[Front Cover]
[MFS INVESTMENT MANAGEMENT LOGO]
Semiannual Report
February 28, 1997
MFS(R) Managed Sectors Fund
[silhouette of two people in front of window]
<PAGE>
Table of Contents
Letter from the Chairman ............ 1
Portfolio Manager's Overview ...... 2
Portfolio Manager's Profile ......... 3
Fund Facts ........................ 4
Performance Summary ............... 4
Portfolio Concentration ............ 6
Portfolio of Investments ............ 7
Financial Statements ............... 9
Notes to Financial Statements ...... 16
Trustees and Officers ............... 21
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Highlights
o For the six months ended February 28, 1997, Class A shares of the Fund
provided a total return at net asset value of 17.55%, while Class B shares
returned 17.18%, and Class I shares returned 16.93%.
o Although many industry sectors performed well, differences within each sector
have been dramatic, as stocks of large-capitalization, multinational leaders
continued to rise to new levels, while others, many with fundamentals intact,
lagged.
o The Fund's investments remain concentrated in four sectors: leisure,
technology, energy, and health care, although the composition of those
holdings has changed to some degree, as have the weightings.
o Energy holdings were modestly reduced, while the leisure weighting was
expanded through investments in the hotel sector, where we believe constrained
supply and continued growth in demand should lead to an extended period of
earnings growth.
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<PAGE>
[Photo of A. Keith Brodkin]
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.
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 12, 1997
1
<PAGE>
Portfolio Manager's Overview
[Photo of Kenneth J. Enright]
Dear Shareholders:
For the six months ended February 28, 1997, Class A shares of the Fund provided
a total return of 17.55%, while Class B shares returned 17.18%, and Class I
shares returned 16.93%. These returns, which include the reinvestment of
distributions but exclude the effects of any sales charges, compare to a 22.5%
return for the Standard & Poor's 500 Composite Index (S&P 500), a popular,
unmanaged index of common stock performance. The Lipper Capital Appreciation
Fund Index, an index of funds which more closely reflects the Fund's objectives,
returned 9.34% during the same period.
While, according to Lipper most broad equity indices gained approximately 20%
over the past six months, a remarkable feat given the strength exhibited in 1995
and the first half of 1996, the primary difference in performance has been the
lack of breadth exhibited in both 1996 and year-to-date in 1997. Although many
industry sectors performed well, the dispersion of results within each sector
has been quite dramatic. Characterized as looking like the "nifty 50" markets of
earlier decades, stocks of large-capitalization, multinational industry leaders
continued to rise to new price and valuation highs while others, many with
fundamentals intact, sorely lagged. Further, stocks in industries which showed
disappointing results, such as health care and technology, were battered.
In health care, disappointing fundamentals in the health maintenance
organizations (HMOs) resulted in the stocks being down by 35% in 1996, according
to Standard & Poor's, while drug stocks performed well and were up, on average,
over 20%. Technology stocks were "beat up" throughout 1996, with the low
occurring in July. Despite this, leaders of their respective sectors, such as
Microsoft, Oracle, Cisco, and Intel, are all at valuations that are at or near
their all-time highs.
The stock market continued to move upward during the past six months,
benefiting from a favorable backdrop for equities, including slow but steady
economic growth, which resulted in little upward pressure on inflation or
interest rates. This environment was further enhanced by unprecedented positive
flows of money into the equity markets and the continuing prospect for
additional fiscal discipline in Washington. The market's response to this
combination of factors surprised many investors, most of whom believed that much
of this good news had already been discounted by the market in 1995 and early
1996. In addition, the second half of 1996 saw a rebound in many of the
2
<PAGE>
Portfolio Manager's Overview - continued
technology sectors which had been battered from midway through 1995 to July of
1996.
The Fund's investments continue to be concentrated in the four sectors outlined
in our last report: leisure, technology, energy, and health care, although the
composition of those holdings has changed to some degree, as have the
weightings. Energy holdings were modestly reduced on the basis of price
strength, while the "other" category also was lowered. The leisure weighting was
expanded through investments in the hotel sector where, we believe, constrained
supply and continued growth in demand should lead to an extended period of rapid
cash flow and earnings growth for much of this industry. Specific hotel stocks
added to the Fund were Host Marriott, Hilton, HFS, and ITT.
In addition, new technology holdings include Texas Instruments, Compaq, and
Sony. Bristol-Myers and Genesis Health Ventures were added in the health care
area. These purchases were funded by proceeds from sales of Federated Department
Stores and Sears in the retailing sector, Argosy and MGM in the gaming sector,
and US Robotics, Oracle, Adobe, and BMC Software in the technology sector.
The results of the past two years have left few sectors undervalued,
particularly in areas such as technology and oil services, where stock perform-
ance has been quite favorable. The Fund continues to look for growing, visible
earnings, but we are conscious of the fact that strength exhibited over the
last two years will put an additional premium on stock versus sector selection.
In addition to the favorable prospects for the hotel sector detailed above, we
believe the outlook for selected technology and oil service companies is
favorable as they continue to exhibit relatively strong earnings and revenue
growth, and we expect earnings of HMOs to rebound in 1997.
Respectfully,
/s/ Kenneth J. Enright
Kenneth J. Enright
Portfolio Manager
- --------------------------------------------------------------------------------
Portfolio Manager's Profile
Kenneth J. Enright joined the MFS Research Department in 1986. A graduate of
Boston State College and of the Babson College Graduate School of Business
Administration, he was named Assistant Vice President - Investments in 1987 and
Vice President - Investments in 1988. Mr. Enright became Portfolio Manager of
MFS Managed Sectors Fund in 1993. He is a Chartered Financial Analyst (C.F.A.).
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Fund Facts
Strategy: The Fund's investment objective is to provide capital appreciation.
As much as 50% of the Fund's assets may be in one sector or cash.
Commencement of
investment operations: Class A: September 20, 1993
Class B: December 29, 1986
Class I: January 2, 1997
Size: $378.6 million net assets as of February 28, 1997
- --------------------------------------------------------------------------------
Performance Summary
Because mutual funds like MFS Managed Sectors Fund are designed for investors
with long-term goals, we have provided cumulative results as well as the average
annual total returns for Class A, Class B, and Class I shares for the applicable
time periods.
Average Annual and Cumulative Total Rates of Return
Class A Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return +17.55% +16.66% +69.57% +191.71%
- --------------------------------------------------------------------------------
Average Annual Total Return -- +16.66% +11.14% + 11.30%
- --------------------------------------------------------------------------------
SEC Results -- + 9.95% +10.06% + 10.76%
- --------------------------------------------------------------------------------
Class B Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
Cumulative Total Return +17.18% +15.86% +65.42% +184.45%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +15.86% +10.59% + 11.02%
- -------------------------------------------------------------------------------
SEC Results -- +11.86% +10.35% + 11.02%
- -------------------------------------------------------------------------------
Class I Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
Cumulative Total Return +16.93% +15.61% +65.12% +183.94%
- -------------------------------------------------------------------------------
Average Annual Total Return -- +15.61% +10.55% + 11.00%
- -------------------------------------------------------------------------------
SEC Results -- +15.61% +10.55% + 11.00%
- -------------------------------------------------------------------------------
4
<PAGE>
Performance Summary - continued
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
Class A SEC results include the maximum 5.75% sales charge. Class B SEC results
reflect the applicable contingent deferred sales charge (CDSC), which declines
over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class I shares, which
became available on January 2, 1997 have no sales load or 12b-1 fees, and are
only available to certain institutional investors.
Class A share results include the performance and operating expenses (e.g., Rule
12b-1 fees) of the Fund's Class B shares for periods prior to the commencement
of offering of Class A shares. Because operating expenses attributable to Class
B shares are greater than those of Class A shares, Class A share performance
would have been higher had Class A shares been outstanding during the entire
period. The Class B share performance included within the Class A SEC
performance has been adjusted to reflect the sales charge generally applicable
to Class A shares rather than the CDSC generally applicable to Class B shares.
Class I share results include the performance and operating expenses of Class B
shares for periods prior to the commencement of offering of Class I shares.
Because operating expenses attributable to Class B 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 B share performance
included in the Class I share performance has been adjusted to reflect the fact
that Class I shares have no CDSC.
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.
5
<PAGE>
Portfolio Concentration as of February 28, 1997
Top 10 Equity Holdings
Telephone & Data Systems, Inc.
Providers of rural and local telephone services
Intel Corp.
Semiconductor manufacturer
Sun Microsystems, Inc.
Computer systems company
ADT Limited
Commercial and residential security company
Tyco International Ltd.
Manufacturer of fire protection, packaging, and electronic equipment
United Healthcare Corp.
Health maintenance organization
Cooper Cameron Corp.
Manufacturer of oil and gas production equipment
Harrah's Entertainment, Inc.
Owner of gaming operations in several states
Equitable of Iowa Cos.
Life and health insurance company
Digital Equipment Corp.
Computer manufacturing and networking company
Largest Sectors
Technology 33.3%
Leisure 24.2%
Health Care 12.4%
Energy 10.3%
Other 19.8%
*For a more complete breakdown, refer to Portfolio of Investments.
6
<PAGE>
Portfolio of Investments (Unaudited) - February 28, 1997
Stocks - 98.2%
- --------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------------
Energy - 10.2%
BJ Services Co.* 104,700 $ 4,161,825
Camco International, Inc. 105,000 4,055,625
Cooper Cameron Corp.* 169,600 11,108,800
McDermott International, Inc. 208,000 4,628,000
Occidental Petroleum Corp. 219,770 5,604,135
Tidewater, Inc. 58,600 2,519,800
Transocean Offshore, Inc. 33,000 1,843,875
Weatherford Enterra, Inc.* 150,000 4,500,000
-------------
$ 38,422,060
-------------
Health Care Revenue - 12.2%
Bristol-Myers Squibb Co. 35,000 $ 4,567,500
Genesis Health Ventures, Inc.* 101,600 3,517,900
HealthSource, Inc.* 341,000 7,118,375
Pacificare Health Systems, Inc.* 80,000 6,700,000
Pharmacia & Upjohn, Inc. 170,000 6,268,750
Rhone-Poulenc Rorer, Inc. 22,300 1,583,300
St. Jude Medical, Inc.* 125,000 4,937,500
United Healthcare Corp. 230,400 11,491,200
-------------
$ 46,184,525
-------------
Leisure - 23.8%
Aerial Communications, Inc. 275,000 $ 1,546,875
AirTouch Communications, Inc.* 192,500 5,245,625
American Radio Systems Corp.* 47,700 1,597,950
Harrah's Entertainment, Inc.* 598,700 11,075,950
HFS, Inc.* 51,000 3,493,500
Hilton Hotels Corp. 185,000 4,648,125
Host Marriott Corp.* 388,700 6,996,600
ITT Corp.* 50,600 2,858,900
LIN Television Corp.* 87,900 3,647,850
Louisiana Quinta Inns, Inc. 185,000 3,653,750
Promus Hotel Corp.* 237,800 8,412,175
Showboat, Inc. 184,000 3,772,000
Telephone & Data Systems, Inc. 830,000 33,200,000
-------------
$ 90,149,300
-------------
Technology - 32.6%
ADT Limited* 575,000 $ 12,506,250
Analog Devices, Inc.* 193,900 4,508,175
Atmel Corp.* 182,000 6,802,250
Cabletron Systems, Inc.* 215,700 6,471,000
Compaq Computer Corp.* 55,000 4,358,750
Computer Associates International, Inc. 175,000 7,612,500
Digital Equipment Corp.* 260,000 8,515,000
Electronic Arts, Inc.* 32,600 1,018,750
Glenayre Technologies, Inc.* 268,800 3,561,600
Intel Corp. 155,000 21,990,625
Microsoft Corp.* 35,000 3,412,500
National Semiconductor Corp.* 224,900 5,875,512
Sony Corp. 53,000 3,827,143
Spectrum Holobyte, Inc.* 850,100 7,013,325
7
<PAGE>
Portfolio of Investments (Unaudited) - continued
Stocks - continued
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Technology - continued
Sun Microsystems, Inc.* 450,000 $13,893,750
Texas Instruments, Inc. 70,000 5,398,750
VLSI Technology, Inc.* 205,000 3,830,938
WorldCom, Inc.* 108,400 2,886,150
------------
$123,482,968
- ---------------------------------------------------------------------------------------
Other - 19.4%
Advanta Corp., "B" 112,700 $ 4,522,087
AGCO Corp. 230,000 6,526,250
Colgate-Palmolive Co. 48,000 4,968,000
Equitable of Iowa Cos. 197,000 10,465,625
Jefferson Smurfit Corp. 125,000 1,703,125
Loral Space & Communications Corp.* 340,000 5,482,500
McDonnell-Douglas Corp. 62,000 3,937,000
Office Depot, Inc.* 425,000 8,075,000
PowerGen PLC 433,000 4,363,119
Smith's Food & Drug Centers, Inc. 34,400 1,130,900
Staples, Inc.* 50,000 1,081,250
Stone Container Corp. 200,000 2,600,000
Tyco International Ltd. 200,000 11,800,000
Wisconsin Central Transportation Corp.* 140,000 5,022,500
WMX Technologies Inc. 60,000 1,897,500
-----------
$73,574,856
- ---------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $318,780,473) $371,813,709
- ---------------------------------------------------------------------------------------
Convertible Bond - 0.1%
- ---------------------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- ---------------------------------------------------------------------------------------
Spectrum Holobyte, Inc., 6.5s, 2002 (Technology)
(Identified Cost, $560,000)## $ 560 $ 362,600
- ---------------------------------------------------------------------------------------
Total Investments (Identified Cost, $319,340,473) $372,176,309
- ---------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.7% 6,437,790
- ---------------------------------------------------------------------------------------
Net Assets - 100.0% $378,614,099
- ---------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
##SEC Rule 144A Restriction.
See notes to financial statements
8
<PAGE>
Financial Statements
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
February 28, 1997
- --------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $319,340,473) $372,176,309
Cash 5,582,072
Receivable for investments sold 4,443,735
Receivable for Fund shares sold 286,806
Dividends and interest receivable 99,616
Other assets 3,903
------------
Total assets $382,592,441
------------
Liabilities:
Payable for investments purchased $ 1,964,503
Payable for Fund shares reacquired 1,666,219
Payable to affiliates -
Management fee 7,806
Shareholder servicing agent fee 1,353
Distribution fee 3,543
Accrued expenses and other liabilities 334,918
------------
Total liabilities $ 3,978,342
------------
Net assets $378,614,099
------------
Net assets consist of:
Paid-in capital $303,283,312
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies 52,835,836
Accumulated undistributed net realized gain on investments and foreign
currency transactions 24,860,041
Accumulated net investment loss (2,365,090)
------------
Total $378,614,099
------------
Shares of beneficial interest outstanding 27,534,161
------------
Class A shares:
Net asset value per share
(net assets of $236,684,573 [dividedby] 17,235,721 shares of beneficial interest
outstanding) $13.73
------
Offering price per share (100 [dividedby] 94.25) $14.57
------
Class B shares:
Net asset value and offering price per share
(net assets of $139,658,897 [dividedby] 10,133,288 shares of beneficial interest
outstanding) $13.78
------
Class I shares:
Net asset value and offering price per share
(net assets of $2,270,629 [dividedby] 165,152 shares of beneficial interest
outstanding) $13.75
------
</TABLE>
On sales of $50,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A
and Class B shares.
See notes to financial statements
9
<PAGE>
Financial Statements - continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended February 28, 1997
- -------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 881,026
Interest 123,196
-----------
Total investment income $ 1,004,222
-----------
Expenses -
Management fee $ 1,380,443
Trustees' compensation 23,471
Shareholder servicing agent fee 81,180
Shareholder servicing agent fee (Class A) 112,975
Shareholder servicing agent fee (Class B) 101,851
Distribution and service fee (Class A) 398,737
Distribution and service fee (Class B) 697,798
Custodian fee 74,050
Printing 52,146
Postage 46,975
Auditing fees 25,138
Miscellaneous 146,663
-----------
Total expenses $ 3,141,427
Fees paid indirectly (29,525)
-----------
Net expenses $ 3,111,902
-----------
Net investment loss $(2,107,680)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $27,930,143
Foreign currency transactions (10,512)
-----------
Net realized gain on investments and foreign currency transactions $27,919,631
Change in unrealized appreciation on investments 32,369,657
-----------
Net realized and unrealized gain on investments and foreign currency $60,289,288
-----------
Increase in net assets from operations $58,181,608
-----------
</TABLE>
See notes to financial statements
10
<PAGE>
Financial Statements - continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1997 Year Ended
(Unaudited) August 31, 1996
----------------- ---------------
<S> <C> <C>
Increase ( decrease) in net assets:
From operations -
Net investment loss $ (2,107,680) $ (3,156,831)
Net realized gain on investments and foreign
currency transactions 27,919,631 62,458,699
Net unrealized gain (loss) on investments and
foreign currency translation 32,369,657 (45,740,086)
------------ -------------
Increase in net assets from operations $ 58,181,608 $ 13,561,782
------------ -------------
Distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions (Class A) $(26,355,849) $ (37,126,652)
From net realized gain on investments and
foreign currency transactions (Class B) (15,051,923) (28,912,351)
------------ -------------
Total distributions declared to
shareholders $(41,407,772) $ (66,039,003)
------------ -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 50,238,308 $ 105,543,935
Net asset value of shares issued to
shareholders in reinvestment of
distributions 38,463,593 60,342,057
Cost of shares reacquired (64,224,188) (154,185,704)
------------ -------------
Increase in net assets from Fund share
transactions $ 24,477,713 $ 11,700,288
------------ -------------
Total increase (decrease) in net assets $ 41,251,549 $ (40,776,933)
Net assets:
At beginning of period 337,362,550 378,139,483
------------ -------------
At end of period (including accumulated net
investment loss of $2,365,090 and
$257,410, respectively) $378,614,099 $ 337,362,550
------------ -------------
</TABLE>
See notes to financial statements
11
<PAGE>
Financial Statements - continued
Financial Highlights
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine
Ended Months
February 28, Year Ended August 31, Ended Period Ended
1997 ------------------------- August 31, November 30,
(Unaudited) 1996 1995 1994 1993*
----------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $ 13.16 $ 15.55 $ 13.41 $ 15.50 $ 15.68
--------- --------- --------- --------- ---------
Income from investment
operations# -
Net investment loss $ (0.07) $ (0.08) $ (0.05) $ (0.03) $ (0.02)
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 2.32 0.58 3.22 0.77 (0.16)
--------- --------- --------- --------- ---------
Total from
investment
operations $ 2.25 $ 0.50 $ 3.17 $ 0.74 $ (0.18)
--------- --------- --------- --------- ---------
Less distributions declared
to shareholders from net
realized gain on
investments and foreign
currency transactions $ (1.68) $ (2.89) $ (1.03) $ (2.83) $ --
--------- --------- --------- --------- ---------
Net asset value - end of period $ 13.73 $ 13.16 $ 15.55 $ 13.41 $ 15.50
--------- --------- --------- --------- ---------
Total return[dbldag] 17.55%++ 3.92% 26.12% 5.12%++ (5.99)%+
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.42%+ 1.43% 1.46% 1.52%+ 1.59%+
Net investment loss (0.88)%+ (0.56)% (0.34)% (0.26)%+ (0.75)%+
Portfolio turnover 49% 117% 115% 76% 106%
Average commission rate### $ 0.0565 $0.0411 $ -- $ -- $ --
Net assets at end of period
(000 omitted) $236,685 $207,504 $178,367 $121,498 $136,179
</TABLE>
*For the period from the commencement of offering of Class A shares,
September 20, 1993 to November 30, 1993.
+Annualized.
++Not annualized.
[dbldag]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.
#Per share data for the periods subsequent to November 30, 1993 are
based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses
are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years
beginning on or after September 1, 1995.
See notes to financial statements
12
<PAGE>
Financial Statements - continued
Financial Highlights- continued
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine
Ended Months
February 28, Year Ended August 31, Ended Year Ended November 30,
1997 ------------------------- August 31, ------------------------
(Unaudited) 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 13.14 $ 15.46 $ 13.35 $ 15.49 $ 15.42 $ 13.00
--------- --------- --------- --------- --------- -------
Income from investment
operations# -
Net investment loss $ (0.11) $ (0.18) $ (0.14) $ (0.10) $ (0.25) $ (0.24)
Net realized and
unrealized gain on
investments and
foreign currency
transactions 2.32 0.58 3.20 0.75 0.94 2.66
--------- --------- --------- --------- --------- -------
Total from
investment
operations $ 2.21 $ 0.40 $ 3.06 $ 0.65 $ 0.69 $ 2.42
--------- --------- --------- --------- --------- -------
Less distributions
declared to
shareholders from net
realized gain on
investments and
foreign currency
transactions $ (1.57) $ (2.72) $ (0.95) $ (2.79) $ (0.62) $ --
--------- --------- --------- --------- --------- -------
Net asset value -
end of period $ 13.78 $ 13.14 $ 15.46 $ 13.35 $ 15.49 $ 15.42
--------- --------- --------- --------- --------- -------
Total return 17.18%++ 3.17% 25.19% 4.47%++ 4.50% 18.62%
Ratios (to average net
assets)/Supplemental data:
Expenses## 2.11%+ 2.15% 2.18% 2.26%+ 2.21% 2.37%
Net investment loss (1.57)%+ (1.27)% (1.06)% (1.01)%+ (1.55)% (1.85)%
Portfolio turnover 49% 117% 115% 76% 106% 22%
Average commission rate### $ 0.0565 $ 0.0411 -- -- -- --
Net assets at end of period
(000 omitted) $139,659 $129,858 $199,773 $214,055 $232,982 $249,493
</TABLE>
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to November 30, 1993 are based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
See notes to financial statements
13
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended November 30, 1991 1990 1989 1988 1987**
- -----------------------------------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.23 $ 11.32 $ 7.86 $ 6.94 $ 6.50
--------- ---------- ------- ------- --------
Income from investment operations -
Net investment income (loss) $ (0.12) $ (0.03) $ 0.03 $ 0.09 $ 0.03
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions 3.89 (2.06) 3.51 0.89 0.42
--------- ---------- ------- ------- --------
Total from investment
operations $ 3.77 $ (2.09) $ 3.54 $ 0.98 $ 0.45
--------- ---------- ------- ------- --------
Less distributions declared to
shareholders from net realized gain
on investments and foreign
currency transactions $ -- $ -- $ (0.08) $ (0.06) $ (0.01)
--------- ---------- ------- ------- ---------
Net asset value - end of period $ 13.00 $ 9.23 $ 11.32 $ 7.86 $ 6.94
--------- ---------- ------- ------- ---------
Total return 40.85% (18.46)% 45.35% 14.06% 7.47%+
Ratios (to average net assets)/
Supplemental data:
Expenses 2.44% 2.50% 2.52% 2.31% 2.25%+
Net investment loss (1.00)% (0.27)% 0.37% 1.08% 0.09%+
Portfolio turnover 59% 79% 84% 146% 163%
Net assets at end of period
(000 omitted) $190,232 $152,132 $180,416 $137,311 $134,762
</TABLE>
**For the period from the commencement of investment operations, December 29,
1986 to November 30, 1987.
+Annualized.
See notes to financial statements
14
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended February 28, 1997* (Unaudited) Class I
- ------------------------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 13.18
---------
Income from investment operations# -
Net investment loss $ (0.02)
Net realized and unrealized gain on investments and foreign currency transactions 0.59
---------
Total from investment operations $ 0.57
---------
Net asset value - end of period $ 13.75
---------
Total return 4.33%++ Ratios (to average net assets)/Supplemental data:
Expenses## 1.07%+
Net investment loss (0.74)%+
Portfolio turnover 49%
Average commission rate $ 0.0565
Net assets at end of period (000 omitted) $ 2,271
</TABLE>
*For the period from the commencement of offering of Class I shares, January 1,
1997 to February 28, 1997.
+Annualized.
++Not annualized.
#Per share data for the period is based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
15
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Managed Sectors Fund (the Fund) is a non-diversified series of MFS Series
Trust I (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed
issues, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data, without exclusive reliance
upon exchange or over-the-counter prices. Short-term obligations, which mature
in 60 days or less, are valued at amortized cost, which approximates market
value. Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction of the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.
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
16
<PAGE>
Notes to Financial Statements (Unaudited) - continued
income is recorded on the ex-dividend date for dividends received in cash.
Dividend and interest payments received in additional securities are recorded on
the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. 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 the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B, and Class I shares. The classes of shares differ in their respective
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.
17
<PAGE>
Notes to Financial Statements (Unaudited) - continued
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75% of
average daily net assets.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and MFS
Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan for
all its independent Trustees and Mr. Bailey. Included in Trustees' compensation
is a net periodic pension expense of $6,321 for the period ended February 28,
1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$10,866 for the period ended February 28, 1997, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A and Class B shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to 0.10%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD retains the service fee for accounts not attributable
to a securities dealer which amounted to $49,412 for the period ended February
28, 1997. Fees incurred under the distribution plan during the period ended
February 28, 1997 were 0.35% of average daily net assets attributable to Class A
shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B shares. MFD will pay to
securities dealers that enter into a sales agreement with MFD all or a portion
of the service fee attributable to Class B shares. The service fee is intended
to be additional consideration for services rendered by the dealer with respect
to Class B shares. MFD retains the service fee for accounts not attributable to
a securities dealer, which amounted to $22,478 for Class B
18
<PAGE>
Notes to Financial Statements (Unaudited) - continued
shares for the period ended February 28, 1997. Fees incurred under the
distribution plan during the period ended February 28, 1997 were 1.00% of
average daily net assets attributable to Class B shares on an annualized basis.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the period ended February 28, 1997 were $0 and $56,199
for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the fund's average daily net assets at an effective annual rate of
0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of the
average daily net assets an effective annual rate of up to 0.15% and up to 0.22%
attributable to Class A and Class B shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations aggregated $177,435,124
and $193,971,652, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $319,340,473
------------
Gross unrealized appreciation $ 68,135,293
Gross unrealized depreciation (15,299,457)
------------
Net unrealized appreciation $ 52,835,836
------------
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Class A Shares
<TABLE>
<CAPTION>
Six Months Ended February 28, 1997 Year Ended August 31, 1996
---------------------------------- -----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Shares sold 1,491,727 $ 20,740,154 4,380,258 $ 63,996,858
Shares issued to
shareholders in
reinvestment of
distributions 1,813,576 24,102,359 2,625,824 33,269,508
Shares transferred to Class I (167,733) (2,210,721)
Shares reacquired (1,669,208) (23,205,714) (2,712,657) (38,139,937)
----------- ------------ ----------- ------------
Net increase 1,468,362 $ 19,426,078 4,293,425 $ 59,126,429
----------- ------------ ----------- ------------
</TABLE>
19
<PAGE>
Notes to Financial Statements (Unaudited) - continued
Class B Shares
<TABLE>
<CAPTION>
Six Months Ended February 28, 1997 Year Ended August 31, 1996
---------------------------------- ----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Shares sold 2,074,131 $ 29,234,395 2,993,295 $ 41,547,077
Shares issued to
shareholders in
reinvestment of
distributions 1,075,736 14,361,234 2,128,326 27,072,549
Shares reacquired (2,896,439) (40,719,338) (8,163,355) (116,045,767)
----------- ------------ ----------- -------------
Net increase
(decrease) 253,428 $ 2,876,291 (3,041,734) $ (47,426,141)
----------- ------------ ----------- -------------
</TABLE>
Class I Shares
Period Ended February 28, 1997*
-------------------------------
Shares Amount
- ----------------------------------------------------
Shares sold 20,012 $ 263,759
Shares transferred from
Class A 167,733 2,210,721
Shares reacquired (22,593) (299,136)
-------- ---------
Net increase 165,152 $2,175,344
-------- ---------
*For the period from the commencement of offering of Class I shares, January 1,
1997 to February 28, 1997.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $400 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the period ended February
28, 1997 was $1,491.
------------------------------------------------------------
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.
20
<PAGE>
MFS(R) Managed Sectors Fund
Trustees
A. Keith Brodkin* - Chairman and President
RICHARD B. BAILEY* - Private Investor;
Former Chairman and Director (until 1991), Massachusetts Financial Services
Company; Director, Cambridge Bancorp; Director, Cambridge Trust Company
MARSHALL N. COHAN - Private Investor
LAWRENCE H. COHN, M.D. - Chief of Cardiac Surgery, Brigham and Women's
Hospital; Professor of Surgery, Harvard Medical School
THE HON. SIR J. DAVID GIBBONS, KBE - Chief Executive Officer, Edmund Gibbons
Ltd.; Chairman, Bank of N.T. Butterfield & Son Ltd.
ABBY M. O'NEILL - Private Investor;
Director, Rockefeller Financial Services, Inc. (investment advisers)
WALTER E. ROBB, III - President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); President, Benchmark Consulting Group,
Inc. (office services); Trustee, Landmark Funds (mutual funds)
ARNOLD D. SCOTT* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
JEFFREY L. SHAMES* - President and Director, Massachusetts Financial Services
Company
J. DALE SHERRATT - President, Insight Resources, Inc. (acquisition planning
specialists)
WARD SMITH - Former Chairman (until 1994), NACCO Industries; Director,
Sundstrand Corporation
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Manager
KENNETH J. ENRIGHT*
Treasurer
W. THOMAS LONDON*
Assistant Treasurer
JAMES O. YOST*
Secretary
STEPHEN E. CAVAN*
*Affiliated with the Investment Adviser
Assistant Secretary
JAMES R. BORDEWICK, JR.*
Custodian
State Street Bank and Trust Company
Investor Information
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458
anytime from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any business day from 8
a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576
any business day from 9 a.m. to 5 p.m. Eastern time. (To use this service,
your phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances, and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
World Wide Web
www.mfs.com
- --------------------------------------------------------------------------------
[DALBAR LOGO]
For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category. The firm
achieved a 3.48 overall score on a scale of 1 to 4 in the 1996 survey. A total
of 110 firms responded, offering input on the quality of service they received
from 29 mutual fund companies nationwide. The survey contained questions about
service quality in 15 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
- --------------------------------------------------------------------------------
21
<PAGE>
MFS(R) [DALBAR LOGO] ----------------
Managed Bulk Rate
Sectors Fund U.S. Postage
P A I D
500 Boylston Street Permit #55638
Boston, MA 02116-3741 Boston, MA
----------------
[MFS Investment Management Logo]
We invented the mutual fund(SM)
(C) 1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MMS-3 4/97 50M 08/208
