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[LOGO: M F S(SM)]
INVESTMENT MANAGEMENT
ANNUAL REPORT
AUGUST 31, 1997
o MFS(R) CORE GROWTH FUND
o MFS(R) EQUITY INCOME FUND
o MFS(R) SPECIAL OPPORTUNITIES FUND
o MFS(R) BLUE CHIP FUND
o MFS(R) CONVERTIBLE SECURITIES FUND
o MFS(R) NEW DISCOVERY FUND
o MFS(R) RESEARCH INTERNATIONAL FUND
o MFS(R) SCIENCE AND TECHNOLOGY FUND
[Graphic Omitted]
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<S> <C>
MFS(R) CORE GROWTH FUND MFS(R) CONVERTIBLE SECURITIES FUND
MFS(R) EQUITY INCOME FUND MFS(R) NEW DISCOVERY FUND
MFS(R) SPECIAL OPPORTUNITIES FUND MFS(R) RESEARCH INTERNATIONAL FUND
MFS(R) BLUE CHIP FUND MFS(R) SCIENCE AND TECHNOLOGY FUND
Trustees
A. Keith Brodkin* - Chairman and President SECRETARY
Stephen E. Cavan*
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991), ASSISTANT SECRETARY
Massachusetts Financial Services Company; James R. Bordewick, Jr.*
Director, Cambridge Bancorp; Director,
Cambridge Trust Company CUSTODIAN
State Street Bank and Trust Company
Marshall N. Cohan - Private Investor
AUDITORS
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery, Ernst & Young LLP
Brigham and Women's Hospital; Professor of Surgery,
Harvard Medical School INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free:
The Hon. Sir J. David Gibbons, KBE - Chief Executive 1-800-637-4458 anytime from a touch-tone telephone.
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 toll free:
Abby M. O'Neill - Private Investor; Director, Rockefeller 1-800-637-2929 any business day from 9 a.m. to 5 p.m.
Financial Services, Inc. (investment advisers) Eastern time (or leave a message anytime).
Walter E. Robb, III - President and Treasurer, Benchmark INVESTOR SERVICE
Advisors, Inc. (corporate financial consultants); President, MFSService Center, Inc.
Benchmark Consulting Group, Inc. (office services); P.O. Box 2281
Trustee, Landmark Funds (mutual funds) Boston, MA 02107-9906
Arnold D. Scott* - Senior Executive Vice President, Director For general information, call toll free: 1-800-225-2606
and Secretary, Massachusetts Financial Services Company any business day from 8 a.m. to 8 p.m. Eastern time.
Jeffrey L. Shames* - President and Director, For service to speech- or hearing-impaired, call toll free:
Massachusetts Financial Services Company 1-800-637-6576 any business day from 9 a.m. to 5 p.m.
Eastern time. (To use this service, your phone must be
J. Dale Sherratt - President, Insight Resources, Inc. equipped with a Telecommunications Device for the Deaf.)
(acquisition planning specialists)
For share prices, account balances, and exchanges, call toll
Ward Smith - Former Chairman (until 1994), NACCO free: 1-800-MFS-TALK (1-800-637-8255) anytime from a
Industries; Director, Sundstrand Corporation touch-tone telephone.
INVESTMENT ADVISER WORLD WIDE WEB
Massachusetts Financial Services Company www.mfs.com
500 Boylston Street
Boston, MA 02116-3741
[DALBAR LOGO] For the fourth year in a row, MFS
Distributor earned a #1 ranking in the DALBAR, Inc.
MFS Fund Distributors, Inc. Broker/Dealer Survey, Main Office Operations
500 Boylston Street Service Quality Category. The firm achieved a
Boston, MA 02116-3741 3.42 overall score on a scale of 1 to 4 in the
1997 survey. A total of 111 firms responded,
PORTFOLIO MANAGERS* offering input on the quality of service they
Irfan Ali received from 29 mutual fund companies
John F. Brennan, Jr. nationwide. The survey contained questions
Mitchell D. Dynan about service quality in 11 categories,
Judith Noelle Lamb including "knowledge of operations contact,"
Robert J. Manning "keeping you informed," and "ease of doing
Lisa B. Nurme business" with the firm.
Kevin R. Parke
Stephen Pesek
Brian E. Stack
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*AFFILIATED WITH THE INVESTMENT ADVISER
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LETTER FROM THE CHAIRMAN
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 (the Fed'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.
In the fixed-income markets, we have been encouraged by the Fed's decision at
its July meeting not to raise short-term interest rates. But we cannot rule
out the possibility of future monetary tightening in the second half of the
year if, as we now expect, the economy strengthens during the balance of 1997.
Therefore, our risk/reward outlook for the fixed-income markets is neutral,
and we believe that fixed-income investors should think in terms of earning
the coupon income from their investments rather than seeking possible gains
from price appreciation.
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
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PORTFOLIO MANAGERS' OVERVIEWS
MFS Core Growth Fund
For the 12 months ended August 31, 1997, Class A shares of the Fund provided a
total return of 45.22%, and Class I shares returned 45.31%. These returns, which
assume 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.
Four general themes best describe the Fund's current holdings, which are built
from the bottom up based on individual stock selection. First, the Fund seeks
companies with high unit sales growth that can support above-average revenue
growth. Second, the Fund looks for companies that 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 seem able to
control their own destinies through internal changes such as 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 that, in our opinion, have the potential to benefit from a fundamental
mismatch in the balance between supply and demand.
Positions in several industry sectors have been added to the Fund or have been
increased in recent months, including drug store chains, in which we expect to
see growth as the population ages, and entertainment companies, in which
consolidations are continuing. We have also increased the Fund's holdings in the
oil service sector, which is benefiting from a mismatch in supply and demand, as
well as in package delivery companies, which are capitalizing on the strong
economy and wage pressures at United Parcel Service.
/s/ Stephen Pesek
Stephen Pesek
Portfolio Manager
MFS Equity Income Fund
For the 12 months ended August 31, 1997, Class A shares of the Fund provided a
total return of 38.05%, and Class I shares returned 37.95%. These returns, which
assume the reinvestment of distributions but exclude the effects of any sales
charges, compare to a 40.78% return for the S&P 500.
The Fund's top holdings remain in the financial services, utilities, energy, and
industrial goods and services sectors. Within financial services, the Fund
remains heavily weighted in insurance stocks, in which restructuring and
consolidation are leading to improved returns and better valuations. The Fund's
utility holdings are concentrated in gas distribution companies, high-quality,
low-cost electric utilities, and well-positioned local and long-distance
telephone companies. Essentially, the Fund is seeking to invest in companies
that we believe are well insulated from heightened competition and/ or companies
that may benefit from continuing consolidation in these industries. The energy
sector remains a key one for the Fund, especially those companies that are
dedicated to increasing production, cutting costs, and improving returns in
lagging businesses such as refining. Pollution control is a growing portion of
the Fund's holdings in industrial goods and services. This industry has
underperformed the market for several years but is now refocusing on its core
business, embracing cost cutting, and allocating capital more carefully.
The Fund continues to seek holdings in companies that we believe provide
attractive dividend yields and reasonable valuations, characteristics that we
feel could provide protection against price declines in a volatile market.
/s/ Lisa B. Nurme
Lisa B. Nurme
Portfolio Manager
MFS Special Opportunities Fund
For the 12 months ended August 31, 1997, Class A shares of the Fund provided a
total return of 31.84%, and Class I shares returned 32.23%. These returns, which
assume the reinvestment of distributions but exclude the effects of any sales
charges, compare to a 40.78% return for the S&P 500 and to a 15.55% return for
the average high-yield corporate bond fund as tracked by CDA/ Wiesenberger, an
independent firm that reports mutual fund performance.
The Fund continues to have the majority of its assets in common stocks because
we have found few attractive investments in the distressed and high-yield
markets. The Fund's investment strategy continues to incorporate both growth
and value disciplines. We have found investment opportunities in companies
that have recently emerged from bankruptcy, companies with financially
leveraged capital structures but with strong cash flow and solid earnings
prospects, and companies with attractive growth prospects but with valuations
that don't fully reflect these prospects. Our overall stock market perspective
continues to be cautious; however, we have been able to find an adequate
number of special situations for investment. The weighting of high-yield and
distressed bonds is likely to increase as more-appealing investment ideas
become available.
/s/ John F. Brennan, Jr. /s/ Robert J. Manning
John F. Brennan, Jr. Robert J. Manning
Portfolio Manager Portfolio Manager
MFS Blue Chip Fund
The Fund commenced operations on January 2, 1997, and from that date through
August 31, 1997, both Class A and Class I shares provided total returns of
17.70%. These returns, which include the reinvestment of distributions but
exclude the effects of any sales charges, compare to a 22.91% return for the S&P
500 for the same period.
The Fund's investment strategy continues to be predicated on the assumption that
the global economy will grow slowly during 1998 and that U.S. interest rates
will remain fairly stable. In the United States, this assumption is supported by
the longevity of the current economic recovery and the high levels of consumer
debt. Economic growth remains moderate in a good part of Europe. Double-digit
unemployment rates in France (in addition to tax increases) and Germany should
prevent these economies from accelerating. Japan is weak, and economic growth in
other Asian countries could slow as interest rates rise.
The Fund is positioned relatively defensively, with the bulk of its investments
in companies that we believe can sustain double-digit earnings growth in a
slow-growth environment. Earnings ultimately drive stock prices, and investors
will bid up the share prices of companies that can achieve above-average
earnings growth.
The Fund's holdings are diverse and spread across many industries. However,
consistent with this defensive posture, the Fund continues to be overweighted in
the consumer staples and health care sectors. Conversely, the Fund is
significantly underweighted in basic materials and automobiles and housing. The
industrial goods sector is overweighted but aerospace and defense companies have
been emphasized. We believe this sector should perform relatively well in a
slow-growth economy. Similarly, the retail weighting is greater than the
market's, but all of this is in supermarkets and drug stores. The financial
services sector is overweighted, with an emphasis on high-quality regional banks
and insurance companies. The weightings in energy and utilities and
communications approximate those of the market, with the primary energy holdings
being large multinational oil companies. While the utility holdings offer modest
price appreciation, they are viewed as the ballast in the portfolio and
contribute to the Fund's yield. Emphasis has also been placed on companies that
have significant recurring revenue streams and/or that participate in dynamic,
high-growth markets. Examples would be First Data, DST Systems, and Service
Corporation International. For the same reasons, the bulk of the Fund's
technology investments are in the software industry.
/s/ Mitchell D. Dynan
Mitchell D. Dynan
Portfolio Manager
MFS Convertible Securities Fund
The Fund commenced operations on January 2, 1997, and from that date through
August 31, 1997, its Class A shares provided a total return of 14.70%, while its
Class I shares returned 14.60%. These returns, which assume the reinvestment of
distributions but exclude the effects of any sales charges, compare to a 15.98%
return for the Merrill Lynch All Convertibles Index, an unmanaged index of
convertible securities, and to a 14.48% return for the average convertible
securities fund for the same period as tracked by Lipper Analytical Services,
Inc., an independent firm that reports mutual fund performance.
The Fund is taking an extremely defensive posture due to the stock market's
current high valuation and its increased volatility in order to preserve
capital. Convertible securities comprise 80% of the portfolio, versus the
required 65% minimum. Increased demand for the convertible asset class has led
to a more expensive convertible market, as illustrated by the aggressive pricing
of new issues. In response, the portfolio is skewed toward convertibles that are
technically cheap; that is, those whose price movements correlate well with
upward price movements in the underlying common stock and that have
above-average yield.
The Fund's overall strategy is to invest in companies that we believe are
benefiting from one or more of the following trends: industry consolidation,
market dominance, and cost containment. Performance was favorably impacted by
overweightings in industrial goods and services companies, including Browning
Ferris, Corning, and U.S. Filter; leisure companies, which included American
Radio Systems and Royal Caribbean Cruises; financial services companies such as
Frontier Insurance and MGIC Investment Corp.; and technology companies,
including Baan and Data General. Conversely, companies in the basic materials
sector, such as RMI Titanium and Titanium Metals, detracted from year-to-date
performance. A value-oriented approach will continue to be used to evaluate
company fundamentals and the technical aspects of convertible securities.
/s/ Judith Noelle Lamb
Judith Noelle Lamb
Portfolio Manager
MFS New Discovery Fund
The Fund commenced operations on January 2, 1997, and from that date through
August 31, 1997, its Class A shares provided a total return of 30.70%, while its
Class I shares returned 30.80%. These returns, which assume the reinvestment of
distributions but exclude the effects of any sales charges, compare to a 17.97%
return for the Russell 2000 Total Return Index, an unmanaged index comprised of
2,000 of the smallest U.S.-domiciled company common stocks that are traded on
the New York Stock Exchange, the American Stock Exchange, and NASDAQ.
The Fund invests principally in the shares of emerging companies that we believe
have the potential to grow into large enterprises. We maintain significant
weightings in the technology, health care, lodging, media, and business and
information services industries. We regard these as fundamentally attractive
sectors within which innovative and well-managed companies can be expected to
experience sustainable unit and earnings growth well above that seen in the
broader economy.
Among the factors contributing to the Fund's favorable performance were gains in
the shares of Summit Design, a provider of electronic design and automation
software, and Idexx Laboratories, a manufacturer of veterinary diagnostics
equipment and consumables. In addition, advances were recorded by broadcasters
American Radio Systems and Jacor Communications. The portfolio also benefited
from appreciation in the shares of Affiliated Computer Services and in high- end
hotel operators such as Wyndham, Renaissance, and Doubletree hotels.
Our research efforts continue to identify many attractively valued, emerging
growth companies that we believe can deliver exceptional long-term returns.
This, coupled with a market backdrop that suggests the potential for renewed
interest in smaller-company shares, makes us optimistic about performance
prospects for the year ahead.
/s/ Brian E. Stack
Brian E. Stack
Portfolio Manager
MFS Research International Fund
The Fund commenced operations on January 2, 1997, and from that date through
August 31, 1997, both Class A and Class I shares provided total returns of
9.60%. These returns, which assume the reinvestment of distributions but exclude
the effects of any sales charges, compare to a 4.39% return for the Morgan
Stanley Capital International EAFE (Europe, Australia, Far East) Index, an
unmanaged index of international stocks.
The top five sectors in the Fund are financial services (at 14.8% of assets),
technology (12.1%), utilities and communications (11.8%), leisure (11.0%), and
industrial goods and services (9.3%). The three top holdings are Nippon
Broadcasting, Secom, and Canon. Nippon Broadcasting is the world's largest radio
network operating company and has held the top audience ratings in Japan for the
past 22 years. We believe the company can continue to increase earnings by 10%
to 15% per year over the next several years. Secom holds a dominant 60% market
share of the electronic security market in Japan and holds over a 70% market
share through subsidiaries in Korea, Taiwan, Thailand, Malaysia, and Singapore.
We expect Canon's underlying operating growth to be at 12% in the coming year.
The company's valuation is currently cheap for a quality growth company.
In the technology sector, Sony's new digital product launches and strong product
pipeline continue to offer the company significant opportunity, while its new
management's compensation is directly tied to the company's performance. Through
major distributors in Europe and Japan, Sony Pictures will soon exploit the
3,400 movie titles it has in its motion picture bank. As a result, we expect
operating profits to grow at an average of over 20% over the next couple of
years.
Within the financial services sector, several banks and insurance companies in
Hong Kong, Great Britain, France, and Japan continue to demonstrate good
earnings growth that, coupled with substantial cost savings, should yield
excellent results.
The Fund is based upon the international research analysts' best ideas within
their industries. Stocks are selected after careful, in-depth, fundamental
analysis of companes' 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 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 are a result of the "best
ideas" stock-selection process. However, the analysts revisit weightings
regularly to assure agreement within the changing economic landscape. We will
continue to use a bottom-up, fundamental approach to investing in companies for
the Fund.
/s/ Kevin R. Parke
Kevin R. Parke
Director of Research
The committee of MFS equity research analysts is responsible for the day-to-
day management of the Fund under the general supervision of Mr. Parke.
MFS Science and Technology Fund
The Fund commenced operations on January 2, 1997, and from that date through
August 31, 1997, both Class A and Class I shares provided total returns of
25.30%. These returns, which assume the reinvestment of distributions but
exclude the effects of any sales charges, compare to a 23.44% return for the
NASDAQ Composite Index, an unmanaged index of common stocks traded on NASDAQ,
and to a 19.78% return for the average technology fund as tracked by CDA/
Wiesenberger, an independent firm that reports mutual fund performance.
The Fund continues to seek companies that we believe are fast growing, have
market share leadership, and have a defensible strategic position. Holdings
remain focused in the computer software, networking, business services, and
semiconductor areas. To date, the Fund has not made significant investments in
the health care sector.
The Fund's performance has been favorably impacted by stock selection and by a
generally strong technology market. The volatility of the technology sector has
also provided attractive buying opportunities during times of price weakness.
Top holdings include Oracle Systems, Microsoft, and Computer Associates
International. All three of these stocks have seen outstanding price
appreciation driven by a healthy industry environment and by each management's
ability to deliver superior financial results. We believe the outlook for the
technology sector remains highly attractive, while the outlook for the health
care sector should start to improve.
/s/ Irfan Ali
Irfan Ali
Portfolio Manager
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PORTFOLIO MANAGERS' PROFILES
Each portfolio manager has acted in that capacity since the commencement of
investment operations of each Fund.
MFS CORE GROWTH FUND
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.
MFS EQUITY INCOME FUND
Lisa B. 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.
MFS SPECIAL OPPORTUNITIES FUND
John F. Brennan, Jr., has been a member of the MFS investment staff since 1985.
A graduate of the University of Rhode Island and the Stanford University
Graduate School of Business Administration, he began his career at MFS as an
industry specialist and was promoted to Assistant Vice President - Investments
in 1987. He was named Vice President Investments in 1988 and Senior Vice
President in 1995.
Robert J. 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 the
Boston College Graduate School of Management, he was named Vice President
Investments in 1988 and Senior Vice President in 1993.
MFS BLUE CHIP FUND
Mitchell D. Dynan joined the MFS Research Department in 1986. A graduate of
Tufts University, he was named Assistant Vice President - Investments in 1987
and Vice President - Investments in 1988.
MFS CONVERTIBLE SECURITIES FUND
Judith Noelle Lamb joined MFS in 1992 as Vice President and analyst
specializing in convertible securities. She is a graduate of New York
University and the New York University Graduate School
of Business.
MFS NEW DISCOVERY FUND
Brian E. Stack joined the MFS Research Department as Vice President Investments
in 1993. A graduate of Boston College and the Darden School of Business at the
University of Virginia, he has worked as an equity analyst since 1987.
MFS RESEARCH INTERNATIONAL FUND
The committee of MFS equity research analysts is responsible for the day-to-day
management of the Fund under the general supervision of Kevin R. Parke. A
graduate of Lehigh University and the Harvard University Graduate School of
Business Administration, Mr. Parke joined the MFS Research Department in 1985 as
an industry specialist and was named Assistant Vice President - Investments in
1987, Vice President - Investments in 1988, Senior Vice President in 1993,
Director of Equity Research in 1995, and Executive Vice President in 1997.
MFS SCIENCE AND TECHNOLOGY FUND
Irfan Ali joined MFS in 1993 as an industry specialist. A graduate of Harvard
College and the Harvard University Graduate School of Business Administration,
he was named Assistant Vice President in 1996 and Vice President in 1997.
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INVESTMENT OBJECTIVES
MFS CORE GROWTH FUND
The objective of the Fund is capital appreciation. Under normal market
conditions, the Fund invests at least 65% of its total assets in equity
securities of well-known and established companies that 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).
Commencement of Investment Operations: Class A: January 2, 1996 Class I:
January 2, 1997
MFS EQUITY INCOME FUND
The primary objective of the Fund is reasonable income and the secondary
objective is 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.
Commencement of Investment Operations: Class A: January 2, 1996 Class I:
January 2, 1997
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 that represent uncommon value by having the potential
for significant capital appreciation over a period of 12 months or longer.
Commencement of Investment Operations: Class A: January 2, 1996 Class I:
January 2, 1997
MFS BLUE CHIP FUND
The objective of the Fund is capital appreciation. The Fund invests, under
normal market conditions, at least 65% of its total assets in equity securities
of well-known, stable, and established companies that the Fund's investment
adviser believes have above-average capital appreciation potential. The Fund may
invest up to 35% of its total assets in other securities (including emerging
growth companies) offering an opportunity for capital appreciation.
Commencement of Investment Operations: Class A: January 2, 1997 Class I:
January 2, 1997
MFS CONVERTIBLE SECURITIES FUND
The objective of the Fund is to maximize total return through a combination of
current income and capital appreciation. The Fund invests, under normal market
conditions, at least 65% of its total assets in convertible securities, and may
invest up to 35% of its total assets in nonconvertible corporate and U.S.
government fixed-income securities, equity securities, and money market
instruments. The Fund may engage in short sales.
Commencement of Investment Operations: Class A: January 2, 1997 Class I:
January 2, 1997
MFS NEW DISCOVERY FUND
The objective of the Fund is capital appreciation. The Fund invests, under
normal market conditions, at least 65% of its total assets in equity securities
of companies of any size that the Fund's manager believes offer superior
prospects for growth. The Fund emphasizes companies in the developing stages of
their life cycle that offer the potential for accelerated earnings or revenue
growth (emerging growth companies) and may invest up to 35% of its total assets
in other securities offering an opportunity for capital appreciation. The Fund
may engage in short sales.
Commencement of Investment Operations: Class A: January 2, 1997 Class I:
January 2, 1997
MFS RESEARCH INTERNATIONAL FUND
The objective of the Fund is capital appreciation. The Fund invests, under
normal market conditions, at least 65% of its total assets in equity securities
of companies whose principal activities are located outside the United States
and may invest up to 35% of its total assets in other securities offering an
opportunity for capital appreciation.
Commencement of Investment Operations: Class A: January 2, 1997 Class I:
January 2, 1997
MFS SCIENCE AND TECHNOLOGY FUND
The objective of the Fund is capital appreciation. The Fund invests, under
normal market conditions, at least 65% of its total assets in equity securities
of companies that the Fund's manager expects to benefit from scientific and
technological advances and improvements, including companies in the developing
stages of their life cycle that offer the potential for accelerated earnings or
revenue growth (emerging growth companies). The Fund may also invest up to 35%
of its total assets in other securities offering an opportunity for capital
appreciation. The Fund may engage in short sales.
Commencement of Investment Operations: Class A: January 2, 1997 Class I:
January 2, 1997
PERFORMANCE SUMMARY
Currently, each Fund offers only Class A and Class I shares, 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.
The information below and on the following page illustrates the historical
performance of the Funds' Class A shares in comparison to various market
indicators. Class A share performance results reflect no 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 differences in charges and fees paid by shareholders investing
in different classes. It is not possible to invest directly in an index.
MFS CORE GROWTH FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2,
1996, through August 31, 1997)
MFS Core S&P 500 Consumer
Growth Fund Composite Price Index
- Class A Index - U.S.
----------- --------- -----------
1/96 $ 10,000 $ 10,000 $ 10,000
8/96 $ 12,330 $ 10,745 $ 10,253
2/97 $ 15,303 $ 13,166 $ 10,405
8/97 $ 17,905 $ 15,112 $ 10,476
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 1997
1 Year Life of Fund+
- ------------------------------------------------------------------------------
MFS Core Growth Fund (Class A) at net asset value +45.22% +41.95%
- ------------------------------------------------------------------------------
MFS Core Growth Fund (Class I) at net asset value +45.31% +42.00%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index* +40.78% +28.29%
- ------------------------------------------------------------------------------
Consumer Price Index*,** + 2.19% + 2.85%
- ------------------------------------------------------------------------------
+ For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1997.
* Source: CDA/Wiesenberger.
** The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
MFS EQUITY INCOME FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1996, through August 31, 1997)
MFS Equity S&P 500 Consumer
Income Fund Composite Price Index
- Class A Index - U.S.
----------- --------- -----------
1/96 $ 10,000 $ 10,000 $ 10,000
8/96 $ 11,070 $ 10,745 $ 10,253
2/97 $ 13,312 $ 13,166 $ 10,405
8/97 $ 15,282 $ 15,112 $ 10,476
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 1997
1 Year Life of Fund+
- ------------------------------------------------------------------------------
MFS Equity Income Fund (Class A) at net asset value +38.05% +29.05%
- ------------------------------------------------------------------------------
MFS Equity Income Fund (Class I) at net asset value +37.95% +29.00%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index* +40.78% +28.29%
- ------------------------------------------------------------------------------
Consumer Price Index*,** + 2.19% + 2.85%
- ------------------------------------------------------------------------------
+ For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1997.
* Source: CDA/Wiesenberger.
** The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
MFS SPECIAL OPPORTUNITIES FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1996, through August 31, 1997)
MFS Special S&P 500 Consumer
Opportunities Fund Composite Price Index
- Class A Index - U.S.
------------------ --------- -----------
1/96 $ 10,000 $ 10,000 $ 10,000
8/96 $ 11,360 $ 10,745 $ 10,253
2/97 $ 12,789 $ 13,166 $ 10,405
8/97 $ 14,976 $ 15,112 $ 10,476
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
1 Year Life of Fund+
- ------------------------------------------------------------------------------------
<S> <C> <C>
MFS Special Opportunities Fund (Class A) at net asset value +31.84% +27.49%
- ------------------------------------------------------------------------------------
MFS Special Opportunities Fund (Class I) at net asset value +32.23% +27.72%
- ------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index* +40.78% +28.29%
- ------------------------------------------------------------------------------------
Average high-yield corporate bond fund* +15.55% +13.22%
- ------------------------------------------------------------------------------------
Consumer Price Index*,** + 2.19% + 2.85%
- ------------------------------------------------------------------------------------
+ For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1997.
* Source: CDA/Wiesenberger.
** The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
</TABLE>
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
Class 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 I share results include the performance and the operating expenses of
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.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED AUGUST 31, 1997, THE PERCENTAGE OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR THE FUNDS
WAS:
FUND DIVIDENDS-RECEIVED DEDUCTION
----------------------------------------------
MFS CORE GROWTH FUND 2.64%
MFS EQUITY INCOME FUND 21.37%
MFS SPECIAL OPPORTUNITIES FUND 4.84%
MFS BLUE CHIP FUND 48.57%
MFS CONVERTIBLE SECURITIES FUND 91.49%
MFS NEW DISCOVERY FUND 0.36%
MFS RESEARCH INTERNATIONAL FUND 0.04%
MFS SCIENCE AND TECHNOLOGY FUND 4.16%
FOREIGN TAX CREDIT
THE RESEARCH INTERNATIONAL FUND IS ESTIMATED TO HAVE DERIVED APPROXIMATELY
11.8% OF ITS ORDINARY INCOME FROM DIVIDENDS PAID BY FOREIGN COMPANIES, AND TO
HAVE PAID FOREIGN TAXES EQUIVALENT TO APPROXIMATELY 1.1% OF ITS ORDINARY
INCOME.
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS CORE GROWTH FUND
Stocks - 96.2%
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 90.9%
Aerospace - 0.6%
Thiokol Corp. 200 $ 15,925
- -------------------------------------------------------------------------------
Airlines - 0.5%
Continental Airlines Holdings, Inc.* 400 $ 14,650
- -------------------------------------------------------------------------------
Automotive - 0.5%
Hayes Wheels International, Inc.* 400 $ 13,000
- -------------------------------------------------------------------------------
Banks and Credit Companies - 1.3%
Comerica, Inc. 200 $ 14,163
Northern Trust Corp. 400 21,250
----------
$ 35,413
- -------------------------------------------------------------------------------
Business Machines - 2.1%
Affiliated Computer Services, Inc., "A"* 500 $ 13,125
Sun Microsystems, Inc.* 300 14,400
Texas Instruments, Inc. 275 31,247
----------
$ 58,772
- -------------------------------------------------------------------------------
Business Services - 3.1%
At Home Corp.* 100 $ 1,913
Computer Sciences Corp.* 350 26,031
Corporate Family Solutions, Inc.* 100 1,500
CUC International, Inc.* 1,200 28,200
Ikon Office Solutions, Inc. 800 20,800
Innova Corp.* 100 2,200
Lamalie Associates, Inc.* 100 1,900
Pierce Leahy Corp.* 100 2,725
----------
$ 85,269
- -------------------------------------------------------------------------------
Chemicals - 1.6%
Air Products & Chemicals, Inc. 300 $ 24,469
Ferro Corp. 500 18,813
----------
$ 43,282
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.7%
Microsoft Corp.* 150 $ 19,828
- -------------------------------------------------------------------------------
Computer Software - Systems - 8.0%
Aehr Test Systems* 100 $ 1,750
Aris Corp.* 100 2,450
BMC Software, Inc.* 300 18,788
Cadence Design Systems, Inc.* 600 28,538
Compaq Computer Corp.* 650 42,575
Computer Associates International, Inc. 500 33,438
Compuware Corp.* 550 33,963
Lear Corp.* 100 4,581
Oracle Systems Corp.* 900 34,313
Peritus Software Services, Inc.* 100 2,500
Synopsys, Inc.* 450 15,581
TSI International Software Ltd.* 100 1,225
----------
$ 219,702
- -------------------------------------------------------------------------------
Consumer Goods and Services - 7.5%
Colgate-Palmolive Co. 200 $ 12,550
Meyer Fred, Inc.* 400 20,800
Philip Morris Cos., Inc. 950 41,444
RJR Nabisco Holdings Corp. 550 19,147
Tyco International Ltd.* 1,440 112,950
----------
$ 206,891
- -------------------------------------------------------------------------------
Containers - 3.1%
AptarGroup, Inc. 350 $ 19,688
Corning, Inc. 550 29,081
Jefferson Smurfit Corp.* 700 13,606
Stone Container Corp. 1,300 22,425
----------
$ 84,800
- -------------------------------------------------------------------------------
Electrical Equipment - 0.5%
Westinghouse Electric Corp. 500 $ 12,875
- -------------------------------------------------------------------------------
Electronics - 7.7%
Altera Corp.* 350 $ 18,638
Analog Devices, Inc.* 500 16,563
Atmel Corp.* 700 24,762
Intel Corp. 600 55,275
International Rectifier Corp.* 600 13,688
KLA-Tencor Corp.* 200 14,175
Kulicke & Soffa Industries, Inc.* 600 27,563
Teradyne, Inc.* 750 41,766
----------
$ 212,430
- -------------------------------------------------------------------------------
Entertainment - 5.5%
American Radio Systems Corp., "A"* 650 $ 32,013
Clear Channel Communications, Inc.* 500 33,969
Gemstar Group Ltd.* 800 16,400
ITT Corp.* 250 15,703
LIN Television Corp.* 500 23,719
Univision Communications, Inc., "A"* 600 30,750
----------
$ 152,554
- -------------------------------------------------------------------------------
Financial Institutions - 2.7%
American Express Co. 325 $ 25,269
Associates First Capital Corp., "A" 200 11,613
Federal National Mortgage Assn. 500 22,000
Morgan Stanley, Dean Witter, Discover and Co. 300 14,438
----------
$ 73,320
- -------------------------------------------------------------------------------
Food and Beverage Products - 1.2%
Archer-Daniels-Midland Co. 525 $ 11,353
Wrigley (Wm) Junior Co. 300 21,750
----------
$ 33,103
- -------------------------------------------------------------------------------
Forest and Paper Products - 0.8%
Champion International Corp. 400 $ 23,675
- -------------------------------------------------------------------------------
Insurance - 5.5%
Chubb Corp. 225 $ 15,047
CIGNA Corp. 150 27,506
Conseco, Inc. 775 33,325
Frontier Insurance Group, Inc. 100 3,500
Hartford Life, Inc., "A" 100 3,731
Lincoln National Corp. 350 23,428
Nationwide Financial Services, Inc., "A" 100 2,775
Progressive Corp. 150 14,850
Reliastar Financial Corp. 250 18,688
Travelers Group, Inc. 150 9,525
----------
$ 152,375
- -------------------------------------------------------------------------------
Machinery - 0.1%
JLK Direct Distribution, Inc., "A"* 100 $ 2,413
- -------------------------------------------------------------------------------
Medical and Health Products - 6.8%
Arterial Vascular Engineering, Inc.* 600 $ 22,200
Boston Scientific Corp.* 400 28,200
Bristol-Myers Squibb Co. 400 30,400
McKesson Corp. 275 25,764
Mentor Corp. 1,000 30,750
Ocular Sciences, Inc.* 100 1,913
Schering Plough Corp. 960 46,080
Schick Technologies, Inc.* 100 2,650
----------
$ 187,957
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 5.0%
AmeriSource Health Corp. "A"* 600 $ 30,037
HEALTHSOUTH Corp.* 800 19,950
Mariner Health Group, Inc.* 300 4,350
Medtronic, Inc. 50 4,519
Orthalliance, Inc.* 100 1,388
St. Jude Medical, Inc.* 650 24,741
United Healthcare Corp. 840 40,845
Vencor, Inc.* 300 12,038
----------
$ 137,868
- -------------------------------------------------------------------------------
Office Equipment - 1.1%
Office Depot, Inc.* 1,600 $ 29,500
- -------------------------------------------------------------------------------
Oil Services - 4.0%
Trico Marine Services, Inc.* 400 $ 12,400
Baker Hughes, Inc. 200 8,475
Cal Dive International, Inc.* 100 3,400
Camco International, Inc. 250 17,219
Cooper Cameron Corp.* 300 19,463
Friede Goldman International, Inc.* 100 4,025
Noble Drilling Corp.* 800 22,750
Weatherford Enterra, Inc.* 500 23,031
----------
$ 110,763
- -------------------------------------------------------------------------------
Oils - 0.2%
Santa Fe International Corp.* 100 $ 4,475
- -------------------------------------------------------------------------------
Pollution Control - 0.9%
Republic Industries, Inc.* 500 $ 12,281
Waste Management, Inc. 400 12,800
----------
$ 25,081
- -------------------------------------------------------------------------------
Printing and Publishing - 0.7%
CMP Media, Inc.* 100 $ 2,675
Quipp, Inc.* 1,200 18,000
----------
$ 20,675
- -------------------------------------------------------------------------------
Railroads - 2.3%
Burlington Northern Santa Fe Railway Co. 225 $ 20,630
Kansas City Southern Industries, Inc. 200 14,975
Wisconsin Central Transportation Corp.* 900 27,900
----------
$ 63,505
- -------------------------------------------------------------------------------
Real Estate - 0.2%
Equity Office Properties Trust* 200 $ 5,838
- -------------------------------------------------------------------------------
Restaurants and Lodging - 1.5%
Hilton Hotels Corp. 950 $ 29,153
Prime Hospitality Corp.* 500 9,500
Trendwest Resorts, Inc.* 100 1,825
----------
$ 40,478
- -------------------------------------------------------------------------------
Special Products and Services - 0.8%
Keystone International, Inc. 600 $ 22,613
- -------------------------------------------------------------------------------
Stores - 7.6%
CVS Corp. 800 $ 45,100
Dollar General Corp. 450 18,647
Linens 'N Things, Inc.* 450 13,050
Penney (J.C.), Inc. 400 24,000
Rite Aid Corp. 1,900 95,119
Viking Office Products, Inc.* 700 14,788
----------
$ 210,704
- -------------------------------------------------------------------------------
Telecommunications - 4.8%
3Com Corp.* 400 $ 19,975
Ascend Communications, Inc.* 250 10,609
Aspect Telecommunications Corp.* 1,200 26,400
Bay Networks, Inc.* 550 19,456
Cable Design Technologies Corp.* 500 16,719
Cisco Systems, Inc.* 250 18,844
Intermedia Communications, Inc.* 350 12,513
Qwest Communications International, Inc.* 200 8,150
----------
$ 132,666
- -------------------------------------------------------------------------------
Transportation - 1.3%
Caliber Systems, Inc. 500 $ 20,875
CNF Transportation, Inc. 400 14,450
----------
$ 35,325
- -------------------------------------------------------------------------------
Utilities - Telephone - 0.7%
Sprint Corp. 400 $ 18,787
- -------------------------------------------------------------------------------
Total U.S. Stocks $2,506,512
- -------------------------------------------------------------------------------
Foreign Stocks - 5.3%
Canada - 1.3%
Canadian National Railway Co. (Railroads) 500 $ 24,844
Coca-Cola Beverages Ltd. (Beverages)* 700 11,074
----------
$ 35,918
- -------------------------------------------------------------------------------
Ireland - 0.7%
Elan Corp. PLC, ADR (Health Products)* 450 $ 20,475
- -------------------------------------------------------------------------------
Netherlands - 0.6%
Akzo Nobel (Chemicals) 100 $ 15,466
- -------------------------------------------------------------------------------
Switzerland - 0.9%
Kuoni Reisen Holdings AG (Transportation) 6 $ 24,620
- -------------------------------------------------------------------------------
United Kingdom - 1.8%
Danka Business Systems PLC, ADR (Business Services) 475 $ 22,206
British Petroleum PLC, ADR (Oil and Gas) 200 16,925
Grand Metropolitan PLC (Food and Beverage Products) 1,300 11,934
----------
$ 51,065
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 147,544
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,371,295) $2,654,056
- -------------------------------------------------------------------------------
Short-Term Obligation - 3.3%
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 9/02/97, at Amortized Cost $ 90 $ 89,987
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,461,282) $2,744,043
Other Assets, Less Liabilities - 0.5% 12,077
- -------------------------------------------------------------------------------
Net Assets - 100.0% $2,756,120
- -------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS EQUITY INCOME FUND
Stocks - 89.3%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 78.1%
Aerospace - 3.9%
Allied Signal, Inc. 210 $ 17,338
General Dynamics Corp. 210 16,721
United Technologies Corp. 300 23,419
----------
$ 57,478
- -------------------------------------------------------------------------------
Agricultural Products - 1.1%
Case Corp. 240 $ 16,095
- -------------------------------------------------------------------------------
Apparel and Textiles - 1.0%
Unifi, Inc. 390 $ 14,966
- -------------------------------------------------------------------------------
Automotive - 1.4%
Ford Motor Co. 200 $ 8,600
TRW, Inc. 240 12,510
----------
$ 21,110
- -------------------------------------------------------------------------------
Banks and Credit Companies - 7.6%
Bank of New York, Inc. 280 $ 12,495
CCB Financial Corp. 190 15,366
Comerica, Inc. 200 14,163
First Commerce Corp. 300 16,013
First Hawaiian, Inc. 350 12,906
National City Corp. 240 13,560
Northern Trust Corp. 250 13,281
PNC Bank Corp. 320 13,840
----------
$ 111,624
- -------------------------------------------------------------------------------
Business Machines - 1.1%
International Business Machines Corp. 160 $ 16,140
- -------------------------------------------------------------------------------
Cellular Telephones - 1.3%
Century Telephone Enterprises, Inc. 520 $ 18,883
- -------------------------------------------------------------------------------
Chemicals - 4.9%
Air Products & Chemicals, Inc. 260 $ 21,206
Dexter Corp. 200 7,600
Du Pont (E.I.) de Nemours & Co., Inc. 240 14,955
Ferro Corp. 380 14,298
Nalco Chemical Co. 370 14,800
----------
$ 72,859
- -------------------------------------------------------------------------------
Consumer Goods and Services - 4.5%
Meyer Fred, Inc.* 240 $ 12,480
Philip Morris Cos., Inc. 550 23,994
RJR Nabisco Holdings Corp. 240 8,355
Rubbermaid, Inc. 200 5,000
Tyco International Ltd. 200 15,687
----------
$ 65,516
- -------------------------------------------------------------------------------
Electrical Equipment - 3.3%
Cooper Industries, Inc. 320 $ 17,060
General Electric Co. 240 15,000
Hubbell, Inc. 350 16,056
----------
$ 48,116
- -------------------------------------------------------------------------------
Energy - 2.3%
Dresser Industries, Inc. 360 $ 15,030
Unocal Corp. 500 19,531
----------
$ 34,561
- -------------------------------------------------------------------------------
Financial Institutions - 1.7%
American Express Co. 150 $ 11,662
Union Planters Corp. 260 13,325
----------
$ 24,987
- -------------------------------------------------------------------------------
Food and Beverage Products - 3.2%
Archer-Daniels-Midland Co. 646 $ 13,970
General Mills, Inc. 80 5,130
Hormel Foods Corp. 480 14,280
Quaker Oats Co. 300 14,100
----------
$ 47,480
- -------------------------------------------------------------------------------
Food Products - 1.1%
Smucker (J.M.) Co. 650 $ 15,966
- -------------------------------------------------------------------------------
Forest and Paper Products - 1.9%
Champion International Corp. 260 $ 15,389
Weyerhaeuser Co. 240 13,860
----------
$ 29,249
- -------------------------------------------------------------------------------
Insurance - 7.2%
Allstate Corp. 170 $ 12,421
Chubb Corp. 260 17,387
CIGNA Corp. 80 14,670
Conseco, Inc. 360 15,480
Hartford Financial Services Group, Inc. 150 11,963
Lincoln National Corp. 300 20,081
Torchmark Corp. 360 13,567
----------
$ 105,569
- -------------------------------------------------------------------------------
Medical and Health Products - 1.2%
Bristol-Myers Squibb Co. 240 $ 18,240
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.5%
United Healthcare Corp. 140 $ 6,808
- -------------------------------------------------------------------------------
Oils - 5.2%
Atlantic Richfield Co. 180 $ 13,500
Chevron Corp. 220 17,036
Exxon Corp. 250 15,297
Texaco, Inc. 150 17,288
USX-Marathon Group 420 13,676
----------
$ 76,797
- -------------------------------------------------------------------------------
Pollution Control - 2.5%
Browning Ferris Industries, Inc. 490 $ 17,119
Waste Management, Inc. 600 19,200
----------
$ 36,319
- -------------------------------------------------------------------------------
Real Estate Investment Trusts - 4.6%
Arden Realty, Inc. 240 $ 6,930
Boston Properties, Inc. 500 14,906
Kilroy Realty Corp. 300 7,669
Mid-America Apartment Communities, Inc. 480 13,170
Sovran Self Storage, Inc. 380 11,543
TriNet Corporate Realty Trust, Inc. 360 12,802
----------
$ 67,020
- -------------------------------------------------------------------------------
Stores - 3.1%
Longs Drug Stores Corp. 530 $ 13,415
Penney (J.C.), Inc. 340 20,400
Rite Aid Corp. 270 13,517
----------
$ 47,332
- -------------------------------------------------------------------------------
Supermarkets - 1.0%
Kroger Co.* 480 $ 14,460
- -------------------------------------------------------------------------------
Utilities - Electric - 4.7%
Cinergy Corp. 440 $ 14,547
FPL Group, Inc. 170 7,905
New Century Energies, Inc. 320 12,920
Pacificorp 420 8,715
Pinnacle West Capital Corp. 460 14,864
Sierra Pacific Resources 330 10,313
----------
$ 69,264
- -------------------------------------------------------------------------------
Utilities - Gas - 5.6%
Brooklyn Union Gas Co. 490 $ 14,792
Columbia Gas System, Inc. 200 13,200
Energen Corp. 300 10,819
National Fuel Gas Co. 300 13,331
Oneok, Inc. 420 13,597
UGI Corp. 630 16,459
----------
$ 82,198
- -------------------------------------------------------------------------------
Utilities - Telephone - 2.2%
GTE Corp. 290 $ 12,923
Sprint Corp. 400 18,800
----------
$ 31,723
- -------------------------------------------------------------------------------
Total U.S. Stocks $1,150,760
- -------------------------------------------------------------------------------
Foreign Stocks - 11.2%
Argentina - 0.5%
YPF Sociedad Anonima, ADR (Oils) 240 $ 7,815
- -------------------------------------------------------------------------------
Canada - 1.3%
Canadian National Railway Co. (Railroads) 390 $ 19,378
- -------------------------------------------------------------------------------
France - 2.1%
Alcatel Alsthom, ADR (Telecommunications) 560 $ 13,790
Elf Aquitaine, ADR (Oils) 320 17,840
----------
$ 31,630
- -------------------------------------------------------------------------------
Germany - 0.8%
Henkel Kgaa (Consumer Goods and Services) 250 $ 12,584
- -------------------------------------------------------------------------------
Italy - 0.4%
Eni S.p.A, ADR (Oils) 120 $ 6,660
- -------------------------------------------------------------------------------
Netherlands - 1.3%
Akzo Nobel (Chemicals) 120 $ 18,560
- -------------------------------------------------------------------------------
Switzerland - 1.0%
Novartis AG (Pharmaceuticals) 10 $ 14,122
- -------------------------------------------------------------------------------
United Kingdom - 3.8%
British Petroleum PLC, ADR (Oil and Gas) 333 $ 28,180
Grand Metropolitan (Food and Beverage Products) 1,550 14,229
SmithKline-Beecham PLC, ADR (Medical and Health
Products) 300 12,994
----------
$ 55,403
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 166,152
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,186,622) $1,316,912
- -------------------------------------------------------------------------------
Bonds - 0.8%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
U.S. Bonds - 0.8%
Automotive - 0.8%
Tower Automotive, Inc., 5s, 2004##
(Identified Cost, $10,000) $ 10 $ 10,800
- -------------------------------------------------------------------------------
Convertible Preferred Stocks - 5.3%
- -------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
Aerospace - 0.6%
Loral Space & Communications Corp., 6s## 150 $ 8,025
- -------------------------------------------------------------------------------
Entertainment - 0.3%
Houston Industries, Inc., 7s 100 $ 5,075
- -------------------------------------------------------------------------------
Food Products - 0.7%
Ralston Purina Co., 7s, 2000 160 $ 9,530
- -------------------------------------------------------------------------------
Insurance - 0.8%
St. Paul Capital, 6s, 2025 180 $ 12,150
- -------------------------------------------------------------------------------
Medical and Health Technology Services- 0.8%
McKesson Financing Trust, 5s## 180 $ 12,375
- -------------------------------------------------------------------------------
Oils - 0.8%
Tosco Financing Trust, 5.75s## 190 $ 11,400
- -------------------------------------------------------------------------------
Utilities - Gas - 0.4%
Williams Cos., Inc., $3.50 Pref., 2049## 50 $ 5,500
- -------------------------------------------------------------------------------
Utilities - Telephone - 0.9%
Salomon, Inc., 6.25s 250 $ 13,906
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(Identified Cost, $49,019) $ 77,961
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,245,641) $1,405,673
Other Assets, Less Liabilities - 4.6% 68,380
- -------------------------------------------------------------------------------
Net Assets - 100.0% $1,474,053
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS SPECIAL OPPORTUNITIES FUND
Stocks - 86.2%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 76.5%
Aerospace - 5.6%
Allied Signal, Inc. 160 $ 13,210
B.E. Aerospace, Inc.* 3,500 124,250
Moog, Inc.* 1,600 58,200
Thiokol Corp. 300 23,887
----------
$ 219,547
- -------------------------------------------------------------------------------
Agricultural Products - 0.2%
AGCO Corp. 200 $ 6,500
----------
Apparel and Textiles - 0.2%
Reebok International Ltd. 200 $ 8,788
- -------------------------------------------------------------------------------
Automotive - 1.3%
Exide Corp. 2,500 $ 52,188
- -------------------------------------------------------------------------------
Banks and Credit Companies - 0.8%
Banc One Corp. 200 $ 10,725
Wells Fargo & Co. 76 19,323
----------
$ 30,048
- -------------------------------------------------------------------------------
Building - 4.4%
Newport News Shipbuilding, Inc. 300 $ 5,813
Nortek, Inc.* 3,000 75,375
Walter Industries, Inc.* 5,000 90,937
----------
$ 172,125
- -------------------------------------------------------------------------------
Business Machines - 1.4%
Compaq Computer Corp.* 875 $ 57,313
- -------------------------------------------------------------------------------
Business Services - 0.6%
Temple-Inland, Inc. 340 $ 21,930
- -------------------------------------------------------------------------------
Chemicals - 2.9%
Ferro Corp. 740 $ 27,842
NL Industries, Inc. 6,500 86,125
----------
$ 113,967
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.5%
Adobe Systems, Inc. 475 $ 18,703
- -------------------------------------------------------------------------------
Computer Software - Systems - 2.0%
Computer Associates International, Inc. 510 $ 34,106
Sybase, Inc.* 400 7,450
Synopsys, Inc.* 1,100 38,088
----------
$ 79,644
- -------------------------------------------------------------------------------
Conglomerates - 1.8%
MAXXAM, Inc.* 1,300 $ 71,500
- -------------------------------------------------------------------------------
Consumer Goods and Services - 13.0%
Darling International, Inc.* 2,300 $ 64,400
Meyer Fred, Inc.* 770 40,040
Philip Morris Cos., Inc. 870 37,954
Thermadyne Industries Holdings Corp.* 4,000 124,000
Tyco International Ltd.* 2,598 203,780
Westpoint Stevens, Inc.* 1,100 44,000
----------
$ 514,174
- -------------------------------------------------------------------------------
Containers - 4.3%
Atlantis Plastics, Inc.* 5,500 $ 32,312
Gaylord Container Corp.* 10,000 94,375
Jefferson Smurfit Corp.* 920 17,883
Stone Container Corp. 1,400 24,150
----------
$ 168,720
- -------------------------------------------------------------------------------
Electrical Equipment - 0.2%
Belden, Inc. 200 $ 7,750
- -------------------------------------------------------------------------------
Electronics - 1.0%
Atmel Corp.* 200 $ 7,075
Intel Corp. 65 5,988
Sony Corp. 50 4,406
Teradyne, Inc.* 370 20,605
----------
$ 38,074
- -------------------------------------------------------------------------------
Entertainment - 3.0%
American Radio Systems Corp., "A"* 802 $ 39,498
Casino America, Inc.* 1,100 3,025
Harrah's Entertainment, Inc.* 1,600 35,900
LIN Television Corp.* 350 16,603
Sodak Gaming, Inc.* 1,700 23,163
----------
$ 118,189
- -------------------------------------------------------------------------------
Financial Institutions - 1.1%
Donaldson Lufkin & Jenrette, Inc. 320 $ 19,000
Federal Home Loan Mortgage Corp. 460 14,979
Union Planters Corp. 200 10,250
----------
$ 44,229
- -------------------------------------------------------------------------------
Food and Beverage Products - 1.5%
Smith's Food & Drug Centers, Inc., "B"* 1,120 $ 61,320
- -------------------------------------------------------------------------------
Insurance - 3.5%
Chubb Corp. 400 $ 26,750
CIGNA Corp. 120 22,005
Conseco, Inc. 650 27,950
Hartford Financial Services Group, Inc. 250 19,938
Lincoln National Corp. 300 20,081
Reliastar Financial Corp. 310 23,172
----------
$ 139,896
- -------------------------------------------------------------------------------
Machinery - 0.3%
Greenfield Industries, Inc. 400 $ 10,550
- -------------------------------------------------------------------------------
Medical and Health Products - 0.6%
Bristol-Myers Squibb Co. 300 $ 22,800
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.1%
Integrated Health Services, Inc. 560 $ 18,480
St. Jude Medical, Inc.* 490 18,651
Tenet Healthcare Corp.* 700 19,075
United Healthcare Corp. 530 25,771
----------
$ 81,977
- -------------------------------------------------------------------------------
Metals and Minerals - 1.4%
Commonwealth Industries, Inc. 3,000 $ 57,375
- -------------------------------------------------------------------------------
Oil Services - 1.0%
Dawson Production Services, Inc.* 2,100 $ 39,375
- -------------------------------------------------------------------------------
Oils - 1.3%
Enron Oil & Gas Co. 1,000 $ 24,125
Texaco, Inc. 220 25,355
----------
$ 49,480
- -------------------------------------------------------------------------------
Photographic Products - 1.4%
Anacomp, Inc.* 3,725 $ 56,806
- -------------------------------------------------------------------------------
Pollution Control - 0.7%
Waste Management, Inc. 900 $ 28,800
- -------------------------------------------------------------------------------
Railroads - 0.9%
Wisconsin Central Transportation Corp.* 1,140 $ 35,340
- -------------------------------------------------------------------------------
Restaurants and Lodging - 3.2%
Hilton Hotels Corp. 640 $ 19,640
Promus Hotel Corp.* 2,800 108,675
----------
$ 128,315
- -------------------------------------------------------------------------------
Special Products and Services - 1.0%
Keystone International, Inc. 1,100 $ 41,456
- -------------------------------------------------------------------------------
Stores - 6.0%
Arbor Drugs, Inc. 300 $ 7,163
Carson Pirie Scott & Co.* 1,800 63,900
CVS Corp. 700 39,462
Gantos, Inc.* 15,000 35,625
Gymboree Corp.* 220 5,390
Phar Mor, Inc.* 5,700 42,394
Rite Aid Corp. 850 42,553
----------
$ 236,487
- -------------------------------------------------------------------------------
Supermarkets - 2.0%
Ingles Markets, Inc. 3,900 $ 52,162
Safeway, Inc.* 512 26,080
----------
$ 78,242
- -------------------------------------------------------------------------------
Telecommunications - 3.8%
Cellular Communications International* 2,600 $ 93,600
HSN, Inc.* 1,775 58,575
----------
$ 152,175
- -------------------------------------------------------------------------------
Utilities - Electric - 1.1%
El Paso Electric Co.* 6,800 $ 42,500
- -------------------------------------------------------------------------------
Utilities - Telephone - 0.4%
Sprint Corp. 370 $ 17,390
- -------------------------------------------------------------------------------
Total U.S. Stocks $ 3,023,673
- -------------------------------------------------------------------------------
Foreign Stocks - 9.7%
Canada - 2.4%
Canadian National Railway Co. (Railroads) 810 $ 40,247
Gulf Canada Resources Ltd. (Oil Services)* 7,000 56,438
----------
$ 96,685
- -------------------------------------------------------------------------------
Hong Kong - 0.8%
Semi-Tech (Global) Ltd. (Electronics)* 21,000 $ 31,436
- -------------------------------------------------------------------------------
Japan - 0.7%
Canon, Inc., ADR (Special Products and Services) 145 $ 20,173
Sony Corp. (Electronics) 100 8,707
----------
$ 28,880
- -------------------------------------------------------------------------------
Netherlands - 0.3%
Akzo Nobel (Chemicals) 70 $ 10,826
- -------------------------------------------------------------------------------
Portugal - 0.4%
Banco Totta E Acores (Financial Institutions) 800 $ 14,351
- -------------------------------------------------------------------------------
South Korea - 0.2%
SK Telecom Ltd, ADR (Telecommunications)* 800 $ 7,200
- -------------------------------------------------------------------------------
Sweden - 0.3%
Sparbanken Sverige AB (Banks and Credit Cos.) 500 $ 10,821
- -------------------------------------------------------------------------------
Switzerland - 0.9%
Novartis AG (Pharmaceuticals) 25 $ 35,305
- -------------------------------------------------------------------------------
United Kingdom - 3.7%
British Petroleum PLC, ADR (Oil and Gas) 422 $ 35,712
Central Transport Rental Group PLC, ADR (Special
Products and Services)* 48,187 33,129
Gallaher Group PLC, ADR
(Consumer Goods and Services)* 1,100 19,731
News Corp. Ltd., ADR (Entertainment) 2,900 43,863
Storehouse PLC (Retail)* 2,200 8,164
Tomkins PLC (Diversified Operations) 1,600 7,752
----------
$ 148,351
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 383,855
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,790,956) $3,407,528
- -------------------------------------------------------------------------------
Preferred Stock - 1.0%
- -------------------------------------------------------------------------------
Renaissance Cosmetics, Inc. (Consumer Goods and
Services)* 22 $ 18,040
Supermarkets General Holdings Corp. (Supermarkets)* 1,100 22,275
- -------------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $47,819) $ 40,315
- -------------------------------------------------------------------------------
Warrants - 0.6%
- -------------------------------------------------------------------------------
Gothic Energy Corp.* 30,000 $ 21,563
Peoples Choice TV Corp.* 45 0
Renaissance Cosmetics, Inc.* 20 2,000
Semi Tech Global* 2,100 509
- -------------------------------------------------------------------------------
Total Warrants (Identified Cost, $21,666) $ 24,072
- -------------------------------------------------------------------------------
Bonds - 1.7%
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Automotive - 0.5%
Harvard Industries, Inc., 11.125s, 2005 $ 45 $ 18,900
- -------------------------------------------------------------------------------
Entertainment - 0.1%
Marvel Holdings, Inc., 0s, 1998 $ 30 $ 4,200
- -------------------------------------------------------------------------------
Restaurants and Lodging - 0.7%
Santa Fe Hotel, Inc., 11s, 2000 $ 35 $ 28,525
- -------------------------------------------------------------------------------
Telecommunications - 0.4%
Peoples Choice TV Corp., 13.125s, 2004 $ 45 $ 15,188
- -------------------------------------------------------------------------------
Total Bonds (Identified Cost, $65,666) $ 66,813
- -------------------------------------------------------------------------------
Short-Term Obligations - 3.8%
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 9/02/97, at Amortized Cost $150 $ 149,978
- -------------------------------------------------------------------------------
Put Options Purchased - 0.7%
- -------------------------------------------------------------------------------
NUMBER OF CONTRACTS
- -------------------------------------------------------------------------------
Standard & Poor Index 500 Put (Identified Cost, $38,812) 4 $ 28,650
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $3,114,897) $3,717,356
- -------------------------------------------------------------------------------
Securities Sold Short - (3.2)%
- --------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
Advanced Micro Devices, Inc.* (500) $ (18,719)
Arcadia Financial Ltd.* (1,800) (17,775)
Jayhawk Acceptance Corp.* (2,800) (3,325)
LCI International, Inc. (1,700) (40,800)
Station Casinos, Inc.* (2,300) (17,393)
Western Digital Corp.* (600) (28,875)
- -------------------------------------------------------------------------------
Total Securities Sold Short (Proceeds Received, $122,480) $ (126,887)
- -------------------------------------------------------------------------------
Other Assets, Less Liabilities - 9.2% 364,342
- -------------------------------------------------------------------------------
Net Assets - 100.0% $3,954,811
- -------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS BLUE CHIP FUND
Stocks - 99.0%
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 97.5%
Aerospace - 4.1%
General Dynamics Corp. 100 $ 7,963
Lockheed-Martin Corp. 150 15,553
United Technologies Corp. 80 6,245
----------
$ 29,761
- -------------------------------------------------------------------------------
Automotive - 1.0%
Goodrich (B.F.) Co. 170 $ 7,161
- -------------------------------------------------------------------------------
Banks and Credit Companies - 7.5%
Chase Manhattan Corp. 110 $ 12,231
Comerica, Inc. 145 10,268
Corestates Financial Corp. 140 8,610
National City Corp. 120 6,780
Norwest Corp. 120 6,892
U.S. Bancorp 110 9,632
----------
$ 54,413
- -------------------------------------------------------------------------------
Business Machines - 1.9%
International Business Machines Corp. 140 $ 14,122
- -------------------------------------------------------------------------------
Business Services - 3.3%
DST Systems, Inc.* 380 $ 13,751
First Data Corp. 250 10,266
----------
$ 24,017
- -------------------------------------------------------------------------------
Cellular Telephones - 1.0%
AirTouch Communications, Inc.* 220 $ 7,439
- -------------------------------------------------------------------------------
Chemicals - 3.3%
Air Products & Chemicals, Inc. 100 $ 8,156
Du Pont (E.I.) de Nemours & Co., Inc. 140 8,724
Praxair, Inc. 130 6,947
----------
$ 23,827
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.6%
Microsoft Corp.* 90 $ 11,897
- -------------------------------------------------------------------------------
Computer Software - Systems - 3.7%
BMC Software, Inc.* 150 $ 9,393
Computer Associates International, Inc. 130 8,694
Oracle Systems Corp.* 240 9,150
----------
$ 27,237
- -------------------------------------------------------------------------------
Consumer Goods and Services - 11.0%
Avon Products, Inc. 100 $ 6,406
Colgate-Palmolive Co. 80 5,020
Gillette Co. 100 8,281
Philip Morris Cos., Inc. 330 14,396
Procter & Gamble Co. 70 9,315
Service Corp. International 300 9,600
Sherwin Williams Co. 200 5,488
Tyco International Ltd.* 275 21,570
----------
$ 80,076
- -------------------------------------------------------------------------------
Electrical Equipment - 3.2%
General Electric Co. 260 $ 16,250
Honeywell, Inc. 100 6,912
----------
$ 23,162
- -------------------------------------------------------------------------------
Electronics - 1.3%
Intel Corp. 100 $ 9,213
- -------------------------------------------------------------------------------
Financial Institutions - 1.1%
Federal Home Loan Mortgage Corp. 235 $ 7,652
- -------------------------------------------------------------------------------
Food and Beverage Products - 8.3%
Coca-Cola Co. 140 $ 8,024
CPC International, Inc. 80 7,130
Hershey Foods Corp. 130 6,939
Interstate Bakeries Corp. 125 7,328
McCormick & Co., Inc. 330 7,796
Nabisco Holdings Corp. 170 7,055
PepsiCo, Inc. 190 6,840
Ralston-Ralston Purina Co. 100 9,000
----------
$ 60,112
- -------------------------------------------------------------------------------
Forest and Paper Products - 0.8%
Kimberly-Clark Corp. 120 $ 5,693
- -------------------------------------------------------------------------------
Insurance - 8.0%
Allstate Corp. 140 $ 10,229
CIGNA Corp. 60 11,002
Hartford Financial Services Group, Inc. 120 9,570
MBIA, Inc. 100 11,325
Progressive Corp. 80 7,920
Torchmark Corp. 220 8,291
----------
$ 58,337
- -------------------------------------------------------------------------------
Medical and Health Products - 9.0%
American Home Products Corp. 120 $ 8,640
Bristol-Myers Squibb Co. 140 10,640
Johnson & Johnson 200 11,338
Lilly (Eli) & Co. 80 8,370
Merck & Co., Inc. 100 9,181
Pfizer, Inc. 310 17,166
----------
$ 65,335
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.0%
Cardinal Health, Inc. 100 $ 6,625
HEALTHSOUTH Corp.* 300 7,481
United Healthcare Corp. 160 7,780
----------
$ 21,886
- -------------------------------------------------------------------------------
Oil Services - 1.0%
Schlumberger Ltd. 100 $ 7,619
- -------------------------------------------------------------------------------
Oils - 6.1%
Chevron Corp. 100 $ 7,744
Exxon Corp. 320 19,580
Mobil Corp. 140 10,185
Texaco, Inc. 60 6,915
----------
$ 44,424
- -------------------------------------------------------------------------------
Railroads - 1.3%
Burlington Northern Santa Fe 100 $ 9,169
- -------------------------------------------------------------------------------
Restaurants and Lodging - 1.5%
HFS, Inc.* 200 $ 11,138
- -------------------------------------------------------------------------------
Stores - 2.4%
CVS Corp. 100 $ 5,637
Rite Aid Corp. 240 12,015
----------
$ 17,652
- -------------------------------------------------------------------------------
Supermarkets - 3.4%
Kroger Co.* 480 $ 14,460
Safeway, Inc.* 200 10,187
----------
$ 24,647
- -------------------------------------------------------------------------------
Utilities - Electric - 3.3%
Cinergy Corp. 210 $ 6,943
CMS Energy Corp. 160 5,750
Pinnacle West Capital Corp. 170 5,493
Public Service Co. of New Mexico 300 5,475
----------
$ 23,661
- -------------------------------------------------------------------------------
Utilities - Gas - 2.6%
Columbia Gas System, Inc. 110 $ 7,260
Pacific Enterprises 180 5,929
Union Pacific Resources Group, Inc. 220 5,500
----------
$ 18,689
- -------------------------------------------------------------------------------
Utilities - Telephone - 2.8%
BellSouth Corp. 155 $ 6,820
SBC Communications, Inc. 125 6,797
Sprint Corp. 150 7,050
----------
$ 20,667
- -------------------------------------------------------------------------------
Total U.S. Stocks $ 709,006
- -------------------------------------------------------------------------------
Foreign Stocks - 1.5%
United Kingdom - 1.5%
British Petroleum PLC, ADR (Oil and Gas)
(Identified Cost, $9,035) 131 $ 11,086
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $624,151) $ 720,092
Other Assets, Less Liabilities - 1.0% 7,397
- -------------------------------------------------------------------------------
Net Assets - 100.0% $ 727,489
- -------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS CONVERTIBLE SECURITIES FUND
Convertible Preferred Stocks - 50.8%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
Aerospace - 0.8%
Loral Space & Communications Corp., 6s## 100 $ 5,350
- -------------------------------------------------------------------------------
Airlines - 0.6%
Continental Airlines Finance Trust, 8.5s 50 $ 4,100
- -------------------------------------------------------------------------------
Chemicals - 0.4%
Atlantic Richfield Co., 9.01s 120 $ 2,850
- -------------------------------------------------------------------------------
Computer Software - Systems - 0.4%
Wang Labs, Inc., 6.5s*## 50 $ 2,494
- -------------------------------------------------------------------------------
Consumer Goods and Services - 2.6%
Corning Delaware L.P., 6s 200 $ 16,600
- -------------------------------------------------------------------------------
Entertainment - 6.3%
American Radio Systems Corp., 7s*## 225 $ 14,681
Golden Books Financing Trust, 8.75s*## 200 10,500
Houston Industries, Inc./Time Warner, 7s* 100 5,075
Royal Caribbean Cruises Ltd., 7.25s 150 10,238
----------
$ 40,494
- -------------------------------------------------------------------------------
Financial Institutions - 8.6%
Finova Finance Trust, 5.5s, 2016 250 $ 15,500
Jefferson Pilot Corp., 7.25s, 2000 100 10,513
Merrill Lynch/MGIC Investment Corp., 6.5s 150 12,975
Merrill Lynch/IMC Global, 6.25s 150 5,606
Salomon/Financial Security Insurance, 7.625s 300 10,575
----------
$ 55,169
- -------------------------------------------------------------------------------
Food - 0.9%
Ralston Purina Interstate Bakeries, 7s* 100 $ 5,956
- -------------------------------------------------------------------------------
Food and Beverage Products - 2.5%
Dole Food, 7s 425 $ 16,150
- -------------------------------------------------------------------------------
Forest and Paper Products - 1.4%
International Paper Capital Trust, 5.25s 150 $ 8,775
- -------------------------------------------------------------------------------
Insurance - 5.9%
American Heritage Life Investment, 8.5s* 100 $ 5,950
Conseco, Inc., 7s 100 14,556
Frontier Financing Trust, 6.25s*## 100 8,025
SunAmerica, Inc., $3.188 150 6,647
SunAmerica, Inc., $3.10 25 2,875
----------
$ 38,053
- -------------------------------------------------------------------------------
Machinery & Tools - 1.8%
Greenfield Capital Trust, 6s, 2016* 250 $ 11,812
- -------------------------------------------------------------------------------
Medical Equipment - 1.1%
McKesson Financing Trust, 5s## 100 $ 6,875
- -------------------------------------------------------------------------------
Metals and Minerals - 1.7%
Timet Capital Trust, 6.625s*## 100 $ 5,913
USX Marathon/RMI Titanium, 6.75s* 200 5,050
----------
$ 10,963
- -------------------------------------------------------------------------------
Oil & Gas - 1.9%
Tosco Financing Trust, 5.75s## 200 $ 12,000
- -------------------------------------------------------------------------------
Pollution Control - 2.6%
Browning Ferris Industries, Inc., 7.25s 500 $ 16,531
- -------------------------------------------------------------------------------
Restaurants and Lodging - 3.3%
Hilton Hotels Corp., 8s 100 $ 2,800
Host Marriott Financial Trust, 6.75s*## 300 18,450
----------
$ 21,250
- -------------------------------------------------------------------------------
Steel - 0.5%
AK Steel Holding Corp., 7s 75 $ 2,962
- -------------------------------------------------------------------------------
Stores - 1.6%
AnnTaylor Finance Trust, 8.5s*# 75 $ 4,406
K-Mart Financing I, 7.75s 100 5,894
----------
$ 10,300
- -------------------------------------------------------------------------------
Telecommunications - 1.0%
Intermedia Communication, Inc., 7s*## 100 $ 2,700
IXC Communications Inc., 7.25s*## 20 2,570
Qualcomm Financial Trust, 5.75s*## 25 1,116
----------
$ 6,386
- -------------------------------------------------------------------------------
Transportation - 0.6%
Hvide Capital Trust, 6.5s *## 60 $ 3,803
- -------------------------------------------------------------------------------
Utilities - Electric - 1.8%
Calenergy Capital Trust III, 6.5s*## 250 $ 11,750
- -------------------------------------------------------------------------------
Utilities - Gas - 0.9%
Enron Corp., 6.25s 250 $ 5,734
- -------------------------------------------------------------------------------
Utilities - Telephone - 1.6%
Salomon/Cincinnati Bell, 6.25s 175 $ 9,734
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(Identified Cost, $292,959) $ 326,091
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 Omitted)
- -------------------------------------------------------------------------------
Convertible Bonds - 27.5%
- --------------------------------------------------------------------------------
Aerospace - 1.4%
Hexcel Corp., 7s, 2003 $ 5 $ 9,287
- -------------------------------------------------------------------------------
Building - 0.3%
Continental Homes Holding Corp., 6.875s, 2002 $ 2 $ 2,248
- -------------------------------------------------------------------------------
Business Services - 1.6%
Protection One Alarm Monitoring, 6.75s, 2003 $ 9 $ 10,114
- -------------------------------------------------------------------------------
Computer Software - Systems - 3.9%
Adaptec, Inc., 4.75s, 2004## $ 8 $ 9,240
Data General Corp., 6s, 2004## 6 9,413
Read Rite Corp., 6.5s, 2004 3 3,135
Wind River Systems Inc., 5s, 2002## 3 3,386
----------
$ 25,174
- -------------------------------------------------------------------------------
Electronics - 3.9%
Cymer, Inc., 3.5s (7.25s, 8/1/00), 2004## $ 6 $ 7,162
Photronics, Inc., 6s, 2004 2 2,545
Solectron Corp., 6s, 2006## 3 4,196
Xilinx, Inc., 5.25s, 2002## 10 11,225
----------
$ 25,128
- -------------------------------------------------------------------------------
Medical and Health Products - 0.3%
North American Vaccine, Inc., 6.5s, 2003## $ 2 $ 1,843
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.4%
FPA Medical Management, Inc., 6.5s, 2001## $ 5 $ 6,675
Healthsource, Inc., 5s, 2003 2 2,010
----------
$ 8,685
- -------------------------------------------------------------------------------
Oil Services - 3.9%
Diamond Offshore Drilling, Inc., 3.75s, 2007 $ 5 $ 6,525
Nabors Industries, Inc., 5s, 2006 3 6,015
Parker Drilling Co., 5.5s, 2004 6 6,540
Pogo Producing Co., 5.5s, 2006 5 5,906
----------
$ 24,986
- -------------------------------------------------------------------------------
Pharmaceuticals - 0.5%
Dura Pharmaceuticals Inc., 3.5s, 2002 $ 3 $ 2,921
- -------------------------------------------------------------------------------
Pollution Control - 3.7%
Sanifill, Inc., 5s, 2006 $ 5 $ 7,856
U.S. Filter Corp., 6s, 2005 5 10,075
USA Waste Services, Inc., 4s, 2002 5 5,700
----------
$ 23,631
- -------------------------------------------------------------------------------
Restaurants and Lodging - 0.9%
Hilton Hotels Corp., 5s, 2006 $ 5 $ 5,675
- -------------------------------------------------------------------------------
Special Products and Services - 3.6%
Corporate Express, Inc., 4.5s, 2000 $ 10 $ 9,150
Personnel Group Of America Inc., 5.75s, 2004## 6 7,088
Sunrise Assisted Living Inc., 5.5s, 2002## 3 3,210
United States Office Products Company, 5.5s, 2001 3 3,697
----------
$ 23,145
- -------------------------------------------------------------------------------
Stores - 2.1%
Home Depot, Inc., 3.25s, 2001 $ 5 $ 5,800
Office Depot, Inc., 0s, 2008 5 2,988
Saks Holdings, Inc., 5.5s, 2006 5 4,337
----------
$ 13,125
- -------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $152,930) $ 175,962
- -------------------------------------------------------------------------------
Stocks - 14.4%
- -------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
U.S. Stocks - 12.8%
Aerospace - 0.6%
United Technologies Corp. 50 $ 3,903
- -------------------------------------------------------------------------------
Building - 0.7%
Newport News Shipbuilding, Inc. 220 $ 4,263
- -------------------------------------------------------------------------------
Chemicals - 0.2%
Du Pont (E.I.) de Nemours & Co., Inc. 25 $ 1,558
- -------------------------------------------------------------------------------
Consumer Goods and Services - 2.5%
Colgate-Palmolive Co. 60 $ 3,765
Gillette Co. 60 4,969
Procter & Gamble Co. 25 3,326
Tyco International Ltd.* 48 3,765
----------
$ 15,825
- -------------------------------------------------------------------------------
Electrical Equipment - 0.4%
General Electric Co. 40 $ 2,500
- -------------------------------------------------------------------------------
Electronics - 1.1%
Intel Corp. 20 $ 1,843
Solectron Corporation* 50 2,094
Sony Corp. 35 3,084
----------
$ 7,021
- -------------------------------------------------------------------------------
Insurance - 0.6%
Hartford Life, Inc., "A"* 100 $ 3,731
- -------------------------------------------------------------------------------
Medical and Health Products - 1.7%
Bristol-Myers Squibb Co. 75 $ 5,700
Johnson & Johnson 50 2,835
McKesson Corp. 25 2,342
----------
$ 10,877
- -------------------------------------------------------------------------------
Oils - 0.7%
Devon Energy Corp. 100 $ 4,269
- -------------------------------------------------------------------------------
Pollution Control - 0.8%
Browning Ferris Industries, Inc. 100 $ 3,494
U.S. Filter Corp.* 50 1,800
----------
$ 5,294
- -------------------------------------------------------------------------------
Restaurants and Lodging - 0.2%
Hilton Hotels Corp. 50 $ 1,534
- -------------------------------------------------------------------------------
Special Products and Services - 0.7%
Stanley Works 100 $ 4,256
- -------------------------------------------------------------------------------
Stores - 0.6%
Rite Aid Corp. 75 $ 3,755
- -------------------------------------------------------------------------------
Telecommunications - 2.0%
IXC Communications Inc.* 50 $ 1,350
Lucent Technologies, Inc. 100 7,787
Qwest Communications International, Inc.* 100 4,075
----------
$ 13,212
- -------------------------------------------------------------------------------
Total U.S. Stocks $ 81,998
- -------------------------------------------------------------------------------
Foreign Stocks - 1.6%
Sweden - 0.2%
Skandia Foersaekrings AB (Insurance) 40 $ 1,544
- -------------------------------------------------------------------------------
Switzerland - 0.7%
Novartis AG (Pharmaceuticals) 3 $ 4,237
- -------------------------------------------------------------------------------
United Kingdom - 0.7%
British Petroleum PLC, ADR (Oil and Gas) 50 $ 4,231
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 10,012
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $77,794) $ 92,010
- -------------------------------------------------------------------------------
Foreign Preferred Stocks - 1.6%
- -------------------------------------------------------------------------------
Australia - 1.6%
National Australia Bank Ltd., 7.875s Capital Unit
Exchangeable 350 $ 9,997
- -------------------------------------------------------------------------------
Total Foreign Preferred Stocks (Identified Cost, $8,750) $ 9,997
- -------------------------------------------------------------------------------
Short-Term Obligations - 3.1%
- -------------------------------------------------------------------------------
<PAGE>
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 9/02/97, at Amortized Cost$ 20 $ 19,997
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $552,430) $ 624,057
Other Assets, Less Liabilities - 2.6% 16,470
- -------------------------------------------------------------------------------
Net Assets - 100.0% $ 640,527
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS NEW DISCOVERY FUND
Stocks - 94.6%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 93.8%
Aerospace - 1.0%
Fairchild Corp.* 1,000 $ 21,063
- -------------------------------------------------------------------------------
Airlines - 0.5%
Atlas Air, Inc.* 400 $ 11,100
- -------------------------------------------------------------------------------
Business Machines - 2.3%
Affiliated Computer Services, Inc., "A"* 1,750 $ 45,937
- -------------------------------------------------------------------------------
Business Services - 17.8%
AccuStaff, Inc.* 1,500 $ 39,844
BDM International, Inc.* 500 12,625
BISYS Group, Inc.* 500 16,875
Claremont Technology Group, Inc.* 400 7,100
Comdisco, Inc. 450 12,234
Corporate Family Solutions, Inc.* 100 1,500
Dendrite International, Inc.* 600 11,325
Diamond Offshore Drilling, Inc. 300 16,388
Diamond Technology Partner, Inc.* 600 9,225
DST Systems, Inc.* 100 3,619
Fine Host Corp.* 200 6,950
First USA Paymentech, Inc.* 700 21,262
Interim Services, Inc.* 700 34,562
Learning Tree International, Inc.* 750 20,625
May and Speh, Inc.* 1,300 16,575
Mecon, Inc.* 3,000 15,000
NOVA Corp.* 1,000 25,375
Personnel Group of America, Inc.* 300 10,050
PMT Services, Inc.* 1,100 18,563
Robert Half International, Inc.* 200 11,675
Staff Leasing, Inc.* 100 1,975
Technology Solutions Co.* 525 12,206
TeleSpectrum Worldwide, Inc.* 2,100 9,581
Teletech Holdings, Inc.* 900 14,737
Transaction System Architects, Inc.* 300 10,388
----------
$ 360,259
- -------------------------------------------------------------------------------
Computer Software - Systems - 16.1%
Aehr Test Systems* 100 $ 1,750
American Business Information, Inc.* 500 13,687
Aspen Technology, Inc.* 300 10,238
Black Box Corp.* 220 8,003
Cadence Design Systems, Inc.* 685 32,580
Compuware Corp.* 450 27,787
Daou Systems, Inc.* 400 9,500
Data Systems Network Corp.* 2,500 39,062
Fair, Isaac & Co., Inc. 200 8,438
IKOS Systems, Inc.* 1,300 19,256
Intelligroup, Inc.* 100 1,488
Metromail Corp.* 700 15,225
Peerless Systems Corp.* 900 13,163
RWD Technologies, Inc.* 100 1,925
Simulation Sciences, Inc.* 2,100 29,662
Smart Modular Technologies, Inc.* 500 29,500
Summit Design, Inc.* 2,700 32,400
Synopsys, Inc.* 200 6,925
USCS International, Inc.* 650 11,619
Vantive Corp.* 200 6,100
Xionics Document Technologies, Inc.* 650 8,775
----------
$ 327,083
- -------------------------------------------------------------------------------
Consumer Goods and Services - 4.9%
Alternative Resources Corp.* 1,000 $ 22,375
Ballantyne of Omaha, Inc.* 800 15,600
Blyth Industries, Inc.* 100 3,694
Cole National Corp.* 100 4,456
Meta Group, Inc.* 400 8,350
Schweitzer-Mauduit International, Inc. 450 18,000
Silgan Holdings, Inc.* 650 26,650
----------
$ 99,125
- -------------------------------------------------------------------------------
Containers - 2.4%
AptarGroup, Inc. 200 $ 11,250
Gaylord Container Corp.* 1,900 17,931
Stone Container Corp. 1,100 18,975
----------
$ 48,156
- -------------------------------------------------------------------------------
Electrical Equipment - 1.3%
AFC Cable Systems, Inc.* 600 $ 18,000
QLogic Corp.* 200 7,850
----------
$ 25,850
- -------------------------------------------------------------------------------
Electronics - 5.5%
Actel Corp.* 600 $ 12,188
Burr Brown* 550 19,525
DuPont Photomasks, Inc.* 200 13,100
International Rectifier Corp.* 600 13,687
Microchip Technology, Inc.* 300 12,131
Photronic, Inc.* 100 5,900
PMC Sierra, Inc.* 700 20,081
SDL, Inc.* 900 15,975
----------
$ 112,587
- -------------------------------------------------------------------------------
Entertainment - 5.7%
American Radio Systems Corp., "A"* 300 $ 14,775
Cox Radio, Inc.* 900 24,075
Gemstar Group Ltd.* 1,100 22,550
Heftel Broadcasting Corp.* 200 12,400
Jacor Communications, Inc., "A"* 500 22,000
LIN Television Corp.* 400 18,975
----------
$ 114,775
- -------------------------------------------------------------------------------
Financial Institutions - 2.7%
BA Merchants Services, Inc.* 500 $ 9,156
Financial Federal Corp.* 900 14,119
Franklin Resources, Inc. 350 27,081
TCF Financial Corp. 100 5,331
----------
$ 55,687
- -------------------------------------------------------------------------------
Food and Beverage Products - 1.2%
Smith's Food & Drug Centers, Inc., "B"* 150 $ 8,212
Suiza Foods Corp.* 400 16,500
----------
$ 24,712
- -------------------------------------------------------------------------------
Insurance - 2.7%
CapMAC Holdings, Inc. 300 $ 8,325
Compdent Corp.* 500 12,125
Equitable of Iowa Cos. 150 9,769
Hartford Life, Inc.,"A" 100 3,731
Life Re Corp. 400 20,525
----------
$ 54,475
- -------------------------------------------------------------------------------
Machinery - 1.4%
Greenfield Industries, Inc. 200 $ 5,275
Hirsch International Group* 900 22,950
----------
$ 28,225
- -------------------------------------------------------------------------------
Medical and Health Products - 1.7%
Phycor, Inc.* 150 $ 4,416
Rexall Sundown, Inc.* 500 17,375
Steris Corp.* 350 13,125
----------
$ 34,916
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 9.1%
AmeriSource Health Corp., "A"* 200 $ 10,013
CRA Managed Care, Inc.* 200 11,100
HCIA, Inc.* 700 10,850
Hologic, Inc.* 650 15,762
IDEXX Labs, Inc.* 1,300 24,456
IDX Systems Corp.* 300 10,163
NCS Healthcare, Inc.* 200 4,925
Orthalliance, Inc.* 100 1,388
Orthodontic Centers America, Inc.* 200 3,425
Physician Sales and Service, Inc.* 200 3,400
Physician Support Systems, Inc.* 1,200 20,250
Quorum Health Group, Inc.* 250 8,516
Renal Treatment Centers, Inc.* 500 16,937
Total Renal Care Holdings, Inc.* 300 13,725
United Dental Care, Inc.* 1,300 22,912
United Payors & United Providers, Inc.* 400 5,900
----------
$ 183,722
- -------------------------------------------------------------------------------
Oil Services - 0.3%
Cal Dive International, Inc.* 100 $ 3,400
Hanover Compressor* 100 2,363
----------
$ 5,763
- -------------------------------------------------------------------------------
Oils - 0.2%
Santa Fe International Corp.* 100 $ 4,475
- -------------------------------------------------------------------------------
Pharmaceuticals - 0.3%
Kos Pharmaceuticals, Inc.* 200 $ 6,900
- -------------------------------------------------------------------------------
Printing and Publishing - 1.0%
Applied Graphics Technologies* 500 $ 20,625
- -------------------------------------------------------------------------------
Restaurants and Lodging - 5.2%
Capstar Hotel Co.* 300 $ 9,825
Doubletree Corp.* 250 12,500
HFS, Inc.* 500 27,844
Interstate Hotels Co.* 750 21,469
Prime Hospitality Corp.* 850 16,150
Promus Hotel Corp.* 200 7,762
Roadhouse Grill, Inc.* 1,400 7,525
Trendwest Resorts, Inc.* 100 1,825
----------
$ 104,900
- -------------------------------------------------------------------------------
Special Products and Services - 0.7%
CHS Electronics, Inc.* 100 $ 3,863
Equity Corp. International* 450 10,378
----------
$ 14,241
- -------------------------------------------------------------------------------
Stores - 4.7%
AnnTaylor Stores Corp.* 500 $ 8,563
Corporate Express, Inc.* 600 10,237
CVS Corp. 400 22,550
Gymboree Corp.* 450 11,025
Mazel Stores, Inc.* 300 6,375
Petco Animal Supplies, Inc.* 400 11,850
PETsMART, Inc.* 600 5,138
U.S. Office Products Co.* 300 9,825
Viking Office Products, Inc.* 500 10,562
----------
$ 96,125
- -------------------------------------------------------------------------------
Telecommunications - 4.4%
APAC Teleservices, Inc.* 600 $ 9,900
Aspect Telecommunications Corp.* 1,800 39,600
Cable Design Technologies Corp.* 400 13,375
Intermedia Communications, Inc.* 400 14,300
Transaction Network Services, Inc.* 600 8,625
VDI Media* 300 4,275
----------
$ 90,075
- -------------------------------------------------------------------------------
Transportation - 0.1%
Carey International, Inc.* 100 $ 1,388
- -------------------------------------------------------------------------------
Utilities - Telephone - 0.6%
Brooks Fiber Properties, Inc.* 350 $ 11,769
- -------------------------------------------------------------------------------
Total U.S. Stocks $1,903,933
- -------------------------------------------------------------------------------
Foreign Stocks - 0.8%
Ireland - 0.1%
Warner Chilcott Laboratories* 100 $ 1,850
- -------------------------------------------------------------------------------
Mexico - 0.1%
TV Azteca, S.A. de C V (Broadcasting)* 100 $ 1,800
- -------------------------------------------------------------------------------
United Kingdom - 0.6%
News Corp. Ltd., ADR (Entertainment) 900 $ 13,612
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 17,262
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,742,794) $1,921,195
- -------------------------------------------------------------------------------
Short-Term Obligations - 3.7%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 9/02/97,
at Amortized Cost $ 75 $ 74,989
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,817,783) $1,996,184
Other Assets, Less Liabilities - 1.7% 33,679
- -------------------------------------------------------------------------------
Net Assets - 100.0% $2,029,863
- -------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS RESEARCH INTERNATIONAL FUND
Stocks - 97.1%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 2.6%
Agricultural Products - 1.1%
AGCO Corp. 760 $ 24,700
- -------------------------------------------------------------------------------
Insurance - 0.5%
Equitable of Iowa Cos. 190 $ 12,374
- -------------------------------------------------------------------------------
Utilities - Telephone - 1.0%
MCI Communications Corp. 865 $ 24,652
- -------------------------------------------------------------------------------
Total U.S. Stocks $ 61,726
- -------------------------------------------------------------------------------
Foreign Stocks - 94.5%
Australia - 1.3%
Q.B.E. Insurance Group Ltd. (Insurance) 5,805 $ 31,338
- -------------------------------------------------------------------------------
Brazil - 0.8%
Telecomunicacoes Brasileiras SA, ADR
(Telecommunications) 152 $ 17,936
- -------------------------------------------------------------------------------
Canada - 1.6%
Canadian National Railway Co. (Railroads) 773 $ 38,408
- -------------------------------------------------------------------------------
Chile - 1.0%
Chilectra SA, ADR (Utilities - Electric) 785 $ 24,224
- -------------------------------------------------------------------------------
China - 0.4%
China Southern Airlines Ltd. (Airlines) 300 $ 9,431
- -------------------------------------------------------------------------------
Czech Republic - 1.1%
Tabak (Tobacco) 100 $ 25,187
- -------------------------------------------------------------------------------
Finland - 0.9%
Huhtamaki Oy Group (Food Company) 230 $ 9,081
TT Tieto Oy (Computer Software - Systems) 135 12,122
----------
$ 21,203
- -------------------------------------------------------------------------------
France - 5.2%
Chargeurs SA (Apparels and Textiles) 250 $ 14,779
Rhone-Poulenc SA (Pharmaceuticals)* 786 28,756
Societe Nationale Elf Aquitaine (Oils) 330 36,577
Televison Francaise (Broadcasting) 270 21,946
Union des Assurances Federales SA (Insurance) 190 19,655
----------
$ 121,713
- -------------------------------------------------------------------------------
Germany - 3.7%
Adidas AG (Apparel and Textiles) 96 $ 11,537
Henkel Kgaa (Consumer Goods and Services) 538 27,081
Phoenix AG (Auto Parts) 1,225 21,322
Prosieben Media AG (Broadcasting) 200 9,029
SAP AG, Preferred (Computer Software - Systems) 79 18,028
----------
$ 86,997
- -------------------------------------------------------------------------------
Greece - 2.1%
Athens Medical Care SA (Medical and Health Technology
and Services) 1,800 $ 17,260
Hellenic Telecommunication Organization SA
(Telecommunications) 880 19,520
Papastratos Cigarettes SA (Consumer Goods and
Services) 660 11,232
----------
$ 48,012
- -------------------------------------------------------------------------------
Hong Kong - 8.9%
Asia Satellite Telecommunications Holdings Ltd.
(Telecommunications)* 9,000 $ 25,087
Citic Pacific Ltd. (Conglomerates) 5,000 26,649
Dah Sing Financial Group (Banks and Credit Cos.) 2,600 $ 10,871
Hong Kong Electric Holdings Ltd. (Utilities -
Electric) 8,000 27,978
Hutchison Whampoa (Real Estate) 1,000 8,324
Ka Wah Bank (Bank and Credit Cos.) 1,000 2,446
Li & Fung Ltd. (Wholesale) 36,000 36,701
Liu Chong Hing Bank (Banks and Credit Cos.) 3,000 7,994
Vanda Systems & Communication Holdings Ltd.
(Computers Software - Systems) 44,000 24,984
Wharf Holdings Ltd. (Real Estate) 6,000 21,719
Wing Hang Bank Ltd. (Banks and Credit Cos.) 3,600 15,331
----------
$ 208,084
- -------------------------------------------------------------------------------
Indonesia - 0.5%
PT Indosat (Telecommunications) 500 $ 1,031
PT Indosat, ADR (Telecommunications) 270 5,856
PT Semen Gresik (Building Materials) 4,500 4,639
----------
$ 11,526
- -------------------------------------------------------------------------------
Ireland - 2.4%
Allied Irish Banks (Banks and Credit Cos.) 2,486 $ 20,989
Anglo Irish Bank Corp. (Banks and Credit Cos.) 16,800 23,957
Smurfit Jefferson (Paper/Plastic) 3,700 12,292
----------
$ 57,238
- -------------------------------------------------------------------------------
Italy - 3.3%
Gucci Group Designs NV (Apparel and Textiles) 304 $ 18,506
INA - Instituto Nazionale delle Assicurazioni
(Insurance) 8,225 11,980
Industrie Natuzzi S.P.A., ADR (Consumer Goods and
Services) 974 26,785
Telecom Italia S.P.A., Saving Shares
(Telecommunications) 12,235 20,416
----------
$ 77,687
- -------------------------------------------------------------------------------
Japan - 23.4%
Bank of Tokyo Mitsubishi (Banks and Credit Cos.) 1,000 $ 18,159
Bridgestone Corp. (Tire and Rubber) 1,000 22,139
Canon, Inc. (Special Products and Services) 2,000 55,224
DDI Corp. (Telecommunications) 3 15,672
Fuji Photo Film Co Ltd., ADR (Photographic Products) 600 22,950
Fujimi Inc. (Distribution Wholesale) 400 22,388
Hirose Electric Co. (Electronics) 100 7,007
Jusco Co. (Retail) 1,000 26,700
Keyence Corp. (Electronics) 110 16,053
Kinki Coca-Cola Bottling Co. (Beverages) 1,000 12,438
Kirin Beverage Corp. (Beverages) 2,000 32,338
Nippon Broadcasting (Broadcasting) 1,000 73,880
Nippon Telephone & Telegraph Co. (Utilities -
Telephone) 2 18,740
Osaka Sanso Kogyo Ltd. (Chemicals) 4,000 8,458
Secom Co. (Consumer Goods and Services) 1,000 71,061
Sony Corp. (Electronics) 300 26,119
Takeda Chemical Industries (Pharmaceuticals) 1,000 26,617
TDK Corp., ADR (Electronics) 680 52,955
Terumo Corp. (Computers) 1,000 18,242
----------
$ 547,140
- -------------------------------------------------------------------------------
Malaysia - 0.2%
UMW Holdings Berhad (Automobiles) 2,000 $ 5,377
- -------------------------------------------------------------------------------
Mexico - 1.0%
Companhia Cerveja Ria Brahma (Broadcasting) 1,400 $ 18,988
TV Azteca SA De CV (Television) 300 5,400
----------
$ 24,388
- -------------------------------------------------------------------------------
Netherlands - 5.1%
Ahrend Kon (Office Furnishers) 630 $ 20,557
Akzo Nobel (Chemicals) 160 24,746
Brunel International NV (Human Resources) 300 6,183
Computer Services (Computers) 2,000 19,038
Fugro NV (Engineering) 100 3,410
Philips Electronics NV (Manufacturing) 260 18,460
Royal Dutch Petroleum (Oils) 544 27,547
----------
$ 119,941
- -------------------------------------------------------------------------------
Peru - 0.9%
Telefonica del Peru SA, ADR (Telecommunications) 870 $ 20,336
- -------------------------------------------------------------------------------
Philippines - 0.2%
Alsons Cement Corp. (Building Materials)*## 41,500 $ 3,860
- -------------------------------------------------------------------------------
Poland - 0.3%
Bank Handlowy Warsza (Banks and Credit Cos.)+ 200 $ 2,525
Kghm Polska Miedz SA (Diversified - Metals)## 400 4,884
----------
$ 7,409
- -------------------------------------------------------------------------------
Portugal - 2.3%
Banco Espirito Santo e Comercial de Lisboa SA (Banks
and Credit Cos.) 500 $ 12,268
Banco Totta E Acores (Financial Institutions) 1,275 22,872
Telecel - Comunicacaoes Pessoais SA
(Telecommunication) 240 17,457
----------
$ 52,597
- -------------------------------------------------------------------------------
Singapore - 2.7%
City Developments Ltd. (Real Estate) 2,000 $ 12,637
Hong Leong Finance Ltd. (Finance)+ 3,000 5,855
Mandarin Oriental International, Ltd.
(Restaurants and Lodgings) 27,000 30,240
Singapore Land Ltd. (Conglomerates) 3,000 13,298
----------
$ 62,030
- -------------------------------------------------------------------------------
Spain - 1.0%
Abengoa SA (Construction)* 300 $ 13,260
Acerinox SA (Iron and Steel) 64 10,507
----------
$ 23,767
- -------------------------------------------------------------------------------
Sweden - 3.1%
Astra AB (Pharmaceuticals) 1,053 $ 16,726
Skandia Foersaekrings AB (Insurance) 705 27,214
Sparbanken Sverige AB (Banks and Credit Cos.) 1,271 27,508
----------
$ 71,448
- -------------------------------------------------------------------------------
Switzerland - 3.5%
Kuoni Reisen Holdings AG (Transportation) 9 $ 36,930
Novartis AG (Pharmaceuticals) 31 43,778
----------
$ 80,708
- -------------------------------------------------------------------------------
Taiwan - 1.6%
ASE Test Limited (Electronics) 500 $ 36,500
- -------------------------------------------------------------------------------
United Kingdom - 15.1%
ASDA Group PLC (Supermarkets) 9,401 $ 21,937
Bank of Scotland (Banks and Credit Cos.) 1,700 11,433
British Aerospace PLC (Aerospace and Defense) 1,486 34,772
British Petroleum PLC (Oil and Gas) 2,155 30,103
Carlton Communicatons PLC (Broadcasting) 2,660 21,165
Corporate Services Group (Business Services) 5,200 16,348
Grand Metropolitan (Food and Beverage Products) 2,910 26,714
Jarvis Hotels PLC (Restaurants and Lodging)*+ 10,900 27,378
JBA Holdings Diversified Operations) 900 12,397
Kwik-Fit Holdings PLC (Retail) 7,704 37,453
Lloyds TSB Group PLC (Banks and Credit Cos.) 2,382 27,445
PowerGen PLC (Utilities - Electric)* 2,113 26,708
Storehouse PLC (Retail)* 6,100 22,637
Tomkins PLC (Diversified Operations) 5,100 24,711
Williams Holdings (Diversified Operations) 2,200 12,424
----------
$ 353,625
- -------------------------------------------------------------------------------
Venezuela - 0.9%
Compania Anonima Nacional Telefonos de Venezuela, ADR
(Telecommunications)* 509 $ 20,996
- -------------------------------------------------------------------------------
Total Foreign Stocks $2,209,106
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,318,693) $2,270,832
- -------------------------------------------------------------------------------
Short-Term Obligations - 2.6%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 9/02/97, at Amortized Cost $ 60 $ 59,991
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,378,684) $2,330,823
Other Assets, Less Liabilities - 0.3% 5,265
- -------------------------------------------------------------------------------
Net Assets - 100.0% $2,336,088
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+Restricted security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
MFS SCIENCE AND TECHNOLOGY FUND
Stocks - 88.4%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 85.2%
Apparel and Textiles - 0.1%
Polo Ralph Lauren Corp.* 100 $ 2,625
- -------------------------------------------------------------------------------
Business Machines - 5.4%
Affiliated Computer Services, Inc., "A"* 1,880 $ 49,350
Compaq Computer Corp.* 200 13,100
Silicon Graphics, Inc.* 500 13,719
Sun Microsystems, Inc.* 1,240 59,520
----------
$ 135,689
- -------------------------------------------------------------------------------
Business Services - 6.1%
AccuStaff, Inc.* 2,180 $ 57,906
First Data Corp. 780 32,029
First USA Paymentech, Inc.* 1,320 40,095
Galieo International, Inc.* 100 2,644
Hall Kinion & Associates, Inc.* 100 2,137
Lamalie Associates, Inc.* 100 1,900
Teletech Holdings, Inc.* 1,000 16,375
----------
$ 153,086
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 14.0%
Activision, Inc.* 1,500 $ 19,500
Adobe Systems, Inc. 1,165 45,872
Autodesk, Inc.* 1,710 74,812
Electronic Arts, Inc.* 1,200 36,975
Microsoft Corp.* 1,000 132,187
Midway Games, Inc.* 960 20,280
Spectrum Holobyte, Inc.* 4,600 22,138
----------
$ 351,764
- -------------------------------------------------------------------------------
Computer Software - Services - 0.9%
Ingram Micro, Inc.* 750 $ 21,563
- -------------------------------------------------------------------------------
Computer Software - Systems - 32.5%
BMC Software, Inc.* 1,180 $ 73,897
Cadence Design Systems, Inc.* 2,831 134,649
Computer Associates International, Inc. 2,095 140,103
Compuware Corp.* 1,660 102,505
Engineering Animation, Inc.* 470 17,977
Great Plains Software, Inc.* 100 2,638
Oracle Systems Corp.* 3,480 132,675
Peoplesoft, Inc.* 660 37,125
Peritus Software Services, Inc.* 100 2,500
Rational Software Corp.* 1,010 16,665
Summit Design, Inc.* 4,400 52,800
Sybase, Inc.* 380 7,078
Synopsys, Inc.* 2,830 97,989
TSI International Software Ltd.* 100 1,225
----------
$ 819,826
- -------------------------------------------------------------------------------
Electronics - 5.1%
Atmel Corp.* 440 $ 15,565
Intel Corp. 340 31,322
Sony Corp. 250 22,031
Teradyne, Inc.* 900 50,119
Xilinx, Inc.* 200 9,500
----------
$ 128,537
- -------------------------------------------------------------------------------
Medical and Health Products - 2.0%
Bristol-Myers Squibb Co. 610 $ 46,360
Ocular Sciences, Inc.* 100 1,912
Schick Technologies, Inc.* 100 2,650
----------
$ 50,922
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 7.6%
Centennial Healthcare Corp.* 100 $ 2,012
HBO & Co. 1,085 77,713
Horizon CMS Healthcare Corp.* 700 14,394
Monarch Dental Corp.* 100 1,813
Oxford Health Plans, Inc.* 370 27,056
Pacificare Health Systems, Inc., "B"* 130 8,889
United Healthcare Corp. 1,240 60,295
----------
$ 192,172
- -------------------------------------------------------------------------------
Oil Services - 0.3%
Cal Dive International, Inc.* 100 $ 3,400
Domain Energy Corp.* 100 1,525
Hanover Compressor* 100 2,363
----------
$ 7,288
- -------------------------------------------------------------------------------
Printing and Publishing - 0.1%
CMP Media, Inc.* 100 $ 2,675
- -------------------------------------------------------------------------------
Stores - 0.2%
CVS Corp. 100 $ 5,638
- -------------------------------------------------------------------------------
Telecommunications - 9.3%
Ascend Communications, Inc.* 1,105 $ 46,893
Aspect Telecommunications Corp.* 2,770 60,940
Cabletron Systems, Inc.* 700 21,175
Cisco Systems, Inc.* 1,055 79,521
Lucent Technologies, Inc. 290 22,584
Qwest Communications International, Inc.* 100 4,075
----------
$ 235,188
- -------------------------------------------------------------------------------
Utilities - Telephone - 1.6%
MCI Communications Corp. 1,410 $ 40,185
- -------------------------------------------------------------------------------
Total U.S. Stocks $2,147,158
- -------------------------------------------------------------------------------
Foreign Stocks - 3.2%
Germany - 1.7%
SAP AG, Preferred (Computer Software - Systems) 185 $ 42,217
- -------------------------------------------------------------------------------
Japan - 1.5%
Canon, Inc., ADR (Special Products and Services) 80 $ 11,130
Sony Corp. (Electronics) 300 26,120
----------
$ 37,250
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 79,467
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,850,603) $2,226,625
- -------------------------------------------------------------------------------
Short-Term Obligations - 11.5%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Bank, due 9/02/97, at Amortized Cost $ 290 $ 289,957
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,140,560) $2,516,582
Other Assets, Less Liabilities - 0.1% 2,168
- -------------------------------------------------------------------------------
Net Assets - 100.0% $2,518,750
- -------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------------------------------------------------------
CORE EQUITY SPECIAL
GROWTH INCOME OPPORTUNITIES
AUGUST 31, 1997 FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost,
$2,461,282, $1,245,641 and $3,114,897,
respectively) $2,744,043 $1,405,673 $3,717,356
Cash 1,141 19,505 489
Deposit with brokers for securities sold short -- -- 95,437
Foreign currency, at value (identified cost, $0,
$0 and $4,055, respectively) -- -- 4,042
Receivable for Fund shares sold -- 50,000 --
Receivable for investments sold 37,779 6,595 262,105
Net receivable for foreign currency exchange
contracts closed or subject to master netting
agreements -- -- 175
Interest and dividends receivable 897 2,892 2,064
Receivable from investment adviser 10,414 -- 17,514
Deferred organization expenses 1,669 1,676 1,688
Other assets 1,288 -- --
---------- ---------- ----------
Total assets $2,797,231 $1,486,341 $4,100,870
---------- ---------- ----------
Liabilities:
Securities sold short, at value (proceeds
received, $0, $0 and $122,480, respectively) $ -- $ -- $ 126,887
Payable for investments purchased 29,934 10,405 5,991
Accrued expenses and other liabilities 11,177 1,883 13,181
---------- ---------- ----------
Total liabilities $ 41,111 $ 12,288 $ 146,059
---------- ---------- ----------
Net assets $2,756,120 $1,474,053 $3,954,811
========== ========== ==========
Net assets consist of:
Paid-in capital $2,164,935 $1,179,568 $3,083,892
Unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies 282,768 160,027 598,225
Accumulated undistributed net realized gain on
investments and foreign currency transactions 107,865 123,884 244,151
Accumulated undistributed net investment income 200,552 10,574 28,543
---------- ---------- ----------
Total $2,756,120 $1,474,053 $3,954,811
---------- ---------- ----------
Shares of beneficial interest outstanding:
Class A 67,032 34,434 140,925
Class I 107,057 65,074 149,230
---------- ---------- ----------
Total shares of beneficial interest
outstanding 174,089 99,508 290,155
========== ========== ==========
Net assets:
Class A $1,060,643 $ 510,280 $1,919,478
Class I 1,695,477 963,773 2,035,333
---------- ---------- ----------
Total net assets $2,756,120 $1,474,053 $3,954,811
========== ========== ==========
Class A shares:
Net asset value and offering and redemption price
per share (net assets / shares of beneficial interest outstanding) $15.82 $14.82 $13.62
====== ====== ======
Class I shares:
Net asset value and redemption price per share
(net assets / shares of beneficial interest outstanding) $15.84 $14.81 $13.64
====== ====== ======
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Assets and Liabilities - continued
- ---------------------------------------------------------------------------------------------------------------------------------
BLUE CONVERTIBLE NEW
CHIP SECURITIES DISCOVERY
AUGUST 31, 1997 FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost, $624,151,
$552,430 and $1,817,783, respectively) $ 720,092 $ 624,057 $1,996,184
Cash 6,338 3,982 33,748
Foreign currency, at value (identified cost, $0, $26
and $0, respectively) -- 26 --
Receivable for investments sold -- 9,904 --
Interest and dividends receivable 1,149 2,643 180
---------- ---------- ----------
Total assets $ 727,579 $ 640,612 $2,030,112
---------- ---------- ----------
Liabilities:
Accrued expenses and other liabilities $ 90 $ 85 $ 249
---------- ---------- ----------
Net assets $ 727,489 $ 640,527 $2,029,863
========== ========== ==========
Net assets consist of:
Paid-in capital $ 617,975 $ 557,991 $1,579,754
Unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies 95,941 71,627 178,401
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions 12,369 (1,197) 126,577
Accumulated undistributed net investment income 1,204 12,106 145,131
---------- ---------- ----------
Total $ 727,489 $ 640,527 $2,029,863
---------- ---------- ----------
Shares of beneficial interest outstanding:
Class A 41,316 50,266 41,008
Class I 20,514 5,555 114,238
---------- ---------- ----------
Total shares of beneficial interest outstanding 61,830 55,821 155,246
========== ========== ==========
Net assets:
Class A $ 486,110 $ 576,830 $ 536,157
Class I 241,379 63,697 1,493,706
---------- ---------- ----------
Total net assets $ 727,489 $ 640,527 $2,029,863
========== ========== ==========
Class A shares:
Net asset value and offering and redemption price per share (net assets /
shares of beneficial interest outstanding) $11.77 $11.48 $13.07
====== ====== ======
Class I shares:
Net asset value and redemption price per share (net assets / shares of
beneficial interest outstanding) $11.77 $11.47 $13.08
====== ====== ======
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Assets and Liabilities - continued
- -------------------------------------------------------------------------------------------------------------
RESEARCH SCIENCE AND
INTERNATIONAL TECHNOLOGY
AUGUST 31, 1997 FUND FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (identified cost, $2,378,684 and
$2,140,560, respectively) $2,330,823 $2,516,582
Cash 924 3,165
Foreign currency, at value (identified cost, $1,560 and $46,
respectively) 1,164 43
Receivable for Fund shares sold 10,000 --
Receivable for investments sold 17,901 --
Interest and dividends receivable 4,591 54
Receivable from investment adviser 6,854 8,711
Other assets -- 250
---------- ----------
Total assets $2,372,257 $2,528,805
---------- ----------
Liabilities:
Payable for investments purchased $ 26,952 $ --
Accrued expenses and other liabilities 9,217 10,055
---------- ----------
Total liabilities $ 36,169 $ 10,055
---------- ----------
Net assets $2,336,088 $2,518,750
========== ==========
Net assets consist of:
Paid-in capital $2,134,309 $2,036,119
Unrealized appreciation (depreciation) on investments and
translation of
assets and liabilities in foreign currencies (48,333) 376,018
Accumulated undistributed net realized gain (loss) on
investments and
foreign currency transactions 239,440 (69,545)
Accumulated undistributed net investment income 10,672 176,158
---------- ----------
Total $2,336,088 $2,518,750
---------- ----------
Shares of beneficial interest outstanding:
Class A 119,940 70,359
Class I 93,365 130,608
---------- ----------
Total shares of beneficial interest outstanding 213,305 200,967
========== ==========
Net assets:
Class A $1,313,579 $ 881,888
Class I 1,022,509 1,636,862
---------- ----------
Total net assets $2,336,088 $2,518,750
========== ==========
Class A shares:
Net asset value and offering and redemption price per share
(net assets / shares of beneficial interest outstanding) $10.95 $12.53
====== ======
Class I shares:
Net asset value and redemption price per share
(net assets / shares of beneficial interest outstanding) $10.95 $12.53
====== ======
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations
- ---------------------------------------------------------------------------------------------------------------------------------
CORE EQUITY SPECIAL
GROWTH INCOME OPPORTUNITIES
YEAR ENDED AUGUST 31, 1997 FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income:
Income -
Dividends $ 217,465 $ 27,016 $ 21,095
Interest 7,705 2,229 22,623
---------- ---------- ----------
Total investment income $ 225,170 $ 29,245 $ 43,718
---------- ---------- ----------
Expenses -
Management fee $ 12,775 $ 6,926 $ 23,164
Shareholder servicing agent fee 2,233 1,209 4,030
Distribution and service fee - Class A 4,216 2,468 9,410
Administrative fee 27 83 --
Registration fee 2,763 2,335 --
Auditing fee 5,101 5,501 8,272
Postage 341 82 119
Printing 2,928 1,635 --
Legal fee 3,223 2,618 2,026
Custodian fee 5,695 5,166 5,902
Amortization of organization expenses 434 434 434
Miscellaneous 4,671 354 325
---------- ---------- ----------
Total expenses $ 44,407 $ 28,811 $ 53,682
Fees paid indirectly (690) (388) (1,010)
Reduction of expenses by investment adviser,
shareholder servicing
agent and distributor (19,224) (14,434) (36,604)
---------- ---------- ----------
Net expenses $ 24,493 $ 13,989 $ 16,068
---------- ---------- ----------
Net investment income $ 200,677 $ 15,256 $ 27,650
---------- ---------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 147,884 $ 130,162 $ 314,835
Securities sold short -- -- (6,786)
Foreign currency transactions (112) (8) (173)
---------- ---------- ----------
Net realized gain on investments and
foreign currency transactions $ 147,772 $ 130,154 $ 307,876
---------- ---------- ----------
Change in unrealized appreciation (depreciation) -
Investments $ 264,806 $ 134,063 $ 542,028
Securities sold short -- -- 14,842
Translation of assets and liabilities in foreign
currencies 12 (5) 173
---------- ---------- ----------
Net change in unrealized appreciation $ 264,818 $ 134,058 $ 557,043
---------- ---------- ----------
Net realized and unrealized gain on investments
and
foreign currency $ 412,590 $ 264,212 $ 864,919
---------- ---------- ----------
Increase in net assets from operations $ 613,267 $ 279,468 $ 892,569
========== ========== ==========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations - continued
- --------------------------------------------------------------------------------------------------------------------------------
BLUE CONVERTIBLE NEW
CHIP SECURITIES DISCOVERY
PERIOD ENDED AUGUST 31, 1997 FUND* FUND* FUND*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income:
Income -
Dividends $ 6,880 $ 12,186 $ 155,787
Interest 978 5,669 6,670
---------- ---------- ----------
Total investment income $ 7,858 $ 17,855 $ 162,457
---------- ---------- ----------
Expenses -
Management fee $ 2,849 $ 2,458 $ 8,539
Shareholder servicing agent fee 576 497 1,498
Distribution and service fee - Class A 1,480 1,738 1,286
Administrative fee 52 44 132
Registration fee 4,030 4,000 4,505
Auditing fee 5,500 5,900 6,000
Printing 2,237 1,135 2,892
Postage 42 -- 25
Legal fee 3,871 3,214 4,534
Custodian fee 392 459 720
Miscellaneous 557 213 271
---------- ---------- ----------
Total expenses $ 21,586 $ 19,658 $ 30,402
Fees paid indirectly (173) (168) (451)
Reduction of expenses by investment adviser,
shareholder servicing
agent, and distributor (14,749) (13,739) (12,625)
---------- ---------- ----------
Net expenses $ 6,664 $ 5,751 $ 17,326
---------- ---------- ----------
Net investment income $ 1,194 $ 12,104 $ 145,131
---------- ---------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 12,369 $ 5,932 $ 126,577
Securities sold short -- (7,129) --
Foreign currency transactions 10 2 --
---------- ---------- ----------
Net realized gain (loss) on investments and
foreign currency
transactions $ 12,379 $ (1,195) $ 126,577
---------- ---------- ----------
Change in unrealized appreciation on investments and
translation
of assets and liabilities in foreign currencies $ 95,941 $ 71,627 $ 178,401
---------- ---------- ----------
Net realized and unrealized gain on investments
and foreign
currency $ 108,320 $ 70,432 $ 304,978
---------- ---------- ----------
Increase in net assets from operations $ 109,514 $ 82,536 $ 450,109
========== ========== ==========
* For the period from the commencement of investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations - continued
- -------------------------------------------------------------------------------------------------------------
RESEARCH SCIENCE AND
INTERNATIONAL TECHNOLOGY
PERIOD ENDED AUGUST 31, 1997 FUND* FUND*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income:
Income -
Dividends $ 32,673 $ 183,332
Interest 4,208 12,047
Foreign taxes withheld (3,096)
---------- ----------
Total investment income $ 33,785 $ 195,379
---------- ----------
Expenses -
Management fee $ 14,026 $ 10,517
Shareholder servicing agent fee 1,819 1,845
Distribution and service fee - Class A 4,164 2,112
Administrative fee 168 166
Registration fee 4,500 4,010
Auditing fees 5,500 5,500
Postage 468 129
Printing 3,357 3,181
Legal fees 3,451 5,691
Custodian fee 4,387 910
Miscellaneous 1,762 327
---------- ----------
Total expenses $ 43,602 $ 34,388
Fees paid indirectly (480) (559)
Reduction of expenses by investment adviser, shareholder
servicing agent, and distributor (20,009) (14,474)
---------- ----------
Net expenses $ 23,113 $ 19,355
---------- ----------
Net investment income $ 10,672 $ 176,024
---------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 241,403 $ (69,545)
Foreign currency transactions (1,963) 134
---------- ----------
Net realized gain (loss) on investments and foreign
currency
transactions $ 239,440 $ (69,411)
---------- ----------
Change in unrealized appreciation (depreciation) -
Investments $ (47,861) $ 376,022
Translation of assets and liabilities in foreign currencies (472) (4)
---------- ----------
Net change in unrealized appreciation (depreciation) $ (48,333) $ 376,018
---------- ----------
Net realized and unrealized gain on investments and
foreign currency $ 191,107 $ 306,607
---------- ----------
Increase in net assets from operations $ 201,779 $ 482,631
========== ==========
* For the period from the commencement of investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
CORE GROWTH FUND AUGUST 31, 1997 AUGUST 31, 1996*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ 200,677 $ (362)
Net realized gain on investments and foreign
currency transactions 147,772 66,889
Net unrealized gain on investments and foreign
currency translation 264,818 17,950
---------- ----------
Increase in net assets from operations $ 613,267 $ 84,477
---------- ----------
Distributions declared to shareholders from net
realized gain on investments - Class A $ (106,559) $ --
---------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $2,273,798 $ 605,756
Net asset value of shares issued to shareholders
in reinvestment of distributions 106,552 --
Cost of shares reacquired (817,088) (4,083)
---------- ----------
Increase in net assets from Fund share
transactions $1,563,262 $ 601,673
---------- ----------
Total increase in net assets $2,069,970 $ 686,150
Net assets:
At beginning of period 686,150 --
---------- ----------
At end of period (including accumulated
undistributed net investment income (loss) of
$200,552 and $(13), respectively) $2,756,120 $ 686,150
========== ==========
*For the period from the commencement of the Fund's investment operations, January 2, 1996, through August 31, 1996.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets - continued
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
EQUITY INCOME FUND AUGUST 31, 1997 AUGUST 31, 1996*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 15,256 $ 4,878
Net realized gain on investments and foreign
currency transactions 130,154 7,246
Net unrealized gain on investments and foreign
currency translation 134,058 25,969
---------- ----------
Increase in net assets from operations $ 279,468 $ 38,093
---------- ----------
Distributions declared to shareholders -
From net investment income - Class A $ (9,552) $ --
From net realized gain on investments - Class A (13,524) --
---------- ----------
Total distributions declared to shareholders $ (23,076) $ --
---------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $1,191,109 $ 449,397
Net asset value of shares issued to shareholders
in reinvestment of distributions 23,074 --
Cost of shares reacquired (473,902) (10,110)
---------- ----------
Increase in net assets from Fund share
transactions $ 740,281 $ 439,287
---------- ----------
Total increase in net assets $ 996,673 $ 477,380
Net assets:
At beginning of period 477,380 --
---------- ----------
At end of period (including accumulated
undistributed net investment income
of $10,574 and $4,878, respectively) $1,474,053 $ 477,380
========== ==========
*For the period from the commencement of the Fund's investment operations, January 2, 1996, through August 31, 1996.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets - continued
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
SPECIAL OPPORTUNITIES FUND AUGUST 31, 1997 AUGUST 31, 1996*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 27,650 $ 10,016
Net realized gain on investments and foreign
currency transactions 307,876 168,487
Net unrealized gain on investments and foreign
currency translation 557,043 41,182
---------- ----------
Increase in net assets from operations $ 892,569 $ 219,685
---------- ----------
Distributions declared to shareholders -
From net investment income - Class A $ (8,950) $ --
From net realized gain on investments - Class A (232,385) --
---------- ----------
Total distributions declared to shareholders $ (241,335) $ --
---------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $2,798,830 $2,038,964
Net asset value of shares issued to shareholders
in reinvestment of distributions 241,330 --
Cost of shares reacquired (1,995,218) (14)
---------- ----------
Increase in net assets from Fund share
transactions $1,044,942 $2,038,950
---------- ----------
Total increase in net assets $1,696,176 $2,258,635
Net assets:
At beginning of period 2,258,635 --
---------- ----------
At end of period (including accumulated
undistributed net investment income of $28,543
and $10,016, respectively) $3,954,811 $2,258,635
========== ==========
*For the period from the commencement of the Fund's investment operations, January 2, 1996, through August 31, 1996.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets - continued
- ---------------------------------------------------------------------------------------------------------------------------------
BLUE CONVERTIBLE NEW
CHIP SECURITIES DISCOVERY
PERIOD ENDED AUGUST 31, 1997* FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,194 $ 12,104 $ 145,131
Net realized gain (loss) on investments and
foreign currency transactions 12,379 (1,195) 126,577
Net unrealized gain on investments and foreign
currency translation 95,941 71,627 178,401
---------- ---------- ----------
Increase in net assets from operations $ 109,514 $ 82,536 $ 450,109
---------- ---------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 720,959 $ 559,838 $1,935,566
Cost of shares reacquired (102,984) (1,847) (355,812)
---------- ---------- ----------
Increase in net assets from Fund share
transactions $ 617,975 $ 557,991 $1,579,754
---------- ---------- ----------
Total increase in net assets $ 727,489 $ 640,527 $2,029,863
Net assets:
At beginning of period -- -- --
---------- ---------- ----------
At end of period (including accumulated
undistributed net investment income of $1,204,
$12,106 and $145,131, respectively) $ 727,489 $ 640,527 $2,029,863
========== ========== ==========
*For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
RESEARCH SCIENCE AND
INTERNATIONAL TECHNOLOGY
PERIOD ENDED AUGUST 31, 1997* FUND FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 10,672 $ 176,024
Net realized gain (loss) on investments and foreign currency
transactions 239,440 (69,411)
Net unrealized gain (loss) on investments and foreign
currency translation (48,333) 376,018
---------- ----------
Increase in net assets from operations $ 201,779 $ 482,631
---------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $2,472,688 $2,470,527
Cost of shares reacquired (338,379) (434,408)
---------- ----------
Increase in net assets from Fund share transactions $2,134,309 $2,036,119
---------- ----------
Total increase in net assets $2,336,088 $2,518,750
Net assets:
At beginning of period -- --
---------- ----------
At end of period (including accumulated undistributed net
investment income of $10,672 and $176,158, respectively) $2,336,088 $2,518,750
========== ==========
*For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
CORE GROWTH FUND AUGUST 31, 1997 AUGUST 31, 1996* AUGUST 31, 1997**
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ---------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $ 12.33 $ 10.00 $ 12.99
---------- ---------- ----------
Income from investment operations# -
Net investment income (loss)(S) $ 1.24 $ (0.01) $ 1.50
Net realized and unrealized gain on investments and
foreign currency transactions 3.93 2.34 1.35
---------- ---------- ----------
Total from investment operations $ 5.17 $ 2.33 $ 2.85
---------- ---------- ----------
Less distributions declared to shareholders from net
realized gain on investments $ (1.68) $ -- $ --
---------- ---------- ----------
Net asset value - end of period $ 15.82 $ 12.33 $ 15.84
========== ========== ==========
Total return 45.22% 23.30%++ 21.94%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.45% 1.50%+ 1.48%+
Net investment income (loss) 9.12% (0.11)%+ 14.08%+
Portfolio turnover 1,043% 204% 1,043%
Average commission rate $ 0.0248 $ 0.0411 $ 0.0248
Net assets at end of period
(000 omitted) $ 1,061 $ 686 $ 1,695
* 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 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 Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.50% of the Fund's average daily net
assets. The investment adviser, distributor and shareholder servicing agent did not impose any of their fees for the periods
indicated. If these fees had not been waived by the Fund and/or if actual expenses had been over/under this limitation, the
net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 1.06 $ (0.18) $ 1.40
Ratios (to average net assets):
Expenses## 2.82% 4.28%+ 2.35%
Net investment income (loss) 7.75% (2.34)%+ 13.20%
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
EQUITY INCOME FUND AUGUST 31, 1997 AUGUST 31, 1996* AUGUST 31, 1997**
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ---------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $ 11.07 $ 10.00 $ 12.20
---------- ---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.22 $ 0.13 $ 0.15
Net realized and unrealized gain on investments and
foreign currency transactions 3.91 0.94 2.46
---------- ---------- ----------
Total from investment operations $ 4.13 $ 1.07 $ 2.61
---------- ---------- ----------
Less distributions declared to shareholders -
From net investment income $ (0.16) $ -- $ --
From net realized gain on investments (0.22) -- --
---------- ---------- ----------
Total distributions declared to shareholders $ (0.38) $ -- $ --
---------- ---------- ----------
Net asset value - end of period $ 14.82 $ 11.07 $ 14.81
========== ========== ==========
Total return 38.05% 10.70%++ 21.39%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50% 1.50%+ 1.50%+
Net investment income 1.75% 1.83%+ 1.51%+
Portfolio turnover 118% 56% 118%
Average commission rate $ 0.0393 $ 0.0331 $ 0.0393
Net assets at end of
period (000 omitted) $ 510 $ 477 $ 964
* 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 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 Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.50% of the Fund's average daily
net assets. The investment adviser, distributor, and shareholder servicing agent did not impose any of their fees for
the periods indicated. If these fees had been waived by the Fund and/or if actual expenses were over/under this
limitation, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.02 $ (0.06) $ 0.03
Ratios (to average net assets):
Expenses## 3.40% 4.67%+ 2.67%+
Net investment income (loss) (0.15)% (0.78)%+ 0.35%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
SPECIAL OPPORTUNITIES FUND AUGUST 31, 1997 AUGUST 31, 1996* AUGUST 31, 1997**
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $ 11.36 $ 10.00 $ 11.39
---------- ---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.08 $ 0.06 $ 0.11
Net realized and unrealized gain on investments
and foreign currency transactions 3.35 1.30 2.14
---------- ---------- ----------
Total from investment operations $ 3.43 $ 1.36 $ 2.25
---------- ---------- ----------
Less distributions declared to shareholders -
From net investment income $ (0.04) $ -- $ --
From net realized gain on investments and
foreign currency transactions (1.13) -- --
---------- ---------- ----------
Total distributions declared to shareholders $ (1.17) $ -- $ --
---------- ---------- ----------
Net asset value - end of period $ 13.62 $ 11.36 $ 13.64
========== ========== ==========
Total return 31.84% 13.60%++ 19.75%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.74% 1.50%+ 0.18%+
Net investment income 0.65% 0.78%+ 1.26%+
Portfolio turnover 161% 108% 161%
Average commission rate $ 0.0387 $ 0.0361 $ 0.0387
Net assets at end of period (000 omitted) $ 1,920 $ 2,259 $ 2,035
* 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 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 Adviser voluntarily agreed to
maintain the expenses of the Fund at not more than 1.50% of the Fund's average daily net assets. The investment adviser,
distributor and shareholder servicing agent did not impose any of their fees for the periods indicated. If these fees
had not been waived by the Fund and/or if actual expenses had been over/under this limitation, the net investment income
(loss) per share and ratios would have been:
Net investment income (loss) $ (0.06) $ (0.01) $ 0.01
Ratios (to average net assets):
Expenses## 1.92% 2.97%+ 1.36%+
Net investment income (loss) (0.53)% (0.16)%+ 0.08%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------
BLUE CHIP FUND PERIOD ENDED AUGUST 31, 1997*
- -------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $ 10.00 $ 10.00
---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.02 $ 0.02
Net realized and unrealized gain on
investments 1.75 1.75
---------- ----------
Total from investment operations $ 1.77 $ 1.77
---------- ----------
Net asset value - end of period $ 11.77 $ 11.77
========== ==========
Total return 17.70%++ 17.70%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 0.28%+ 0.24%+
Portfolio turnover 32% 32%
Average commission rate $ 0.0427 $ 0.0427
Net assets at end of period (000 omitted) $ 486 $ 241
* For the period from the commencement of the Fund's investment operations, 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 Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.50% of the Fund's average daily
net assets. The Investment adviser, distributor, and shareholder servicing agent did not impose any of their fees for
the periods indicated. If these fees had not been waived by the Fund and/or if actual expenses had been over/under this
limitation, the net investment income loss per share and the ratios would have been:
Net investment loss $ (0.26) $ (0.23)
Ratios (to average net assets):
Expenses## 5.04%+ 4.54%+
Net investment loss (3.25)%+ (2.80)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------
CONVERTIBLE SECURITIES FUND PERIOD ENDED AUGUST 31, 1997*
- -------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $ 10.00 $ 10.00
---------- ----------
Income from investment operations -
Net investment income(S) $ 0.25 $ 0.26
Net realized and unrealized gain on
investments 1.23 1.21
---------- ----------
Total from investment operations $ 1.48 $ 1.47
---------- ----------
Net asset value - end of period $ 11.48 $ 11.47
========== ==========
Total return 14.70%++ 14.60%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 3.16%+ 3.19%+
Portfolio turnover 76% 76%
Average commission rate $ 0.0453 $ 0.0453
Net assets at end of period (000 omitted) $ 577 $ 64
* For the period from the commencement of the Fund's investment operations, 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 Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.50% of the Fund's daily net
assets. The investment adviser, distributor, and shareholder servicing agent did not impose any of their fees for the
periods indicated. If these fees had not been waived by the Fund and/or if actual expenses had been over/under this
limitation, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ (0.04) $ --
Ratios (to average net assets):
Expenses## 5.19%+ 4.69%+
Net investment income (loss) (0.53)%+ --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------
NEW DISCOVERY FUND PERIOD ENDED AUGUST 31, 1997*
- -------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $ 10.00 $ 10.00
---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.98 $ 1.01
Net realized and unrealized gain on
investments 2.09 2.07
---------- ----------
Total from investment operations $ 3.07 $ 3.08
---------- ----------
Net asset value - end of period $ 13.07 $ 13.08
========== ==========
Total return 30.70%++ 30.80%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 12.41%+ 12.65%+
Portfolio turnover 887% 887%
Average commission rate $ 0.0250 $ 0.0250
Net assets at end of period (000 omitted) $ 536 $ 1,494
* For the period from the commencement of the Fund's investment operations, 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 Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.50% of the Fund's average daily
net assets. The investment adviser, distributor and shareholder servicing agent did not impose any of their fees for the
periods indicated. If these fees had not been waived by the Fund and/or if actual expenses had been over/under this
limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.89 $ 0.92
Ratios (to average net assets):
Expenses## 3.10%+ 2.52%+
Net investment income 10.81%+ 11.63%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------
RESEARCH INTERNATIONAL FUND PERIOD ENDED AUGUST 31, 1997*
- -------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $ 10.00 $ 10.00
---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.06 $ 0.07
Net realized and unrealized gain on
investments 0.89 0.88
---------- ----------
Total from investment operations $ 0.95 $ 0.95
---------- ----------
Net asset value - end of period $ 10.95 $ 10.95
========== ==========
Total return 9.60%++ 9.60%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.68%+ 1.68%+
Net investment income 0.71%+ 0.85%+
Portfolio turnover 137% 137%
Average commission rate $ 0.0198 $ 0.0198
Net assets at end of period (000 omitted) $ 1,314 $ 1,022
* For the period from the commencement of the Fund's investment operations, 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 Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.75% of the Fund's average daily net
assets. The investment adviser, distributor and shareholder servicing agent did not impose any of their fees for the
periods indicated. If these fees had not been waived by the Fund and/or if actual expenses had been over/under this
limitation, the net investment income (loss) per share and the ratios would have been:
Net investment loss $ (0.01) $ --
Ratios (to average net assets):
Expenses## 3.31%+ 2.81%+
Net investment loss (0.92)%+ (0.28)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SCIENCE AND TECHNOLOGY FUND PERIOD ENDED AUGUST 31, 1997*
- -------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
<S> <C> <C>
Net asset value - beginning of period $ 10.00 $ 10.00
---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.84 $ 1.05
Net realized and unrealized gain on
investments and foreign currency transactions 1.69 1.48
---------- ----------
Total from investment operations $ 2.53 $ 2.53
---------- ----------
Net asset value - end of period $ 12.53 $ 12.53
========== ==========
Total return 25.30%++ 25.30%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.40%+ 1.41%+
Net investment income 10.73%+ 13.11%+
Portfolio turnover 792% 792%
Average commission rate $ 0.0243 $ 0.0243
Net assets at end of period (000 omitted) $ 882 $ 1,637
* For the period from the commencement of the Fund's investment operations, 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 Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.50% of the Fund's average daily net
assets. The investment adviser, distributor and shareholder servicing agent did not impose any of their fees for the
period indicated. If these fees had not been waived by the Fund and/or if actual expenses had been over/under this
limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.73 $ 0.98
Ratios (to average net assets):
Expenses## 2.77%+ 2.28%+
Net investment income 9.36%+ 12.24%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Core Growth Fund, MFS Equity Income Fund, MFS Special Opportunities Fund,
MFS Blue Chip Fund, MFS Convertible Securities Fund, MFS New Discovery Fund, MFS
Research International Fund, MFS Science and Technology Fund are diversified
series of MFS Series Trust I (the Trust), and MFS Special Opportunities Fund is
a non-diversified series of 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 reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues and forward contracts and interest rate
swaps, 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. 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. Short-term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value. Futures contracts, options, and options on futures
contracts listed on commodities exchanges are reported at market value using
closing settlement prices. Over-the-counter options on securities are valued by
brokers. Over-the-counter currency options are valued through the use of a
pricing model which takes into account foreign currency exchange spot and
forward rates, implied volatility, and short-term repurchase rates. Securities
for which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by each 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 each
Fund's operations.
Forward Foreign Currency Exchange Contracts - Each 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. Each Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, each 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, each Fund 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 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.
Written Options - Each Fund may also write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, each Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by each Fund. Each Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of each
Fund's management on the direction of interest rates.
Short Sales - The Special Opportunities Fund, the Convertible Securities Fund,
the New Discovery Fund, and the Science and Technology Fund may enter into short
sales. A short sale transaction involves selling a security which a Fund does
not own with the intent of purchasing it later at a lower price. A 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 a Fund must
replace the borrowed security. Losses can exceed the proceeds from short sales
and 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 a Fund may be required to pay
in connection with a short sale. Whenever a Fund engages in short sales, its
custodian segregates cash or marketable 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 is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. 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 and the Convertible Securities Fund may 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 Funds use the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. 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 additions 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 expensed.
Fees Paid Indirectly - Each Fund's custody fee is calculated as a percentage of
each 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
each Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - Each Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. 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.
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 year ended August 31, 1997, the following amounts were reclassified
between accumulated undistributed net investment income and accumulated net
realized gain on investments 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>
BLUE CONVERTIBLE CORE EQUITY
CHIP SECURITIES GROWTH INCOME
INCREASE (DECREASE) FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated undistributed net
realized gain (loss) on
investments and foreign
currency transactions $ (10) $ (2) $ 112 $ 8
Accumulated undistributed net
investment income (loss) $ 10 $ 2 $ (112) $ (8)
<CAPTION>
NEW RESEARCH SCIENCE AND SPECIAL
DISCOVERY INTERNATIONAL TECHNOLOGY OPPORTUNITIES
INCREASE (DECREASE) FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated undistributed net
realized gain (loss) on
investments and foreign
currency transactions $ -- $ 1,963 $ (134) $ 173
Accumulated undistributed net
investment income (loss) $ -- $ (1,963) $ 134 $ (173)
</TABLE>
At August 31, 1997, the Convertible Securities Fund, for federal income tax
purposes, had a capital loss carryforward of $1,022 which may be applied against
any net taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on August 31, 2005.
Multiple Classes of Shares of Beneficial Interest - The Funds offer multiple
classes of shares. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of each Fund pro
rata based on average daily net assets of each class, without distinction
between share classes. Dividends are declared separately for each class. No
class has preferential dividend rights; differences in per share dividend rates
are generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - 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
0.65% of average daily net assets for the Blue Chip Fund and the Convertible
Securities Fund, at an annual rate of 0.75% of average daily net assets for the
Core Growth Fund, the Equity Income Fund, the New Discovery Fund, the Science
and Technology Fund, and the Special Opportunities Fund, and at an annual rate
of 1.00% of average daily net assets for the Research International Fund. For
the year ended August 31, 1997, the investment adviser did not impose any of its
fee, which is reflected as a reduction of expenses in the Statement of
Operations.
Each Fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of each Fund's operating expenses, exclusive of
management, distribution and service fees. Each Fund in turn will pay MFS an
expense reimbursement fee not greater than 1.50% of average daily net assets,
except that the Research International Fund will pay a fee of 1.75%. 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,
1997, the aggregate unreimbursed expenses owed to MFS by each Fund amounted to:
<TABLE>
<CAPTION>
BLUE CONVERTIBLE CORE EQUITY NEW RESEARCH SCIENCE AND SPECIAL
CHIP SECURITIES GROWTH INCOME DISCOVERY INTERNATIONAL TECHNOLOGY OPPORTUNITIES
FUND FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$9,844 $9,046 $ -- $8,413 $1,302 $ -- $ -- $ --
</TABLE>
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 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 each Fund.
Administrator - Effective March 1, 1997, the Funds have an administrative
services agreement with MFS to provide the Fund with certain financial, legal,
shareholder servicing, compliance, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Funds pay
MFS an administrative fee at the following annual percentages of the Fund's
average daily net assets, provided that the administrative fee is not assessed
on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales on Class A shares of each Fund for the year
ended August 31, 1997.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's 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 by 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 year ended August 31, 1997,
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 0.13%. 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%. MFSC is currently waiving its fee for an indefinite
period.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, were as follows:
<TABLE>
<CAPTION>
BLUE CONVERTIBLE CORE EQUITY
CHIP SECURITIES GROWTH INCOME
FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases
- ----------
Investments $ 801,689 $ 916,065 $ 17,817,514 $ 1,735,832
========== ========== ============= ============
Sales
- ----------
Investments $ 189,892 $ 382,668 $ 16,161,162 $ 1,069,051
========== ========== ============= ============
<CAPTION>
NEW RESEARCH SCIENCE AND SPECIAL
DISCOVERY INTERNATIONAL TECHNOLOGY OPPORTUNITIES
FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases
- ----------
Investments (non-U.S. government
securities) $ 14,628,778 $ 4,633,699 $ 15,372,426 $ 4,871,185
============= ============ ============= ============
Sales
- ----------
Investments (non-U.S. government
securities) $ 13,012,489 $ 2,561,525 $ 13,452,258 $ 4,574,155
============= ============ ============= ============
</TABLE>
The cost and unrealized appreciation or depreciation in value of the investments
owned by each Fund, as computed on a federal income tax basis, are as follows:
<TABLE>
<CAPTION>
BLUE CONVERTIBLE CORE EQUITY
CHIP SECURITIES GROWTH INCOME
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $ 624,151 $ 552,605 $ 2,467,904 $1,245,767
------------ ---------- ------------ ----------
Gross unrealized appreciation $ 99,721 $ 77,886 $ 310,563 $ 163,961
Gross unrealized depreciation (3,780) (6,434) (34,424) (4,055)
------------ ---------- ------------ ----------
Net unrealized appreciation $ 95,941 $ 71,452 $ 276,139 $ 159,906
============ ========== ============ ==========
<CAPTION>
NEW RESEARCH SCIENCE AND SPECIAL
DISCOVERY INTERNATIONAL TECHNOLOGY OPPORTUNITIES
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $ 1,823,392 $2,379,678 $ 2,151,232 $3,115,308
------------ ---------- ------------ ----------
Gross unrealized appreciation $ 215,761 $ 128,745 $ 427,647 $ 687,707
Gross unrealized depreciation (42,969) (177,600) (62,297) (85,659)
------------ ---------- ------------ ----------
Net unrealized appreciation
(depreciation) $ 172,792 $ (48,855) $ 365,350 $ 602,048
============ ========== ============ ==========
</TABLE>
(5) Shares of Beneficial Interest
Each 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
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1997
--------------------------------------------------------------------------------------------
BLUE CHIP FUND** CONVERTIBLE SECURITIES FUND** CORE GROWTH FUND
--------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 46,967 $ 474,750 50,444 $ 504,497 59,769 $ 808,314
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- -- 8,292 106,552
Shares reacquired (5,651) (56,185) (178) (1,847) (56,691) (726,457)
------ ---------- ------ ---------- ------ ----------
Net increase 41,316 $ 418,565 50,266 $ 502,650 11,370 $ 188,409
====== ========== ====== ========== ====== ==========
<CAPTION>
Class A Shares
YEAR ENDED AUGUST 31, 1997
---------------------------------------------------------------------------------------------
EQUITY INCOME FUND NEW DISCOVERY FUND** RESEARCH INTERNATIONAL FUND**
---------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 28,321 $ 354,214 46,587 $ 483,036 145,874 $ 1,462,123
Shares issued to
shareholders in
reinvestment of
distributions 1,898 23,074 -- -- -- --
Shares reacquired (38,910) (473,850) (5,579) (56,315) (25,934) (255,253)
------ ---------- ------ ---------- ------- ------------
Net increase
(decrease) (8,691) $ (96,562) 41,008 $ 426,721 119,940 $ 1,206,870
====== ========== ====== ========== ======= ============
<CAPTION>
Class A Shares
YEAR ENDED AUGUST 31, 1997
--------------------------------------------------------------
SCIENCE AND TECHNOLOGY FUND** SPECIAL OPPORTUNITIES FUND
--------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 78,193 $ 811,064 80,611 $ 941,341
Shares issued to
shareholders in
reinvestment of
distributions -- -- 21,566 241,330
Shares reacquired (7,834) (79,182) (160,079) (1,817,353)
------ ---------- ------- -----------
Net increase
(decrease) 70,359 $ 731,882 (57,902) $ (634,682)
====== ========== ======= ===========
<CAPTION>
Class A Shares
PERIOD ENDED AUGUST 31, 1996*
---------------------------------------------------------------------------------------------
CORE GROWTH FUND EQUITY INCOME FUND SPECIAL OPPORTUNITIES FUND
---------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 56,000 $ 605,756 44,072 $ 449,397 198,828 $ 2,038,964
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- -- -- --
Shares reacquired (338) (4,083) (947) (10,110) (1) (14)
------ ---------- ------ ---------- ------- ------------
Net increase
(decrease) 55,662 $ 601,673 43,125 $ 439,287 198,827 $ 2,038,950
====== ========== ====== ========== ======= ============
<CAPTION>
Class I Shares
YEAR ENDED AUGUST 31, 1997
------------------------------------------------------------------------------------------
BLUE CHIP FUND** CONVERTIBLE SECURITIES FUND** CORE GROWTH FUND
------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 24,471 $ 246,209 5,555 $ 55,341 113,207 $ 1,465,484
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- -- -- --
Shares reacquired (3,957) (46,799) -- -- (6,150) (90,631)
------ ---------- ----- --------- ------- ------------
Net increase 20,514 $ 199,410 5,555 $ 55,341 107,057 $ 1,374,853
====== ========== ===== ========= ======= ============
*For the period from the commencement of investment operations, January 2, 1996, through August 31, 1996.
**For the period from the commencement of investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
<TABLE>
<CAPTION>
Class I Shares
YEAR ENDED AUGUST 31, 1997
------------------------------------------------------------------------------------------
EQUITY INCOME FUND NEW DISCOVERY FUND** RESEARCH INTERNATIONAL FUND**
------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 65,078 $ 836,895 144,634 $ 1,452,530 100,754 $ 1,010,565
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- -- -- --
Shares reacquired (4) (52) (30,396) (299,497) (7,389) (83,126)
------ ---------- ------- ------------ ------ ----------
Net increase 65,074 $ 836,843 114,238 $ 1,153,033 93,365 $ 927,439
====== ========== ======= ============ ====== ==========
<CAPTION>
Class I Shares
YEAR ENDED AUGUST 31, 1997
--------------------------------------------------------------
SCIENCE AND TECHNOLOGY FUND** SPECIAL OPPORTUNITIES FUND
--------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 164,633 $ 1,659,463 163,990 $ 1,857,489
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- --
Shares reacquired (34,025) (355,226) (14,760) (177,865)
------- ------------ ------- ------------
Net increase 130,608 $ 1,304,237 149,230 $ 1,679,624
======= ============ ======= ============
**For the period from the commencement of investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
(6) Line of Credit
Each Fund and other affiliated funds participate in a $400 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of each
Fund's 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 Fund for the year ended August 31, 1997, were as follows:
<TABLE>
<CAPTION>
BLUE CONVERTIBLE CORE EQUITY NEW RESEARCH SCIENCE AND SPECIAL
CHIP SECURITIES GROWTH INCOME DISCOVERY INTERNATIONAL TECHNOLOGY OPPORTUNITIES
FUND FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$6 $3 $3 $8 $2 $8 $1 $4
</TABLE>
(7) Restricted Securities
Each Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At August 31, 1997, the
Research International Fund owned the following restricted securities
(consisting of 1.53% of its net assets) which may not be publicly sold without
registration under the Securities Act of 1933. The Fund does not have the right
to demand that such securities be registered. The value of these securities is
determined by valuations supplied by a pricing service or brokers or, if not
available, in good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF
FUND/DESCRIPTION ACQUISITION SHARES COST VALUE
- ------------------------------------------------------------------------------------------------------------------
RESEARCH INTERNATIONAL FUND
<S> <C> <C> <C> <C>
Bank Handlowy Warsza 6/18/97 200 $ 2,162 $ 2,525
Hong Leong Finance Ltd. 1/15/96 3,000 11,940 5,855
Jarvis Hotels 6/21/96 - 7/02/96 10,900 30,014 27,378
-------
$35,758
=======
</TABLE>
(8) 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 the Funds have in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts for the Special
Opportunities Fund amounted to a net receivable of $175 with Deutschebank at
August 31, 1997.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust I and Shareholders of MFS Core Growth Fund,
MFS Equity Income Fund, MFS Special Opportunities Fund, MFS Blue Chip Fund, MFS
Convertible Securities Fund, MFS New Discovery Fund, MFS Research International
Fund and MFS Science and Technology Fund:
We have audited the accompanying statements of assets and liabilities of MFS
Core Growth Fund, MFS Equity Income Fund, MFS Special Opportunities Fund, MFS
Blue Chip Fund, MFS Convertible Securities Fund, MFS New Discovery Fund, MFS
Research International Fund and MFS Science and Technology Fund (the Funds)
(eight of the portfolios constituting MFS Series Trust I) including the
schedules of portfolio investments as of August 31, 1997, and the related
statements of operations, the statements of changes in net assets and the
financial highlights for each of the periods indicated herein. 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. 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
securities owned as of 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 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
Core Growth Fund, MFS Equity Income Fund, MFS Special Opportunities Fund, MFS
Blue Chip Fund, MFS Convertible Securities Fund, MFS New Discovery Fund, MFS
Research International Fund and MFS Science and Technology Fund at August 31,
1997, and the results of their operations, the changes in their net assets, and
the financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.
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) Core Growth Fund
MFS(R) Equity Income Fund
MFS(R) Special Opportunities Fund
MFS(R) Blue Chip Fund
MFS(R) Convertible SecuritiesFund
MFS(R) New Discovery Fund
MFS(R) Research InternationalFund
MFS(R) Science and Technology Fund
500 Boylston Street
Boston, MA02116-3741
[LOGO: M F S(SM)]
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(SM)
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
INC-2 10/97 970
