the expenses of the Fund at not more than 1.50%
of the average daily net assets. To the extent actual expenses were over/under the limitation, the
net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.07 $(0.13)
Ratios (to average net assets):
Expenses## 1.55% 4.58%+
Net investment income (loss) 0.51% (1.86)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PERIOD ENDED
AUGUST 31,
1997**
- -------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C>
Net asset value - beginning of period $12.01
------
Income from investment operations# -
Net investment loss(S) $(0.02)
Net realized and unrealized gain on investments and foreign currency
transactions 2.13
------
Total from investment operations $ 2.11
------
Less distributions declared -
From net investment income (0.01)
------
Net asset value - end of period $14.11
======
Total return 17.56%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.25%+
Net investment loss (0.22)%+
Portfolio turnover 106%
Average commission rate $0.0423
Net assets at end of period (000 omitted) $43,069
*For the period from the commencement of the Fund's offering of Class B
shares, January 2, 1997, through August 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
(S)The investment advisor voluntarily agreed to maintain the expenses of the
Fund at not more than 2.25% of the average daily net assets. To the extent
actual expenses were over/ under the limitation, the net investment loss per
share and the ratios would have been:
Net investment loss $(0.02)
Ratios (to average net assets):
Expenses## 2.30%+
Net investment loss (0.27)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PERIOD ENDED
AUGUST 31,
1997**
- -------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C>
Net asset value - beginning of period $ 12.00
-------
Income from investment operations# -
Net investment loss(S) $ (0.02)
Net realized and unrealized gain on investments and foreign currency
transactions 2.11
-------
Total from investment operations $ 2.09
-------
Less distributions declared -
From net investment income (0.01)
-------
Net asset value - end of period $ 14.08
=======
Total return 17.41%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.25%+
Net investment loss (0.21)%+
Portfolio turnover 106%
Average commission rate $0.0423
Net assets at end of period (000 omitted) $ 7,433
**For the period from the commencement of the Fund's offering of Class C
shares, January 2, 1997, through August 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
(S)The investment advisor voluntarily agreed to maintain the expenses of the
Fund at not more than 2.25% of the average daily net assets. To the extent
actual expenses were over/ under the limitation, the net investment loss per
share and the ratios would have been:
Net investment loss $(0.02)
Ratios (to average net assets):
Expenses## 2.30%+
Net investment loss (0.26)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
YEAR ENDED
AUGUST 31,
1997**
- -------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C>
Net asset value - beginning of period $12.01
------
Income from investment operations# -
Net investment income(S) $ 0.08
Net realized and unrealized gain on investments and foreign currency
transactions 2.11
------
Total from investment operations $ 2.19
------
Less distributions declared -
From net investment income (0.04)
------
Net asset value - end of period $14.16
======
Total return 19.01%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.18%+
Net investment income 0.87%+
Portfolio turnover 106%
Average commission rate $0.0423
Net assets at end of period (000 omitted) $ 825
** For the period from the commencement of the Fund's offering of Class I shares, January
2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) The investment advisor voluntarily agreed to maintain the expenses of the Fund at not
more than 1.25% of the average daily net assets. To the extent actual expenses were
over/ under the limitation, the net investment income per share and the ratios would
have been:
Net investment income $ 0.08
Ratios (to average net assets):
Expenses## 1.22%+
Net investment income 0.83%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Research Growth and Income Fund (the Fund) is a diversified series of MFS
Series Trust I (the Trust). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 gain and losses
on investments that results from fluctuations in foreign currency exchange
rates is not separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its 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 Fund
operations.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency 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 Fund may enter into
contracts with the intent of changing the relative exposure of the Fund's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date. On contract settlement date, the gains or losses are recorded
as realized gains or losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All 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 payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. The fee is reduced according to an
arrangement which measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of
net investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV. Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes are classified
as distributions in excess of net investment income or accumulated net
realized gains. During the year ended August 31, 1997, $1,538 was reclassified
from accumulated net investment income to accumulated net realized gain on
investments due to differences between book and tax accounting for currency
transactions. This change had no effect on the net assets or net asset value
per share.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65%
of average daily net assets. The investment adviser did not impose a portion
of its fee, which is reflected as a preliminary reduction of expenses in the
Statement of Operations.
Under a temporary expense reimbursement agreement with MFS, MFS has
voluntarily agreed to pay all of the Fund's operating expenses exclusive of
management, distribution, and service fees. The Fund in turn will pay MFS an
expense reimbursement fee not greater than 0.60% of average daily net assets
of the Fund. To the extent that the expense reimbursement fee exceeds the
Fund's actual expenses, the excess will be applied to amounts paid by MFS in
prior years. At August 31, 1997, the aggregate unreimbursed expenses owed to
MFS by the Fund amounted to $15,331, including $10,800 incurred in the current
period.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trustees
are currently not receiving any payments for their services to the Fund.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$61,977 for the year ended August 31, 1997, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares, commissions to dealers and payments to MFD
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by the Fund. MFD retains the
service fee for accounts not attributable to a securities dealer which
amounted to $520 for the year ended August 31, 1997. Payment of the 0.10% per
annum Class A distribution fee is currently being waved on a voluntary basis
and may be imposed at the discretion of MFD. Fees incurred under the
distribution plan during the year ended August 31, 1997, were 0.25% of average
daily net assets attributable to Class A shares.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be additional consideration for services rendered by the dealer with
respect to Class B and Class C shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $73 and
$19 for Class B and Class C shares, respectively, for the year ended August
31, 1997. Fees incurred under the distribution plan during the period ended
August 31, 1997, were 1.00% of average daily net assets attributable to Class
B and Class C shares on an annualized basis.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class C shares in the event of a shareholder redemption within
12 months of purchases. MFD receives all contingent deferred sales charges.
There were no contingent deferred sales charges imposed during the year ended
August 31, 1997, on Class A shares of the Fund. Contingent deferred sales
charges imposed during the year ended August 31, 1997, were $12,565 and $1,795
for Class B and Class C shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the average daily net assets at an effective annual rate of up
to 0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of
the average daily net assets of Class A shares at an effective annual rate of
up to 0.15%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
- ------------------------------------------------------------------------------
U.S. government securities $ 1,462,070 $ 361,245
============ ===========
Investments (non-U.S. government securities) $105,914,449 $32,798,325
============ ===========
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $79,835,431
===========
Gross unrealized appreciation $ 6,710,597
Gross unrealized depreciation (1,194,480)
-----------
Net unrealized appreciation $ 5,516,117
===========
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
Class A Shares
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996*
---------------------- -----------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
Shares sold 2,557,527 $32,802,879 44,240 $453,853
Shares issued to shareholders in
reinvestment of distributions 6,926 87,900 -- --
Shares reacquired (230,966) (2,975,784) -- --
--------- ----------- ------- --------
Net increase 2,333,487 $29,914,995 44,240 $453,853
========= =========== ======= ========
Class B Shares
PERIOD ENDED AUGUST 31,
1997**
----------------------
SHARES AMOUNT
- --------------------------------------------------------
Shares sold 3,163,454 $40,817,323
Shares issued to shareholders in
reinvestment of distributions 854 10,426
Shares reacquired (112,325) (1,518,396)
--------- -----------
Net increase 3,051,983 $39,309,353
========= ===========
Class C Shares
PERIOD ENDED AUGUST 31,
1997**
----------------------
SHARES AMOUNT
- --------------------------------------------------------
Shares sold 557,072 $7,186,023
Shares issued to shareholders in
reinvestment of distributions 97 1,196
Shares reacquired (29,255) (395,528)
-------- ----------
Net increase 527,914 $6,791,691
======== ==========
Class I Shares
PERIOD ENDED AUGUST 31,
1997**
-----------------------
SHARES AMOUNT
- --------------------------------------------------------
Shares sold 58,353 $701,858
Shares issued to shareholders in
reinvestment of distributions 148 1,976
Shares reacquired (253) (3,197)
------- --------
Net increase 58,248 $700,637
======= ========
* For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1996.
** For the period from the commencement of the Fund's offering of Class B,
Class C, and Class I shares, January 2, 1997, through August 31, 1997.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $400 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the year ended August
31, 1997, was $50.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust I and Shareholders of MFS Research Growth
and Income Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Research Growth and Income Fund, including the schedule of portfolio
investments as of August 31, 1997, and the related statement of operations for
the year then ended, the statement of changes in net assets and the financial
highlights for the year then ended and 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 Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of the securities owned at August 31, 1997, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from 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 audit provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Research Growth and Income Fund at August 31, 1997, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the year then ended and for the period from January
2, 1996 (commencement of operaitons) to August 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
October 9, 1997
--------------------------------------------
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) RESEARCH GROWTH AND INCOME FUND
<TABLE>
<S> <C>
TRUSTEES SECRETARY
A. Keith Brodkin* - Chairman and President Stephen E. Cavan*
Richard B. Bailey* - Private Investor; ASSISTANT SECRETARY
Former Chairman and Director (until 1991), James R. Bordewick, Jr.*
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, Cambridge CUSTODIAN
Trust Company State Street Bank and Trust Company
Marshall N. Cohan - Private Investor AUDITORS
Ernst & Young LLP
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery,
Brigham and Women's Hospital; Professor of INVESTOR INFORMATION
Surgery, Harvard Medical School For MFS stock and bond market outlooks, call toll
free: 1-800-637-4458 anytime from a touch-tone
The Hon. Sir J. David Gibbons, KBE - Chief telephone.
Executive Officer, Edmund Gibbons Ltd.; Chairman,
Bank of N.T. Butterfield & Son Ltd. For information on MFS mutual funds, call your
financial adviser or, for an information kit, call
Abby M. O'Neill - Private Investor; toll free: 1-800-637-2929 any business day from 9
Director, Rockefeller Financial Services, Inc. a.m. to 5 p.m. Eastern time (or leave a message
(investment advisers) anytime).
Walter E. Robb, III - President and Treasurer, INVESTOR SERVICE
Benchmark Advisors, Inc. (corporate financial MFS Service Center, Inc.
consultants); President, Benchmark Consulting P.O. Box 2281
Group, Inc. (office services); Trustee, Landmark Boston, MA 02107-9906
Funds (mutual funds)
For general information, call toll free:
Arnold D. Scott* - Senior Executive Vice 1-800-225-2606 any business day from
President, Director and Secretary, Massachusetts 8 a.m. to 8 p.m. Eastern time.
Financial Services Company
For service to speech- or hearing-impaired, call
Jeffrey L. Shames* - President and Director, toll free: 1-800-637-6576 any business day from 9
Massachusetts Financial Services Company a.m. to 5 p.m. Eastern time. (To use this service,
your phone must be equipped with a
J. Dale Sherratt - President, Insight Resources, Telecommunications Device for the Deaf.)
Inc. (acquisition planning specialists)
For share prices, account balances, and exchanges,
Ward Smith - Former Chairman (until 1994), NACCO call toll free: 1-800-MFS-TALK (1-800-637-8255)
Industries; Director, Sundstrand Corporation anytime from a touch-tone telephone.
INVESTMENT ADVISER WORLD WIDE WEB
Massachusetts Financial Services Company www.mfs.com
500 Boylston Street
Boston, MA 02116-3741
[DALBAR For the fourth year in a row,
DISTRIBUTOR LOGO] MFS earned a #1 ranking in the
MFS Fund Distributors, Inc. DALBAR, Inc. Broker/Dealer Survey,
500 Boylston Street Main Office Operations Service Quality
Boston, MA 02116-3741 Category. The firm achieved a 3.42
overall score on a scale of 1 to 4 in
DIRECTOR OF RESEARCH the 1997 survey. A total of 111 firms
Kevin R. Parke* responded, offering input on the
quality of service they received from
TREASURER 29 mutual fund companies nationwide.
W. Thomas London* The survey contained questions about
service quality in 11 categories,
ASSISTANT TREASURERS including "knowledge of operations
Mark E. Bradley* contact," "keeping you informed,"
Ellen Moynihan* "ease of doing business" with the firm.
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
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MFS(R) RESEARCH GROWTH BULK RATE
AND INCOME FUND U.S. POSTAGE
PAID
MFS
-------------
500 Boylston Street
Boston, MA 02116-3741
[LOGO] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[DALBAR
LOGO]
TOP-RATED SERVICE
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MRG-2 10/97 17M 091/291/391/891
