<PAGE>
[graphic omitted] MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) MANAGED
SECTORS FUND
SEMIANNUAL REPORT o FEBRUARY 28, 1998
THE ROTH IRA IS NOW AVAILABLE (see page 27)
<PAGE>
IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT(SM)
On February 2, 1998, Keith Brodkin, a friend
and leader to everyone at MFS, died
unexpectedly at age 62. His thoughtful
[Photo of A. Keith Brodkin] letters to shareholders on the markets and
economy have been an integral part of MFS
shareholder reports like this one for many years.
Keith joined MFS in 1970 as the firm's first
fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and
four years later became Chairman and Chief Executive Officer. During his
stewardship, MFS has achieved significant growth in total assets under
management, rising from some $25 billion in 1991 to the over $70 billion
today entrusted to us by three million individual and institutional investors
worldwide. Under Keith's leadership, MFS has carefully but steadily built its
domestic and international investment capabilities through the introduction
of a range of new products and a still-growing staff that now numbers over
100 equity and fixed-income professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
A Discussion with the Portfolio Manager ................................... 4
Portfolio Manager's Profile ............................................... 7
Fund Facts ................................................................ 8
Performance Summary ....................................................... 8
Portfolio Concentration ................................................... 10
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 21
Roth IRA .................................................................. 27
The MFS Family of Funds(R) ................................................ 28
Trustees and Officers ..................................................... 29
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HIGHLIGHTS
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o FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 5.52%, CLASS B SHARES 5.24%,
AND CLASS I SHARES 5.70%. (SEE PERFORMANCE SUMMARY FOR MORE INFORMATION.)
o THE PRIMARY CATALYST FOR PERFORMANCE, BOTH POSITIVE AND NEGATIVE, HAS BEEN
THE FUND'S HOLDINGS IN TECHNOLOGY AND ENERGY. THROUGH MID-OCTOBER, THESE
AREAS LED TO STRONG RELATIVE PERFORMANCE BUT, LARGELY AS A RESULT OF THE
ASIAN FINANCIAL CRISIS, THESE SECTORS WENT THROUGH A PERIOD OF WEAK RELATIVE
PERFORMANCE THAT LASTED THROUGH THE END OF 1997.
o WE HAVE REDUCED THE FUND'S TECHNOLOGY WEIGHTING BY 3.8%, WHILE INCREASING
HEALTH CARE BY OVER 2%. ALSO, THE FUND HAS ADDED A FINANCIAL SECTOR THAT NOW
MAKES UP APPROXIMATELY 5% OF ASSETS.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders:
As investment managers we take a long-term view of the world's economies, as
well as of the stock and bond markets, and try to avoid getting caught up in
short-term fluctuations. However, it is hard to ignore unexpected events such as
the Asian economic turmoil or closely watched companies that miss their
quarterly earnings estimates. Given the potential for these events and their
possible impact on major market indices, we think it's important to offer some
perspective about recent market behavior and to let you know what MFS is doing
in an effort to provide you with favorable long-term investment performance.
The most notable recent event affecting investment markets has been the Asian
turmoil, which began in the summer of 1997 as a result of slowing growth rates
in the region and excess speculation in real estate markets. Since then, most
countries in the region have begun to implement the economic and regulatory
restructuring needed to put themselves on a stronger financial foundation. While
it may be a few years before some of these countries return to solid economic
footing, and while there will probably be a relatively short-term impact on the
U.S. economy, we believe the long-term outlook for the region is quite positive.
The Asian situation has brought home the lesson that major events can quickly
impact investment markets around the world, including those of the United
States. Although U.S. equities have enjoyed a bull market lasting more than 15
years and have continued to set records in the first several weeks of 1998,
there have been brief bouts of volatility associated with the Asian turmoil, as
well as with perceived downturns for certain industries such as technology.
While we believe the long-term outlook for the equity markets is favorable,
other, unforeseen events can trigger fairly extended periods during which prices
decline or remain relatively flat. Since no one can predict market cycles, that
makes it that much more important to find companies that can keep growing in the
face of the occasional downturn and even gain market share. For us, this means
using original, bottom-up research to examine each company's earnings potential
and position as well as the overall prospects for its industry. To that end, MFS
continues to increase the research support available to portfolio managers of
MFS funds.
On the fixed-income side, MFS uses active portfolio management based on
extensive research and credit analysis to reduce the potential for price
declines and enhance the opportunity for price appreciation. For both equity and
fixed-income managers, this means visiting and meeting with thousands of
companies and issuers of credit every year, as well as attending many
presentations and closely following sources of industry research.
We believe this approach, based on thorough research, teamwork, innovative
thinking, and the free exchange of ideas, is the best way to get the most
performance for shareholders in MFS funds -- in any market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
March 16, 1998
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JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED MFS IN 1983. AFTER
FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO MANAGER, HE WAS NAMED CHIEF
EQUITY OFFICER IN 1987 AND PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS IN
1993. MR. SHAMES WAS APPOINTED CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY
1998.
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<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Kenneth J. Enright]
Kenneth J. Enright
For the six months ended February 28, 1998, Class A shares of the Fund provided
a total return of 5.52%, Class B shares 5.24%, and Class I shares 5.70%. These
returns, which include the reinvestment of distributions but exclude the effects
of any sales charges, compare to a 17.62% return for the Standard & Poor's 500
Composite Index, a popular, unmanaged index of common stock total return
performance. The Lipper Capital Appreciation Fund Index, which more closely
reflects the Fund's objectives, returned 11.37% during the same period.
Q. WHAT DO YOU SEE AS SOME OF THE MAJOR REASONS FOR THE FUND'S PERFORMANCE OVER
THE PAST SIX MONTHS?
A. The primary catalyst for performance, both positive and negative, has been
the Fund's holdings in the technology and energy sectors. Through mid-
October, those holdings led to strong relative performance by the Fund but,
largely as a result of the Asian financial crisis, these sectors went
through a period of volatility and weak relative performance that lasted
through the end of 1997. So far in 1998, however, results in both sectors
have improved, especially in technology.
Q. HOW WOULD YOU DESCRIBE THE OVERALL INVESTMENT ENVIRONMENT OF THE PAST
SEVERAL MONTHS?
A. By far the dominant factor has been confusion over how problems in Asia
would impact the rest of the world's economies. After a short period of
uncertainty, the market has resumed its upward bias, as a majority of
investors now expect the Asian turmoil to have a positive impact on
inflation due to both cheaper exports and sources of goods for
manufacturing. The supporters of this scenario have outnumbered those who
are concerned that the weak Asian economies will dampen, or even reverse,
the positive growth in the rest of the world, especially in the United
States. But due to the uncertainty, this rising market has -- as in the
early part of 1997 -- been led by large multinationals with dominant,
worldwide diversified franchises and domestic industries with no exposure to
the vagaries of the international marketplace.
Q. HAVE YOU MADE ANY SIGNIFICANT CHANGES AMONG THE FUND'S FOUR MAJOR SECTORS:
TECHNOLOGY, ENERGY, HEALTH CARE, AND LEISURE?
A. The energy and leisure positions are essentially unchanged, although some
minor changes have been made in leisure. The technology weighting is lower
by 4.0%, and health care has been increased by over 2%. The "other" category
-- consisting of additional sectors that we feel have attractive prospects
-- is down by 0.9%. Also, the Fund has added a financial sector that now
makes up approximately 5% of assets.
Q. WHAT ABOUT PARTICULAR STOCKS? ANY SIGNIFICANT CHANGES THERE?
A. There have been numerous changes. In technology, we have materially reduced
the Fund's exposure to the personal computer and semiconductor industries
through the sales of Digital Equipment and Texas Instruments and the
reduction of its Compaq holding. The proceeds were primarily directed toward
software companies, with the addition of BMC Software and increased
weightings in Microsoft and Oracle. In addition, networking stocks 3Com and
Ascend were sold and the proceeds put toward the networking leader, Cisco
Systems. Equitable of Iowa, ITT Corp., and LIN Television were sold after
receiving takeover offers. The Fund reduced its hotel holdings through the
sales of LaQuinta and Host Marriott. Notable purchases were made in
financial services to exploit the continued favorable interest-rate
environment. Franklin Resources, Lincoln National, Transamerica, and
FirstPlus Financial are new holdings in this area. Other companies such as
American Home Products, Sears, Raytheon, and Teleport were also purchased.
Q. COULD YOU TALK ABOUT SOME OF YOUR HOLDINGS THAT PERFORMED BETTER THAN
EXPECTED, AND WHY YOU THINK THEY DID WELL?
A. Tyco International, the Fund's largest position, performed very well as
earnings expectations have continually been met or exceeded. The company
continues to improve margins, primarily through folding in acquisitions and
expanding its product offerings to exploit the worldwide distribution
systems in many of its businesses. Despite their volatility of late, oil
services stocks also contributed to performance, as did the acquired
companies Equitable of Iowa, ITT, and LIN Television. Finally, strong
performance from technology companies such as Microsoft, Compaq, Texas
Instruments, Cisco, and Loral contributed to results.
Q. NOW, WHAT ABOUT SOME STOCKS OR SECTORS THAT DID NOT PERFORM AS WELL AS YOU
WOULD HAVE LIKED?
A. Aetna and CIGNA, both health maintenance organizations (HMOs), exhibited
poor results due to a difficult pricing environment and worse-than-expected
cost controls. Also in health care, operating results for MedPartners and
Genesis Health Ventures were below expectations and, as a result, those
stocks suffered. Some technology stocks did poorly, particularly those
exposed to Asia, such as Atmel Corp. Finally, although oil services stocks
were strong for all of 1997, they have not recovered from their Asia-
induced correction in October as commodity prices have weakened due to
increased supply and lower-than-expected demand.
Q. WHAT DO YOU SEE AS THE BIGGEST RISK TO THE FUND IN THE NEXT SIX MONTHS
OR SO?
A. Given the market's continued rise over the past three years, few groups
appear undervalued. These historically high valuations have stemmed from
expectations for continued low inflation and favorable interest rates. While
few pressure signs appear on the horizon, a significant reversal of
expectations for inflation or an increase in interest rates would likely
precipitate a market correction.
Q. WHAT KIND OF MARKET OR ECONOMIC ENVIRONMENT DO YOU SEE GOING FORWARD, AND
HOW MIGHT THIS AFFECT SOME OF YOUR INVESTMENT DECISIONS?
A. As mentioned, modest inflation and low interest rates, coupled with
reasonable economic growth, have provided an ideal backdrop for financial
assets. While all signs point to a continuation of this environment, current
valuations for most sectors have put a premium on stock picking versus
sector selection. We continue to rely on bottom-up fundamental research to
drive our investment decisions, but we remain cautious in light of
historically high valuations.
/s/ Kenneth J. Enright
Kenneth J. Enright
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGER'S PROFILE
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KENNETH J. ENRIGHT JOINED THE MFS RESEARCH DEPARTMENT IN 1986 AND WAS NAMED
ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1987 AND VICE PRESIDENT --
INVESTMENTS IN 1988. A GRADUATE OF BOSTON STATE COLLEGE AND THE BABSON COLLEGE
GRADUATE SCHOOL OF BUSINESS ADMINISTRATION, HE IS A CHARTERED FINANCIAL ANALYST
AND HAS MANAGED MFS(R) MANAGED SECTORS FUND SINCE 1993.
<PAGE>
FUND FACTS
OBJECTIVE: SEEKS TO PROVIDE CAPITAL APPRECIATION. DIVIDEND INCOME,
IF ANY, IS INCIDENTAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 20, 1993
CLASS B DECEMBER 29, 1986
CLASS I JANUARY 2, 1997
SIZE: $455.7 MILLION NET ASSETS AS OF FEBRUARY 28, 1998
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
AS OF FEBRUARY 28, 1998
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
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Cumulative Total Return +5.52% +29.19% +126.46% +326.90%
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Average Annual Total Return -- +29.19% + 17.76% + 15.62%
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SEC Results -- +21.74% + 16.62% + 15.06%
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CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
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Cumulative Total Return +5.24% +28.38% +119.62% +314.16%
- ---------------------------------------------------------------------------
Average Annual Total Return -- +28.38% + 17.04% + 15.27%
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SEC Results -- +24.38% + 16.82% + 15.27%
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CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- ---------------------------------------------------------------------------
Cumulative Total Return +5.70% +29.61% +121.22% +317.04%
- ---------------------------------------------------------------------------
Average Annual Total Return -- +29.61% + 17.21% + 15.35%
- ---------------------------------------------------------------------------
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class I shares ("I") have
no sales charge or Rule 12b-1 fees and are only available to certain
institutional investors.
A results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of A. Because operating expenses
of B are greater than those of A, A performance generally would have been higher
than B performance. The B performance included within the A SEC performance has
been adjusted to reflect the maximum initial sales charge generally applicable
to A rather than the CDSC generally applicable to B.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of I. Because operating expenses
of B are greater than those of I, I performance generally would have been higher
than B performance. The B performance included in the I performance has been
adjusted to reflect the fact that I have no CDSC.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. 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.
The Fund may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
<PAGE>
PORTFOLIO CONCENTRATION AS OF FEBRUARY 28, 1998
LARGEST EQUITY SECTORS
Technology 28.7%
Leisure 20.3%
Health Care 18.8%
Other Sectors 16.1%
Energy 9.9%
Financial Institutions 5.3%
Miscelaneous 0.9%
For a more complete breakdown, refer to the Portfolio of Investments.
TOP 10 EQUITY HOLDINGS
TYCO INTERNATIONAL LTD. 9.9% ORACLE CORP. 2.6%
Fire protection, packaging, Database software developer
and electronic and manufacturer
equipment manufacturer
CISCO SYSTEMS, INC. 2.5%
TELEPHONE & DATA SYSTEMS, INC. 5.7% Computer network developer
Rural and local telephone company
SUN MICROSYSTEMS, INC. 2.4%
UNITED HEALTHCARE CORP. 3.6% Computer systems company
Health maintenance organization
BRISTOL-MYERS SQUIBB CO. 2.3%
COMPUTER ASSOCIATES INTERNATIONAL, INC. 2.8% Pharmaceutical products company
Computer software company
TERADYNE, INC. 2.1%
HARRAH'S ENTERTAINMENT, INC. 2.7% Electronic systems and software
Gaming operator in several states manufacturer
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 28, 1998
Stocks - 99.1%
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ISSUER SHARES VALUE
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Energy - 9.9%
BJ Services Co.* 195,900 $ 6,734,063
Camco International, Inc. 131,000 7,663,500
Cooper Cameron Corp.* 136,100 7,298,362
Noble Drilling Corp.* 225,300 6,392,888
Occidental Petroleum Corp. 270,000 6,901,875
Transocean Offshore, Inc. 55,000 2,365,000
Weatherford Enterra, Inc.* 229,500 7,946,437
------------
$ 45,302,125
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Financial Institutions - 5.3%
FIRSTPLUS Financial Group, Inc.* 125,600 $ 4,144,800
Franklin Resources, Inc. 110,000 5,610,000
Green Tree Financial Corp. 147,200 3,376,400
Lincoln National Corp. 66,900 5,602,875
Transamerica Corp. 45,000 5,239,688
------------
$ 23,973,763
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Leisure - 20.3%
Aerial Communications, Inc.* 275,000 $ 2,337,500
CBS Corp. 40,000 1,237,500
Cellular Communications International, Inc.* 52,900 2,525,975
Cendant Corp.* 215,000 8,062,500
Century Telephone Enterprises, Inc. 61,800 3,769,800
Harrah's Entertainment, Inc.* 585,300 12,327,881
Hearst-Argyle Television, Inc.* 26,800 941,350
Hilton Hotels Corp. 210,000 6,260,625
Jacor Communications, Inc.* 5,400 312,525
MGM Grand, Inc.* 105,000 3,793,125
Mirage Resorts, Inc.* 207,200 4,739,700
Promus Hotel Corp.* 166,499 8,033,577
Sprint Corp. 100,000 6,600,000
Tele-Communications Inc.* 95,000 2,760,937
Telephone & Data Systems, Inc. 591,100 25,749,794
Univision Communications, Inc., "A"* 81,000 3,108,375
------------
$ 92,561,164
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Medical and Health Technology and Services - 18.8%
American Home Products Corp. 70,000 $ 6,562,500
AmeriSource Health Corp., "A"* 105,800 6,189,300
Bristol-Myers Squibb Co. 105,000 10,519,687
CVS Corp. 77,500 5,739,844
Genesis Health Ventures, Inc.* 240,000 6,960,000
HealthSouth Corp.* 257,700 6,957,900
McKesson Corp.## 70,000 3,648,750
MedPartners, Inc.* 209,700 2,516,400
Meyer (Fred), Inc.* 110,300 4,901,456
Rite Aid Corp. 261,000 $ 8,449,875
Safeway, Inc.* 194,000 6,765,750
United Healthcare Corp. 270,000 16,385,625
------------
$ 85,597,087
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Technology - 28.7%
Analog Devices, Inc.* 262,000 $ 8,449,500
Aspect Telecommunications Corp.* 225,000 5,934,375
Atmel Corp.* 350,000 5,687,500
BMC Software, Inc.* 84,800 6,487,200
Cisco Systems, Inc.* 170,250 11,215,219
Compaq Computer Corp. 282,100 9,044,831
Computer Associates International, Inc. 267,500 12,605,937
Danka Business Systems, ADR (United Kingdom) 248,500 4,441,938
Global TeleSystems Group, Inc.* 2,800 102,550
Intel Corp. 60,000 5,381,250
International Business Machines Corp. 76,500 7,989,469
Micron Technology, Inc.* 180,000 5,973,750
Microprose, Inc.* 543,600 1,070,213
Microsoft Corp.* 110,000 9,322,500
Oracle Corp.* 485,000 11,943,125
Sun Microsystems, Inc.* 228,900 10,901,362
Teleport Communications Group, Inc., "A"* 85,000 4,643,125
Teradyne, Inc.* 205,000 9,673,437
------------
$130,867,281
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Other - 16.1%
Jefferson Smurfit Corp.* 236,700 $ 3,535,706
LCI International, Inc.* 110,900 3,659,700
Raytheon Co., "A" 105,000 6,090,000
Sears, Roebuck & Co. 100,000 5,306,250
Stone Container Corp.* 400,000 4,500,000
Tyco International Ltd. 880,000 44,660,000
Wisconsin Central Transportation Corp.* 211,300 5,731,513
------------
$ 73,483,169
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Total Stocks (Identified Cost, $378,167,279) $451,784,589
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Convertible Bond - 0.1%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------
Spectrum Holobyte, Inc. (Technology)##, 6.5s, 2002
(Identified Cost, $560,000) $ 560 $ 424,200
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Short-Term Obligations - 1.5%
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General Electric Capital Corp., due 3/02/98, at
Amortized Cost $6,880 $ 6,878,911
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Total Investments (Identified Cost, $385,606,190) $459,087,700
Other Assets, Less Liabilities - (0.7)% (3,359,253)
- ------------------------------------------------------------------------------
Net Assets - 100.0% $455,728,447
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*Non-income producing security.
##SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
FEBRUARY 28, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified Cost, $385,606,190) $459,087,700
Cash 7,430
Receivable for investments sold 8,179,916
Receivable for Fund shares sold 244,434
Dividends and interest receivable 118,022
Other assets 3,297
------------
Total assets $467,640,799
------------
Liabilities:
Payable for investments purchased $ 7,988,287
Payable for Fund shares reacquired 3,589,687
Payable to affiliates -
Management fee 18,862
Administrative fee 377
Shareholder servicing agent fee 2,829
Distribution and service fee 187,125
Accrued expenses and other liabilities 125,185
------------
Total liabilities $ 11,912,352
------------
Net assets $455,728,447
============
Net assets consist of:
Paid-in capital $358,314,100
Unrealized appreciation on investments 73,481,510
Accumulated undistributed net realized gain on
investments
and foreign currency transactions 26,190,515
Accumulated net investment loss (2,257,678)
------------
Total $455,728,447
============
Shares of beneficial interest outstanding 31,957,975
==========
Class A shares:
Net asset value per share
(net assets of $296,867,266 / 20,852,473 shares of
beneficial
interest outstanding) $14.24
======
Offering price per share (100 / 94.25) $15.11
======
Class B shares:
Net asset value and offering price per share
(net assets of $156,392,549 / 10,932,387 shares of
beneficial interest outstanding) $14.31
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $2,468,632 / 173,115 shares
of beneficial interest outstanding) $14.26
======
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
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 28, 1998
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 884,730
Interest 361,876
Foreign taxes withheld (5,083)
------------
Total investment income $ 1,241,523
------------
Expenses -
Management fee $ 1,663,494
Trustees' compensation 21,164
Shareholder servicing agent fee 275,737
Distribution and service fee (Class A) 499,234
Distribution and service fee (Class B) 779,741
Administrative fee 29,548
Custodian fee 73,518
Postage 41,836
Printing 16,829
Auditing fees 1,082
Legal fees 455
Miscellaneous 97,066
------------
Total expenses $ 3,499,704
Fees paid indirectly (51,304)
------------
Net expenses $ 3,448,400
------------
Net investment loss $ (2,206,877)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 41,385,291
Written option transactions 4,184,173
Foreign currency transactions 6,574
------------
Net realized gain on investments and foreign
currency transactions $ 5,576,038
------------
Change in unrealized appreciation -
Investments $(20,122,132)
Written options 567,441
------------
Net unrealized loss on investments and foreign
currency translation $(19,554,691)
------------
Net realized and unrealized gain on investments
and foreign currency $ 26,021,347
------------
Increase in net assets from operations $ 23,814,470
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED
1998 AUGUST 31, 1997
(UNAUDITED)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (2,206,877) $ (4,471,998)
Net realized gain on investments and foreign
currency transactions 45,576,038 69,844,274
Net unrealized gain (loss) on invesments and foreign
currency translation (19,554,691) 72,570,022
------------ ------------
Increase in net assets from operations $ 23,814,470 $137,942,298
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $(52,766,286) $(26,355,849)
From net realized gain on investments and foreign
currency transactions (Class B) (28,280,294) (15,051,923)
From net realized gain on investments and foreign
currency transactions (Class I) (445,020) --
------------ ------------
Total distributions declared to shareholders $(81,491,600) $(41,407,772)
------------ ------------
Net increase in net assets from Fund share
transactions $ 65,777,356 $ 13,731,145
------------ ------------
Total increase in net assets $ 8,100,226 $110,265,671
Net assets:
At beginning of period 447,628,221 337,362,550
------------ ------------
At end of period (including accumulated net investment
loss of $2,257,678 and $50,801, respectively) $455,728,447 $447,628,221
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NINE
SIX MONTHS MONTHS PERIOD
ENDED YEAR ENDED AUGUST 31, ENDED ENDED
FEBRUARY 28, -------------------------------------------- AUGUST 31, NOVEMBER 30,
1998 1997 1996 1995 1994 1993*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $16.81 $13.16 $15.55 $13.41 $15.50 $15.68
------ ------ ------ ------ ------ ------
Income from investment
operations# -
Net investment loss $(0.06) $(0.13) $(0.08) $(0.05) $(0.03) $(0.02)
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions 0.63 5.46 0.58 3.22 0.77 (0.16)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.57 $ 5.33 $ 0.50 $ 3.17 $ 0.74 $(0.18)
------ ------ ------ ------ ------ ------
Less distributions
declared to shareholders
from net realized gain on
investments and foreign
currency transactions $(3.14) $(1.68) $(2.89) $(1.03) $(2.83) $ --
------ ------ ------ ------ ------ ------
Net asset value - end of
period $14.24 $16.81 $13.16 $15.55 $13.41 $15.50
====== ====== ====== ====== ====== ======
Total return(+) 5.52%++ 43.92% 3.92% 26.12% 5.12%++ (5.99)%+
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.31%+ 1.43% 1.43% 1.46% 1.52%+ 1.59%+
Net investment loss (0.76)%+ (0.93)% (0.56)% (0.34)% (0.26)%+ (0.75)%+
Portfolio turnover 60% 96% 117% 115% 76% 106%
Average commission rate###
$ 0.0540 $ 0.0569 $ 0.0411 $ -- $ -- $ --
Net assets at end of
period (000 omitted) $296,867 $288,227 $207,504 $178,367 $121,498 $136,179
*For the period from the inception of Class A, September 20, 1993, through November 30, 1993.
+Annualized.
++Not annualized.
(+)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 fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NINE
SIX MONTHS MONTHS
ENDED YEAR ENDED AUGUST 31, ENDED
FEBRUARY 28, -------------------------------------------- AUGUST 31,
1998 1997 1996 1995 1994
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.81 $13.14 $15.46 $13.35 $15.49
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.11) $(0.23) $(0.18) $(0.14) $(0.10)
Net realized and unrealized gain on
investments and foreign currency
transactions 0.64 5.47 0.58 3.20 0.75
------ ------ ------ ------ ------
Total from investment operations $ 0.53 $ 5.24 $ 0.40 $ 3.06 $ 0.65
------ ------ ------ ------ ------
Less distributions declared to
shareholders from net realized gain on
investments and foreign currency
transactions $(3.03) $(1.57) $(2.72) $(0.95) $(2.79)
------ ------ ------ ------ ------
Net asset value - end of period $14.31 $16.81 $13.14 $15.46 $13.35
====== ====== ====== ====== ======
Total return 5.24%++ 42.95% 3.17% 25.19% 4.47%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.95%+ 2.11% 2.15% 2.18% 2.26%+
Net investment loss (1.40)%+ (1.60)% (1.27)% (1.06)% (1.01)%+
Portfolio turnover 60% 96% 117% 115% 76%
Average commission rate###
$ 0.0540 $ 0.0569 $ 0.0411 $ -- $ --
Net assets at end of period (000
omitted) $156,393 $157,052 $129,858 $199,773 $214,055
+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 fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
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 $15.42 $13.00 $ 9.23 $11.32 $ 7.86 $ 6.94
------ ------ ------ ------ ------ ------
Income from investment operations -
Net investment income
(loss) $(0.25) $(0.24) $(0.12) $(0.03) $ 0.03 $ 0.09
Net realized and
unrealized gain (loss) on
investments and foreign
currency transactions 0.94 2.66 3.89 (2.06) 3.51 0.89
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.69 $ 2.42 $ 3.77 $(2.09) $ 3.54 $ 0.98
------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders from net
realized gain on
investments and foreign
currency transactions $(0.62) $ -- $ -- $ -- $(0.08) $(0.06)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $15.49 $15.42 $13.00 $ 9.23 $11.32 $ 7.86
====== ====== ====== ====== ====== ======
Total return 4.50% 18.62% 40.85% (18.46)% 45.35% 14.06%
Ratios (to average net assets)/
Supplemental data:
Expenses 2.21% 2.37% 2.44% 2.50% 2.52% 2.31%
Net investment income
(loss) (1.55)% (1.85)% (1.00)% (0.27)% 0.37% 1.08%
Portfolio turnover 106% 22% 59% 79% 84% 146%
Net assets at end of period
(000 omitted) $232,982 $249,493 $190,232 $152,132 $180,416 $137,311
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED PERIOD ENDED
FEBRUARY 28, AUGUST 31,
1998 1997***
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.86 $13.18
------ ------
Income from investment operations# -
Net investment loss $(0.03) $(0.07)
Net realized and unrealized gain on investments and foreign
currency transactions 0.62 3.75
------ ------
Total from investment operations $ 0.59 $ 3.68
------ ------
Less distributions declared to shareholders from net realized $
gain on investments and foreign currency transactions
$(3.19) --
------ ------
Net asset value - end of period $14.26 $16.86
====== ======
Total return 5.70%++ 27.92%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.96%+ 1.07%+
Net investment loss (0.42)%+ (0.65)%+
Portfolio turnover 60% 96%
Average commission rate $0.0540 $0.0569
Net assets at end of period (000 omitted) $ 2,469 $ 2,349
***For the period from the inception of Class I, January 2, 1997, through August 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
<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 reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, are valued on the basis of valuations
furnished by dealers or by a pricing service with consideration to factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Fund may also write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the option contract. When a written option
expires, the Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put is exercised, the premium reduces the cost basis of the security
purchased by the Fund. The 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.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement and tax reporting
purposes as required by federal income tax regulations. Dividends received in
cash are recorded on the ex-dividend date. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or ex-interest
date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of the Fund 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 - 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.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD),
and MFS Service Center, Inc. (MFSC). The 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 $6,714 for the six months
ended February 28, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$15,971 for the six months ended February 28, 1998, 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 $57,282 for the six months ended
February 28, 1998. Fees incurred under the distribution plan during the six
months ended February 28, 1998, 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 $23,951 for Class B shares for the six
months ended February 28, 1998. Fees incurred under the distribution plan during
the six months ended February 28, 1998, 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 by 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 six months ended February 28, 1998, were $66 and $40,625 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 of each class of shares at an
effective annual rate of up to 0.1125%. Prior to January 1, 1998, the fee was
calculated as a percentage of the average daily net assets at an effective
annual rate of up to 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations aggregated
$261,101,399 and $265,133,373, 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 $385,606,190
------------
Gross unrealized appreciation $ 92,952,873
Gross unrealized depreciation (19,471,363)
------------
Net unrealized appreciation $ 73,481,510
============
(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:
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,538,547 $69,862,413 5,344,407 $ 80,513,731
Shares issued to shareholders in
reinvestment of distributions 3,802,866 48,562,738 1,814,003 24,108,369
Shares transferred to Class I -- -- (167,732) (2,210,708)
Shares reacquired (4,637,282) (72,896,567) (5,609,695) (83,104,253)
---------- ----------- ---------- ------------
Net increase 3,704,131 $45,528,584 1,380,983 $ 19,307,139
========== =========== ========== ============
<CAPTION>
Class B Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,779,357 $28,460,590 3,284,660 $ 47,554,552
Shares issued to shareholders in
reinvestment of distributions 2,100,346 26,969,554 1,075,701 14,360,963
Shares reacquired (2,288,447) (35,612,835) (4,899,090) (69,295,923)
---------- ----------- ---------- ------------
Net increase (decrease) 1,591,256 $19,817,309 (538,729) $ (7,380,408)
========== =========== ========== ============
<CAPTION>
Class I Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 PERIOD ENDED AUGUST 31, 1997*
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,005 $ 62,726 23,376 $ 310,582
Shares transferred from Class A -- -- 167,732 2,210,708
Shares issued to shareholders in
reinvestment of distributions 34,822 445,021 -- --
Shares reacquired (5,034) (76,284) (51,786) (716,876)
---------- ----------- ---------- ------------
Net increase 33,793 $ 431,463 139,322 $ 1,804,414
========== =========== ========== ============
*For the period from the inception of Class I, January 2, 1997, through August 31, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of 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 six
months ended February 28, 1998, was $1,498.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. The financial
instruments are written options. The notional or contractual amounts of these
instruments represent the investment the Fund has in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
<PAGE>
Written Option Transactions
1997 CALLS
-----------------------
CONTRACTS PREMIUMS
- --------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF PERIOD 29,313 $5,098,759
Options written
Options terminated in closing transactions 5,728 901,413
Options exercised 3,700 665,759
Options expired 19,885 3,531,587
------ ----------
OUTSTANDING, END OF PERIOD -- $ --
====== ==========
--------------------------------------------
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) MANAGED SECTORS FUND
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until
1991), MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
CUSTODIAN
Lawrence H. Cohn, M.D. - Chief of State Street Bank and Trust Company
Cardiac Surgery, Brigham and Women's
Hospital; Professor of Surgery, INVESTOR INFORMATION
Harvard Medical School For MFS stock and bond market
outlooks, call toll free:
The Hon. Sir J. David Gibbons, KBE - 1-800-637-4458 anytime from a
Chief Executive Officer, Edmund touch-tone telephone.
Gibbons Ltd.
For information on MFS mutual
Abby M. O'Neill - Private Investor funds, call your financial adviser
or, for an information kit, call
Walter E. Robb, III - President and toll free: 1-800-637-2929 any
Treasurer, Benchmark Advisors, Inc. business day from 9 a.m. to 5 p.m.
(corporate financial consultants); Eastern time (or leave a message
President, Benchmark Consulting Group, anytime).
Inc. (office services)
INVESTOR SERVICE
Arnold D. Scott* - Senior Executive MFS Service Center, Inc.
Vice President, Director, and Secretary, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman, Chief For general information, call toll
Executive Officer, and Director, free: 1-800-225-2606 any business
MFS Investment Management day from 8 a.m. to 8 p.m. Eastern
time.
J. Dale Sherratt - President, Insight
Resources, Inc. (acquisition planning For service to speech- or
specialists) hearing-impaired, call toll free:
1-800-637-6576 any business day
Ward Smith - Former Chairman (until from 9 a.m. to 5 p.m. Eastern
1994), NACCO Industries (holding time. (To use this service, your
company) phone must be equipped with a
Telecommunications Device for the
INVESTMENT ADVISER Deaf.) For share prices, account
Massachusetts Financial Services Company balances, and exchanges, call toll
500 Boylston Street free: 1-800-MFS-TALK
Boston, MA 02116-3741 (1-800-637-8255) anytime from a
touch-tone telephone.
DISTRIBUTOR
MFS Fund Distributors, Inc. WORLD WIDE WEB
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
[Dalbar logo] For the fourth year
PORTFOLIO MANAGER in a row, MFS earned a #1 ranking
Kenneth J. Enright* in the DALBAR, Inc. Broker/Dealer
Survey, Main Office Operations
TREASURER Service Quality Category. The firm
W. Thomas London* achieved a 3.42 overall score on a
scale of 1 to 4 in the 1997
ASSISTANT TREASURERS survey. A total of 111 firms
Mark E. Bradley* responded, offering input on the
Ellen Moynihan* quality of service they received
James O. Yost* from 29 mutual fund companies
nationwide. The survey contained
*Affiliated with the Investment Adviser questions about service quality in
11 categories, including
"knowledge of operations,"
"keeping you informed," and
"ease of doing business"
with the firm.
<PAGE>
MFS(R) MANAGED ------------
SECTORS FUND BULK RATE
U.S. POSTAGE
[graphic omitted] MFS(SM) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(SM) ------------
500 Boylston Street
Boston, MA 02116-3741
[DALBAR Logo]
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MMS-3 4/98 53M 08/208/808
