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[LOGO] MFS(SM)
INVESTMENT MANAGEMENT
SEMIANNUAL REPORT
FEBRUARY 28, 1997
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MFS(R) CORE GROWTH FUND
MFS(R) EQUITY INCOME FUND
MFS(R) SPECIAL OPPORTUNITIES FUND
MFS(R) BLUE CHIP FUND
MFS(R) CONVERTIBLE SECURITIES FUND
MFS(R) NEW DISCOVERY FUND
MFS(R) RESEARCH INTERNATIONAL FUND
MFS(R) SCIENCE AND TECHNOLOGY FUND
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MFS(R) INCUBATOR FUNDS
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
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TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* - Chairman and President Massachusetts Financial Services Company
500 Boylston Street
Richard B. Bailey* - Private Investor; Boston, MA 02116-3741
Former Chairman and Director (until 1991),
Massachusetts Financial Services Company; Director, Cambridge DISTRIBUTOR
Bancorp; Director, Cambridge Trust Company MFS Fund Distributors, Inc.
500 Boylston Street
Marshall N. Cohan - Private Investor Boston, MA 02116-3741
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery, TREASURER
Brigham and Women's Hospital; Professor of Surgery, Harvard W. Thomas London*
Medical School
ASSISTANT TREASURER
The Hon. Sir J. David Gibbons, KBE - Chief Executive James O. Yost*
Officer, Edmund Gibbons Ltd.; Chairman, Bank of
N.T. Butterfield & Son Ltd. SECRETARY
Stephen E. Cavan*
Abby M. O'Neill - Private Investor; Director, Rockefeller
Financial Services, Inc. (investment advisers) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Walter E. Robb, III - President and Treasurer, Benchmark
Advisors, Inc. (corporate financial consultants); President, World Wide Web
Benchmark Consulting Group, Inc. (office services); www.mfs.com
Trustee, Landmark Funds (mutual funds)
INVESTOR INFORMATION
Arnold D. Scott* - Senior Executive Vice President, For MFS stock and bond market outlooks, call toll free:
Director and Secretary, Massachusetts Financial Services 1-800-637-4458 anytime from a touch-tone telephone.
Company
For information on MFS mutual funds, call your financial
Jeffrey L. Shames* - President and Director, Massachusetts adviser or, for an information kit, call toll free:
Financial Services Company 1-800-637-2929 any business day from 9 a.m. to 5 p.m.
Eastern time (or leave a message anytime).
J. Dale Sherratt - President, Insight Resources, Inc.
(acquisition planning specialists) INVESTOR SERVICE
MFS Service Center, Inc.
Ward Smith - Former Chairman (until 1994), NACCO Industries; P.O. Box 2281
Director, Sundstrand Corporation Boston, MA 02107-9906
PORTFOLIO MANAGERS* For general information, call toll free: 1-800-225-2606
Irfan Ali any business day from 8 a.m. to 8 p.m. Eastern time.
John F. Brennan, Jr.
Mitchell D. Dynan For service to speech- or hearing-impaired, call toll free:
Judith Noelle Lamb 1-800-637-6576 any business day from 9 a.m. to 5 p.m.
John D. Laupheimer, Jr. Eastern time. (To use this service, your phone must be
Robert J. Manning equipped with a Telecommunications Device for the Deaf.)
Lisa B. Nurme
Kevin R. Parke For share prices, account balances, and exchanges, call toll
Stephen Pesek free: 1-800-MFS-TALK (1-800-637-8255) anytime from a
Brian E. Stack touch-tone telephone.
CUSTODIAN
State Street Bank and Trust Company
*Affiliated with the Investment Adviser
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LETTER FROM THE CHAIRMAN
Dear Shareholders:
After more than six years of expansion, the U.S. economy appears to be
experiencing another year of moderate growth in 1997, although a few signs
point to the possibility of a modest rise in inflation during the year. On the
positive side, the pattern of moderate growth and inflation set over the past
few years now seems fairly well entrenched in the economy and, short of a
major international or domestic crisis, appears to have enough momentum to
remain on track for some time. Also, gains in such important sectors as
housing, automobiles, industrial production, and exports indicate a fair
amount of underlying strength in the economy. However, some reason for caution
can be seen in the continuing high levels of consumer debt and rising personal
bankruptcies, as well as in the ongoing tightness in labor markets, which
could add some inflationary pressures to the economy. Given these somewhat
conflicting indicators, we expect real (inflation-adjusted) growth to revolve
around 2% in 1997, which would represent a modest decline from 1996.
We continue to urge U.S. equity investors to lower their expectations for
1997 and to point out that the impressive gains of the past two years are not
sustainable. Just as the slowdown in corporate earnings growth and increases
in interest rates in 1996 raised some near-term concerns, further interest
rate increases and an acceleration of inflation could negatively affect the
stock market in 1997. However, to the extent that some slowdown in earnings
means that the economy is not overheating, this could be beneficial for the
equity market in the long run. Also, we believe many of the technology-driven
productivity gains that U.S. companies have made in recent years will continue
to enhance corporate America's competitiveness and profitability. Therefore,
while we have some near-term concerns, we remain reasonably positive about the
long-term viability of the equity market.
In the bond markets, conflicting signals over the strength of the economy
have created near-term volatility, while comments by Federal Reserve Board
Chairman Alan Greenspan late in 1996 and earlier this year created some
uncertainty about the Federal Reserve's next move. However, we expect the Fed
to maintain its anti-inflationary stance should signs of more rapid economic
growth and, particularly, of higher inflation resurface. While inflationary
forces largely remained in check in 1996, the continued strength in the labor
market means that a pickup in inflation is still possible. At the same time,
the U.S. budget deficit continues to decline and, as a percentage of gross
domestic product, is now less than 2%, which we consider a positive
development for the bond markets. Although interest rates may move higher over
the coming months, we believe that, at current levels, fixed-income markets
remain equitably valued.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
March 14, 1997
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PORTFOLIO MANAGERS' OVERVIEWS
MFS CORE GROWTH FUND
For the six months ended February 28, 1997, Class A shares of the Fund
provided a total return of 24.12% and Class I shares returned 24.30%. These
returns, which assume the reinvestment of distributions but exclude the
effects of any sales charges, compare to a 22.50% return for the Standard &
Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock 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, which supports above-average
revenue growth. The second theme pertains to companies that we believe could
exhibit accelerated earnings growth driven by new product cycles and/or
acquisitions. Third, the Fund seeks companies that are able to control their
own destiny via 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.
/s/ John D. Laupheimer, Jr. /s/ Stephen Pesek
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John D. Laupheimer, Jr. Stephen Pesek
Portfolio Manager Portfolio Manager
MFS EQUITY INCOME FUND
For the six months ended February 28, 1997, Class A shares of the Fund
provided a total return of 20.26% and Class I shares returned 20.16%. These
returns, which assume the reinvestment of distributions but exclude the
effects of any sales charges, compare to a 22.50% return for the S&P 500.
The Fund's top holdings were in the financial services, utilities,
industrial goods and services, and energy sectors. Within financial services,
the Fund has increased its weighting in insurance stocks, an industry in which
companies are aggressively reshaping their business portfolios. The Fund has
reduced its exposure to gas pipelines, after a strong performance in 1996.
Currently, 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. The Fund has maintained exposure
to the commercial jet building cycle; however, some profits have been taken in
this sector, a strong contributor to performance in 1996. Energy holdings
remain focused in both international and domestic companies, which are seeing
improved returns despite being in lagging businesses, especially refining,
where we believe a slow recovery is underway.
The Fund continues to seek holdings in companies that we anticipate will
provide attractive dividend yields and reasonable valuations, characteristics
that we believe could provide protection against price declines in a volatile
market.
/s/ Lisa B. Nurme
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Lisa B. Nurme
Portfolio Manager
MFS SPECIAL OPPORTUNITIES FUND
For the six months ended February 28, 1997, Class A shares of the Fund
provided a total return of 12.59% and Class I shares returned 12.78%. These
returns, which assume the reinvestment of distributions but exclude the
effects of any sales charges, compare to a 22.50% return for the S&P 500.
The Fund continues to have the majority of its assets in common stocks
because we have found few interesting opportunities in the distressed and
high-yield markets. The Fund's holdings can be separated as follows: one-third
in equities of companies that have emerged from bankruptcy, such as Anacomp;
one-third in leveraged-company equities, such as Maxxam; and one-third in
companies that we feel have significant earnings power and that trade at a
substantial discount to their anticipated long-term growth rates, such as Tyco
International. The Fund has also benefited from being invested in companies
that have been taken over. Two recent examples include Loral and Eljer
Industries. The Fund will continue its value-oriented style of investing and
will patiently wait for the markets to present what we feel are more
interesting opportunities over time.
/s/ John F. Brennan, Jr. /s/ Robert J. Manning
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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
February 28, 1997, provided a total return of 4.30%. This return, which
assumes the reinvestment of distributions but excludes the effects of any
sales charges, compares to a 7.08% return for the S&P 500 for the same period.
The investment strategy of the Fund is predicated on the assumption that
the U.S. economy will grow slowly during 1997 and that interest rates will
remain fairly stable. Given the longevity of the current economic recovery and
the high levels of consumer debt, we believe that the economic risks are on
the downside. During the second half of 1997, investors could become
increasingly concerned about slower growth or a recession during 1998. If this
scenario unfolds, then interest rates could move downward. The Fund is
positioned to anticipate this potential change in perception, with the bulk of
its investments in companies that we believe can sustain double-digit earnings
growth in this type of environment. Earnings ultimately drive stock prices,
and investors will bid up prices of companies that can achieve above-average
earnings growth.
The Fund's current industry weightings reflect a fairly defensive posture
that is consistent with this economic scenario. While sector allocations have
been made, the Fund's holdings are diverse and spread across many industries.
For example, the Fund is significantly underweighted in the basic materials,
auto, and housing sectors. Conversely, it is overweighted in consumer staples
and health care. Industrial goods are overweighted but skewed toward aerospace
and defense companies that, we believe, should perform relatively well in a
slow-growth economy. Similarly, the retail weighting is greater than the
market's, but two-thirds of this is in supermarkets and drug stores. The
financial services weighting is close to that of the S&P 500, with an emphasis
on high-quality regional banks and insurance companies. The weightings in the
energy and utilities and communications sectors also approximate those of the
market. While we believe these holdings offer modest price appreciation, they
are viewed as the ballast in the portfolio. Emphasis has also been placed on
companies that have significant recurring revenue streams and participate in
dynamic, high-growth markets. Examples are First Data, IKON, and DST Systems.
For the same reasons, the bulk of the Fund's technology investments are in the
software industry.
/s/ Mitchell D. Dynan
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Mitchell D. Dynan
Portfolio Manager
MFS CONVERTIBLE SECURITIES FUND
The Fund commenced operations on January 2, 1997 and from that date through
February 28, 1997, provided a total return of 1.50%. This return, which
assumes the reinvestment of distributions but excludes the effects of any
sales charges, compares to a 2.53% return for the Merrill Lynch All
Convertibles Index, an unmanaged index of 509 convertible securities, and a
2.60% return for the average convertible securities fund for the same period
as tracked by Lipper Analytical Services, an independent firm that monitors
mutual fund performance.
The Fund has taken an extremely defensive posture to preserve capital due
to what we feel are the stock market's current high valuation and its
increased volatility. Convertible securities comprise 88% of the portfolio
versus the required 65% minimum. Increased demand for the convertible asset
class has led to a more expensive convertible securities market, as
illustrated by the aggressive pricing of new issues. In response, the
portfolio is skewed toward convertibles that are technically cheap (i.e.,
those whose price movements correlate well with the 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 are benefiting
from one or more of the following trends: industry consolidation, market
dominance, or cost containment. Performance was favorably impacted by
overweightings in industrial goods and services companies such as Browning
Ferris and U.S. Filter; consumer staples such as Dole Foods; retailers such as
Saks Fifth Avenue and K-Mart; financial services companies such as Conseco,
NationsBank, and Finova; and technology companies such as Baan and Xilinx.
Performance has been hindered by basic materials companies such as RMI
Titanium and Titanium Metals and, to a lesser extent, by energy companies such
as Enron Oil & Gas and Devon Energy. A value-oriented approach will continue
to be used to evaluate company fundamentals and technical aspects of
convertible securities.
/s/ Judith Noelle Lamb
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Judith Noelle Lamb
Portfolio Manager
MFS NEW DISCOVERY FUND
The Fund commenced operations on January 2, 1997 and, from that date through
February 28, 1997, provided a total return of 0.90%. This return, which
assumes the reinvestment of distributions but excludes the effects of any
sales charges, compares to a -0.48% return for the Russell 2000 Total Return
Index, an 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 maintains significant weightings in technology, health services,
financial services, and lodging -- sectors that we believe will experience
sustainable earnings growth well in excess of that of the overall economy. The
Fund's favorable performance versus the Russell 2000 Index reflects the
exceptional strength shown by its financial services and lodging holdings. The
former, such as Franklin Resources and Reliastar Financial, are experiencing
strong asset and earnings growth, as individuals both in the United States and
abroad are paying increased attention to building retirement assets. The
portfolio has also seen strong gains in the shares of several operators of
high-end hotel chains, such as Renaissance Hotels and Wyndham Hotels. These
companies are experiencing rapid earnings growth, reflecting strong industry
supply/demand fundamentals. Due to the sell-off of technology shares early in
1997, these stocks have hindered the Fund's performance. However, we remain
convinced that the technology sector offers the single best secular growth
opportunity in our economy, and our holdings are concentrated in companies
that we believe are well positioned and attractively valued. As a result, we
expect holdings such as Cadence Design Systems to contribute materially to the
Fund's future performance.
The Fund will continue to seek what we feel are attractively valued,
emerging growth companies that can provide exceptional long-term returns. Of
late, the performance of larger-company shares has significantly outpaced that
of smaller-company stocks. Additionally, growing worries about inflationary
pressures have prompted an ongoing sell-off in many high-quality emerging
growth stocks that we would, heretofore, have considered overpriced. As a result
of these factors, we are encountering a greater number of what we see as
attractive investment opportunities, and we remain optimistic about the Fund's
future prospects.
/s/ Brian E. Stack
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Brian E. Stack
Portfolio Manager
MFS RESEARCH INTERNATIONAL FUND
The Fund commenced operations on January 2, 1997 and, from that date through
February 28, 1997, provided a total return of -1.50%. This return, which
assumes the reinvestment of distributions but excludes the effects of any
sales charges, compares to a -1.87% 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 technology (15.8% of assets),
financial services (15.7%), utilities and communications (10.9%), retailing
(10.2%), and industrial goods and services (10.0%).
The three top holdings in the Fund, which uses a bottom-up, fundamental
approach to investing, are in the technology sector with Sony, Canon, and TDK
Corporation. We believe Sony's new digital product launches and strong product
pipeline offer the company significant opportunities, while management's
compensation is directly tied to the company's performance. Also, through
major distributors in Europe and Japan, Sony Pictures' new management team
will soon be able to capitalize on the 3,400 movie titles it has in its motion
picture bank. As a result, we anticipate that operating profits could grow at
an average of over 20% over the next couple of years.
Canon's underlying operating growth should be at 12% in the coming year.
We feel that the company's valuation is currently cheap for a quality growth
company. TDK has strong proprietary technology in a number of high-growth
component markets. We expect these products to continue providing strong
earnings growth over the next couple of years.
Our top holding in the utilities and communications sector is PowerGen, a
British electric utility. There is currently strong industry demand and
availability at PowerGen's plants. As a result, production should be higher
than expected, and market share should be around 20% to 21%. Several of our
top holdings are also in the retail sector. Companies such as ASDA, Kwik-Fit,
and Storehouse all offer what we believe is good earnings potential at
reasonable valuations. Within the financial services sector, several banks and
insurance companies in Hong Kong, Great Britain, France, and Japan have
demonstrated good earnings growth, which, coupled with substantial cost
savings, is yielding excellent results.
/s/ Kevin R. Parke
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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
February 28, 1997, provided a total return of 0.80%. This return, which
assumes the reinvestment of distributions but excludes the effects of any
sales charges, compares to a 1.47% return over the same period for the NASDAQ-
OTC Index, an unmanaged index of common stocks traded on NASDAQ. The Fund's
performance during this period also compares to a -1.05% return for the
average technology fund as tracked by CDA/Wiesenberger, an independent firm
that reports mutual fund performance.
The Fund's holdings are focused in the computer software, networking,
computer services, and semiconductor sectors. We believe that the long-term
outlook for these sectors is highly favorable due to several key factors, such
as growth in unit shipments of personal computers, increases in computing
power, new products, and expansion of international markets. The Fund seeks
companies that are fast growing, have market share leadership, and have a
defensible strategic position. Top holdings include Computer Associates,
Synopsis, and Intel. All three dominate their respective market segments, are
highly profitable, and have recently introduced new products that could
potentially accelerate growth.
The Fund's performance is significantly impacted by the performance of its
industry sectors. Year to date, the stocks in this area have been extremely
volatile. Fund performance has been negatively affected by market declines in
the software and networking sectors. The Fund has, however, used its cash
position to purchase stocks whose prices have come down due to market
volatility but which, we believe, have substantial prospects for appreciation.
/s/ Irfan Ali
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Irfan Ali
Portfolio Manager
PORTFOLIO MANAGERS' PROFILES
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.
JOHN F. BRENNAN has been a member of the MFS investment staff since 1985. A
graduate of the University of Rhode Island and Stanford University's Graduate
School of Business Administration, he began his career at MFS as an industry
specialist and was promoted to Assistant Vice President - Investments in 1987.
He was named Vice President - Investments in 1988 and Senior Vice President in
1995.
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. Mr. Dynan became Portfolio Manager
of Massachusetts Investors Trust in 1995.
JUDITH NOELLE LAMB is a Vice President of MFS and a member of the portfolio
management team of MFS Total Return Fund. She specializes in convertible
securities. Ms. Lamb joined MFS in 1992 as a research analyst. She is a
graduate of New York University and the New York University Graduate School of
Business.
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 Boston
College's Graduate School of Management, he was named Vice President -
Investments in 1988 and Senior Vice President in 1993.
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.
KEVIN R. PARKE joined the MFS Research Department in 1985 as an industry
specialist. He was named Assistant Vice President - Investments in 1987, Vice
President - Investments and Portfolio Manager of MFS(R) Capital Growth Fund in
1988, Portfolio Manager of Massachusetts Investors Trust in 1991, Senior Vice
President in 1993, and Director of Equity Research in 1995. Mr. Parke is a
graduate of Lehigh University and the Harvard University Graduate School of
Business Administration.
STEPHEN PESEK joined MFS as a research analyst in 1994 and was that year named
Vice President - Investments. He is a graduate of the University of
Pennsylvania and Columbia University.
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 of the University of Virginia, he has worked as an equity analyst
since 1987. Mr. Stack has served as Portfolio Manager of MFS Institutional
Emerging Equities Fund since January 1996.
INVESTMENT OBJECTIVES AND POLICIES
Currently, each Fund only offers 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 as well as members of the governing boards of the various Funds
sponsored by MFS.
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).
MFS EQUITY INCOME FUND
The primary objective of the Fund is reasonable income. In selecting
investments, the Fund also considers the potential for capital appreciation.
Under normal market conditions, the Fund invests at least 65% of its total
assets in income producing equity securities. The Fund may also invest up to
35% of its total assets in fixed-income securities, including up to 20% in
fixed-income securities rated "BB" or lower by Standard & Poor's Rating Group
or Fitch Investors Service, Inc., or "Ba" or lower by Moody's Investors
Service, Inc.
MFS 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.
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
managers believe have above-average capital appreciation potential, and may
invest up to 35% of its total assets in other securities (including emerging
growth companies) offering an opportunity for capital appreciation.
MFS CONVERTIBLE SECURITIES FUND
The objective of the Fund is high 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% in nonconvertible corporate and U.S. government fixed-
income securities, equity securities, and money market instruments. The Fund
may engage in short sales.
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 managers believe offer
superior prospects for growth, and emphasizes 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.
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.
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 managers expect 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.
PERFORMANCE SUMMARY
Because mutual funds like MFS Core Growth Fund, MFS Equity Income Fund and MFS
Special Opportunities Fund are designed for investors with long-term goals, we
have provided cumulative results as well as the average annual total returns
for Class A and Class I shares for the applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN FOR PERIODS ENDED FEBRUARY
28, 1997
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
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MFS CORE GROWTH FUND 6 Months 1 Year Life of Fund*
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Cumulative Total Return +24.12% +40.40% +53.03%
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Average Annual Total Return -- +40.40% +44.36%
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SEC Results -- +33.77% +38.41%
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<CAPTION>
CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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Cumulative Total Return +24.30% +40.61% +53.27%
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Average Annual Total Return -- +40.61% +44.55%
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SEC Results -- +33.97% +38.59%
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*For the period from the commencement of the Fund's operations, January 2,
1996 to February 28, 1997.
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CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
MFS EQUITY INCOME FUND 6 Months 1 Year Life of Fund*
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Cumulative Total Return +20.26% +28.50% +33.12%
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Average Annual Total Return -- +28.50% +28.00%
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SEC Results -- +22.36% +22.73%
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<CAPTION>
CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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Cumulative Total Return +20.16% +28.40% +33.02%
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Average Annual Total Return -- +28.40% +27.92%
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SEC Results -- +22.26% +22.64%
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CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
MFS SPECIAL OPPORTUNITY FUND 6 Months 1 Year Life of Fund*
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Cumulative Total Return +12.59% +22.39% +27.90%
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Average Annual Total Return -- +22.39% +23.66%
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SEC Results -- +16.59% +18.56%
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CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
6 Months 1 Year Life of Fund*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +12.78% +28.60% +28.12%
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +28.60% +23.84%
- -----------------------------------------------------------------------------------------------------------------------------------
SEC Results -- +16.79% +18.73%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
January 2, 1996 to February 28, 1997.
All results represent past performance and are not an indication of future
results. 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.
SEC results include the maximum 4.75% sales charge.
Class I share results include the performance and operating expenses (e.g.,
Rule 12b-1 fees) 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
would have been higher had Class I shares been outstanding during the entire
period. The Class A share performance included in the Class I share
performance has been adjusted to reflect the fact that Class I shares have no
initial sales load.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies
and waivers may be discontinued at any time.
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS CORE GROWTH FUND
Stocks - 80.0%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 73.8%
Aerospace - 3.1%
Allied Signal, Inc. 200 $ 14,450
Goodrich (B.F.) Co. 350 14,219
Thiokol Corp. 200 11,150
United Technologies Corp. 200 15,050
----------
$ 54,869
- ----------------------------------------------------------------------------------------------
Banks and Credit Companies - 0.7%
Compass Bancshares, Inc. 75 $ 3,347
Norwest Corp. 200 9,950
----------
$ 13,297
- ----------------------------------------------------------------------------------------------
Business Machines - 1.4%
HMT Technology Corp.* 500 $ 9,563
Sun Microsystems, Inc.* 500 15,437
----------
$ 25,000
- ----------------------------------------------------------------------------------------------
Business Machines - Peripherals - 0.7%
Seagate Technology 250 $ 11,813
- ----------------------------------------------------------------------------------------------
Business Services - 3.1%
Administaff, Inc.* 100 $ 2,388
Computer Sciences Corp. 250 16,875
CUC International, Inc. 400 9,550
Ikon Office Solutions, Inc. 400 16,500
Loewen Group, Inc. 260 8,385
Nu Skin Asia Pacific, Inc.* 100 2,912
----------
$ 56,610
- ----------------------------------------------------------------------------------------------
Cellular Telephones - 0.3%
Telephone & Data Systems, Inc. 150 $ 6,000
- ----------------------------------------------------------------------------------------------
Chemicals - 2.2%
Air Products & Chemicals, Inc. 150 $ 11,119
Betzdearborn, Inc. 300 19,462
Praxair, Inc. 200 9,725
----------
$ 40,306
- ----------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.1%
Electronic Arts, Inc.* 200 $ 6,250
First Data Corp. 200 7,325
Spectrum Holobyte, Inc.* 700 5,775
----------
$ 19,350
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 5.6%
BMC Software, Inc.* 780 $ 33,394
Cadence Design Systems, Inc.* 350 12,906
Compaq Computer Corp. 200 15,850
Compuware Corp. 300 18,675
Oracle Systems Corp.* 200 7,850
USCS International, Inc.* 300 6,225
Xionics Document Technologies* 400 6,800
----------
$ 101,700
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 6.8%
Colgate-Palmolive Co. 100 $ 10,350
Philip Morris Cos., Inc. 210 28,376
Schweitzer-Mauduit International, Inc. 200 6,825
Tyco International Ltd. 1,275 75,225
United States Rentals, Inc.* 100 1,900
----------
$ 122,676
- ----------------------------------------------------------------------------------------------
Electronics - 3.8%
Altera Corp.* 275 $ 12,478
Analog Devices, Inc.* 100 2,325
Atmel Corp. 425 15,884
Intel Corp. 100 14,188
Kulicke & Soffa Industries, Inc.* 500 13,250
Xilinx, Inc.* 250 11,281
----------
$ 69,406
- ----------------------------------------------------------------------------------------------
Entertainment - 0.6%
ITT Corp.* 200 $ 11,300
- ----------------------------------------------------------------------------------------------
Financial Institutions - 3.0%
Beneficial Corp. 100 $ 6,913
Federal Home Loan Mortgage Corp. 400 11,900
Federal National Mortgage Assn. 350 14,000
Finova Group, Inc. 100 7,637
Franklin Resources, Inc. 100 5,850
Student Loan Corp. 200 8,075
----------
$ 54,375
- ----------------------------------------------------------------------------------------------
Food and Beverage Products - 4.3%
Earthgrains Co. 175 $ 9,581
Hershey Foods Corp. 400 18,250
Hudson Foods, Inc. 600 10,500
PepsiCo, Inc. 500 16,438
Smith's Food & Drug Centers, Inc. 700 23,012
----------
$ 77,781
- ----------------------------------------------------------------------------------------------
Forest and Paper Products - 1.3%
Kimberly-Clark Corp. 75 $ 7,950
Unisource Worldwide, Inc. 737 15,846
----------
$ 23,796
- ----------------------------------------------------------------------------------------------
Insurance - 4.3%
Chubb Corp. 300 $ 17,587
Conseco, Inc. 400 15,700
ITT Hartford Group, Inc. 100 7,500
PennCorp Financial Group, Inc. 400 14,000
Reliastar Financial Corp. 200 12,400
Travelers Group, Inc. 200 10,725
----------
$ 77,912
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 3.1%
Bristol-Myers Squibb Co. 250 $ 32,625
Mentor Corp. 600 14,925
Zoll Medical Corp.* 800 8,600
----------
$ 56,150
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 6.7%
AmeriSource Health Corp.* 200 $ 10,075
Cardinal Health, Inc. 150 9,225
HBO & Co. 225 12,966
HealthSouth Corp.* 150 6,038
Safeguard Health Enterprises, Inc. 450 6,637
St. Jude Medical, Inc. 500 19,750
Tenet Healthcare Corp. 800 21,700
Trigon Healthcare, Inc.* 100 1,788
United Healthcare Corp. 300 14,962
Vivra, Inc.* 600 17,850
----------
$ 120,991
- ----------------------------------------------------------------------------------------------
Oil Services - 1.6%
Baker Hughes, Inc. 200 $ 7,100
Camco International, Inc. 200 7,725
Diamond Offshore Drilling, Inc.* 125 7,375
Input/Output, Inc.* 300 6,413
----------
$ 28,613
- ----------------------------------------------------------------------------------------------
Photographic Products - 1.0%
Eastman Kodak Co. 200 $ 17,925
- ----------------------------------------------------------------------------------------------
Railroads - 0.7%
Burlington Northern Santa Fe Railway Co. 75 $ 6,244
Wisconsin Central Transportation Corp.* 200 7,175
----------
$ 13,419
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 5.0%
Coldwater Creek, Inc.* 100 $ 1,838
HFS, Inc.* 360 24,660
Hilton Hotels Corp. 350 8,794
Host Marriott Corp.* 700 12,600
Prime Hospitality Corp.* 500 8,250
Promus Hotel Corp.* 100 3,537
Renaissance Hotel Group NV* 500 14,812
Servico, Inc.* 350 6,737
Wyndham Hotel Corp.* 350 9,844
----------
$ 91,072
- ----------------------------------------------------------------------------------------------
Stores - 8.7%
American Stores Co. 300 $ 13,425
Ann Taylor Stores Corp.* 600 12,000
CVS Corp. 350 16,187
Hollywood Entertainment Corp.* 500 12,000
Longs Drug Stores Corp. 500 12,688
Office Depot, Inc.* 400 7,600
Rite-Aid Corp. 1,100 46,337
Staples, Inc.* 1,675 36,222
----------
$ 156,459
- ----------------------------------------------------------------------------------------------
Supermarkets - 2.2%
Kroger Co.* 300 $ 15,900
Safeway, Inc.* 500 24,062
----------
$ 39,962
- ----------------------------------------------------------------------------------------------
Telecommunications - 1.6%
Cable Design Technologies Corp. 550 $ 14,575
Lucent Technologies, Inc. 250 13,469
----------
$ 28,044
- ----------------------------------------------------------------------------------------------
Utilities - Gas - 0.5%
National Fuel Gas Co. 200 $ 8,600
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 0.4%
MCI Communications Corp. 225 $ 8,044
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $1,335,470
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 6.2%
Canada - 1.0%
Canadian National Railway Co. (Railroads) 200 $ 7,275
Philip Environmental, Inc. (Business Services) 650 10,644
----------
$ 17,919
- ----------------------------------------------------------------------------------------------
Ireland - 0.8%
Elan Corp. PLC, ADR (Medical and Health Products)* 450 $ 15,581
- ----------------------------------------------------------------------------------------------
Sweden - 0.8%
Astra AB, "A", ADR (Medical and Health Products) 200 $ 9,625
Astra AB, "B", ADR (Pharmaceuticals) 100 4,674
----------
$ 14,299
- ----------------------------------------------------------------------------------------------
Switzerland - 1.9%
Logitech International (Electrical Equipment)* 100 $ 17,023
Novartis AG (Pharmaceuticals) 15 17,151
----------
$ 34,174
- ----------------------------------------------------------------------------------------------
United Kingdom - 1.7%
Danka Business Systems, ADR (Business Services) 250 $ 10,469
Grand Metropolitan (Food and Beverage Products) 1,300 9,644
SmithKline-Beecham PLC, ADR (Medical and Health
Products) 150 11,137
----------
$ 31,250
- ----------------------------------------------------------------------------------------------
Total Foreign Stocks $ 113,223
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,377,962) $1,448,693
- ----------------------------------------------------------------------------------------------
Warrant - 0.1%
- ----------------------------------------------------------------------------------------------
Ciba Specialty Chemicals AG* (Identified Cost, $0) 15 $ 950
- ----------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Obligation - 21.0%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank, due 3/03/97, at Amortized Cost $ 380 $ 379,888
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,757,850) $1,829,531
Other Assets, Less Liabilities - (1.1)% (19,585)
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,809,946
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS EQUITY INCOME FUND
Stocks - 85.3%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
U.S. Stocks - 78.1%
Aerospace - 5.1%
<S> <C> <C>
General Dynamics Corp. 140 $ 9,415
Goodrich (B.F.) Co. 300 12,187
United Technologies Corp. 360 27,090
--------
$ 48,692
- ----------------------------------------------------------------------------------------------
Automotive - 1.7%
Ford Motor Co. 170 $ 5,589
TRW, Inc. 200 10,475
--------
$ 16,064
- ----------------------------------------------------------------------------------------------
Banks and Credit Companies - 7.7%
Bank of Boston Corp. 120 $ 9,045
Chase Manhattan Corp. 90 9,011
First Commerce Corp. 250 10,375
First Hawaiian, Inc. 300 9,975
Fleet/Norstar Financial Group, Inc. 200 12,200
National City Corp. 250 12,625
PNC Bank Corp. 230 9,746
--------
$ 72,977
- ----------------------------------------------------------------------------------------------
Business Machines - 0.1%
Digital Equipment Corp.* 30 $ 983
- ----------------------------------------------------------------------------------------------
Chemicals - 6.3%
Air Products & Chemicals, Inc. 200 $ 14,825
Betzdearborn, Inc. 270 17,516
Dexter Corp. 500 14,750
Ferro Corp. 420 13,230
--------
$ 60,321
- ----------------------------------------------------------------------------------------------
Construction Services - 1.1%
Martin Marietta Materials, Inc. 400 $ 10,550
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 4.5%
American Brands, Inc. 140 $ 7,368
Colgate-Palmolive Co. 80 8,280
Philip Morris Cos., Inc. 130 17,566
Sherwin Williams Co. 180 10,102
--------
$ 43,316
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 2.9%
Cooper Industries, Inc. 220 $ 9,735
General Electric Co. 100 10,288
Hubbell, Inc. 190 8,051
--------
$ 28,074
- ----------------------------------------------------------------------------------------------
Financial Institutions - 1.3%
Union Planters Corp. 280 $ 12,530
- ----------------------------------------------------------------------------------------------
Food and Beverage Products - 4.1%
General Mills, Inc. 100 $ 6,525
Heinz (H.J.) Co. 250 10,406
Hormel Foods Corp. 400 10,500
PepsiCo, Inc. 350 11,506
--------
$ 38,937
- ----------------------------------------------------------------------------------------------
Forest and Paper Products - 1.1%
Unisource Worldwide, Inc. 500 $ 10,750
- ----------------------------------------------------------------------------------------------
Insurance - 4.4%
Allstate Corp. 140 $ 8,873
Chubb Corp. 200 11,725
CIGNA Corp. 70 10,701
Torchmark Corp. 180 10,597
--------
$ 41,896
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 3.0%
Bristol-Myers Squibb Co. 100 $ 13,050
Pharmacia & Upjohn, Inc. 230 8,481
Rhone-Poulenc Rorer, Inc. 100 7,100
--------
$ 28,631
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.9%
United Healthcare Corp. 170 $ 8,479
- ----------------------------------------------------------------------------------------------
Metals and Minerals - 0.8%
Century Aluminum Co. 480 $ 7,920
- ----------------------------------------------------------------------------------------------
Oils - 5.2%
Atlantic Richfield Co. 60 $ 7,500
Exxon Corp. 110 10,986
Mobil Corp. 100 12,275
Texaco, Inc. 100 9,887
USX-Marathon Group 350 9,319
--------
$ 49,967
- ----------------------------------------------------------------------------------------------
Photographic Products - 1.4%
Eastman Kodak Co. 150 $ 13,444
- ----------------------------------------------------------------------------------------------
Pollution Control - 0.7%
WMX Technologies, Inc. 200 $ 6,325
- ----------------------------------------------------------------------------------------------
Printing and Publishing - 0.4%
Gannett Co., Inc. 50 $ 3,988
- ----------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 5.4%
Boykin Lodging Co.* 170 $ 3,740
Brandywine Reality Trust 400 8,250
Golf Trust America, Inc.* 450 10,912
Hospitality Properties Trust 280 9,065
Storage Trust Reality 330 8,869
TriNet Corporate Realty Trust, Inc. 300 10,238
--------
$ 51,074
- ----------------------------------------------------------------------------------------------
Stores - 2.0%
Rite-Aid Corp. 230 $ 9,689
Smith's Food & Drug Centers, Inc. 300 9,863
--------
$ 19,552
- ----------------------------------------------------------------------------------------------
Supermarkets - 1.1%
Kroger Co.* 200 $ 10,600
- ----------------------------------------------------------------------------------------------
Utilities - Electric - 5.3%
Carolina Power & Light Co. 100 $ 3,713
Cinergy Corp. 270 9,315
Dominion Resources, Inc. 250 10,063
FPL Group, Inc. 140 6,370
Pinnacle West Capital Corp. 280 8,750
Public Service Co. of Colorado 100 3,900
Sierra Pacific Resources 280 8,190
--------
$ 50,301
- ----------------------------------------------------------------------------------------------
Utilities - Gas - 6.8%
Brooklyn Union Gas Co. 280 $ 7,980
Energen Corp. 300 9,000
KN Energy, Inc. 230 9,085
National Fuel Gas Co. 250 10,750
Oneok, Inc. 300 8,550
PanEnergy Corp. 180 7,672
UGI Corp. 480 11,940
--------
$ 64,977
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 4.8%
GTE Corp. 280 $ 13,090
MCI Communications Corp. 300 10,725
Pacific Telesis Group 250 10,187
Sprint Corp. 250 11,375
--------
$ 45,377
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $745,725
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 7.2%
Canada - 1.3%
Canadian National Railway Co. (Railroads) 340 $ 12,368
- ----------------------------------------------------------------------------------------------
France - 1.1%
Elf Aquitaine, ADR (Oils) 220 $ 10,560
- ----------------------------------------------------------------------------------------------
Switzerland - 1.2%
Novartis AG (Pharmaceuticals)* 10 $ 11,434
- ----------------------------------------------------------------------------------------------
United Kingdom - 3.6%
British Petroleum PLC, ADR (Oils) 110 $ 14,561
Grand Metropolitan (Food and Beverage Products) 1,300 9,645
SmithKline-Beecham PLC, ADR (Medical and Health
Products) 140 10,395
--------
$ 34,601
- ----------------------------------------------------------------------------------------------
Total Foreign Stocks $ 68,963
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $721,896) $814,688
- ----------------------------------------------------------------------------------------------
Warrant - 0.1%
- ----------------------------------------------------------------------------------------------
Ciba Specialty Chemicals AG* (Identified Cost, $0) 10 $ 633
- ----------------------------------------------------------------------------------------------
<CAPTION>
Convertible Bonds - 1.5%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
North American Vaccine, Inc., 6.5s, 2003## $ 8 $ 8,080
Robbins & Myers, Inc., 6.5s, 2003 5 5,875
- ----------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $13,440) $ 13,955
- ----------------------------------------------------------------------------------------------
<CAPTION>
Preferred Stock - 1.1%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Germany - 1.1%
Henkel KGaA (Consumer Goods and Services) (Identified
Cost, $8,995) 200 $ 10,670
- ----------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 9.9%
- ----------------------------------------------------------------------------------------------
Aerospace - 0.8%
Loral Space & Communications Corp., 6s, 2006## 150 $ 7,725
- ----------------------------------------------------------------------------------------------
Financial Institutions - 1.9%
Finova Finance Trust, 5.5s, 2016 160 $ 9,240
Penncorp Financial Group, Inc., $3.50## 160 9,440
--------
$ 18,680
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.0%
McKesson Financing Trust, $2.50, 2027## 180 $ 9,518
- ----------------------------------------------------------------------------------------------
Metals and Minerals - 0.9%
Timet Capital Trust, "I", 6.625s, 2026## 170 $ 8,245
- ----------------------------------------------------------------------------------------------
Oils - 1.9%
Tosco Financing Trust, 5.75s## 160 $ 8,540
Unocal Capital Trust Corp., 6.25s, 2026 171 9,597
--------
$ 18,137
- ----------------------------------------------------------------------------------------------
Pollution Control - 1.1%
Browning-Ferris Industries, Inc., ACES, 7.25% 320 $ 10,280
- ----------------------------------------------------------------------------------------------
Utilities - Gas - 2.4%
Enron Corp., 6.25s 400 $ 8,350
Williams Cos., Inc., $3.50## 50 5,131
--------
$ 13,481
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 0.9%
Salomon, Inc., DECS (Cincinnati Bell, Inc.), 6.25s, 2001 140 $ 8,575
- ----------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost,
$89,424) $ 94,641
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $833,755) $934,587
Other Assets, Less Liabilities - 2.1% 20,395
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $954,982
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A Restriction.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS SPECIAL OPPORTUNITIES FUND
Stocks - 86.4%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 78.1%
Advertising - 0.3%
Outdoor Systems, Inc.* 400 $ 12,000
- ----------------------------------------------------------------------------------------------
Aerospace - 3.4%
Allied Signal, Inc. 460 $ 33,235
B.E. Aerospace, Inc.* 1,400 33,950
Goodrich (B.F.) Co. 550 22,344
Thiokol Corp. 500 27,875
----------
$ 117,404
- ----------------------------------------------------------------------------------------------
Agricultural Products - 0.5%
AGCO Corp. 600 $ 17,025
- ----------------------------------------------------------------------------------------------
Automotive - 1.6%
Exide Corp. 2,500 $ 49,062
Ford Motor Co. 200 6,575
----------
$ 55,637
- ----------------------------------------------------------------------------------------------
Banks and Credit Companies - 0.6%
Wells Fargo & Co. 66 $ 20,081
- ----------------------------------------------------------------------------------------------
Building - 4.7%
Newport News Shipbuilding, Inc. 900 $ 13,950
Nortek, Inc.* 3,000 72,000
Walter Industries, Inc.* 5,000 75,937
----------
$ 161,887
- ----------------------------------------------------------------------------------------------
Business Machines - 0.5%
Sun Microsystems, Inc.* 600 $ 18,525
- ----------------------------------------------------------------------------------------------
Business Machines - Peripherals - 0.5%
Seagate Technology* 400 $ 18,900
- ----------------------------------------------------------------------------------------------
Business Services - 1.2%
ADT Ltd.* 1,405 $ 30,559
Canon, Inc. 115 12,017
----------
$ 42,576
- ----------------------------------------------------------------------------------------------
Cellular Telephones - 0.7%
Telephone & Data Systems, Inc. 600 $ 24,000
- ----------------------------------------------------------------------------------------------
Chemicals - 3.3%
Betzdearborn, Inc. 127 $ 8,239
Dexter Corp. 600 17,700
Ferro Corp. 400 12,600
NL Industries, Inc. 6,500 73,938
----------
$ 112,477
- ----------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.3%
TDK Corp. 130 $ 8,775
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 1.8%
Cerner Corp.* 900 $ 13,725
Compaq Computer Corp.* 300 23,775
Sybase, Inc.* 1,600 26,200
----------
$ 63,700
- ----------------------------------------------------------------------------------------------
Conglomerates - 2.8%
Insilco Corp.* 1,300 $ 47,450
MAXXAM, Inc.* 1,000 48,125
----------
$ 95,575
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 7.8%
Darling International, Inc.* 2,300 $ 56,063
Philip Morris Cos., Inc. 290 39,186
Silgan Holdings, Inc.* 100 2,550
Thermadyne Industries Holdings Corp.* 2,000 55,750
Tyco International Ltd. 1,300 76,700
Westpoint Stevens, Inc.* 1,100 37,950
----------
$ 268,199
- ----------------------------------------------------------------------------------------------
Containers - 3.6%
Atlantis Plastics, Inc.* 5,000 $ 43,750
Gaylord Container Corp.* 10,000 63,750
Jefferson Smurfit Corp.* 600 8,175
Stone Container Corp. 600 7,800
----------
$ 123,475
- ----------------------------------------------------------------------------------------------
Electronics - 0.8%
Atmel Corp.* 300 $ 11,213
Intel Corp. 80 11,350
Sony Corp. 50 3,600
----------
$ 26,163
- ----------------------------------------------------------------------------------------------
Entertainment - 3.0%
Casino America, Inc.* 1,100 $ 3,369
Chancellor Broadcast Corp., "A"* 400 10,900
Cox Radio, Inc.* 300 5,737
EZ Communications, Inc.* 280 11,830
Harrah's Entertainment, Inc.* 2,100 38,850
Harveys Casino Resorts 200 3,100
ITT Corp.* 140 7,910
LIN Television Corp.* 350 14,525
Showboat, Inc. 400 8,200
----------
$ 104,421
- ----------------------------------------------------------------------------------------------
Financial Institutions - 1.3%
Federal Home Loan Mortgage Corp. 760 $ 22,610
Union Planters Corp. 460 20,585
----------
$ 43,195
- ----------------------------------------------------------------------------------------------
Food and Beverage Products - 1.8%
Dr. Pepper Bottling Holdings, Inc. 2,400 $ 37,350
Smith's Food & Drug Centers, Inc. 720 23,670
----------
$ 61,020
- ----------------------------------------------------------------------------------------------
Forest and Paper Products - 0.3%
Kimberly-Clark Corp. 45 $ 4,770
Unisource Worldwide, Inc. 280 6,020
----------
$ 10,790
- ----------------------------------------------------------------------------------------------
Insurance - 3.8%
Chubb Corp. 400 $ 23,450
Integon Corp. 2,800 36,050
ITT Hartford Group, Inc. 150 11,250
PennCorp Financial Group, Inc. 800 28,000
PMI Group, Inc. 170 9,307
Reliastar Financial Corp. 150 9,300
Safeco Corp. 300 12,525
----------
$ 129,882
- ----------------------------------------------------------------------------------------------
Machinery - 0.7%
Greenfield Industries, Inc. 400 $ 8,750
Stewart & Stevenson Services, Inc. 600 15,675
----------
$ 24,425
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 1.4%
Pharmacia & Upjohn, Inc. 580 $ 21,387
Rhone-Poulenc Rorer, Inc. 300 21,300
Uromed Corp.* 900 7,313
----------
$ 50,000
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.2%
AmeriSource Health Corp.* 200 $ 10,075
Cardinal Health, Inc. 300 18,450
Pacificare Health Systems, Inc.* 100 8,375
Quorum Health Group, Inc.* 100 3,137
St. Jude Medical, Inc.* 900 35,550
Trigon Healthcare, Inc.* 100 1,788
----------
$ 77,375
- ----------------------------------------------------------------------------------------------
Metals and Minerals - 1.6%
Commonwealth Aluminum Corp. 3,000 $ 54,000
- ----------------------------------------------------------------------------------------------
Oil Services - 0.1%
Tidewater, Inc. 100 $ 4,300
- ----------------------------------------------------------------------------------------------
Oils - 0.4%
Texaco, Inc. 140 $ 13,843
- ----------------------------------------------------------------------------------------------
Photographic Products - 1.5%
Anacomp, Inc.* 3,725 $ 43,769
Eastman Kodak Co. 70 6,274
----------
$ 50,043
- ----------------------------------------------------------------------------------------------
Railroads - 1.4%
Burlington Northern Santa Fe Railway Co. 300 $ 24,975
Wisconsin Central Transportation Corp.* 680 24,395
----------
$ 49,370
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 6.4%
Apple South, Inc. 500 $ 6,750
Applebee's International, Inc. 100 2,525
Hilton Hotels Corp. 1,580 39,697
Host Marriott Corp.* 1,210 21,780
La Quinta Inns, Inc. 600 11,850
Prime Hospitality Corp.* 1,700 28,050
Promus Hotel Corp.* 2,400 84,900
Servico* 1,400 26,950
----------
$ 222,502
- ----------------------------------------------------------------------------------------------
Special Products and Services - 1.5%
IMO Industries, Inc.* 17,000 $ 53,125
- ----------------------------------------------------------------------------------------------
Stores - 4.5%
Ann Taylor Stores Corp.* 300 $ 6,000
Carson Pirie Scott & Co.* 1,800 49,050
Gantos, Inc.* 15,000 32,812
Gymboree Corp.* 500 12,313
Rite-Aid Corp. 850 35,806
Trans World Entertainment Corp.* 1,800 18,900
----------
$ 154,881
- ----------------------------------------------------------------------------------------------
Supermarkets - 2.7%
Ingles Markets, Inc. 3,900 $ 58,500
Vons Cos., Inc.* 500 34,062
----------
$ 92,562
- ----------------------------------------------------------------------------------------------
Telecommunications - 6.2%
Cabletron Systems, Inc.* 500 $ 15,000
Cellular Communications International* 2,600 73,450
Echostar Communications Corp.* 1,500 34,125
Granite Broadcasting Corp.* 3,800 36,575
HSN, Inc.* 1,775 45,706
Lucent Technologies, Inc. 200 10,775
----------
$ 215,631
- ----------------------------------------------------------------------------------------------
Utilities - Electric - 1.4%
El Paso Electric Co.* 6,800 $ 47,600
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 1.5%
MCI Communications Corp. 1,460 $ 52,195
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $2,697,559
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 8.3%
Canada - 1.4%
Gulf Canada Resources Ltd. (Oil Services)* 7,000 $ 49,000
- ----------------------------------------------------------------------------------------------
Hong Kong - 0.8%
Liu Chong Hing Bank (Banks and Credit Companies) 1,000 $ 1,899
Semi-Tech (Global) Ltd. (Electronics)* 21,000 24,409
----------
$ 26,308
- ----------------------------------------------------------------------------------------------
Japan - 0.2%
Sony Corp. (Electronics) 100 $ 7,221
- ----------------------------------------------------------------------------------------------
New Zealand - 1.0%
Tranz Rail Holdings Ltd., ADR (Railroads)* 2,000 $ 35,500
- ----------------------------------------------------------------------------------------------
Portugal - 0.3%
Banco Totta E Acores (Financial Institutions) 800 $ 11,903
- ----------------------------------------------------------------------------------------------
South Korea - 0.3%
Korea Mobile Telecommunications, ADR
(Telecommunications) 900 $ 11,138
- ----------------------------------------------------------------------------------------------
Switzerland - 0.8%
Novartis AG (Pharmaceuticals)* 25 $ 28,586
- ----------------------------------------------------------------------------------------------
United Kingdom - 3.5%
ASDA Group PLC (Retail) 11,000 $ 20,032
British Petroleum PLC, ADR (Oils) 100 13,238
Central European Media Enterprises Ltd.
(Entertainment)* 600 20,250
Central Transport Rental Group PLC, ADR (Special
Products and Services)* 11,188 4,195
Comcast UK Cable Partners Ltd. (Telecommunications)* 500 5,875
News Corp. Ltd., ADR (Entertainment) 2,900 51,837
Storehouse PLC (Retail) 2,200 9,829
----------
$ 125,256
- ----------------------------------------------------------------------------------------------
Total Foreign Stocks $ 294,912
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,881,788) $2,992,471
- ----------------------------------------------------------------------------------------------
Warrant
- ----------------------------------------------------------------------------------------------
Ciba Specialty Chemicals AG (Chemicals)* (Identified Cost, $0) 21 $ 1,329
- ----------------------------------------------------------------------------------------------
<CAPTION>
Bonds - 2.3%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Entertainment - 0.4%
Marvel Holdings, Inc., 0s, 1998** $ 80 $ 13,601
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.1%
Unilab Corp., 11s, 2006 $ 5 $ 3,550
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.7%
Harrah's Jazz Co., 14.25s, 2001** $ 75 $ 35,250
Santa Fe Hotel, Inc., 11s, 2000 35 24,500
----------
$ 59,750
- ----------------------------------------------------------------------------------------------
Telecommunications - 0.1%
Mobilemedia Communications, Inc., 9.375s, 2007 $ 10 $ 1,950
- ----------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $105,299) $ 78,851
- ----------------------------------------------------------------------------------------------
<CAPTION>
Preferred Stocks - 1.5%
- ----------------------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Harvard Industries, Inc. (Automotive) 1,100 $ 4,675
Renaissance Cosmetics, Inc. (Consumer Goods and Services)##* 1 87
Renaissance Cosmetics, Inc. (Consumer Goods and Services)+* 20 20,000
Supermarkets General Holdings Corp. (Supermarkets)* 1,100 27,500
- ----------------------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $58,000) $ 52,262
- ----------------------------------------------------------------------------------------------
Equity Option - 1.2%
- ----------------------------------------------------------------------------------------------
Standard & Poor Index 500 Put (Identified Cost, $44,118) 6 $ 40,500
- ----------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Obligation - 8.1%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank, due 3/03/97, at Amortized Cost $ 280 $ 279,918
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $3,369,123) $3,445,331
- ----------------------------------------------------------------------------------------------
<CAPTION>
Short Sells - (2.0)%
- ----------------------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Jayhawk Acceptance Corp.* (2,700) $ (6,412)
Olympic Financial Ltd.* (4,800) (52,800)
Station Casinos, Inc. (1,100) (10,313)
- ----------------------------------------------------------------------------------------------
Total Short Sells (Identified Cost, $(66,341)) $ (69,525)
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 2.5% $ 78,973
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $3,454,779
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
**Non-income producing security in default.
+Restricted security.
##SEC Rule 144A Restriction.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS BLUE CHIP FUND
Stocks - 99.6%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 97.3%
Aerospace - 6.3%
General Dynamics Corp. 100 $ 6,725
Goodrich (B.F.) Co. 200 8,125
Lockheed Martin Corp. 120 10,620
McDonnell-Douglas Corp. 130 8,255
United Technologies Corp. 80 6,020
--------
$ 39,745
- ----------------------------------------------------------------------------------------------
Apparel and Textiles - 1.0%
Nike, Inc., "B" 90 $ 6,469
- ----------------------------------------------------------------------------------------------
Banks and Credit Companies - 4.8%
Chase Manhattan Corp. 60 $ 6,007
Corestates Financial Corp. 110 5,789
First Bank Systems, Inc. 80 6,280
National City Corp. 120 6,060
Norwest Corp. 120 5,970
--------
$ 30,106
- ----------------------------------------------------------------------------------------------
Business Machines - 2.6%
International Business Machines Corp. 70 $ 10,062
Sun Microsystems, Inc.* 210 6,484
--------
$ 16,546
- ----------------------------------------------------------------------------------------------
Business Services - 2.4%
DST Systems, Inc.* 280 $ 9,205
Ikon Office Solutions, Inc. 140 5,775
--------
$ 14,980
- ----------------------------------------------------------------------------------------------
Cellular Telephones - 1.0%
AirTouch Communications, Inc.* 220 $ 5,995
- ----------------------------------------------------------------------------------------------
Chemicals - 3.4%
Air Products & Chemicals, Inc. 100 $ 7,413
du Pont (E.I.) de Nemours & Co., Inc. 70 7,507
Praxair, Inc. 130 6,321
--------
$ 21,241
- ----------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 3.3%
First Data Corp. 250 $ 9,156
Microsoft Corp.* 120 11,700
--------
$ 20,856
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 3.9%
BMC Software, Inc.* 150 $ 6,422
Computer Associates International, Inc. 210 9,135
Oracle Systems Corp.* 230 9,027
--------
$ 24,584
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 12.4%
Avon Products, Inc. 100 $ 5,825
Colgate-Palmolive Co. 90 9,315
Gillette Co. 100 7,912
Philip Morris Cos., Inc. 100 13,512
Procter & Gamble Co. 70 8,409
Service Corp. International 300 8,700
Sherwin Williams Co. 100 5,613
Tupperware Corp. 100 4,475
Tyco International Ltd. 150 8,850
UST, Inc. 160 4,940
--------
$ 77,551
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 3.0%
General Electric Co. 130 $ 13,374
Honeywell, Inc. 80 5,690
--------
$ 19,064
- ----------------------------------------------------------------------------------------------
Electronics - 1.7%
Intel Corp. 75 $ 10,641
- ----------------------------------------------------------------------------------------------
Financial Institutions - 3.1%
Beneficial Corp. 90 $ 6,221
Federal Home Loan Mortgage Corp. 200 5,950
State Street Boston Corp. 90 7,234
--------
$ 19,405
- ----------------------------------------------------------------------------------------------
Food and Beverage Products - 4.6%
CPC International, Inc. 80 $ 6,730
Hershey Foods Corp. 230 10,494
McCormick & Co., Inc. 230 5,434
PepsiCo, Inc. 190 6,246
--------
$ 28,904
- ----------------------------------------------------------------------------------------------
Forest and Paper Products - 1.0%
Kimberly-Clark Corp. 60 $ 6,360
- ----------------------------------------------------------------------------------------------
Insurance - 7.0%
Allstate Corp. 140 $ 8,872
CIGNA Corp. 40 6,115
ITT Hartford Group, Inc. 120 9,000
MBIA, Inc. 90 8,786
Progressive Corp. - Ohio 80 5,290
Transamerica Corp. 70 6,134
--------
$ 44,197
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 11.0%
American Home Products Corp. 120 $ 7,680
Bristol-Myers Squibb Co. 120 15,660
Johnson & Johnson 220 12,678
Lilly (Eli) & Co. 80 6,990
Merck & Co., Inc. 100 9,200
Pfizer, Inc. 130 11,911
Rhone-Poulenc Rorer, Inc. 70 4,970
--------
$ 69,089
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.3%
Cardinal Health, Inc. 100 $ 6,150
United Healthcare Corp. 160 7,980
--------
$ 14,130
- ----------------------------------------------------------------------------------------------
Oil Services - 0.8%
Schlumberger Ltd. 50 $ 5,031
- ----------------------------------------------------------------------------------------------
Oils - 6.4%
Chevron Corp. 50 $ 3,225
Exxon Corp. 110 10,986
Mobil Corp. 70 8,592
Phillips Petroleum Co. 140 5,793
Texaco, Inc. 60 5,932
Union Pacific Resources Group, Inc. 220 5,363
--------
$ 39,891
- ----------------------------------------------------------------------------------------------
Railroads - 1.3%
Burlington Northern Santa Fe Railway Co. 100 $ 8,325
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.0%
HFS, Inc.* 90 $ 6,165
- ----------------------------------------------------------------------------------------------
Stores - 2.6%
Rite-Aid Corp. 240 $ 10,110
Staples, Inc.* 300 6,488
--------
$ 16,598
- ----------------------------------------------------------------------------------------------
Supermarkets - 2.5%
Kroger Co.* 120 $ 6,360
Safeway, Inc.* 200 9,625
--------
$ 15,985
- ----------------------------------------------------------------------------------------------
Utilities - Electric - 4.2%
CMS Energy Corp. 160 $ 5,240
GPU, Inc. 160 5,600
Illinova Corp. 200 5,000
Pinnacle West Capital Corp. 170 5,313
Public Service Co. of New Mexico* 300 5,512
--------
$ 26,665
- ----------------------------------------------------------------------------------------------
Utilities - Gas - 1.7%
Pacific Enterprises 180 $ 5,490
PanEnergy Corp. 120 5,115
--------
$ 10,605
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 2.0%
GTE Corp. 130 $ 6,078
SBC Communications, Inc. 110 6,325
--------
$ 12,403
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $611,531
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 2.3%
Sweden - 0.9%
Astra AB, Free Shares, "B" ADR (Pharmaceuticals) 120 $ 5,609
- ----------------------------------------------------------------------------------------------
United Kingdom - 1.4%
British Petroleum PLC, ADR (Oils) 65 $ 8,604
- ----------------------------------------------------------------------------------------------
Total Foreign Stocks $ 14,213
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $602,664) $625,744
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $602,664) $625,744
Other Assets, Less Liabilities - 0.4% 2,371
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $628,115
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS CONVERTIBLE SECURITIES FUND
Stocks - 13.6%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 12.7%
Aerospace - 0.7%
United Technologies Corp. 50 $ 3,763
- ----------------------------------------------------------------------------------------------
Building - 0.3%
Newport News Shipbuilding, Inc. 100 $ 1,550
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.1%
Colgate-Palmolive Co. 30 $ 3,105
Gillette Co. 35 2,769
--------
$ 5,874
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 0.4%
General Electric Co. 20 $ 2,058
- ----------------------------------------------------------------------------------------------
Electronics - 0.9%
Intel Corp. 10 $ 1,419
Sony Corp. 50 3,600
--------
$ 5,019
- ----------------------------------------------------------------------------------------------
Financial Institutions - 2.2%
Liberty Property 100 $ 2,375
Merrill Lynch & Co., Inc. 250 9,594
--------
$ 11,969
- ----------------------------------------------------------------------------------------------
Insurance - 0.2%
Providian Corp. 25 $ 1,397
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 1.3%
Baxter International, Inc. 25 $ 1,150
Bristol-Myers Squibb Co. 25 3,262
Pharmacia & Upjohn, Inc. 75 2,766
--------
$ 7,178
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.3%
St. Jude Medical, Inc. 50 $ 1,975
- ----------------------------------------------------------------------------------------------
Oil Services - 0.3%
Diamond Offshore Drilling, Inc.* 25 $ 1,475
- ----------------------------------------------------------------------------------------------
Oils - 0.6%
Devon Energy Corp. 100 $ 3,125
- ----------------------------------------------------------------------------------------------
Pollution Control - 0.9%
United States Filter Corp.* 150 $ 5,250
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.1%
Hilton Hotels Corp. 100 $ 2,512
Prime Hospitality Corp.* 100 1,650
Wendys International, Inc. 100 2,075
--------
$ 6,237
- ----------------------------------------------------------------------------------------------
Special Products and Services - 0.7%
Stanley Works 100 $ 3,825
- ----------------------------------------------------------------------------------------------
Stores - 0.5%
Home Depot, Inc. 50 $ 2,725
- ----------------------------------------------------------------------------------------------
Telecommunications - 1.2%
Cincinnati Bell, Inc. 25 $ 1,550
Lucent Technologies, Inc. 100 5,387
--------
$ 6,937
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $ 70,357
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 0.9%
Portugal - 0.3%
Banco Totta E Acores (Financial Institutions) 100 $ 1,488
- ----------------------------------------------------------------------------------------------
Switzerland - 0.6%
Novartis AG (Pharmaceuticals)* 3 $ 3,430
- ----------------------------------------------------------------------------------------------
Total Foreign Stocks $ 4,918
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $75,567) $ 75,275
- ----------------------------------------------------------------------------------------------
Warrant
- ----------------------------------------------------------------------------------------------
Ciba Specialty Chemicals AG* (Identified Cost, $0) 3 $ 190
- ----------------------------------------------------------------------------------------------
<CAPTION>
Convertible Bonds - 30.9%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace - 1.2%
Hexcel Corp., 7s, 2003 $ 5 $ 6,931
- ----------------------------------------------------------------------------------------------
Apparel and Textiles - 1.8%
Nine West Group, Inc., 5.5s, 2003## $ 10 $ 10,050
- ----------------------------------------------------------------------------------------------
Building - 1.9%
Continental Homes Holding Corp., 6.875s, 2002 $ 10 $ 10,738
- ----------------------------------------------------------------------------------------------
Business Machines - 0.9%
HMT Technology Corp., 5.75s, 2004*## $ 5 $ 5,138
- ----------------------------------------------------------------------------------------------
Business Services - 1.6%
Protection One Alarm Monitoring, 6.75s, 2003 $ 9 $ 8,606
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 5.1%
Adaptec, Inc., 4.75s, 2004## $ 8 $ 8,000
Apple Computer, Inc., 6s, 2001## 10 8,475
Baan Co. NV, 4.5s, 2001## 10 11,825
--------
$ 28,300
- ----------------------------------------------------------------------------------------------
Electronics - 2.0%
Xilinx, Inc., 5.25s, 2002## $ 10 $ 10,975
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 1.0%
North American Vaccine, Inc., 6.5s, 2003## $ 5 $ 5,050
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.2%
FPA Med Management, Inc., 6.5s, 2001## $ 5 $ 5,537
Healthsource, Inc., 5s, 2003 2 1,960
Vivra, Inc., 5s, 2001 10 10,325
--------
$ 17,822
- ----------------------------------------------------------------------------------------------
Oil Services - 0.9%
Diamond Offshore Drilling, Inc., 3.75s, 2007 $ 5 $ 4,863
- ----------------------------------------------------------------------------------------------
Pollution Control - 4.0%
Sanifill, Inc., 5s, 2006 $ 5 $ 6,994
United States Filter Corp., 6s, 2005 5 9,775
USA Waste Services, Inc., 4s, 2002 5 5,212
--------
$ 21,981
- ----------------------------------------------------------------------------------------------
Real Estate - 0.5%
AC International Finance Ltd., 0.5s, 2002## $ 3 $ 3,034
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.9%
Hilton Hotels Corp., 5s, 2006 $ 5 $ 5,094
- ----------------------------------------------------------------------------------------------
Special Products and Services - 1.7%
Corporate Express, Inc., 4.5s, 2000 $ 10 $ 9,300
- ----------------------------------------------------------------------------------------------
Stores - 4.2%
Home Depot, Inc., 3.25s, 2001 $ 5 $ 5,037
Office Depot, Inc., 0s, 2008 5 2,950
Saks Holdings, Inc., 5.5s, 2006 15 15,169
--------
$ 23,156
- ----------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $166,571) $171,038
- ----------------------------------------------------------------------------------------------
<CAPTION>
Convertible Preferred Stocks - 54.6%
- ----------------------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace - 0.9%
Loral Space & Communications Corp., 6s, 2006## 100 $ 5,150
- ----------------------------------------------------------------------------------------------
Business Services - 1.7%
Ikon Office Solutions, Inc., $5.04, 1998 100 $ 9,350
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 0.5%
Wang Labs, 6.5s, 2049## 50 $ 2,631
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.1%
Corning - Delaware LP, 6s, 2049 100 $ 6,238
- ----------------------------------------------------------------------------------------------
Entertainment - 5.0%
American Radio Systems Corp., 7s, 2049## 325 $ 16,575
Golden Books Financing Trust, 8.75s, 2016## 200 10,150
Royal Caribbean Cruises Ltd., 7.25s, 2049 20 1,097
--------
$ 27,822
- ----------------------------------------------------------------------------------------------
Financial Institutions - 15.7%
Advanta Corp., Depository Shares 50 $ 1,962
Finova Finance Trust, 5.5s, 2016 300 17,325
Greenfield Capital Trust, 6s, 2016 250 10,500
Insignia Financing, "I", 6.5s, 2016## 200 10,050
Jefferson-Pilot Corp., NationsBank (ACES), 2000 100 10,775
Merrill Lynch, STRYPES, 6.5s, 1998 150 10,275
Owens-Corning Capital LLC, 6.5s, 2049## 275 15,400
Tosco Financing Trust, 5.75s## 200 10,675
--------
$ 86,962
- ----------------------------------------------------------------------------------------------
Food and Beverages - 3.6%
Dole Food, TRACES, 7s, 1999 525 $ 20,081
- ----------------------------------------------------------------------------------------------
Forest and Paper Products - 1.7%
International Paper Capital Trust, 5.25s, 2025 200 $ 9,400
- ----------------------------------------------------------------------------------------------
Insurance - 4.5%
Conseco, Inc., 7s, 2000 75 $ 10,462
Frontier Financing Trust, 6.25s, 2026## 100 5,550
SunAmerica, Inc., PERCS 150 6,319
SunAmerica, Inc., $3.10, 1998 25 2,528
--------
$ 24,859
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.0%
McKesson Financing Trust, $2.50, 2027## 100 $ 5,288
- ----------------------------------------------------------------------------------------------
Metals and Minerals - 1.8%
Timet Capital Trust, "I", 6.625s, 2026## 200 $ 9,700
- ----------------------------------------------------------------------------------------------
Oils - 0.5%
Atlantic Richfield Co., LYONDELL, 9.01%, 1997 120 $ 2,745
- ----------------------------------------------------------------------------------------------
Pollution Control - 3.5%
Browning-Ferris Industries, Inc., ACES, 7.25% 600 $ 19,275
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 4.0%
Hilton Hotels Corp., 8s, 1999 100 $ 2,375
Host Marriott Financial Trust, 6.75s, 2026## 300 17,325
Wendys Financial, "I", 5s, 2026 50 2,600
--------
$ 22,300
- ----------------------------------------------------------------------------------------------
Steel - 1.9%
Alaska Steel Holding Corp., 7s 200 $ 6,575
USX Corp., 6.75s, 2000 200 3,750
--------
$ 10,325
- ----------------------------------------------------------------------------------------------
Stores - 1.5%
Ann Taylor Finance Trust, $4.25, 8.5s, 2016## 50 $ 2,950
K-Mart Financing, "I", 7.75%, 2016 100 5,475
--------
$ 8,425
- ----------------------------------------------------------------------------------------------
Utilities - Gas - 0.9%
Enron Corp., 6.25s 250 $ 5,219
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 4.8%
Salomon, Inc., DECS (Cincinnati Bell, Inc.), 7.625s, 1999 500 $ 16,000
Salomon, Inc., DECS (Cincinnati Bell, Inc.), 6.25s, 2001 175 10,719
--------
$ 26,719
- ----------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $299,380) $302,489
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $541,518) $548,992
Short Sells - (0.6)%
- ----------------------------------------------------------------------------------------------
Apple Computer* (Proceeds, $(3,468)) (190) $ (3,088)
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.5% $ 8,282
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $554,186
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A Restriction.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS NEW DISCOVERY FUND
Stocks - 92.0%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 91.6%
Advertising - 0.2%
Universal Outdoor Holdings, Inc.* 100 $ 2,700
VDI Media 200 1,400
----------
$ 4,100
- ----------------------------------------------------------------------------------------------
Agricultural Products - 0.5%
AGCO Corp. 300 $ 8,513
- ----------------------------------------------------------------------------------------------
Banks and Credit Companies - 0.3%
TCF Financial Corp. 100 $ 4,538
- ----------------------------------------------------------------------------------------------
Building - 1.1%
Newport News Shipbuilding, Inc. 1,200 $ 18,600
- ----------------------------------------------------------------------------------------------
Business Machines - 4.9%
Affiliated Computer Services, Inc. 4,200 $ 86,625
- ----------------------------------------------------------------------------------------------
Business Services - 12.8%
AccuStaff, Inc.* 800 $ 16,600
Administaff, Inc.* 100 2,388
ADT Ltd.* 1,200 26,100
America Online, Inc.* 100 3,750
Bisys Group, Inc.* 300 9,375
Ceridian Corp.* 150 5,869
Claremont Technology Group, Inc.* 500 10,562
Computer Sciences Corp. 100 6,750
Data Processing Corp.* 1,000 19,625
DST Systems, Inc.* 550 18,081
Fine Host Corp.* 600 15,750
Fiserv, Inc.* 550 18,012
Interim Services, Inc.* 500 18,875
May and Speh, Inc.* 1,000 9,000
Moneygram Payment Systems, Inc.* 800 10,400
PMT Services, Inc.* 899 11,575
Sabre Group Holding, Inc.* 500 14,125
Technology Solutions Co. 200 5,925
Walsh International, Inc.* 300 2,513
----------
$ 225,275
- ----------------------------------------------------------------------------------------------
Chemicals - 1.3%
Betzdearborn, Inc. 350 $ 22,706
- ----------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 1.7%
Apex PC Solutions, Inc.* 1,100 $ 10,175
Spectrum Holobyte, Inc.* 800 6,600
TDK Corp. 200 13,500
----------
$ 30,275
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 16.6%
Acxiom Corp.* 200 $ 3,050
Adobe Systems, Inc. 400 14,600
American Business Information, Inc.* 500 9,625
BMC Software, Inc.* 200 8,562
Cadence Design Systems, Inc.* 600 22,125
Computer Associates International, Inc. 400 17,400
Compuware Corp. 400 24,900
Control Data Systems, Inc.* 1,050 15,750
Cooper & Chyan Technology, Inc.* 400 12,275
Intelligroup, Inc.* 2,400 30,600
Metromail Corp.* 300 5,213
Premier Research Worldwide Ltd.* 100 2,213
Pure Atria Corp.* 900 17,269
Quickturn Design Systems, Inc.* 500 7,969
Sierra Semi Conductor Corp.* 800 12,800
Simulation Sciences, Inc.* 1,100 14,850
Sterling Software, Inc.* 500 14,312
Synopsys, Inc.* 1,000 35,687
USCS International, Inc.* 900 18,675
Xionics Document Technologies * 250 4,250
----------
$ 292,125
- ----------------------------------------------------------------------------------------------
Construction Services - 0.6%
Martin Marietta Materials, Inc. 400 $ 10,550
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.1%
Alternative Resources Corp.* 700 $ 10,762
Meta Group, Inc.* 300 7,125
United States Rentals, Inc.* 100 1,900
----------
$ 19,787
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 0.5%
Belden, Inc. 250 $ 8,906
- ----------------------------------------------------------------------------------------------
Electronics - 6.4%
Actel Corp.* 400 $ 7,800
Analog Devices, Inc.* 1,500 34,875
Atmel Corp. 250 9,344
Burr Brown 250 8,187
CFM Technologies, Inc.* 100 4,000
GaSonics International Corp.* 450 7,538
Kulicke & Soffa Industries, Inc.* 300 7,950
Lattice Semiconductor Corp.* 200 9,550
Microchip Technology, Inc.* 200 7,475
Photronic, Inc.* 200 6,900
Ultratech Stepper, Inc.* 300 7,837
----------
$ 111,456
- ----------------------------------------------------------------------------------------------
Entertainment - 4.1%
Clear Channel Communications, Inc.* 400 $ 19,150
Cox Radio, Inc.* 650 12,431
Emmis Broadcasting Corp.* 250 8,625
EZ Communications, Inc.* 300 12,675
Jacor Communications, Inc., "A"* 400 11,775
Midway Games, Inc.* 500 7,813
----------
$ 72,469
- ----------------------------------------------------------------------------------------------
Financial Institutions - 6.8%
BA Merchants Services, Inc.* 200 $ 3,100
Financial Federal Corp.* 400 7,550
Franklin Resources, Inc. 600 35,100
Kilroy Realty Corp.* 100 2,625
PHH Corp. 1,250 59,844
Quick & Reilly Group, Inc. 300 10,500
----------
$ 118,719
- ----------------------------------------------------------------------------------------------
Food and Beverage Products - 2.7%
Earthgrains Co. 400 $ 21,900
Smith's Food & Drug Centers, Inc. 650 21,369
Suiza Foods Corp.* 200 5,025
----------
$ 48,294
- ----------------------------------------------------------------------------------------------
Insurance - 3.1%
Compdent Corp.* 550 $ 16,569
PennCorp Financial Group, Inc. 200 7,000
Reliastar Financial Corp. 350 21,700
Security Connecticut Corp. 200 9,300
----------
$ 54,569
- ----------------------------------------------------------------------------------------------
Machinery - 1.0%
Greenfield Industries, Inc. 500 $ 10,937
Special Devices, Inc.* 400 7,200
----------
$ 18,137
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 1.0%
Mentor Corp. 300 $ 7,463
Zoll Medical Corp.* 900 9,675
----------
$ 17,138
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 9.0%
Apache Med Systems, Inc.* 1,700 $ 11,475
HCIA, Inc.* 600 20,550
Health Management Associates, Inc. 500 13,250
HealthSource, Inc.* 200 4,175
HealthSouth Corp.* 400 16,100
Horizon/CMS Healthcare Corp.* 1,300 21,287
IDX Systems Corp.* 300 9,450
Lincare Holdings, Inc. 200 8,625
Physician Sales and Service, Inc.* 100 1,525
Quorum Health Group, Inc.* 100 3,138
Safeguard Health Enterprises, Inc. 400 5,900
St. Jude Medical, Inc. 300 11,850
Trigon Healthcare, Inc.* 100 1,788
Vivra, Inc.* 1,000 29,750
----------
$ 158,863
- ----------------------------------------------------------------------------------------------
Metals and Minerals - 0.7%
Titanium Metals Corp.* 150 $ 4,106
Transaction System Architects, Inc. 300 7,800
----------
$ 11,906
- ----------------------------------------------------------------------------------------------
Oil Services - 2.1%
Camco International, Inc. 200 $ 7,725
Cooper Cameron Corp.* 120 7,860
Global Industries, Inc.* 400 7,300
National Oilwell, Inc.* 150 4,612
Weatherford Enterra, Inc.* 300 9,000
----------
$ 36,497
- ----------------------------------------------------------------------------------------------
Pollution Control - 0.6%
USA Waste Services, Inc.* 300 $ 10,800
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 4.9%
Applebee's International, Inc. 100 $ 2,525
Coldwater Creek, Inc.* 500 9,187
Doubletree Corp.* 500 20,875
HFS, Inc.* 400 27,400
Prime Hospitality Corp.* 600 9,900
Promus Hotel Corp.* 100 3,538
Renaissance Hotel Group NV* 400 11,850
----------
$ 85,275
- ----------------------------------------------------------------------------------------------
Stores - 4.1%
Ann Taylor Stores Corp.* 300 $ 6,000
Gymboree Corp. 350 8,619
Hollywood Entertainment Corp.* 900 21,600
Linens N'Things, Inc.* 500 10,750
Micro Warehouse, Inc.* 100 1,437
Petco Animal Supplies, Inc.* 300 8,287
Rite-Aid Corp. 350 14,744
----------
$ 71,437
- ----------------------------------------------------------------------------------------------
Telecommunications - 3.1%
Ascend Communications, Inc.* 750 $ 39,187
Cable Design Technologies Corp. 300 7,950
Glenayre Technologies, Inc.* 500 6,625
----------
$ 53,762
- ----------------------------------------------------------------------------------------------
Utilities - Gas - 0.4%
Energy Ventures, Inc. 150 $ 7,650
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $1,608,972
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 0.4%
United Kingdom - 0.4%
SELECT Software Tools, ADR (Computer Software - Systems)* 500 $ 7,000
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,621,305) $1,615,972
- ----------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Obligation - 3.7%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank, due 3/03/97, at Amortized Cost $ 65 $ 64,981
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,686,286) $ 1,680,953
Other Assets, Less Liabilities - 4.3% 75,393
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 1,756,346
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS RESEARCH INTERNATIONAL FUND
Stocks - 94.6%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 5.7%
Agricultural Products - 0.9%
AGCO Corp. 620 $ 17,592
- ----------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.2%
TDK Corp. 640 $ 43,200
- ----------------------------------------------------------------------------------------------
Medical and Health Products - 1.5%
Pharmacia & Upjohn, Inc. 555 $ 20,466
Rhone-Poulenc Rorer, Inc. 119 8,449
----------
$ 28,915
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 1.1%
MCI Communications Corp. 625 $ 22,344
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $ 112,051
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 88.9%
Australia - 1.3%
Q.B.E. Insurance Group Ltd. (Insurance) 5,042 $ 25,269
- ----------------------------------------------------------------------------------------------
Brazil - 3.7%
ABB AB (Aerospace) 281 $ 31,393
Jusco Co. (Real Estate Investment Trusts) 1,000 28,353
Telecomunicacoes Brasileiras SA, ADR
(Telecommunications) 142 13,774
----------
$ 73,520
- ----------------------------------------------------------------------------------------------
Canada - 1.0%
Canadian National Railway Co. (Railroads) 533 $ 19,388
- ----------------------------------------------------------------------------------------------
Chile - 0.7%
Chilectra SA, ADR (Utilities - Electric) 206 $ 13,338
- ----------------------------------------------------------------------------------------------
Finland - 2.0%
Huhtamaki Oy Group (Food Products) 740 $ 34,752
TT Tieto Oy (Computer Software - Systems) 50 4,288
----------
$ 39,040
- ----------------------------------------------------------------------------------------------
France - 6.2%
Assurance Generale de France (Agricultural
Products)## 196 $ 6,904
Elf Aquitaine SA (Oils) 253 24,224
Michelin (C.G.D.E.), "B" (Tire and Rubber) 226 14,167
Rhone-Poulenc SA (Pharmaceuticals)* 733 25,755
TV Francaise (Entertainment) 120 11,131
TOTAL SA (Oils)* 220 17,567
Union des Assurances Federales SA (Insurance) 180 21,599
----------
$ 121,347
- ----------------------------------------------------------------------------------------------
Germany - 2.4%
Adidas AG (Stores) 366 $ 35,038
Hoechst AG (Chemicals) 288 12,223
----------
$ 47,261
- ----------------------------------------------------------------------------------------------
Greece - 1.1%
Hellenic Telecommunication Organization SA
(Telecommunications) 460 $ 10,086
Papastratos Cigarettes SA (Consumer Goods and Services) 620 12,305
----------
$ 22,391
- ----------------------------------------------------------------------------------------------
Hong Kong - 9.5%
Asia Satellite Telecommunications Holdings Ltd.
(Telecommunications)* 9,000 $ 23,712
Dah Sing Financial Group (Banks and Credit
Companies) 3,800 15,901
Giordano International Ltd. (Retail) 8,000 5,683
Great Eagle Holdings Co. (Food and Beverage Products) 7,000 26,262
Hong Kong Electric Holdings Ltd. (Utilities - Electric) 7,000 24,228
Hysan Development Co. (Real Estate) 4,000 13,793
Li & Fung Ltd. (Stores) 36,000 29,291
Liu Chong Hing Bank (Banks and Credit Companies) 4,000 7,594
Peregrine Investment Holdings (Finance) 3,000 5,482
Wharf Holdings Ltd. (Real Estate) 5,000 22,214
Wing Hang Bank Ltd. (Banks and Credit Companies) 2,500 11,365
----------
$ 185,525
- ----------------------------------------------------------------------------------------------
Indonesia - 0.7%
Semen Gresik (Building Materials) 4,500 $ 13,288
- ----------------------------------------------------------------------------------------------
Ireland - 1.1%
Allied Irish Banks (Banks and Credit Companies) 3,026 $ 21,709
- ----------------------------------------------------------------------------------------------
Italy - 3.2%
Gucci Group NV (Apparel and Textiles) 284 $ 18,354
Industrie Natuzzi S.p.A., ADR (Consumer Goods and
Services) 824 16,995
Instituto Nazionale delle Assicurazioni (Insurance) 7,865 10,279
Telecom Italia S.p.A. (Telecommunications) 11,645 17,801
----------
$ 63,429
- ----------------------------------------------------------------------------------------------
Japan - 16.8%
Bank of Tokyo - Mitsubishi (Banks and Credit
Companies) 1,000 $ 16,415
Bridgestone Corp. (Tire and Rubber) 1,000 17,908
Canon, Inc. (Office Equipment) 2,000 41,784
DDI Corp. (Telecommunications) 3 18,082
East Japan Railway Co. (Railroads) 2 8,523
Hirose Electric Co. (Electronics) 100 5,605
Keyence Corp. (Electronics) 100 12,187
Kinki Coca-Cola Bottling Co. (Beverages) 1,000 12,021
Kirin Beverage Corp. (Beverages) 2,000 27,193
Matsushita Electric Industrial Co. (Electrical Equipment) 1,000 15,420
Nippon Telephone & Telegraph Co. (Utilities -
Telecommunications) 2 14,243
Nitto Denko Corp. (Industrials) 2,000 26,695
Omron Corp. (Electronics) 1,000 15,752
Osaka Sanso Kogyo Ltd. (Chemicals) 2,000 5,372
Sony Corp. (Electronics) 700 50,547
Takeda Chemical Industries (Chemicals) 1,000 20,063
Ushio, Inc. (Electronics) 2,000 22,550
----------
$ 330,360
- ----------------------------------------------------------------------------------------------
Malaysia - 0.4%
Petronas Gas Berhad (Gas)## 2,000 $ 7,292
- ----------------------------------------------------------------------------------------------
Netherlands - 3.3%
ASM Lithography Holding NV (Electronics)## 290 $ 19,321
Ahrend Groep NV (Furniture and Home Appliances) 240 13,609
Royal Dutch Petroleum Co. (Oils) 126 21,841
Stork NV (Machinery) 270 11,081
----------
$ 65,852
- ----------------------------------------------------------------------------------------------
Norway - 0.6%
Orkla Asa (Consumer Goods and Services) 149 $ 11,938
- ----------------------------------------------------------------------------------------------
Peru - 1.1%
Telefonica del Peru SA, ADR (Utilities - Telephone) 1,008 $ 22,176
- ----------------------------------------------------------------------------------------------
Philippines - 1.0%
Alsons Cement Corp. (Building Materials)## 39,500 $ 10,213
Ayala Corp. (Real Estate) 8,300 9,468
----------
$ 19,681
- ----------------------------------------------------------------------------------------------
Portugal - 0.8%
Banco Totta E Acores (Financial Institutions) 1,075 $ 15,995
- ----------------------------------------------------------------------------------------------
Singapore - 2.5%
City Developments Ltd. (Real Estate) 2,000 $ 19,789
Hong Leong Finance Ltd. (Finance)+ 3,000 11,579
Mandarin Oriental International Ltd. (Restaurants
and Lodging) 13,000 17,680
----------
$ 49,048
- ----------------------------------------------------------------------------------------------
South Korea - 1.7%
Korea Electric Power Corp., ADR (Utilities - Electric) 598 $ 10,764
Korea Mobile Telecommunications, ADR
(Telecommunications)* 1,781 22,040
----------
$ 32,804
- ----------------------------------------------------------------------------------------------
Spain - 3.4%
Acerinox SA (Iron and Steel) 61 $ 8,484
Cubiertas y Mzov SA (Engineering - Construction) 181 17,818
Repsol SA (Oils) 590 22,450
Telefonica de Espana (Utilities - Telephone) 760 17,510
----------
$ 66,262
- ----------------------------------------------------------------------------------------------
Sweden - 3.3%
Astra AB (Pharmaceuticals) 475 $ 22,770
Nobel Biocare AB (Medical and Health Products) 995 17,754
Sparbanken Sverige AB (Banks and Credit Companies) 1,211 23,865
----------
$ 64,389
- ----------------------------------------------------------------------------------------------
Switzerland - 3.2%
Kuoni Reisen Holdings AG (Transportation) 4 $ 10,526
Logitech International (Electrical Equipment) 81 13,788
Nestle AG (Food and Beverage Products) 9 9,803
Novartis AG (Pharmaceuticals)* 25 28,586
----------
$ 62,703
- ----------------------------------------------------------------------------------------------
United Kingdom - 17.3%
ASDA Group PLC (Retail) 17,701 $ 32,236
British Aerospace PLC (Aerospace) 1,696 35,265
British Petroleum PLC (Oils) 2,012 22,308
Capital Radio PLC (Broadcasting) 971 8,945
Carlton Communications PLC (Broadcasting) 1,200 10,214
Grand Metropolitan (Food and Beverage Products) 2,750 20,402
Inchcape PLC (Automotive) 2,327 10,092
Jarvis Hotels PLC (Restaurants and Lodging)+ 12,322 35,561
Kwik-Fit Holdings PLC (Automotive) 8,744 32,221
Lloyds TSB Group PLC (Banks and Credit Companies) 2,030 16,880
Pace Micro Technology (Electronics) 7,096 10,413
PowerGen PLC (Utilities - Electric) 3,992 40,225
Reuters Holdings PLC, ADR (Printing and Publishing) 140 8,977
Smith (W.H.) Group PLC (Retail) 1,445 10,720
Storehouse PLC (Retail) 7,150 31,943
Wimpey (Geo.) PLC (Construction Services) 5,290 12,162
----------
$ 338,564
- ----------------------------------------------------------------------------------------------
Venezuela - 0.6%
Compania Anonima Nacional Telefonos de Venezuela, ADR
(Telecommunications)* 369 $ 11,716
- ----------------------------------------------------------------------------------------------
Total Foreign Stocks $1,744,285
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,898,775) $1,856,336
- ----------------------------------------------------------------------------------------------
Warrant - 0.1%
- ----------------------------------------------------------------------------------------------
Ciba Specialty Chemicals AG* (Identified Cost, $0) 23 $ 1,456
- ----------------------------------------------------------------------------------------------
Preferred Stocks - 2.7%
- ----------------------------------------------------------------------------------------------
Germany - 2.7%
Sap AG (Computer Software - Systems) 148 $ 22,853
Henkel KGaA (Consumer Goods and Services) 578 30,836
- ----------------------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $49,659) $ 53,689
- ----------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Obligation - 8.4%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank, due 3/03/97, at Amortized Cost $ 165 $ 164,952
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,113,386) $2,076,433
Other Assets, Less Liabilities - (5.8)% (114,610)
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,961,823
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
+Restricted Security.
##SEC Rule 144A Restriction.
</TABLE>
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - February 28, 1997
<TABLE>
<CAPTION>
MFS SCIENCE AND TECHNOLOGY FUND
Stocks - 77.2%
- ----------------------------------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 76.8%
Advertising - 0.1%
Universal Outdoor Holdings, Inc.* 100 $ 2,700
- ----------------------------------------------------------------------------------------------
Business Machines - 5.0%
Affiliated Computer Services, Inc.* 3,000 $ 61,875
International Business Machines Corp. 20 2,875
Sun Microsystems, Inc.* 1,320 40,755
----------
$ 105,505
- ----------------------------------------------------------------------------------------------
Business Services - 6.7%
AccuStaff, Inc.* 1,980 $ 41,085
ADT Ltd.* 940 20,445
Claremont Technology Group, Inc.* 920 19,435
CUC International, Inc.* 1,160 27,695
Data Processing Corp.* 500 9,813
Ikon Office Solutions, Inc. 565 23,306
----------
$ 141,779
- ----------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 7.0%
Activision, Inc.* 2,100 $ 28,087
Dell Computer Corp.* 230 16,359
Electronic Arts, Inc.* 710 22,188
First Data Corp. 780 28,567
Microsoft Corp.* 200 19,500
Spectrum Holobyte, Inc.* 3,900 32,175
----------
$ 146,876
- ----------------------------------------------------------------------------------------------
Computer Software - Services - 0.8%
Ingram Micro, Inc.* 750 $ 17,062
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 27.4%
Adobe Systems, Inc. 970 $ 35,405
BMC Software, Inc.* 1,560 66,787
Cadence Design Systems, Inc.* 1,760 64,900
Compaq Computer Corp.* 530 42,003
Computer Associates International, Inc. 1,905 82,867
Compuware Corp.* 930 57,893
Cooper & Chyan Technology, Inc.* 905 27,772
Oracle Systems Corp.* 1,590 62,408
Peoplesoft, Inc.* 310 12,361
Pure Atria Corp.* 1,900 36,456
Silicon Graphics, Inc.* 330 7,961
Sybase, Inc.* 380 6,223
Synopsys, Inc.* 2,110 75,301
----------
$ 578,337
- ----------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.1%
Silgan Holdings, Inc.* 100 $ 2,550
- ----------------------------------------------------------------------------------------------
Electronics - 4.7%
Atmel Corp.* 440 $ 16,445
Intel Corp. 515 73,066
Xilinx, Inc.* 200 9,025
----------
$ 98,536
- ----------------------------------------------------------------------------------------------
Entertainment - 0.9%
Midway Games, Inc.* 1,160 $ 18,125
- ----------------------------------------------------------------------------------------------
U.S. Stocks - continued
Medical and Health Products - 2.7%
Bristol-Myers Squibb Co. 260 $ 33,930
North American Vaccine, Inc.* 470 10,634
Pharmacia & Upjohn, Inc. 340 12,537
----------
$ 57,101
- ----------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 8.1%
HBO & Co. 955 $ 55,032
Oxford Health Plans, Inc.* 370 20,627
Pacificare Health Systems, Inc.* 250 20,937
Trigon Healthcare, Inc.* 100 1,788
United Healthcare Corp. 1,240 61,845
Vivra, Inc.* 350 10,413
----------
$ 170,642
- ----------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.4%
Renaissance Hotel Group NV* 300 $ 8,888
- ----------------------------------------------------------------------------------------------
Stores - 1.2%
Office Depot, Inc.* 850 $ 16,150
Rite-Aid Corp. 200 8,425
----------
$ 24,575
- ----------------------------------------------------------------------------------------------
Telecommunications - 10.2%
ADC Telecommunications, Inc.* 250 $ 6,750
Ascend Communications, Inc.* 815 42,584
Cabletron Systems, Inc.* 1,760 52,800
Cisco Systems, Inc.* 1,305 72,590
Lucent Technologies, Inc. 760 40,945
----------
$ 215,669
- ----------------------------------------------------------------------------------------------
Utilities - Telephone - 1.5%
MCI Communications Corp. 910 $ 32,532
- ----------------------------------------------------------------------------------------------
Total U.S. Stocks $1,620,877
- ----------------------------------------------------------------------------------------------
Foreign Stocks - 0.4%
United Kingdom - 0.4%
SELECT Software Tools, ADR (Computer Software - Systems)* 600 $ 8,400
- ----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,666,296) $1,629,277
- ----------------------------------------------------------------------------------------------
Preferred Stock - 0.6%
- ----------------------------------------------------------------------------------------------
Germany - 0.6%
Sap AG (Computer Software - Systems) (Identified Cost, $12,820) 85 $ 13,125
- ----------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Obligation - 24.7%
- ----------------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank, due 3/03/97, at Amortized Cost $ 520 $ 519,847
- ----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,198,963) $2,162,249
Other Assets, Less Liabilities - (2.5)% (51,833)
- ----------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,110,416
- ----------------------------------------------------------------------------------------------
*Non-income producing security.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
Core Equity Special
Growth Income Opportunities
February 28, 1997 Fund Fund Fund
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost,
$1,757,850,
$833,755 and $3,369,123,
respectively) $1,829,531 $934,587 $3,445,331
Cash 885 6,612 904
Deposits with brokers for securities
sold short -- -- 66,341
Receive for Fund shares sold -- 2,673 --
Receivable for investments sold 44,957 11,311 139,730
Interest and dividends receivable 827 2,520 2,171
Deferred organization expenses 1,670 1,670 1,670
Other assets -- -- 4,362
---------- -------- ----------
Total assets $1,877,870 $959,373 $3,660,509
---------- -------- ----------
Liabilities:
Securities sold short, at value
(proceeds, $0, $0 and $66,341,
respectively) $ -- $ -- $ 69,525
Payable for investments purchased 66,178 2,681 131,912
Payable for Fund shares reacquired -- -- 4,293
Accrued expenses and other liabilities 1,746 1,710 --
---------- -------- ----------
Total liabilities $ 67,924 $ 4,391 $ 205,730
---------- -------- ----------
Net assets $1,809,946 $954,982 $3,454,779
========== ======== ==========
Net assets consist of:
Paid-in capital $1,631,814 $808,171 $3,181,500
Unrealized appreciation on investments
and translation of assets and
liabilities in foreign currencies 71,676 100,832 72,046
Accumulated undistributed net realized
gain on investments and
foreign currency transactions 108,021 44,051 194,802
Accumulated undistributed net
investment income (loss)
(1,565) 1,928 6,431
---------- -------- ----------
Total $1,809,946 $954,982 $3,454,779
========== ======== ==========
Shares of beneficial interest
outstanding:
Class A 58,526 27,624 143,624
Class I 75,010 46,379 154,087
---------- -------- ----------
Total shares of beneficial interest
outstanding 133,536 74,003 297,711
========== ======== ==========
Net assets:
Class A $ 792,523 $356,622 $1,665,613
Class I 1,017,423 598,360 1,789,166
---------- -------- ----------
Total net assets $1,809,946 $954,982 $3,454,779
========== ======== ==========
Class A shares:
Net asset value and redemption price
per share
(net assets / shares of beneficial
interest outstanding) $13.54 $12.91 $11.60
====== ====== ======
Class I shares:
Net asset value and redemption price
per share
(net assets / shares of beneficial
interest outstanding) $13.56 $12.90 $11.61
====== ====== ======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Assets and Liabilities (Unaudited) - continued
- --------------------------------------------------------------------------------
Blue Convertible New
Chip Securities Discovery
February 28, 1997 Fund Fund Fund
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost,
$602,664, $541,518 and
$1,686,286, respectively) $625,744 $548,992 $1,680,953
Cash 5,991 311 4,923
Deposits with brokers for securities
sold short -- 3,468 --
Receivable for Fund shares sold -- -- --
Receivable for investments sold -- 9,610 111,264
Interest and dividends receivable 1,113 2,417 18,821
Deferred organization expenses -- -- --
Other assets -- -- --
-------- -------- ----------
Total assets $632,848 $564,798 $1,815,961
-------- -------- ----------
Liabilities:
Securities sold short, at value
(proceeds, $0, $3,468 and $0,
respectively) $ -- $ 3,088 $ --
Payable for investments purchased 4,707 -- 59,542
Payable for Fund shares reacquired -- -- --
Accrued expenses and other liabilities 26 7,524 73
-------- -------- ----------
Total liabilities $ 4,733 $ 10,612 $ 59,615
-------- -------- ----------
Net assets $628,115 $554,186 $1,756,346
======== ======== ==========
Net assets consist of:
Paid-in capital $603,679 $546,260 $1,742,008
Unrealized appreciation (depreciation)
on investments and
translation of assets and liabilities
in foreign currencies 23,080 7,854 (5,333)
Accumulated undistributed net realized
gain (loss) on
investments and foreign currency
transactions 476 (1,800) (14,789)
Accumulated undistributed net investment
income 880 1,872 34,460
-------- -------- ----------
Total $628,115 $554,186 $1,756,346
======== ======== ==========
Shares of beneficial interest outstanding:
Class A 43,773 50,353 37,384
Class I 16,448 4,271 136,603
-------- -------- ----------
Total shares of beneficial interest
outstanding 60,221 54,624 173,987
======== ======== ==========
Net assets:
Class A $456,567 $510,877 $ 377,387
Class I 171,548 43,309 1,378,959
-------- -------- ----------
Total net assets $628,115 $554,186 $1,756,346
======== ======== ==========
Class A shares:
Net asset value and redemption price per
share
(net assets / shares of beneficial
interest outstanding) $10.43 $10.15 $10.09
====== ====== ======
Class I shares:
Net asset value and redemption price per
share
(net assets / shares of beneficial
interest outstanding) $10.43 $10.14 $10.09
====== ====== ======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Assets and Liabilities (Unaudited) - continued
- ----------------------------------------------------------------------------
Research Science and
International Technology
February 28, 1997 Fund Fund
- ----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost,
$2,113,386 and $2,198,963, respectively) $2,076,433 $2,162,249
Cash 4,867 4,653
Receivable for Fund shares sold -- --
Receivable for investments sold 5,455 8,267
Interest and dividends receivable 2,103 28,056
Deferred organization expenses -- --
Other assets -- 250
---------- ----------
Total assets $2,088,858 $2,203,475
---------- ----------
Liabilities:
Payable for investments purchased $ 126,955 $ 92,981
Payable for Fund shares reacquired -- --
Accrued expenses and other liabilities 80 78
---------- ----------
Total liabilities $ 127,035 $ 93,059
---------- ----------
Net assets $1,961,823 $2,110,416
========== ==========
Net assets consist of:
Paid-in capital $1,988,844 $2,101,702
Unrealized depreciation on investments and
translation of assets and
liabilities in foreign currencies (37,172) (36,712)
Accumulated undistributed net realized
gain (loss) on investments and
foreign currency transactions 9,629 (43,675)
Accumulated undistributed net investment
income 522 89,101
---------- ----------
Total $1,961,823 $2,110,416
========== ==========
Shares of beneficial interest outstanding:
Class A 140,561 57,447
Class I 58,601 151,769
---------- ----------
Total shares of beneficial interest
outstanding 199,162 209,216
========== ==========
Net assets:
Class A $1,384,566 $ 579,551
Class I 577,257 1,530,865
---------- ----------
Total net assets $1,961,823 $2,110,416
========== ==========
Class A shares:
Net asset value and redemption price per
share
(net assets / shares of beneficial
interest outstanding) $ 9.85 $10.09
====== ======
Class I shares:
Net asset value and redemption price per
share
(net assets / shares of beneficial
interest outstanding) $ 9.85 $10.09
====== ======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
Core Equity Special
Growth Income Opportunities
Six Months Ended February 28, 1997 Fund Fund Fund
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 3,010 $ 10,972 $ 7,162
Interest 3,399 1,228 9,413
-------- --------- ---------
Total investment income $ 6,409 $ 12,200 $ 16,575
-------- --------- ---------
Expenses -
Management fee $ 3,971 $ 2,799 $ 9,558
Shareholder servicing agent fee -
common 693 482 1,546
Distribution and service fee - Class A 1,880 1,410 4,998
Registration fees 6,181 6,335 3,221
Auditing fees 3,001 3,001 3,003
Custodian fee 2,253 2,036 1,833
Printing 607 238 746
Postage 144 76 378
Legal fees 1,574 928 78
Amortization of organization expenses 215 215 215
Miscellaneous -- 74 1,248
--------- -------- --------
Total expenses $ 20,519 $ 17,594 $ 26,824
Fees paid indirectly (188) (150) (534)
Reduction of expenses by investment
adviser (12,370) (11,846) (15,080)
--------- -------- --------
Net expenses $ 7,961 $ 5,598 $ 11,210
--------- -------- --------
Net investment income (loss) $ (1,552) $ 6,602 $ 5,365
--------- -------- --------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 148,054 $ 50,317 $258,732
Foreign currency transactions (14) 12 (32)
--------- -------- --------
Net realized gain on investments
and foreign currency transactions $ 148,040 $ 50,329 $258,700
--------- -------- --------
Change in unrealized appreciation on
investments and translation of assets
and liabilities in foreign currencies $ 53,726 $ 74,863 $ 30,864
--------- -------- --------
Net realized and unrealized gain
on investments and foreign
currency $ 201,766 $125,192 $289,564
--------- -------- --------
Increase in net assets from
operations $ 200,214 $131,794 $294,929
========= ======== ========
See notes to financial statements
<PAGE>
Statements of Operations (Unaudited) - continued
- --------------------------------------------------------------------------------
Blue Convertible New
Chip Securities Discovery
Period Ended February 28, 1997* Fund Fund Fund
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 1,509 $ 1,695 $ 33,712
Interest 771 1,462 4,733
-------- -------- ---------
Total investment income $ 2,280 $ 3,157 $ 38,445
-------- -------- ---------
Expenses -
Management fee $ 595 $ 546 $ 1,956
Shareholder servicing agent fee -
common 121 111 344
Distribution and service fee - Class A 334 394 256
Registration fees 6,000 5,000 6,000
Auditing fees 3,000 3,000 3,000
Printing 400 400 400
Custodian fee 200 200 200
Postage 10 10 5
Legal fees 986 986 986
Miscellaneous 104 98 147
-------- -------- ---------
Total expenses $ 11,750 $ 10,745 $ 13,294
Reduction of expenses by investment
adviser (10,350) (9,460) (9,308)
-------- -------- ---------
Net expenses $ 1,400 $ 1,285 $ 3,986
-------- -------- ---------
Net investment income $ 880 $ 1,872 $ 34,460
-------- -------- ---------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 457 $ (1,805) $ (14,789)
Foreign currency transactions 19 5 --
-------- -------- ---------
Net realized gain (loss) on
investments and foreign currency
transactions $ 476 $ (1,800) $ (14,789)
-------- -------- ---------
Change in unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
in foreign currencies $ 23,080 $ 7,854 $ (5,333)
-------- -------- ---------
Net realized and unrealized gain
(loss) on investments and foreign
currency $ 23,556 $ 6,054 $ (20,122)
-------- -------- ---------
Increase in net assets from
operations $ 24,436 $ 7,926 $ 14,338
======== ======== =========
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Operations (Unaudited) - continued
- --------------------------------------------------------------------------
Research Science and
International Technology
Period Ended February 28, 1997* Fund Fund
- --------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 2,245 $ 88,647
Interest 2,279 4,961
-------- --------
Total investment income $ 4,524 $ 93,608
-------- --------
Expenses -
Management fee $ 2,614 $ 2,215
Shareholder servicing agent fee - common 346 390
Distribution and service fee - Class A 884 310
Registration fees 5,000 6,000
Auditing fees 3,000 3,000
Printing 400 400
Custodian fee 200 200
Postage 10 14
Legal fees 986 986
Miscellaneous 151 152
-------- --------
Total expenses $ 13,591 $ 13,667
Reduction of expenses by investment
adviser (9,589) (9,160)
-------- --------
Net expenses $ 4,002 $ 4,507
-------- --------
Net investment income $ 522 $ 89,101
-------- --------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 9,231 $(43,666)
Foreign currency transactions 398 (9)
-------- --------
Net realized gain (loss) on
investments and foreign currency
transactions $ 9,629 $(43,675)
-------- --------
Change in unrealized depreciation on
investments and translation of assets
and liabilities in foreign currencies $(37,172) $(36,712)
-------- --------
Net realized and unrealized loss on
investments and foreign
currency $(27,543) $(80,387)
-------- --------
Increase (decrease) in net assets
from operations $(27,021) $ 8,714
======== ========
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
Six Months
Ended
February 28,
1997 Period Ended
Core Growth Fund (Unaudited) August 31, 1996*
- -----------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,552) $ (362)
Net realized gain on investments and
foreign currency
transactions 148,040 66,889
Net unrealized gain on investments and
foreign currency
translation 53,726 17,950
---------- --------
Increase in net assets from operations $ 200,214 $ 84,477
---------- --------
Distributions declared to shareholders -
From net investment income - Class A $ -- $ --
From net realized gain on investments -
Class A (106,559) --
---------- --------
Total distributions declared to
shareholders $ (106,559) $ --
---------- --------
Fund shares (principal) transactions -
Net proceeds from sale of shares $1,217,508 $605,756
Net asset value of shares issued to
shareholders in
reinvestment of distributions 106,552 --
Cost of shares reacquired (293,919) (4,083)
---------- --------
Increase in net assets from Fund share
transactions $1,030,141 $601,673
---------- --------
Total increase in net assets $1,123,796 $686,150
Net assets:
At beginning of period 686,150 --
---------- --------
At end of period (including accumulated
net investment loss
of $1,565 and $13, respectively) $1,809,946 $686,150
========== ========
*For the period from the commencement of investment operations, January 2,
1996 to August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets - continued
- -------------------------------------------------------------------------------
Six Months
Ended
February 28, 1997 Period Ended
Equity Income Fund (Unaudited) August 31, 1996*
- -------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 6,602 $ 4,878
Net realized gain on investments and
foreign currency
transactions 50,329 7,246
Net unrealized gain on investments and
foreign currency
translation 74,863 25,969
-------- --------
Increase in net assets from operations $131,794 $ 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 $347,213 $449,397
Net asset value of shares issued to
shareholders in
reinvestment of distributions 23,074 --
Cost of shares reacquired (1,403) (10,110)
-------- --------
Increase in net assets from Fund share
transactions $368,884 $439,287
-------- --------
Total increase in net assets $477,602 $477,380
Net assets:
At beginning of period 477,380 --
-------- --------
At end of period (including accumulated
undistributed net
investment income of $1,928 and $4,878,
respectively) $954,982 $477,380
======== ========
*For the period from the commencement of investment operations, January 2,
1996 to August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets - continued
- -------------------------------------------------------------------------------
Six Months
Ended
February 28, 1997 Period Ended
Special Opportunities Fund (Unaudited) August 31, 1996*
- -----------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 5,365 $ 10,016
Net realized gain on investments and
foreign currency
transactions 258,700 168,487
Net unrealized gain on investments and
foreign currency
translation 30,864 41,182
---------- ----------
Increase in net assets from operations $ 294,929 $ 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 $ 949,135 $2,038,964
Net asset value of shares issued to
shareholders in
reinvestment of distributions 241,330 --
Cost of shares reacquired (47,915) (14)
---------- ----------
Increase in net assets from Fund share
transactions $1,142,550 $2,038,950
---------- ----------
Total increase in net assets $1,196,144 $2,258,635
Net assets:
At beginning of period 2,258,635 --
---------- ----------
At end of period (including accumulated
undistributed net
investment income of $6,431 and $10,016,
respectively) $3,454,779 $2,258,635
========== ==========
*For the period from the commencement of investment operations, January 2,
1996 to August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets (Unaudited) - continued
- --------------------------------------------------------------------------------
Blue Convertible New
Chip Securities Discovery
Period Ended February 28, 1997* Fund Fund Fund
- --------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 880 $ 1,872 $ 34,460
Net realized gain (loss) on
investments and foreign currency
transactions 476 (1,800) (14,789)
Net unrealized gain (loss) on
investments and foreign currency
translation 23,080 7,854 (5,333)
-------- -------- ----------
Increase in net assets from
operations $ 24,436 $ 7,926 $ 14,338
-------- -------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $604,990 $547,061 $1,742,009
Cost of shares reacquired (1,311) (801) (1)
-------- -------- ----------
Increase in net assets from Fund
share transactions $603,679 $546,260 $1,742,008
-------- -------- ----------
Total increase in net assets $628,115 $554,186 $1,756,346
Net assets:
At beginning of period -- -- --
-------- -------- ----------
At end of period (including
accumulated undistributed net
investment income of $880, $1,872
and $34,460, respectively) $628,115 $554,186 $1,756,346
======== ======== ==========
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
See notes to financial statements
- --------------------------------------------------------------------------
Research Science and
International Technology
Period Ended February 28, 1997* Fund Fund
- ----------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 522 $ 89,101
Net realized gain (loss) on investments
and foreign currency transactions 9,629 (43,675)
Net unrealized loss on investments and
foreign currency translation (37,172) (36,712)
---------- ----------
Increase (decrease) in net assets from
operations $ (27,021) $ 8,714
---------- ----------
Fund share (principal) transactions -
Net proceeds from sale of shares $1,989,004 $2,101,703
Cost of shares reacquired (160) (1)
---------- ----------
Increase in net assets from Fund share
transactions $1,988,844 $2,101,702
---------- ----------
Total increase in net assets $1,961,823 $2,110,416
Net assets:
At beginning of period -- --
---------- ----------
At end of period (including accumulated
undistributed net investment
income of $522 and $89,101,
respectively) $1,961,823 $2,110,416
========== ==========
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
Six Months Ended Period Ended Period Ended
Core Growth Fund February 28, 1997 August 31, 1996* February 28, 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 loss(S) $ (0.02) $ (0.01) $ --
Net realized and unrealized gain on investments and
foreign currency transactions 2.91 2.34 0.57
------- ------- -------
Total from investment operations $ 2.89 $ 2.33 $ 0.57
------- ------- -------
Less distributions declared to shareholders -
From net realized gain on investments $ (1.68) $ -- $ --
------- ------- -------
Total distributions declared to shareholders $ (1.68) $ -- $ --
------- ------- -------
Net asset value - end of period $ 13.54 $ 12.33 $ 13.56
======= ======= =======
Total return(+) 24.12%++ 23.30%++ 5.78%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+ 1.50%+
Net investment loss (0.34)%+ (0.11)%+ (0.18)%+
Portfolio turnover 175% 204% 175%
Average commission rate $0.0356 $0.0411 $0.0356
Net assets at end of period (000 omitted) $ 793 $ 686 $ 1,017
* For the period from the commencement of investment operations, January 2, 1996 to August 31, 1996.
** For the period from the commencement of offering of Class I shares, January 2, 1997 to February 28, 1997.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly. The reduction of expenses by
fees paid indirectly, as a percentage of net assets, amounted to:
(0.04)%+ (0.02)%+ (0.04)%+
(+)Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the Funds at not more than 1.50% of each Fund's
average daily net assets. The investment adviser did not impose a portion of its management fee for the periods
indicated. If this fee had been incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ (0.16) $(0.18) $ (0.05)
Ratios (to average net assets):
Expenses## 4.01%+ 4.28%+ 3.51%+
Net investment loss (2.85)%+ (2.34)%+ (2.19)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights (Unaudited) - continued
- ------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period Ended Period Ended
Equity Income Fund February 28, 1997 August 31, 1996* February 28, 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 $ 12.21
------- ------- -------
Income from investment operations# -
Net investment income(S) $ 0.12 $ 0.13 $ 0.03
Net realized and unrealized gain on investments and
foreign currency transactions 2.10 0.94 0.66
------- ------- -------
Total from investment operations $ 2.22 $ 1.07 $ 0.69
------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.16) $ -- $ --
From net realized gain (loss) on investments (0.22) -- --
------- ------- -------
Total distributions declared to shareholders $ (0.38) $ -- $ --
------- ------- -------
Net asset value - end of period $ 12.91 $ 11.07 $ 12.90
======= ======= =======
Total return(+) 20.26%++ 10.70%++ 6.35%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+ 1.50%+
Net investment income 1.90%+ 1.83%+ 1.37%+
Portfolio turnover 66% 56% 66%
Average commission rate $0.0334 $0.0331 $0.0334
Net assets at end of period (000 omitted) $ 357 $ 477 $ 598
* For the period from the commencement of investment operations, January 2, 1996 to August 31, 1996.
** For the period from the commencement of offering of Class I shares, January 2, 1997 to February 28, 1997.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly. The reduction of expenses by fees
paid indirectly, as a percentage of net assets, amounted to:
(0.04)%+ (0.03)%+ (0.04)%+
(+)Total returns for Class A shares do not include the applicable sales charge. If the charge had been included,
the results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the Funds at not more than 1.50% of each
Fund's average daily net assets. The investment adviser did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net investment income per share and the
ratios would have been:
Net investment income $(0.11) $(0.06) $(0.04)
Ratios (to average net assets):
Expenses## 5.23%+ 4.67%+ 4.74%+
Net investment loss (1.83)%+ (0.78)%+ (1.87)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights (Unaudited) - continued
- ------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period Ended Period Ended
Special Opportunities Fund February 28, 1997 August 31, 1996* February 28, 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 $ 11.38
------- ------- -------
Income from investment operations# -
Net investment income(S) $ 0.01 $ 0.06 $ 0.04
Net realized and unrealized gain on investments and
foreign currency transactions 1.40 1.30 0.19
------- ------- -------
Total from investment operations $ 1.41 $ 1.36 $ 0.23
------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.04) $ -- $ --
From net realized gain (loss) on investments (1.13) -- --
------- ------- -------
Total distributions declared to shareholders $ (1.17) $ -- $ --
------- ------- -------
Net asset value - end of period $ 11.60 $ 11.36 $ 11.61
======= ======= =======
Total return(+) 12.59%++ 13.60%++ 2.66%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.88%+ 1.50%+ 0.88%+
Net investment income 0.17%+ 0.78%+ 1.34%+
Portfolio turnover 89% 108% 89%
Average commission rate $0.0440 $0.0361 $0.0440
Net assets at end of period (000 omitted) $ 1,666 $ 2,259 $ 1,789
* For the period from the commencement of investment operations, January 2, 1996 to August 31, 1996.
** For the period from the commencement of offering of Class I shares, January 2, 1997 to February 28, 1997.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly. The reduction of expenses by fees
paid indirectly, as a percentage of net assets, amounted to:
(0.04)%+ (0.02)%+ (0.04)%+
(+)Total returns for Class A shares do not include the applicable sales charge. If the charge had been included,
the results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the Funds at not more than 1.50% of each
Fund's average daily net assets. The investment adviser did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net investment income per share and the
ratios would have been:
Net investment income $(0.07) $(0.01) $ 0.01
Ratios (to average net assets):
Expenses## 2.21%+ 2.97%+ 1.72%+
Net investment income (loss) (1.16)%+ (0.16)%+ 0.50%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights (Unaudited) - continued
- --------------------------------------------------------------------------------
Blue Chip Fund Period Ended February 28, 1997*
- --------------------------------------------------------------------------------
Class A Class I
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.01 $ 0.01
Net realized and unrealized gain on investments 0.42 0.42
------ ------
Total from investment operations $ 0.43 $ 0.43
------ ------
Net asset value - end of period $10.43 $10.43
====== ======
Total return(+) 4.30%++ 4.30%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 0.95%+ 0.94%+
Portfolio turnover 6% 6%
Average commission rate $0.0366 $0.0366
Net assets at end of period (000 omitted) $457 $172
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
+Annualized.
++Not annualized.
#Per share data for periods is based on average shares outstanding.
(+)Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the
Funds at not more than 1.50% of each Fund's average daily net assets. The
investment adviser did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment income $(0.16) $(0.16)
Ratios (to average net assets):
Expenses 12.76%+ 12.27%+
Net investment loss (10.31)%+ (9.83)%+
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights (Unaudited) - continued
- --------------------------------------------------------------------------------
Convertible Securities Fund Period Ended February 28, 1997*
- --------------------------------------------------------------------------------
Class A Class I
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ -- $ 0.03
Net realized and unrealized gain on investments 0.15 0.11
------ ------
Total from investment operations $ 0.15 $ 0.14
------ ------
Net asset value - end of period $10.15 $10.14
====== ======
Total return(+) 1.50%++ 1.40%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 2.20%+ 2.18%+
Portfolio turnover 23% 23%
Average commission rate $0.0481 $0.0481
Net assets at end of period (000
omitted) $511 $43
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
+Annualized.
++Not annualized.
#Per share data for periods is based on average shares outstanding.
(+)Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the
Funds at not more than 1.50% of each Fund's average daily net assets. The
investment adviser did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment income $ -- $(0.13)
Ratios (to average net assets):
Expenses 12.63%+ 12.13%+
Net investment loss (8.93)%+ (8.45)%+
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights (Unaudited) - continued
- --------------------------------------------------------------------------------
New Discovery Fund Period Ended February 28, 1997*
- --------------------------------------------------------------------------------
Class A Class I
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.19 $ 0.20
Net realized and unrealized loss on investments (0.10) (0.11)
------ ------
Total from investment operations $ 0.09 $ 0.09
------ ------
Net asset value - end of period $10.09 $10.09
====== ======
Total return(+) 0.90%++ 0.90%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 13.90%+ 12.79%+
Portfolio turnover 327% 327%
Average commission rate $0.0268 $0.0268
Net assets at end of period (000 omitted) $377 $1,379
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
+Annualized.
++Not annualized.
#Per share data for periods is based on average shares outstanding.
(+)Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the
Funds at not more than 1.50% of each Fund's average daily net assets. The
investment adviser did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment income $ 0.14 $ 0.15
Ratios (to average net assets):
Expenses 5.42%+ 4.92%+
Net investment income 9.98%+ 9.37%+
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights (Unaudited) - continued
- --------------------------------------------------------------------------------
Research International Fund Period Ended February 28, 1997*
- --------------------------------------------------------------------------------
Class A Class I
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ -- $ --
Net realized and unrealized loss on investments (0.15) (0.15)
------ ------
Total from investment operations $(0.15) $(0.15)
------ ------
Net asset value - end of period $ 9.85 $ 9.85
====== ======
Total return(+) (1.50)%++ (1.50)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 0.21%+ 0.17%+
Portfolio turnover 176% 176%
Average commission rate $0.0193 $0.0193
Net assets at end of period (000
omitted) $1,385 $577
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
+Annualized.
++Not annualized.
#Per share data for periods is based on average shares outstanding.
(+)Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the
Funds at not more than 1.50% of each Fund's average daily net assets. The
investment adviser did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment income $(0.05) $(0.05)
Ratios (to average net assets):
Expenses 5.27%+ 4.77%+
Net investment loss (3.56)%+ (3.10)%+
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights (Unaudited) - continued
- --------------------------------------------------------------------------------
Science and Technology Fund Period Ended February 28, 1997*
- --------------------------------------------------------------------------------
Class A Class I
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.38 $ 0.46
Net realized and unrealized loss on investments (0.29) (0.37)
------ ------
Total from investment operations $ 0.09 $ 0.09
------ ------
Net asset value - end of period $10.09 $10.09
====== ======
Total return(+) 0.80%++ 0.70%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.50%+ 1.50%+
Net investment income 30.63%+ 29.42%+
Portfolio turnover 716% 716%
Average commission rate $0.0268 $0.0268
Net assets at end of period (000
omitted) $580 $1,531
*For the period from the commencement of investment operations, January 2,
1997 to February 28, 1997.
+Annualized.
++Not annualized.
#Per share data for periods is based on average shares outstanding.
(+)Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
(S)The investment adviser voluntarily agreed to maintain the expenses of the
Funds at not more than 1.50% of each Fund's average daily net assets. The
investment adviser did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment income $ 0.34 $ 0.42
Ratios (to average net assets):
Expenses 4.95%+ 4.45%+
Net investment income 27.18%+ 26.47%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Business and Organization
MFS Series Trust I (the Trust) is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Trust presently consists of eight
Funds, as follows: MFS Cash Reserve Fund, MFS Managed Sectors Fund, MFS World
Asset Allocation Fund, MFS Aggressive Growth Fund, MFS Research Growth and
Income Fund, MFS Core Growth Fund* (the Core Growth Fund), MFS Equity Income
Fund* (the Equity Income Fund), MFS Special Opportunities Fund* (the Special
Opportunities Fund), MFS Blue Chip Fund* (the Blue Chip Fund), MFS Convertible
Securities Fund* (the Convertible Securities Fund), MFS New Discovery Fund* (the
New Discovery Fund), MFS Research International Fund* (the Research
International Fund) and MFS Science and Technology Fund* (the Science and
Technology Fund). Each Fund, except MFS Managed Sectors Fund, MFS World Asset
Allocation Fund and the MFS Special Opportunities Fund is diversified.
The Funds denoted with an asterisk (*) above are included within these financial
statements.
(2) Significant Accounting Policies
General -- The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations -- Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days of less), including listed issues
and forward contracts, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
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 valued at closing
settlement prices. Over-the-counter options are valued by brokers through the
use of a pricing model which takes into account closing bond valuations, implied
volatility and short-term repurchase rates. Securities for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gain and losses on investments that
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
operations of each Fund.
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. The Funds 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 for financial statement purposes as unrealized until the
contract settlement date.
Written Options -- Each Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a 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 the
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 the Fund must
replace the borrowed security. Possible losses from short sales can be greater
than losses from the actual purchase of a security. The amount of any gain will
be decreased, and the amount of any loss increased, by the amount of the
premium, dividends or interest 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 U.S. Government securities in an amount that, when combined with the
amount of collateral deposited with the broker in connection with the short
sale, at least equals the current market value of the security sold short.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
The Special Opportunities Fund and the Convertible Securities Fund can invest up
to 100% of its portfolio in high-yield securities rated below investment grade.
Investments in high-yield securities involve greater degrees of credit and
market risk than investments in higher-rated securities, and tend to be more
sensitive to economic conditions.
These Funds use the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds, whereby interest income on PIK bonds is recorded
ratably by the Funds at a constant yield to maturity. Legal fees and other
related expenses incurred to preserve and protect the value of a security owned
are added to the cost of the security; other legal fees are expensed. Capital
infusions, which are generally non-recurring, incurred to protect or enhance the
value of high-yield debt securities, are reported as an addition to the cost
basis of the security. Costs that are incurred to negotiate the terms or
conditions of capital infusions or that are expected to result in a plan of
reorganization are reported as realized losses. Ongoing costs incurred to
protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are reported as operating expenses.
Fees Paid Indirectly -- Each Fund's custodian bank calculates its fee based on
each Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by each
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions -- 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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. Each Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on each Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
Each Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
Multiple Classes of Shares of Beneficial Interest -- The Funds offer Class A and
Class I shares. The two classes of shares differ in their respective shareholder
servicing agent, distribution and service fees. All shareholders bear the common
expenses of the Fund pro rata based on 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 period ended February 28, 1997, the investment adviser did not impose any of
its fee, which is reflected as a reduction of expenses in the Statement of
Operations.
Under a temporary expense reimbursement agreement with MFS, MFS has voluntarily
agreed to pay all of each Fund's operating expenses exclusive of management,
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 of its
Class A shares. To the extent that the expense reimbursement fee exceeds each
Fund's actual expenses, the excess will be applied to amounts paid by MFS in
prior years. At February 28, 1997, the aggregate unreimbursed expenses owed to
MFS by each Fund amounted to:
<TABLE>
<CAPTION>
Core Equity Blue Convertible New Research Science and
Growth Income Chip Securities Discovery International Technology
Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$(5,825) $(7,156) $(9,300) $(8,410) $(6,752) $(5,744) $(6,244)
</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 of the officers
and Trustees of each Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trustees are
currently not receiving any payments for their services to each Fund.
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 period
ended February 28, 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:
The Class A distribution plan provides that each Fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of each Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of each Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.25% per annum of each Fund's average daily net assets
attributable to Class A shares, commissions to dealers and payments to MFD
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by each Fund. Distribution and
service fees under the Class A distribution plan are currently being waived.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within 12 months following such purchase. There were
no contingent deferred sales charges imposed during the period ended February
28, 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 serving agent. The fee is calculated as a
percentage of the average daily net assets of each Fund at an effective annual
rate of 0.13%. Prior to January 1, 1997, the fee was calculated as a percentage
of the average daily net assets of Class A 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 purchased option transactions,
U.S. government and short-term obligations, were as follows:
<TABLE>
<CAPTION>
Core Equity Special Blue
Growth Income Opportunities Chip
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $2,325,915 $ 810,785 $2,795,370 $ 625,899
========== ========== ========== ==========
Sales $1,664,515 $ 476,074 $2,184,663 $ 23,691
========== ========== ========== ==========
<CAPTION>
Convertible New Research Science and
Securities Discovery International Technology
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $ 624,195 $4,632,587 $2,147,829 $8,829,159
========== ========== ========== ==========
Sales $ 84,338 $2,996,493 $2,081,625 $7,106,378
========== ========== ========== ==========
</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>
Core Equity Special Blue
Growth Income Opportunities Chip
Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $1,757,850 $ 833,755 $3,435,464 $ 602,664
========== ========== ========== ==========
Gross unrealized appreciation $ 98,521 $ 105,128 $ 296,986 $ 32,791
Gross unrealized depreciation (26,840) (4,296) (223,962) (9,711)
---------- ---------- ---------- ----------
Net unrealized appreciation $ 71,681 $ 100,832 $ 73,024 $ 23,080
========== ========== ========== ==========
<CAPTION>
Convertible New Research Science and
Securities Discovery International Technology
Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $ 541,518 $1,686,286 $2,113,386 $2,198,963
========== ========== ========== ==========
Gross unrealized appreciation $ 21,890 $ 69,639 $ 40,098 $ 40,952
Gross unrealized depreciation (14,036) (74,972) (77,051) (77,664)
---------- ---------- ---------- ----------
Net unrealized appreciation
(depreciation) $ 7,854 $ (5,333) $ (36,953) $ (36,712)
========== ========== ========== ==========
</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:
<TABLE>
<CAPTION>
Class A Shares
Period Ended February 28, 1997
---------------------------------------------------------------------------------------------
Core Growth Fund Equity Income Fund Special Opportunities Fund
---------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 51,112 $ 686,975 19,146 $ 226,214 79,367 $ 925,741
Shares issued to
shareholders in
reinvestment of
distributions 8,292 106,552 1,898 23,074 21,567 241,330
Shares transferred
to Class I (33,596) (430,367) (36,420) (441,769) (154,886) (1,750,208)
Shares reacquired (22,944) (293,919) (125) (1,403) (1,251) (15,361)
------ ---------- ------ ---------- ------ ----------
Net increase
(decrease) 2,864 $ 69,241 (15,501) $ (193,884) (55,203) $ (598,498)
====== ========== ====== ========== ====== ==========
<CAPTION>
Class I Shares
Period Ended February 28, 1997
---------------------------------------------------------------------------------------------
Core Growth Fund Equity Income Fund Special Opportunities Fund
---------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 41,414 $ 530,533 9,959 $ 120,999 2,069 $ 23,394
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- -- -- --
Shares transferred
from Class A 33,596 430,367 36,420 441,769 154,886 1,750,208
Shares reacquired -- -- -- -- (2,868) (32,554)
------ ---------- ------ ---------- ------- ----------
Net increase 75,010 $ 960,900 46,379 $ 562,768 154,087 $1,741,048
====== ========== ====== ========== ======= ==========
<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 55,662 $ 601,673 43,125 $ 439,287 198,827 $2,038,950
====== ========== ====== ========== ======= ==========
*For the period from the commencement of investment operations, January 2, 1996 to August 31, 1996.
<CAPTION>
Class A Shares
Period Ended February 28, 1997**
---------------------------------------------------------------------------------------------
Blue Chip Fund Convertible Securities Fund New Discovery Fund
---------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 43,894 $ 440,505 50,431 $ 504,346 37,384 $ 375,933
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- -- -- --
Shares reacquired (121) (1,301) (78) (801) -- (1)
------ ---------- ------ ---------- ------ ----------
Net increase 43,773 $ 439,204 50,353 $ 503,545 37,384 $ 375,932
====== ========== ====== ========== ====== ==========
<CAPTION>
Class A Shares
Period Ended February 28, 1997**
------------------------------------------------------------
Research International Fund Science and Technology Fund
------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 140,576 $1,402,992 57,447 $ 583,734
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- --
Shares reacquired (15) (150) -- (1)
------- ---------- ------ ----------
Net increase 140,561 $1,402,842 57,447 $ 583,733
======= ========== ====== ==========
<CAPTION>
Class I Shares
Period Ended February 28, 1997**
---------------------------------------------------------------------------------------------
Blue Chip Fund Convertible Securities Fund New Discovery Fund
---------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 16,449 $ 164,485 4,271 $ 42,715 136,603 $ 1,366,076
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- -- -- --
Shares reacquired (1) (10) -- -- -- --
------ ---------- ----- --------- ------- -----------
Net increase 16,448 $ 164,475 4,271 $ 42,715 136,603 $ 1,366,076
====== ========== ===== ========= ======= ===========
<CAPTION>
Class I Shares
Period Ended February 28, 1997**
------------------------------------------------------------
Research International Fund Science and Technology Fund
------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 58,602 $ 586,012 151,769 $1,517,969
Shares issued to
shareholders in
reinvestment of
distributions -- -- -- --
Shares reacquired (1) (10) -- --
------ ---------- ------- ----------
Net increase 58,601 $ 586,002 151,769 $1,517,969
====== ========== ======= ==========
**For the period from the commencement of investment operations, January 2, 1997
to February 28, 1997.
</TABLE>
(6) Line of Credit
Each Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $400 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to each Fund for the period ended February
28, 1997, were as follows:
<TABLE>
<CAPTION>
Core Equity Special Blue Convertible New Research Science and
Growth Income Opportunities Chip Securities Discovery International Technology
Fund Fund Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1 $ 1 $ 4 $ -- $ 1 $ -- $ 1 $ 1
</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 February 28, 1997,
the Research International Fund and the Special Opportunities Fund owned the
following restricted securities (consisting of 2.4% and 0.6% of their net
assets, respectively). Each 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 of 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
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS RESEARCH INTERNATIONAL FUND
Hong Leong Finance Ltd. 1/7/97-2/26/97 3,000 $11,940 $11,579
Jarvis Hotels PLC 1/7/97-2/26/97 12,322 $33,892 $35,561
-------
$47,140
MFS SPECIAL OPPORTUNITIES FUND
Renaissance Cosmetics, Inc. 8/8/96 20 $20,000 $20,000
</TABLE>
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) CORE GROWTH FUND
MFS(R) EQUITY INCOME FUND
MFS(R) SPECIAL OPPORTUNITIES FUND
MFS(R) BLUE CHIP FUND
MFS(R) CONVERTIBLE SECURITIES FUND
MFS(R) NEW DISCOVERY FUND
MFS(R) RESEARCH INTERNATIONAL FUND
MFS(R) SCIENCE AND TECHNOLOGY FUND
500 Boylston Street
Boston, MA 02116-3741
[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-3-2/97/715
