<PAGE>
[Logo] MFS(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
Annual Report
August 31, 1998
o MFS(R) Core Growth Fund
o MFS(R) Special
Opportunities Fund
o MFS(R) Blue Chip Fund
o MFS(R) Convertible Securities Fund
o MFS(R) Science and Technology Fund
o MFS(R) Real Estate
Investment Fund
<PAGE>
<TABLE>
<S> <C>
MFS(R) CORE GROWTH FUND MFS(R) CONVERTIBLE SECURITIES FUND
MFS(R) SPECIAL OPPORTUNITIES FUND MFS(R) SCIENCE AND TECHNOLOGY FUND
MFS(R) BLUE CHIP FUND MFS(R) REAL ESTATE INVESTMENT 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 Cardiac Surgery, State Street Bank and Trust Company
Brigham and Women's Hospital; Professor of
Surgery, Harvard Medical School AUDITORS
Ernst & Young LLP
The Hon. Sir J. David Gibbons, KBE - Chief
Executive Officer, Edmund Gibbons Ltd.; Chairman, INVESTOR INFORMATION
Colonial Insurance Company, Ltd. For MFS stock and bond market outlooks, call toll
free: 1-800-637-4458 anytime from a touch-tone
Abby M. O'Neill - Private Investor telephone.
Walter E. Robb, III - President and Treasurer, For information on MFS mutual funds, call your
Benchmark Advisors, Inc. (corporate financial financial adviser or, for an information kit, call
consultants); President, Benchmark Consulting toll free: 1-800-637-2929 any business day from 9
Group, Inc. (office services) a.m. to 5 p.m. Eastern time (or leave a message
anytime).
Arnold D. Scott* - Senior Executive Vice
President, Director, and Secretary, MFS Investment INVESTOR SERVICE
Management MFS Service Center, Inc.
P.O. Box 2281
Jeffrey L. Shames* - Chairman, Chief Executive Boston, MA 02107-9906
Officer, and Director, MFS Investment Management
For general information, call toll free:
J. Dale Sherratt - President, Insight Resources, 1-800-225-2606 any business day from 8 a.m. to
Inc. (acquisition planning specialists) 8 p.m. Eastern time.
Ward Smith - Former Chairman (until 1994), NACCO For service to speech- or hearing-impaired, call
Industries (holding company) toll free: 1-800-637-6576 any business day from
9 a.m. to 5 p.m. Eastern time. (To use this service,
INVESTMENT ADVISER your phone must be equipped with a
Massachusetts Financial Services Company Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, and exchanges,
call toll free: 1-800-MFS-TALK (1-800-637-8255)
DISTRIBUTOR anytime from a touch-tone telephone.
MFS Fund Distributors, Inc.
500 Boylston Street WORLD WIDE WEB
Boston, MA 02116-3741 www.mfs.com
PORTFOLIO MANAGERS
Irfan Ali*
John F. Brennan, Jr.*
Mitchell D. Dynan*
Robert J. Manning*
Constantinos Mokas*
Stephen Pesek*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
In the coming year, MFS will celebrate its 75th anniversary. In 1924, our
Massachusetts Investors Trust, the nation's first mutual fund, opened to the
public and helped launch a revolution in investing that continues today. In
the 75 years since, MFS has grown with its investors not only through bear
markets, economic and political turmoil, wars, and oil shortages, but also
through long periods of growth and prosperity. We are very proud of our record
of investment management and service to shareholders throughout our history.
One of the best ways for us to serve our shareholders is to help them
understand some of the reasons behind developments in the investment markets
and, when necessary, to take a more cautious outlook. This is particularly
important during periods of market volatility such as we are experiencing this
year, when equity prices do not follow a straight course. In light of this
summer's volatility, it is clear that equity valuations have risen to a point
at which stock prices have become vulnerable to changes in the investment
environment such as a slowing economy, earnings disappointments, and global
economic and political turmoil. While we continue to hold a favorable long-
term outlook for the equity markets, we also believe that this market
correction is overdue and could continue for several months. However,
in our view, this is a healthy near-term event that should rid the financial
system of excesses that have developed.
Currently, equity investors seem to be focused on the slowdown in corporate
earnings and, more recently, on the continuing uncertainty overseas,
particularly in Russia and some of the emerging markets. In the second
quarter, for example, average earnings growth for companies in the Standard &
Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock total return performance, was about 3%, well below what people were
expecting a year ago. As a result of this and continuing concerns about Asia
and emerging markets, the stock markets pulled back from the record-high
levels set in mid-July. This retreat has helped correct some -- but not all --
of the overvaluations that have been building in the markets for some time.
Prior to July, equity prices had been rising without a corresponding increase
in corporate earnings. As a result, price-to-earnings (P/E) ratios, or the
amount investors paid for stocks in relation to companies' earnings per share,
also went up. A year ago this July, the average P/E ratio for stocks in the
S&P 500 stood at approximately 23; this July, it was at about 28, and it
declined to approximately 25 by early September. If this summer's downturn
helps create more reasonable valuations, we believe it could provide a sounder
long-term foundation for the equity markets. On another positive note,
interest rates have been relatively stable for several months as inflation has
remained low. In an environment of low interest rates, stocks become more
attractive than most fixed-income investments, while low inflation helps
control companies' costs.
Internationally, the economic turmoil in Asia continues to be a concern to us,
while Russia is facing political gridlock and economic uncertainty and Latin
American economies are feeling substantial pressure. We believe the United
States has yet to see the full impact of this crisis. There have been brief
periods of improvement in a few countries but, for the most part, most of
these economies are still very weak and the situation could turn worse before
getting better. At the same time, the Asian turmoil has had the beneficial
effect of moderating U.S. growth and keeping inflation in check, which has
helped establish a favorable interest-rate environment.
Countering the situation in Asia has been the growing strength of European
economies, although European equity markets have also seen some volatility
this summer. But as these countries move toward economic union, they are
benefiting from a convergence of interest rates to lower levels, a rapid
expansion of manufacturing and service businesses, and an increasingly strong
consumer sector. This has helped American exporters offset some of their Asian
losses while providing investment opportunities in developed and emerging
European markets.
Given the uncertainty arising from these conflicting developments, we believe
that it is prudent to remind investors of the need to take a long-term view
and to diversify their investments across a range of asset classes. This
includes portfolios that focus on bond and international investments as well
as on the U.S. stock market. At MFS, we also believe our decades-long
commitment to original, company-by-company research gives us an advantage by
helping us find companies that we think can keep growing or gain market share
during periods of turmoil. To help fulfill this commitment and to provide the
broadest possible coverage of industry sectors and individual companies, MFS
continues to increase its number of full-time research analysts, who
thoroughly investigate each company's earnings potential and position in its
industry as well as the overall prospects for that industry.
We also use active portfolio management on the fixed-income side, using our
extensive research and credit analysis to help reduce the potential for price
declines and enhance the opportunity for appreciation. Every year, both fixed-
income and equity managers meet with thousands of credit issuers and
companies. They also attend many presentations, closely follow sources of
industry research, and keep track of competitors.
As we have for 75 years, we will continue to apply this discipline of
thorough, bottom-up research to both the equity and fixed-income markets
because we believe it offers the best potential for providing favorable long-
term performance for our shareholders -- regardless of changes in the overall
market environment.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
September 14, 1998
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
MFS Core Growth Fund
Dear Shareholders,
For the 12 months ended August 31, 1998, Class A shares of the Fund provided a
total return of 8.75%, and Class I shares returned 8.82%. These returns, which
assume the reinvestment of distributions but exclude the effects of any sales
charges, compare to an 8.05% return for the S&P 500 and to a 2.15% return for
the average growth fund as tracked by Lipper Analytical Services, Inc., an
independent firm that reports mutual fund performance.
The Fund generally seeks companies exhibiting one or more of the following
characteristics: a sustainable competitive advantage in market share,
distribution, or pricing power; positive change resulting from restructuring,
synergistic acquisitions, or cost cutting; and fundamental advantages arising
from mismatches in supply and demand versus their competitors. Given the
current context of severe economic dislocations in major regions of the world
including Asia, Latin America, and Russia, the Fund has concentrated on
companies focused on the United States and Western Europe. In addition, the
Fund is looking for companies that have demonstrated predictability and
consistency of earnings. Favored sectors include health care, technology, and
service companies.
Respectfully,
/s/ Stephen Pesek
Stephen Pesek
Portfolio Manager
MFS Special Opportunities Fund
Dear Shareholders,
For the 12 months ended August 31, 1998, both Class A and Class I shares of
the Fund provided a total return of -1.50%. These returns, which assume the
reinvestment of distributions but exclude the effects of any sales charges,
compare to an 8.05% return for the S&P 500 and to a 1.04% return for the
average high-yield corporate bond fund as tracked by CDA/Wiesenberger, an
independent firm that reports mutual fund performance.
At the present time, approximately 87% of the portfolio is invested in common
stocks. We are anticipating opportunities to invest in the high-yield and
distressed bond markets over the next year as the world economy slows and the
credit cycle peaks. At this time the stocks in our portfolio are diversified
among many industries but have a common theme in that they are "event driven"
in nature. They are either out-of-favor companies such as Gulf Canada, a major
oil and gas producer, or they are involved in an industry consolidation, such
as Safeway, a major supermarket operator. We will continue to exercise a
patient, value-oriented style of investing and wait for the markets to present
us with opportunities.
Respectfully,
/s/ John F. Brennan, Jr. /s/ Robert J. Manning
John F. Brennan, Jr. Robert J. Manning
Portfolio Manager Portfolio Manager
MFS Blue Chip Fund
Dear Shareholders,
For the 12 months ended August 31, 1998, Class A shares of the Fund provided a
total return of 10.19%, and Class I shares returned 10.28%. These returns,
which assume the reinvestment of distributions but exclude the effects of any
sales charges, compare to an 8.05% return for the S&P 500 for the same period.
The Fund's current investment strategy is based on the assumption that the
global economy will continue to grow slowly and, in some regions, contract
during the remainder of 1998 and into 1999 and that interest rates in the
United States will remain flat or decline. As a result, the Fund is positioned
relatively defensively, with the majority of its investments in companies that
we believe can continue to increase earnings in a slow-growth environment.
Although the Fund's holdings are diverse, it is overweighted in the retail,
consumer staples, health care, and utilities and communications sectors. In
financial services, the emphasis is on insurance and regional banks and
includes such companies as National City and Norwest in banking and Hartford
Financial, Chubb, Allstate, and Torchmark in insurance. Conversely, the Fund
is underweighted in more economically sensitive areas such as basic materials,
industrial goods, technology, and autos.
The Fund continues to emphasize large-cap, blue-chip companies. As of August
31, 1998, the average weighted market capitalization of the stocks in the Fund
was $50 billion. The Fund's beta, or price volatility, is currently about
0.92, or 8% less than that of the S&P 500. The top five holdings are Tyco
International, Microsoft, Philip Morris, General Electric, and Pfizer.
Respectfully,
/s/ Mitchell Dynan
Mitchell D. Dynan
Portfolio Manager
MFS Convertible Securities Fund
Dear Shareholders,
For the 12 months ended August 31, 1998, Class A shares of the Fund provided a
total return of -1.90%, and Class I shares returned -2.00%. These returns,
which assume the reinvestment of distributions but exclude the effects of any
sales charges, compare to a -2.70% return for the Merrill Lynch All
Convertibles Index, an unmanaged index of 542 securities, and to a -6.33%
return for the average convertible securities fund for the same period as
tracked by Lipper Analytical Services, Inc.
In a period of stock market turmoil, the Fund held up reasonably well, as the
convertible bond component helped support the prices of these securities. At
the same time, however, investors continued to seek the highest quality fixed-
income securities available, such as U.S. Treasury securities, and this flight
to quality negatively impacted convertible bond prices. In this environment,
the Fund benefited from being overweighted in domestically oriented sectors
such as leisure and retailing. Leisure holdings included AirTouch
Communications, a cellular telephone company; Jacor Communications, a radio
broadcaster; and American Tower, another broadcaster. Retail holdings included
the drug store chains Rite Aid and CVS, as well as Home Depot, Kmart, and
AnnTaylor. The Fund was underweighted in health care, consumer staples,
utilities, and transportation.
Respectfully,
/s/ Constantinos Mokas
Constantinos Mokas
Portfolio Manager
Note to Shareholders: Effective April 1, 1998, the Fund is being managed by
Constantinos Mokas, succeeding Judith Noelle Lamb.
MFS Science and Technology Fund
Dear Shareholders,
For the 12 months ended August 31, 1998, both Class A and Class I shares of
the Fund provided a total return of -0.61%. These returns, which assume the
reinvestment of distributions but exclude the effects of any sales charges,
compare to a -4.89% return for the NASDAQ Composite Index, an unmanaged index
of common stocks traded on NASDAQ, and to a -11.98% return for the average
technology fund as tracked by CDA/Wiesenberger.
The Fund invests in companies that benefit from scientific and technological
advances and improvements and that can maintain strong, sustainable earnings
growth. We aggressively employ MFS(R) Original Research(SM) to drive our
bottom-up stock selection process.
In general, demand for technology has remained strong and stable as more and
more companies seek to improve productivity. For example, prices of personal
computers (PCs) have come down, which has generated continued demand as
corporations deploy these systems on a growing number of employee desktops.
The pace of innovation in this market has also created demand and encouraged
corporations to upgrade their existing systems. The Internet, for example, has
brought about a fundamental shift in computing architectures. All of these
advances have led to an explosion in data and, concurrently, an increased
demand for all the computing tools needed to store, manage, and analyze these
data.
A number of top holdings saw significant price appreciation. Microsoft, the
Fund's largest holding, benefited from steady growth in PC demand, continued
success with a broad line of software products, and particular success with
new products such as Windows98. Other companies such as BMC Software and
Compuware saw high demand for their products, which help companies manage data
and ensure that corporate computing installations are running twenty-four
hours a day, seven days a week. Cisco Systems gained further industry
dominance as the preferred vendor for networking systems that link all of
these personal computers together and enable the exchange of information
between office workers.
The environment for health care stocks remains difficult, and some of our
holdings in this area hurt performance. Though the Fund benefited by not
having a major exposure to these stocks, United Healthcare was a top position
and it underperformed. The company is the premier health maintenance
organization in the United States and, though it excels in its industry
positioning and management strength, its earnings suffered from the cost
pressures that continue to plague the health care industry.
The impact of troubles in weak international economies on Fund holdings varies
from company to company. Russia is, in general, an insignificant part of most
of the companies in the portfolio. Asia, however, is an important market for
almost all mature technology companies. The Fund has sought companies that
either have little Asian exposure or are able to offset Asian weakness with
strength in other regions of the world.
As we face a possible period of slowing corporate earnings growth worldwide,
the Fund has shifted its focus to larger, industry-leading, financially
powerful players that are better able to execute their business plans in a
dynamic industry environment. We believe that the key is to find companies
whose products are truly critical to their customers or companies that are
introducing innovative products and technologies that will spur new demand.
The outlook for the technology sector is favorable. The critical factor is PC
demand, which looks strong for the remainder of 1998 and 1999. Corporations
are increasingly viewing technology as important to their corporate success.
Also, technology companies continue to offer attractive innovations and better
products at lower prices. The outlook for the health care sector, on the other
hand, we feel will remain murky until cost and payment reimbursement issues
are resolved.
Respectfully,
/s/ Irfan Ali
Irfan Ali
Portfolio Manager
MFS Real Estate Investment Fund
Dear Shareholders,
This Fund, which commenced operations on March 17, 1998, seeks to achieve a high
yield and solid total return by investing in the securities of companies in the
real estate sector. The Fund is predominantly invested in real estate investment
trusts (REITs) across the commercial, consumer, and industrial real estate
markets.
Volatility in the equity markets has had a negative impact on the Fund's
performance as investors have focused their attention on larger, multinational
corporations to the detriment of smaller-capitalization firms such as REITs.
The curtailed cash flow has drained capital and liquidity from the real estate
market, which has caused these stocks to underperform. One strongly performing
stock has been CBL Associates, a shopping mall developer. CBL has seen its
business benefit from the healthy retail sales trends that have been driven by
continued strong consumer confidence.
Respectfully,
/s/ Constantinos Mokas
Constantinos Mokas
Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
<PAGE>
PERFORMANCE SUMMARY
Currently, each Fund offers only Class A and Class I shares, which are
available for purchase at net asset value only by certain retirement plans
established for the benefit of employees of MFS and its affiliates and certain
of their members who are also residents of the Commonwealth of Massachusetts.
The following information illustrates the historical performance of each
Fund's Class A shares in comparison to various market indicators. Performance
results reflect the percentage change in net asset value, including
reinvestment of dividends. Benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown. (See Notes to Performance Summary
for more information.) It is not possible to invest directly in an index.
MFS CORE GROWTH FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1996, through August 31, 1998)
MFS Core S&P 500 Consumer
Growth Fund Composite Price Index
- Class A Index - U.S.
-----------------------------------------------------
1/96 $10,000 $10,000 $10,000
8/96 12,330 10,745 10,253
8/97 17,905 15,112 10,483
8/98 19,472 16,335 10,652
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
CLASS A
10 Years/
1 Year Life*
- ----------------------------------------------------------------------------
Average Annual Total Return +8.75% +28.43%
- ----------------------------------------------------------------------------
SEC Results +3.59% +26.11%
- ----------------------------------------------------------------------------
CLASS I
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average Annual Total Return +8.82% +27.79%
- ---------------------------------------------------------------------------
COMPARATIVE INDICES
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average growth fund** +2.15% +13.37%
- ---------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +8.05% +20.24%
- ---------------------------------------------------------------------------
Consumer Price Index+# +1.61% + 2.40%
- ---------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1998.
** Source: Lipper Analytical Services, Inc.
+ Source: CDA/Wiesenberger.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
MFS SPECIAL OPPORTUNITIES FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1996, through August 31, 1998)
MFS Special S&P 500 Consumer
Opportunities Fund Composite Price Index
- Class A Index - U.S.
-----------------------------------------------------
1/96 $10,000 $10,000 $10,000
8/96 11,360 10,745 10,253
8/97 14,976 15,112 10,483
8/98 14,751 16,335 10,652
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
CLASS A
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average Annual Total Return -1.50% +15.72%
- ---------------------------------------------------------------------------
SEC Results -6.18% +13.62%
- ---------------------------------------------------------------------------
CLASS I
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average Annual Total Return -1.50% +15.50%
- ---------------------------------------------------------------------------
COMPARATIVE INDICES
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average high-yield corporate bond fund+ +1.04% + 8.42%
- ---------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +8.05% +20.24%
- ---------------------------------------------------------------------------
Consumer Price Index+# +1.61% + 2.40%
- ---------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
January 2, 1996, through August 31, 1998.
+ Source: CDA/Wiesenberger.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
MFS BLUE CHIP FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1997, through August 31, 1998)
MFS Blue S&P 500 Consumer
Chip Fund Composite Price Index
- Class A Index - U.S.
-----------------------------------------------------
1/97 $10,000 $10,000 $10,000
8/97 11,770 12,291 10,139
8/98 12,970 13,286 10,303
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
CLASS A
10 Years/
1 Year Life*
- -----------------------------------------------------------------------------
Average Annual Total Return +10.19% +16.95%
- -----------------------------------------------------------------------------
SEC Results + 4.96% +13.58%
- -----------------------------------------------------------------------------
CLASS I
1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
Average Annual Total Return +10.28% +17.01%
- -----------------------------------------------------------------------------
COMPARATIVE INDICES
1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ + 8.05% +18.66%
- -----------------------------------------------------------------------------
Consumer Price Index+# + 1.61% + 1.81%
- -----------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
January 2, 1997, through August 31, 1998.
+ Source: CDA/Wiesenberger.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
MFS CONVERTIBLE SECURITIES FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1997, through August 31, 1998)
MFS Convertible Merrill Lynch Consumer
Securities Fund All Convertibles Price Index
- Class A Index - U.S.
------------------------------------------------------------
1/97 $10,000 $10,000 $10,000
8/97 11,470 11,490 10,140
8/98 11,251 11,018 10,303
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
CLASS A
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average Annual Total Return -1.90% +7.36%
- ---------------------------------------------------------------------------
SEC Results -6.56% +4.26%
- ---------------------------------------------------------------------------
CLASS I
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average Annual Total Return -2.00% +7.24%
- ---------------------------------------------------------------------------
COMPARATIVE INDICES
10 Years/
1 Year Life*
- ---------------------------------------------------------------------------
Average convertible securities fund** -6.33% +5.05%
- ---------------------------------------------------------------------------
Merrill Lynch All Convertibles Index++ -2.70% +6.16%
- ---------------------------------------------------------------------------
Consumer Price Index+# +1.61% +1.81%
- ---------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
January 2, 1997, through August 28, 1998.
** Source: Lipper Analytical Services, Inc.
+ Source: CDA/Wiesenberger.
++ Source: Bloomberg.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
MFS SCIENCE AND TECHNOLOGY FUND+
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from January 2, 1997, through August 31, 1998)
MFS Science NASDAQ Consumer
and Technology Composite Price Index
Fund - Class A Index - U.S.
--------------------------------------------------------
1/97 $10,000 $10,000 $10,000
8/97 12,530 12,344 10,139
8/98 12,454 11,737 10,303
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
CLASS A
1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
Average Annual Total Return - 0.61% +14.13%
- -----------------------------------------------------------------------------
SEC Results - 5.33% +10.83%
- -----------------------------------------------------------------------------
CLASS I
1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
Average Annual Total Return - 0.61% +14.13%
- -----------------------------------------------------------------------------
COMPARATIVE INDICES
1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
NASDAQ Composite Index** - 4.89% +10.13%
- -----------------------------------------------------------------------------
Average technology fund** -11.98% + 3.23%
- -----------------------------------------------------------------------------
Consumer Price Index+# + 1.61% + 1.81%
- -----------------------------------------------------------------------------
+ The Fund may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
* For the period from the commencement of the Fund's investment operations,
January 2, 1997, through August 31, 1998. Source: Lipper Analytical Services,
Inc.
+ Source: CDA/Wiesenberger.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
NOTES TO PERFORMANCE SUMMARY
Performance results reflect any applicable 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 include 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.
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1998
MFS CORE GROWTH FUND
Stocks - 92.2%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 87.3%
Aerospace - 0.5%
Gulfstream Aerospace Corp.* 400 $ 14,050
- -------------------------------------------------------------------------------
Automotive - 0.5%
Harley-Davidson, Inc. 500 $ 15,406
- -------------------------------------------------------------------------------
Business Machines - 1.9%
Affiliated Computer Services, Inc., "A"* 1,300 $ 42,494
Xerox Corp. 150 13,172
---------
$ 55,666
- -------------------------------------------------------------------------------
Business Services - 4.3%
Ceridian Corp.* 810 $ 39,285
Computer Sciences Corp. 700 39,594
Policy Management Systems Corp.* 1,100 45,925
---------
$ 124,804
- -------------------------------------------------------------------------------
Computer Hardware - Systems - 2.5%
Compaq Computer Corp. 700 $ 19,556
Dell Computer Corp.* 130 13,000
EMC Corp.* 900 40,669
---------
$ 73,225
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 3.0%
Microsoft Corp.* 900 $ 86,344
- -------------------------------------------------------------------------------
Computer Software - Systems - 6.8%
BMC Software, Inc. 1,170 $ 49,505
Cadence Design Systems, Inc.* 1,200 25,350
Computer Associates International, Inc. 900 24,300
Compuware Corp.* 1,100 49,981
Network Associates, Inc.* 600 19,350
Oracle Corp.* 900 17,944
Parametric Technology Corp.* 1,000 10,250
---------
$ 196,680
- -------------------------------------------------------------------------------
Consumer Goods and Services - 10.1%
Clorox Co. 200 $ 19,288
Dial Corp. 500 9,750
Monsanto Co. 450 24,609
Philip Morris Cos , Inc. 1,200 49,875
Revlon, Inc., "A"* 800 28,850
Service Corp. International 1,050 35,569
Tyco International Ltd. 2,264 125,652
---------
$ 293,593
- -------------------------------------------------------------------------------
Containers - 0.5%
Sealed Air Corp.* 400 $ 14,400
- -------------------------------------------------------------------------------
Entertainment - 9.3%
CBS Corp. 300 $ 7,800
Gemstar International Group Ltd.* 1,200 41,625
Heftel Broadcasting Corp., "A"* 500 15,125
Jacor Communications, Inc.* 500 29,500
MediaOne Group, Inc.* 1,100 45,100
Mirage Resorts, Inc.* 1,090 16,214
Time Warner, Inc. 650 52,243
Univision Communications, Inc., "A"* 1,000 $ 26,625
Viacom, Inc., "B"* 750 37,219
---------
$ 271,451
- -------------------------------------------------------------------------------
Financial Institutions - 1.4%
Federal Home Loan Mortgage Corp. 700 $ 27,650
Morgan Stanley Dean Witter & Co. 250 14,516
---------
$ 42,166
- -------------------------------------------------------------------------------
Food and Beverage Products - 1.7%
Hershey Foods Corp. 300 $ 21,000
Nabisco Holdings Corp., "A" 400 13,225
Tootsie Roll Industries, Inc. 418 14,107
---------
$ 48,332
- -------------------------------------------------------------------------------
Insurance - 6.2%
American International Group, Inc. 100 $ 7,731
Conseco, Inc. 500 13,813
Equitable Cos., Inc. 280 16,013
Life Re Corp. 250 22,437
Lincoln National Corp. 375 32,250
Progressive Corp. 300 29,231
ReliaStar Financial Corp. 750 29,437
Transamerica Corp. 300 30,769
---------
$ 181,681
- -------------------------------------------------------------------------------
Medical and Health Products - 7.1%
Allergan, Inc. 400 $ 18,900
American Home Products Corp. 400 20,050
Boston Scientific Corp.* 200 13,850
Bristol-Myers Squibb Co. 250 24,469
McKesson Corp. 400 30,000
Pfizer, Inc. 175 16,275
Schering Plough Corp. 500 43,000
Warner-Lambert Co. 600 39,150
---------
$ 205,694
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 4.8%
Cardinal Health, Inc. 300 $ 26,250
Guidant Corp. 100 6,175
HBO & Co. 1,600 34,000
HealthSouth Corp.* 2,000 37,875
United Healthcare Corp. 1,000 36,125
---------
$ 140,425
- -------------------------------------------------------------------------------
Printing and Publishing - 0.5%
Scholastic Corp.* 400 $ 15,500
- -------------------------------------------------------------------------------
Restaurants and Lodging - 1.8%
Cendant Corp.* 2,500 $ 28,906
CKE Restaurants, Inc. 800 24,800
---------
$ 53,706
- -------------------------------------------------------------------------------
Special Products and Services - 1.4%
SPX Corp.* 800 $ 39,800
- -------------------------------------------------------------------------------
Stores - 9.9%
BJ's Wholesale Club, Inc.* 600 $ 20,250
CompUSA, Inc.* 1,500 17,812
CVS Corp. 1,200 43,650
Linens 'N Things, Inc.* 300 7,013
Lowes Co., Inc. 1,100 38,569
Office Depot, Inc. 1,300 33,150
Rite Aid Corp. 3,100 112,181
TJX Cos., Inc. 650 14,503
---------
$ 287,128
- -------------------------------------------------------------------------------
Supermarkets - 4.4%
Kroger Co. 720 $ 32,400
Meyer (Fred), Inc. 1,200 47,175
Safeway, Inc.* 1,200 47,250
---------
$ 126,825
- -------------------------------------------------------------------------------
Telecommunications - 8.1%
AirTouch Communications, Inc.* 300 $ 16,875
Ascend Communications, Inc.* 900 31,669
Century Telephone Enterprises, Inc. 900 40,837
Cisco Systems, Inc.* 400 32,750
Global TeleSystems Group, Inc.* 400 12,800
Lucent Technologies, Inc. 220 15,593
Qwest Communications International, Inc.* 500 12,500
Sprint Corp. 340 22,801
WorldCom, Inc.* 1,250 51,172
---------
$ 236,997
- -------------------------------------------------------------------------------
Utilities - Electric - 0.6%
AES Corp.* 600 $ 16,350
- -------------------------------------------------------------------------------
Total U.S. Stocks $,540,223
- -------------------------------------------------------------------------------
Foreign Stocks - 4.9%
Bermuda - 1.2%
Ace Ltd. (Insurance) 600 $ 17,400
ESG Re Ltd. (Insurance) 1,000 17,375
---------
$ 34,775
- -------------------------------------------------------------------------------
France - 0.9%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 900 $ 27,169
- -------------------------------------------------------------------------------
Ireland - 1.0%
Elan Corp. PLC, ADR (Medical and Health Products)* 483 $ 28,376
- -------------------------------------------------------------------------------
Japan - 0.4%
AFLAC, Inc. (Insurance) 500 $ 12,563
- -------------------------------------------------------------------------------
Sweden - 0.3%
Skandia Forsakrings AB (Insurance) 575 $ 8,112
- -------------------------------------------------------------------------------
United Kingdom - 1.1%
Shire Pharmaceuticals Group PLC (Pharmaceuticals)* 1,500 $ 10,004
Taylor Nelson Sofres PLC (Market Research) 12,000 22,523
---------
$ 32,527
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 143,522
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,662,140) $,683,745
- -------------------------------------------------------------------------------
Short-Term Obligations - 0.9%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/01/98, at
Amortized Cost $ 25 $ 25,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,687,140) $2,708,745
Other Assets, Less Liabilities - 6.9% 200,355
- -------------------------------------------------------------------------------
Net Assets - 100.0% $2,909,100
- -------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1998
MFS SPECIAL OPPORTUNITIES FUND
Stocks - 86.8%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 76.1%
Aerospace - 3.2%
B.E. Aerospace, Inc. 2,500 $ 52,031
Cordant Technologies, Inc. 96 3,420
Lockheed-Martin Corp. 95 8,307
Moog, Inc., "A"* 1,600 45,200
----------
$ 108,958
- -------------------------------------------------------------------------------
Automotive - 0.2%
Hayes Lemmerz International, Inc.* 50 $ 1,487
Tower Automotive, Inc.* 300 5,494
----------
$ 6,981
- -------------------------------------------------------------------------------
Banks and Credit Companies - 2.3%
Fleet Financial Group, Inc. 285 $ 18,685
National City Corp. 333 19,564
PNC Bank Corp. 381 16,383
State Street Corp. 200 10,413
Wells Fargo & Co. 45 12,684
----------
$ 77,729
- -------------------------------------------------------------------------------
Building - 3.4%
Nortek, Inc.* 2,000 $ 49,625
Walter Industries, Inc.* 4,500 63,563
----------
$ 113,188
- -------------------------------------------------------------------------------
Business Machines - 0.2%
Affiliated Computer Services, Inc., "A"* 175 $ 5,720
- -------------------------------------------------------------------------------
Business Services - 0.1%
Ceridian Corp.* 95 $ 4,608
- -------------------------------------------------------------------------------
Chemicals - 1.3%
Cambrex Corp. 34 $ 778
NL Industries, Inc. 1,500 29,813
Polymer Group, Inc.* 1,500 13,781
----------
$ 44,372
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.2%
Autodesk, Inc. 300 $ 7,013
- -------------------------------------------------------------------------------
Computer Software - Systems - 1.8%
AccuStaff, Inc.* 238 $ 2,975
Computer Associates International, Inc. 1,472 39,744
Oracle Corp.* 953 19,001
Synopsys, Inc.* 2 52
----------
$ 61,772
- -------------------------------------------------------------------------------
Conglomerates - 2.2%
MAXXAM, Inc.* 1,300 $ 74,100
- -------------------------------------------------------------------------------
Construction Services - 0.4%
Martin Marietta Materials, Inc. 333 $ 14,194
- -------------------------------------------------------------------------------
Consumer Goods and Services - 8.4%
Black & Decker Corp. 95 $ 3,954
Philip Morris Cos , Inc. 486 20,199
Tyco International Ltd. 3,781 209,845
Westpoint Stevens, Inc., "A"* 1,700 50,363
----------
$ 284,361
- -------------------------------------------------------------------------------
Containers - 3.7%
Atlantis Plastics, Inc.* 5,750 $ 38,812
Gaylord Container Corp.* 15,000 45,000
Sealed Air Corp.* 550 19,800
Stone Container Corp.* 2,066 21,564
----------
$ 125,176
- -------------------------------------------------------------------------------
Electrical Equipment - 0.9%
GTECH Holdings Corp.* 1,136 $ 29,820
- -------------------------------------------------------------------------------
Electronics - 0.6%
AMP, Inc. 360 $ 12,848
Analog Devices, Inc.* 583 8,198
----------
$ 21,046
- -------------------------------------------------------------------------------
Entertainment - 5.8%
Casino America, Inc.* 626 $ 1,467
CBS Corp. 960 24,960
Citadel Communications Corp.* 100 2,425
Gemstar International Group Ltd.* 190 6,590
Harrah's Entertainment, Inc.* 2,082 30,059
Jacor Communications, Inc.* 290 17,110
Loews Cineplex Entertainment Corp.* 475 3,741
MediaOne Group, Inc.* 300 12,300
Mirage Resorts, Inc.* 800 11,900
Paxson Communications Corp.* 3,610 32,941
USA Networks Inc. 2,550 50,044
----------
$ 193,537
- -------------------------------------------------------------------------------
Financial Institutions - 1.3%
Federal Home Loan Mortgage Corp. 1,141 $ 45,070
- -------------------------------------------------------------------------------
Food and Beverage Products - 2.3%
Archer-Daniels-Midland Co. 798 $ 11,970
Beverly Enterprises, Inc.* 1,334 10,505
Hershey Foods Corp. 309 21,630
McCormick & Co., Inc. 286 8,312
Nabisco Holdings Corp., "A" 610 20,168
Whitman Corp. 376 5,828
----------
$ 78,413
- -------------------------------------------------------------------------------
Insurance - 2.2%
Annuity and Life Re Holdings Ltd.* 571 $ 10,421
Chartwell Re Corp. 375 9,867
CIGNA Corp. 111 6,459
Hartford Financial Services Group, Inc. 102 4,564
Lincoln National Corp. 57 4,902
Nationwide Financial Services, Inc., "A" 476 $ 21,271
ReliaStar Financial Corp. 456 17,898
----------
$ 75,382
- -------------------------------------------------------------------------------
Machinery - 1.4%
Lear Corp.* 95 $ 3,853
Newcor, Inc. 5,465 32,107
Thermadyne Holdings Corp.* 304 11,324
----------
$ 47,284
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 2.0%
Columbia/HCA Healthcare Corp. 952 $ 21,479
Mid Atlantic Medical Services, Inc.* 1,715 9,540
United Healthcare Corp. 547 19,760
Wellpoint Health Networks, Inc., "A"* 300 16,013
----------
$ 66,792
- -------------------------------------------------------------------------------
Metals and Minerals - 0.1%
Commonwealth Industries, Inc. 600 $ 3,825
- -------------------------------------------------------------------------------
Photographic Products - 1.4%
Anacomp, Inc.* 3,725 $ 47,494
- -------------------------------------------------------------------------------
Printing and Publishing - 1.1%
Scripps (E.W.) Howard, Inc., "A" 809 $ 38,175
- -------------------------------------------------------------------------------
Railroads - 0.2%
Wisconsin Central Transportation Corp.* 454 $ 5,703
- -------------------------------------------------------------------------------
Restaurants and Lodging - 3.0%
Outback Steakhouse, Inc.* 286 $ 8,598
Promus Hotel Corp. 2,029 62,392
Red Roof Inns, Inc.* 2,000 28,625
----------
$ 99,615
- -------------------------------------------------------------------------------
Special Products and Services - 0.1%
Newport News Shipbuilding, Inc. 174 $ 4,089
- -------------------------------------------------------------------------------
Steel - 0.9%
WHX Corp.* 3,100 $ 31,000
- -------------------------------------------------------------------------------
Stores - 4.4%
Edison Brothers Stores, Inc.* 8,569 $ 28,920
Gantos, Inc.* 15,000 15,469
Musicland Stores Corp.* 2,000 18,750
PharMor, Inc.* 4,545 32,951
Rite Aid Corp. 1,426 51,604
----------
$ 147,694
- -------------------------------------------------------------------------------
Supermarkets - 5.9%
Giant Food Inc., "A" 571 $ 24,267
Ingles Markets, Inc., "A" 3,900 42,900
Meyer (Fred), Inc. 2,357 92,660
Safeway, Inc.* 982 38,666
----------
$ 198,493
- -------------------------------------------------------------------------------
Telecommunications - 11.9%
AirTouch Communications, Inc.* 750 $ 42,187
Alltel Corp. 300 13,538
American Mobile Satellite Corp.* 1,200 6,600
American Tower Corp., "A"* 1,113 17,530
Cellular Communications International, Inc.* 3,900 206,700
Century Telephone Enterprises, Inc. 333 15,110
Commonwealth Telephone Enterprises, Inc.* 1,533 33,151
Crown Castle International Corp.* 600 4,875
CTC Communications Corp.* 2,575 14,806
Global TeleSystems Group, Inc.* 338 10,816
Intermedia Communications, Inc.* 190 4,726
Pagemart Wireless, Inc., "A"* 2,300 16,963
Sprint Corp. 192 12,876
----------
$ 399,878
- -------------------------------------------------------------------------------
Textiles - 1.3%
Synthetic Industries Inc.* 2,535 $ 42,144
- -------------------------------------------------------------------------------
Transportation - 0.3%
FDX Corp.* 166 $ 8,310
- -------------------------------------------------------------------------------
Utilities - Electric - 1.6%
El Paso Electric Co.* 6,800 $ 53,550
- -------------------------------------------------------------------------------
Total U.S. Stocks $2,565,486
- -------------------------------------------------------------------------------
Foreign Stocks - 10.7%
Bermuda - 1.4%
Ace Ltd. (Insurance) 571 $ 16,559
ESG Re Ltd. (Insurance) 476 8,271
EXEL Ltd., "A" (Insurance) 62 4,142
Global Crossing Ltd. (Telecommunications)* 100 1,775
LaSalle Re Holdings Ltd. (Insurance) 571 16,773
----------
$ 47,520
- -------------------------------------------------------------------------------
Canada - 1.4%
Gulf Canada Resources Ltd. (Oil Services)* 7,000 $ 21,000
International Utility Structures Inc. (Utilities -
Electric)* 17,000 27,094
----------
$ 48,094
- -------------------------------------------------------------------------------
France - 2.9%
Alcatel Alsthom Compagnie (Telecommunications) 100 $ 17,058
Sanofi S.A. (Medical and Health Products) 714 80,268
----------
$ 97,326
- -------------------------------------------------------------------------------
Germany - 0.5%
Mannesmann AG (Conglomerate) 200 $ 18,078
- -------------------------------------------------------------------------------
Hong Kong - 0.1%
Semi-Tech (Global) Ltd. (Electronics) 97,768 $ 3,407
- -------------------------------------------------------------------------------
Mexico - 0.2%
Tubos de Acero de Mexico S.A. (Steel) 1,300 $ 5,850
- -------------------------------------------------------------------------------
Netherlands - 1.2%
Akzo Nobel N.V. (Chemicals) 146 $ 6,005
Elsag Bailey Process Automation N.V. (Machinery)* 1,600 34,100
----------
$ 40,105
- -------------------------------------------------------------------------------
Portugal - 0.5%
Banco Pinto & Sotto Mayor, S.A. (Banks and
Credit Cos.) 832 $ 15,960
- -------------------------------------------------------------------------------
Singapore
Hong Leong Finance Ltd. (Finance)+ 2,000 $ 1,185
- -------------------------------------------------------------------------------
United Kingdom - 2.5%
British Petroleum PLC, ADR (Oils) 182 $ 13,309
LucasVarity PLC (Automotive) 2,479 8,807
News Corp. Ltd., ADR (Entertainment) 2,900 60,900
----------
$ 83,016
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 360,541
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,999,666) $2,926,027
- -------------------------------------------------------------------------------
Convertible Preferred Stock - 0.6%
- -------------------------------------------------------------------------------
Restaurants and Lodging
Cendant Corp.* (Identified Cost, $25,070) 765 $ 19,364
- -------------------------------------------------------------------------------
Preferred Stock - 1.4%
- -------------------------------------------------------------------------------
Consumer Goods and Services
Renaissance Cosmetics, Inc. 31 $ 310
- -------------------------------------------------------------------------------
Entertainment - 0.7%
MediaOne Group, Inc. 400 $ 22,200
- -------------------------------------------------------------------------------
Supermarkets - 0.7%
Supermarkets General Holdings Corp. 985 $ 24,625
- -------------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $70,258) $ 47,135
- -------------------------------------------------------------------------------
Bonds - 6.1%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
U.S. Bonds - 1.1%
Entertainment - 0.1%
Marvel Holdings, Inc., 0s, 1998** $ 30 $ 1,050
- -------------------------------------------------------------------------------
Restaurants and Lodging - 1.0%
Santa Fe Hotel, Inc., 11s, 2000 $ 35 $ 34,300
- -------------------------------------------------------------------------------
Total U.S. Bonds $ 35,350
- -------------------------------------------------------------------------------
Foreign Bonds - 5.0%
Brazil - 2.2%
Companhia Energetica de Minas Gerais, 9.125s, 2004
(Utilities - Electric) $ 100 $ 74,750
- -------------------------------------------------------------------------------
Bulgaria - 1.6%
National Republic of Bulgaria, 6.688s, 2024 $ 100 $ 54,000
- -------------------------------------------------------------------------------
Russia - 1.2%
Ministry of Finance, 10s, 2007 $ 85 $ 18,700
Ministry of Finance, 12.75s, 2028## 10 2,375
Vnesheconombank, 6.625s, 2015 (Banks and Credit
Companies) 140 18,900
----------
$ 39,975
- -------------------------------------------------------------------------------
Total Foreign Bonds $ 168,725
- -------------------------------------------------------------------------------
Total Bonds (Identified Cost, $330,112) $ 204,075
- -------------------------------------------------------------------------------
Warrants
- -------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
Consumer Goods and Services
Renaissance Cosmetics, Inc.*
(Identified Cost, $2,041) 26 $ 0
- -------------------------------------------------------------------------------
Short-Term Obligations - 5.0%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/01/98, at
Amortized Cost $ 170 $ 170,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $3,597,147) $3,366,601
Other Assets, Less Liabilities - 0.1% 3,400
- -------------------------------------------------------------------------------
Net Assets - 100.0% $3,370,001
- -------------------------------------------------------------------------------
* Non-income producing security.
** Non-income producing security in default.
## SEC Rule 144A restriction.
+ Restricted security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1998
MFS BLUE CHIP FUND
Stocks - 99.4%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 98.3%
Aerospace - 4.3%
General Dynamics Corp. 264 $ 12,557
Lockheed-Martin Corp. 94 8,219
Raytheon Co., "A" 127 5,691
--------
$ 26,467
- -------------------------------------------------------------------------------
Banks and Credit Companies - 7.8%
Comerica, Inc. 178 $ 9,300
Fleet Financial Group, Inc. 90 5,901
National City Corp. 164 9,635
Norwest Corp. 197 5,861
US Bancorp 369 12,592
Washington Mutual, Inc. 154 4,928
--------
$ 48,217
- -------------------------------------------------------------------------------
Business Machines - 1.3%
International Business Machines Corp. 70 $ 7,884
- -------------------------------------------------------------------------------
Business Services - 1.9%
DST Systems, Inc.* 212 $ 11,978
- -------------------------------------------------------------------------------
Chemicals - 0.8%
E. I. du Pont de Nemours & Co. 82 $ 4,730
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 2.8%
Microsoft Corp.* 181 $ 17,365
- -------------------------------------------------------------------------------
Computer Software - Systems - 1.9%
BMC Software, Inc. 188 $ 7,955
Computer Associates International, Inc. 152 4,104
--------
$ 12,059
- -------------------------------------------------------------------------------
Construction Services - 1.7%
Martin Marietta Materials, Inc. 254 $ 10,827
- -------------------------------------------------------------------------------
Consumer Goods and Services - 11.3%
Colgate-Palmolive Co. 66 $ 4,760
Dial Corp. 450 8,775
Gillette Co. 65 2,673
Philip Morris Cos , Inc. 415 17,248
Procter & Gamble Co. 115 8,798
Service Corp. International 280 9,485
Tyco International Ltd. 328 18,204
--------
$ 69,943
- -------------------------------------------------------------------------------
Electrical Equipment - 2.8%
General Electric Co. 213 $ 17,040
- -------------------------------------------------------------------------------
Financial Institutions - 3.1%
Associates First Capital Corp., "A" 94 $ 5,558
Federal Home Loan Mortgage Corp. 193 7,624
Household International, Inc. 171 6,316
--------
$ 19,498
- -------------------------------------------------------------------------------
Food and Beverage Products - 8.1%
Bestfoods Co. 131 $ 6,575
Coca-Cola Co. 115 7,489
Hershey Foods Corp. 103 7,210
Interstate Bakeries Corp. 435 $ 11,337
McCormick & Co., Inc. 200 5,813
PepsiCo., Inc. 156 4,319
Ralston-Ralston Purina Co. 270 7,104
--------
$ 49,847
- -------------------------------------------------------------------------------
Insurance - 8.4%
Allstate Corp. 230 $ 8,625
Chubb Corp. 100 6,250
CIGNA Corp. 147 8,553
Hartford Financial Services Group, Inc. 196 8,771
Lincoln National Corp. 82 7,052
Progressive Corp. 66 6,431
Torchmark Corp. 181 6,471
--------
$ 52,153
- -------------------------------------------------------------------------------
Medical and Health Products - 10.2%
American Home Products Corp. 164 $ 8,221
Bristol-Myers Squibb Co. 156 15,268
Johnson & Johnson 204 14,076
Pfizer, Inc. 180 16,740
Schering Plough Corp. 20 1,720
Warner-Lambert Co. 105 6,851
--------
$ 62,876
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 4.2%
HealthSouth Corp.* 416 $ 7,878
Tenet Healthcare Corp.* 400 10,325
United Healthcare Corp. 222 8,020
--------
$ 26,223
- -------------------------------------------------------------------------------
Oils - 6.6%
Chevron Corp. 82 $ 6,073
Exxon Corp. 246 16,098
Mobil Corp. 115 7,949
Texaco, Inc. 98 5,445
USX-Marathon Group 210 5,460
--------
$ 41,025
- -------------------------------------------------------------------------------
Railroads - 1.1%
Burlington Northern Santa Fe Railway Co. 70 $ 6,514
- -------------------------------------------------------------------------------
Restaurants and Lodging - 0.6%
Cendant Corp.* 339 $ 3,920
- -------------------------------------------------------------------------------
Stores - 3.6%
CVS Corp. 220 $ 8,002
Rite Aid Corp. 394 14,258
--------
$ 22,260
- -------------------------------------------------------------------------------
Supermarkets - 4.4%
Kroger Co. 254 $ 11,430
Safeway, Inc.* 407 16,026
--------
$ 27,456
- -------------------------------------------------------------------------------
Telecommunications - 4.1%
AirTouch Communications, Inc.* 181 $ 10,181
Sprint Corp. 123 8,249
WorldCom, Inc.* 170 6,959
--------
$ 25,389
- -------------------------------------------------------------------------------
Utilities - Electric - 2.8%
CMS Energy Corp. 131 $ 5,543
Unicom Corp. 326 11,614
--------
$ 17,157
- -------------------------------------------------------------------------------
Utilities - Gas - 1 1%
Columbia Energy Group, Inc. 135 $ 6,716
- -------------------------------------------------------------------------------
Utilities - Telephone - 3.4%
Bell Atlantic Corp. 164 $ 7,237
BellSouth Corp. 127 8,707
SBC Communications, Inc. 130 4,940
--------
$ 20,884
- -------------------------------------------------------------------------------
Total U.S. Stocks $608,428
- -------------------------------------------------------------------------------
Foreign Stocks - 1.1%
United Kingdom
British Petroleum PLC, ADR (Oils) 90 $ 6,581
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $532,867) $615,009
Other Assets, Less Liabilities - 0.6% 3,435
- -------------------------------------------------------------------------------
Net Assets - 100.0% $618,444
- -------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1998
MFS CONVERTIBLE SECURITIES FUND
Convertible Preferred Stocks - 40.3%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
Banks and Credit Companies - 2.4%
McKesson Financing Trust, 5%*## 100 $ 10,200
National Australia Bank Ltd., 7.875% 115 3,119
--------
$ 13,319
- -------------------------------------------------------------------------------
Business Services - 2.9%
Central Parking Finance Trust, 5.25% 150 $ 3,413
EVI, Inc., 5%* 400 13,300
--------
$ 16,713
- -------------------------------------------------------------------------------
Computer Software - Services - 0.4%
Cendant Corp.* 100 $ 2,531
- -------------------------------------------------------------------------------
Consumer Goods and Services - 3.0%
Newell Financial Trust Co.## 200 $ 11,400
Readers Digest, $1.9336* 300 5,887
--------
$ 17,287
- -------------------------------------------------------------------------------
Containers - 1.8%
Sealed Air Corp. 250 $ 10,281
- -------------------------------------------------------------------------------
Entertainment - 4.2%
CBS Radio, Inc., 7% 125 $ 8,781
Royal Caribbean Cruises Ltd., 7.25% 50 3,675
Mediaone Group, Inc. 200 11,100
--------
$ 23,556
- -------------------------------------------------------------------------------
Financial Institutions - 9.3%
Finova Finance Trust, 5.5% 250 $ 16,531
Jefferson Pilot Corp., 7.25% 75 8,231
Merrill Lynch & Co., Inc., 6.25% 75 1,674
Salomon, Inc., 6.25% 115 5,448
Salomon, Inc., 7.625% 300 12,000
Tosco Financing Trust, 5.75%## 200 8,975
--------
$ 52,859
- -------------------------------------------------------------------------------
Food and Beverage Products - 3.2%
Houston Industries, Inc. 100 $ 7,150
Ralston Purina Co. 7%* 125 6,625
Suiza Capital Trust II, 5.5%## 100 4,200
--------
$ 17,975
- -------------------------------------------------------------------------------
Insurance - 5.0%
American Heritage Life Investment Corp., 8.5% 100 $ 5,850
Conseco, Inc., 7% 50 5,350
Frontier Financing Trust, 6.25%*## 100 4,925
SunAmerica, Inc., $3.10 25 4,488
SunAmerica, Inc., $3.188 150 7,631
--------
$ 28,244
- -------------------------------------------------------------------------------
Metals and Minerals - 0.6%
Timet Capital Trust, 6.625%*## 100 $ 3,350
- -------------------------------------------------------------------------------
Special Products and Services - 0.9%
Fleetwood Capital Trust, 6%* 100 $ 4,963
- -------------------------------------------------------------------------------
Steel - 0.6%
USX-Marathon Group, 6.75%* 200 $ 3,500
- -------------------------------------------------------------------------------
Stores - 1.8%
AnnTaylor Finance Trust, 8.5%* 75 $ 4,987
Kmart Financing I, 7.75% 100 5,244
--------
$ 10,231
- -------------------------------------------------------------------------------
Telecommunications - 1.7%
Intermedia Communications, Inc., $3.25* 50 $ 1,675
Intermedia Communications, Inc., 7%*## 100 3,463
IXC Communications, Inc., 7.25%*## 20 2,290
Winstar Communications, Inc.* 60 2,040
--------
$ 9,468
- -------------------------------------------------------------------------------
Utilities - Electric - 2.3%
Calenergy Capital Trust III, 6.5%*## 100 $ 4,188
Texas Utilities Co. 200 8,975
--------
$ 13,163
- -------------------------------------------------------------------------------
Utilities - Gas - 0 2%
Devon Financing Trust* 25 $ 1,322
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost,
$228,621) $228,762
- -------------------------------------------------------------------------------
Convertible Bonds - 27.5%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Aerospace - 0.8%
Hexcel Corp., 7s, 2003 $ 5 $ 4,744
- -------------------------------------------------------------------------------
Business Services - 3.4%
Concentra Managed Care, Inc., 4.5s, 2003 $ 5 $ 3,200
Personnel Group Of America, Inc., 5.75s, 2004 6 5,400
Protection One Alarm Monitoring, 6.75s, 2003 9 10,485
--------
$ 19,085
- -------------------------------------------------------------------------------
Chemicals - 0.4%
Sepracor, Inc., 6 25s, 2005 $ 2 $ 2,580
- -------------------------------------------------------------------------------
Computer Software - Services - 2.3%
Affiliated Computer Services, Inc., 4s, 2005 $ 5 $ 5,056
Aspen Technology, 5.25s, 2005 10 7,800
--------
$ 12,856
- -------------------------------------------------------------------------------
Computer Software - Systems - 4.2%
Adaptec, Inc., 4.75s, 2004## $ 8 $ 6,110
Comverse Technology, Inc., 4.5s, 2005 10 8,962
Solectron Corp., 6s, 2006## 3 3,923
System Software Associates, Inc., 7s, 2002 3 1,826
Wind River Systems, Inc., 5s, 2002## 3 3,105
--------
$ 23,926
- -------------------------------------------------------------------------------
Electronics - 0.3%
Photronics, Inc., 6s, 2004 $ 2 $ 1,845
- -------------------------------------------------------------------------------
Industrial - 2.0%
Quintiles Transnational Corp., 4.25s, 2000 $ 5 $ 5,294
Waste Management, Inc., 4s, 2002 5 5,812
--------
$ 11,106
- -------------------------------------------------------------------------------
Medical and Health Products - 0.7%
North American Vaccine, Inc., 6.5s, 2003## $ 2 $ 977
Omnicare, Inc., 5s, 2007 3 3,154
--------
$ 4,131
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.5%
Sunrise Assisted Living, Inc., 5.5s, 2002## $ 3 $ 2,914
- -------------------------------------------------------------------------------
Oil Services - 2.9%
Diamond Offshore Drilling, Inc., 3.75s, 2007 $ 10 $ 8,825
Key Energy, 5s, 2004## 5 3,244
Parker Drilling Co., 5.5s, 2004 6 4,500
--------
$ 16,569
- -------------------------------------------------------------------------------
Pollution Control - 2.4%
Sanifill, Inc., 5s, 2006 $ 5 $ 8,125
U.S. Filter Corp., 6s, 2005 5 5,231
--------
$ 13,356
- -------------------------------------------------------------------------------
Stores - 3.0%
Home Depot, Inc., 3.25s, 2001 $ 5 $ 8,612
Office Depot, Inc. 0s, 2008 5 3,494
Saks Holdings, Inc., 5.5s, 2006 5 4,838
--------
$ 16,944
- -------------------------------------------------------------------------------
Telecommunications - 4.6%
Aspect Telecommunications Corp., 0s, 2018 $ 30 $ 8,325
Global Telesystems Group, Inc., 5.75s, 2010 15 11,278
World Access, Inc. 4.5s, 2002 8 6,560
--------
$ 26,163
- -------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $173,003) $156,219
- -------------------------------------------------------------------------------
Bonds - 3.8%
- -------------------------------------------------------------------------------
U.S. Bonds - 2.2%
Industrial - 1.3%
Network Associates, Inc., 0s, 2018 $ 20 $ 7,150
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.9%
HealthSouth Corp., 3.25s, 2003 $ 6 $ 5,445
- -------------------------------------------------------------------------------
Total U.S. Bonds $ 12,595
- -------------------------------------------------------------------------------
Foreign Bonds - 1.6%
Switzerland - 1.6%
Swiss Life Finance Ltd., 1.5s, 2003 (Finance) $ 8 $ 8,960
- -------------------------------------------------------------------------------
Total Bonds (Identified Cost, $21,821) $ 21,555
- -------------------------------------------------------------------------------
Stocks - 14.3%
- -------------------------------------------------------------------------------
SHARES
- -------------------------------------------------------------------------------
U.S. Stocks - 13.1%
Aerospace - 0.5%
United Technologies Corp. 40 $ 2,902
- -------------------------------------------------------------------------------
Banks and Credit Companies - 0.2%
Washington Mutual, Inc. 37 $ 1,184
- -------------------------------------------------------------------------------
Computer Hardware - Systems - 0.8%
EMC Corp.* 100 $ 4,519
- -------------------------------------------------------------------------------
Computer Software - Systems - 0.5%
Oracle Corp.* 150 $ 2,991
- -------------------------------------------------------------------------------
Consumer Goods and Services - 1.4%
Revlon, Inc., "A"* 75 $ 2,705
Tyco International Ltd. 96 5,328
--------
$ 8,033
- -------------------------------------------------------------------------------
Entertainment - 1.1%
Jacor Communications, Inc.* 100 $ 5,900
- -------------------------------------------------------------------------------
Financial Institutions - 1.8%
MGIC Investment Corp. 249 $ 10,333
- -------------------------------------------------------------------------------
Insurance - 0.9%
Hartford Life, Inc., "A" 100 $ 5,125
- -------------------------------------------------------------------------------
Medical and Health Products - 2.0%
Bristol-Myers Squibb Co. 75 $ 7,341
McKesson Corp. 50 3,750
--------
$ 11,091
- -------------------------------------------------------------------------------
Special Products and Services - 0.9%
Newport News Shipbuilding, Inc. 220 $ 5,170
- -------------------------------------------------------------------------------
Stores - 1.0%
Rite Aid Corp. 150 $ 5,428
- -------------------------------------------------------------------------------
Telecommunications - 2.0%
Global TeleSystems Group, Inc.* 100 $ 3,200
Intermedia Communications, Inc.* 1 25
IXC Communications, Inc.* 50 1,225
Lucent Technologies, Inc. 70 4,961
Nextlink Communications, Inc., "A"* 100 2,075
--------
$ 11,486
- -------------------------------------------------------------------------------
Total U.S. Stocks $ 74,162
- -------------------------------------------------------------------------------
Foreign Stocks - 1.2%
Ireland - 0.7%
Allied Irish Banks PLC (Banks and Credit Cos.)* 303 $ 4,164
- -------------------------------------------------------------------------------
Japan - 0.5%
Sony Corp., ADR (Electronics) 35 $ 2,474
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 6,638
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $63,503) $ 80,800
- -------------------------------------------------------------------------------
Preferred Stocks - 10.2%
- -------------------------------------------------------------------------------
Aerospace - 1.2%
Loral Space & Communications* 125 $ 6,625
- -------------------------------------------------------------------------------
Automotive - 3.7%
Federal Mogul Financing Trust* 200 $ 12,300
Tower Automotive Capital Trust* 200 8,800
--------
$ 21,100
- -------------------------------------------------------------------------------
Insurance - 3.2%
Lincoln National Corp.* 600 $ 12,375
Philadelphia Consolidated Holding Corp.* 800 5,800
--------
$ 18,175
- -------------------------------------------------------------------------------
Retail - 1.1%
Dollar General Strypes Trust 200 $ 6,400
- -------------------------------------------------------------------------------
Telecommunications - 1.0%
ICG Funding LLC*## 100 $ 5,500
- -------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $64,725) $ 57,800
- -------------------------------------------------------------------------------
Rights - 1.3%
- -------------------------------------------------------------------------------
CVS Corp.* (Identified Cost, $7,050) 100 $ 7,237
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $558,723) $552,373
Other Assets, Less Liabilities - 2.6% 14,793
- -------------------------------------------------------------------------------
Net Assets - 100.0% $567,166
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1998
MFS SCIENCE AND TECHNOLOGY FUND
Stocks - 89.8%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 82.7%
Advertising - 0.2%
Doubleclick, Inc.* 100 $ 2,388
Young & Rubicam, Inc.* 100 3,056
----------
$ 5,444
- -------------------------------------------------------------------------------
Business Machines - 3.7%
Affiliated Computer Services, Inc., "A"* 1,980 $ 64,721
Silicon Graphics, Inc.* 500 4,531
Sun Microsystems, Inc.* 940 37,248
----------
$ 106,500
- -------------------------------------------------------------------------------
Business Services - 2.8%
Answerthink Consulting Group, Inc.* 100 $ 1,725
C.H. Robinson Worldwide, Inc. 100 2,000
Diamond Technology Partners, Inc., "A"* 100 2,325
Fiserv, Inc.* 300 11,700
Galileo International, Inc. 100 3,269
Paymentech, Inc.* 620 7,091
Policy Management Systems Corp.* 400 16,700
PRT Group, Inc.* 1,300 6,662
Renaissance Worldwide, Inc.* 2,000 20,000
Teletech Holdings, Inc.* 1,000 8,375
----------
$ 79,847
- -------------------------------------------------------------------------------
Computer Hardware - Systems - 1.6%
EMC Corp.* 1,000 $ 45,187
PC Connection, Inc.* 100 1,500
----------
$ 46,687
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 13.6%
Activision, Inc.* 1,500 $ 15,187
Autodesk, Inc. 2,080 48,620
Electronic Arts, Inc.* 1,400 53,375
MicroProse, Inc.* 920 5,232
Microsoft Corp.* 2,680 257,112
Midway Games, Inc. 360 3,398
Verio, Inc.* 100 2,213
----------
$ 385,137
- -------------------------------------------------------------------------------
Computer Software - Services - 1.3%
DSET Corp.* 100 $ 825
Evolving Systems, Inc.* 100 319
Ingram Micro, Inc. 750 33,750
International Integration, Inc.* 100 1,550
----------
$ 36,444
- -------------------------------------------------------------------------------
Computer Software - Systems - 32.6%
AccuStaff, Inc.* 2,180 $ 27,250
Adobe Systems, Inc. 625 16,406
Aspen Technology, Inc.* 2,600 61,587
BMC Software, Inc. 3,360 142,170
Cadence Design Systems, Inc.* 5,562 117,497
Computer Associates International, Inc. 2,612 70,524
Compuware Corp.* 2,120 96,327
Edwards (J.D.) & Co.* 100 4,050
Engineering Animation, Inc.* 180 6,638
Etec Systems, Inc. 300 7,238
Exodus Communications, Inc.* 100 2,875
Great Plains Software, Inc.* 100 3,375
ISS Group, Inc.* 100 2,725
Network Associates, Inc.* 900 29,025
Oracle Corp.* 5,930 118,229
Peoplesoft, Inc.* 1,520 42,750
Peritus Software Services, Inc.* 100 300
Range Resources Corp. 120 818
Rational Software Corp.* 4,810 53,511
Security Dynamics Technologies, Inc.* 200 1,875
Siebel Systems, Inc.* 145 2,719
Summit Design, Inc.* 4,050 24,300
Sybase, Inc.* 380 2,613
Synopsys, Inc.* 3,280 85,690
System Software Associates, Inc.* 1,200 5,400
Unigraphics Solutions Inc.* 100 794
----------
$ 926,686
- -------------------------------------------------------------------------------
Consumer Goods and Services - 0.2%
Avis Rent A Car, Inc.* 400 $ 6,275
- -------------------------------------------------------------------------------
Electronics - 4.2%
Altera Corp.* 300 $ 8,737
Amkor Technology, Inc.* 100 462
Atmel Corp.* 440 2,654
Intel Corp. 640 45,560
SIPEX Corp.* 1,925 34,530
Teradyne, Inc.* 1,080 18,765
Xilinx, Inc.* 300 9,150
----------
$ 119,858
- -------------------------------------------------------------------------------
Entertainment - 0.7%
Citadel Communications Corp.* 100 $ 2,425
Hearst-Argyle Television, Inc.* 500 16,469
----------
$ 18,894
- -------------------------------------------------------------------------------
Financial Institutions - 0.4%
CIT Group, Inc., "A" 100 $ 2,569
Conning Corp. 100 1,388
Federated Investors, Inc., "A"* 100 1,325
Franchise Mortgage Acceptance Co.* 100 1,612
Freedom Securities Corp.* 100 1,250
Heller Financial, Inc., "A"* 100 1,975
Waddell & Reed Financial, Inc., "A" 100 1,662
----------
$ 11,781
- -------------------------------------------------------------------------------
Insurance - 0.1%
Annuity & Life Re Holdings Ltd.* 100 $ 1,825
- -------------------------------------------------------------------------------
Medical and Health Products - 2.2%
Bristol-Myers Squibb Co. 650 $ 63,619
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 6.3%
American Dental Partners, Inc.* 100 $ 1,075
Centennial Healthcare Corp.* 100 850
Guidant Corp. 300 18,525
HBO & Co. 4,340 92,225
HealthSouth Corp.* 590 11,173
Oxford Health Plans, Inc.* 520 3,185
PacifiCare Health Systems, Inc., "B"* 70 4,410
Province Healthcare Co.* 100 2,700
United Healthcare Corp. 1,240 44,795
----------
$ 178,938
- -------------------------------------------------------------------------------
Printing and Publishing - 0.2%
CMP Media, Inc., "A"* 100 $ 1,638
Petersen Cos., Inc., "A"* 100 3,200
----------
$ 4,838
- -------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Cavanaughs Hospitality Corp.* 100 $ 1,037
Friendly Ice Cream Corp.* 100 688
----------
$ 1,725
- -------------------------------------------------------------------------------
Special Products and Services
Caliber Learning Network, Inc.* 100 $ 500
Edutrek International, Inc., "A"* 100 700
----------
$ 1,200
- -------------------------------------------------------------------------------
Stores - 0.5%
CSK Auto Corp.* 100 $ 2,181
CVS Corp. 200 7,275
Duane Reade, Inc.* 100 3,738
----------
$ 13,194
- -------------------------------------------------------------------------------
Telecommunications - 12.0%
Amdocs Ltd.* 100 $ 900
Ascend Communications, Inc.* 805 28,326
Aspect Telecommunications Corp.* 2,770 65,961
Cabletron Systems, Inc.* 300 2,100
Cisco Systems, Inc.* 1,582 129,526
Com21, Inc.* 100 1,063
Global TeleSystems Group, Inc.* 100 3,200
Hyperion Telecommunications, Inc., "A"* 100 900
L-3 Communications Holding, Inc.* 100 3,313
Lucent Technologies, Inc. 700 49,612
MCI Communications Corp. 910 45,500
Nextlink Communications, Inc., "A"* 100 2,075
WorldCom, Inc.* 200 8,187
----------
$ 340,663
- -------------------------------------------------------------------------------
Total U.S. Stocks $2,349,555
- -------------------------------------------------------------------------------
Foreign Stocks - 7.1%
Bermuda - 0.1%
Global Crossing Ltd. (Telecommunications)* 100 $ 1,775
- -------------------------------------------------------------------------------
France - 0.9%
Dassault Systemes S.A. (Computer Software - Systems 200 $ 10,343
Dassault Systemes S.A., ADR (Computer Software -
Systems) 295 13,718
----------
$ 24,061
- -------------------------------------------------------------------------------
Germany - 3.3%
SAP AG, Preferred (Computer Software - Systems) 165 $ 93,803
- -------------------------------------------------------------------------------
Hong Kong
Asia Electronics Holding Co. (Electronics)* 1,000 $ 781
- -------------------------------------------------------------------------------
Israel
Fundtech Ltd. (Computer Software - Systems)* 100 $ 1,275
- -------------------------------------------------------------------------------
Japan - 2.8%
Canon, Inc., ADR (Special Products and Services) 400 $ 8,200
Meitec Corp. (Computer Software - Systems) 400 13,418
Sony Corp. (Electronics) 300 21,890
Sony Corp., ADR (Electronics) 510 36,051
----------
$ 79,559
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 201,254
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,462,025) $2,550,809
- -------------------------------------------------------------------------------
Short-Term Obligations - 11.2%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/01/98, at
Amortized Cost $ 320 $ 320,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,782,025) $2,870,809
Other Assets, Less Liabilities - (1.0)% (29,618)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $2,841,191
- -------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1998
MFS REAL ESTATE INVESTMENT FUND
Stocks - 90.1%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 90.1%
Real Estate Investment Trusts - 90.1%
American Health Properties, Inc. 200 $ 4,450
Anthracite Capital, Inc. 900 8,719
Archstone Communities Trust 863 16,720
Arden Realty, Inc. 479 10,119
Associated Estates Realty Corp. 500 8,094
Avalon Bay Community, Inc. 235 7,755
Beacon Capital Partners, Inc.*## 750 15,000
Boston Properties, Inc. 151 4,313
Brandywine Realty Trust 400 7,200
Camden Property Trust 372 9,323
CarrAmerica Realty Corp. 645 14,512
CBL & Associates Properties, Inc. 603 15,000
Corporate Office Properties Trust, Inc. 500 3,563
Crescent Real Estate Equities Co. 683 15,709
Duke Realty Investments, Inc. 416 8,632
Equity Office Properties Trust 675 15,314
Equity Residential Properties Trust 510 20,368
Federal Realty Investment Trust 296 5,957
FelCor Suite Hotels, Inc. 381 7,763
First Industrial Realty Trust, Inc. 447 10,477
Glimcher Realty Trust 400 6,500
Highwoods Properties, Inc. 500 12,719
Horizon Group Properties, Inc.* 12 42
HRPT Properties Trust 253 3,953
Insignia Financial Group, Inc.* 200 3,513
Kilroy Realty Corp. 487 10,014
Koger Equity, Inc. 542 9,011
Liberty Property Trust 399 9,027
Mack-Cali Realty Corp. 333 9,595
Meditrust Cos 628 9,734
MeriStar Hospitality Corp.* 410 6,919
Mid-America Apartment Communities, Inc. 355 8,165
National Golf Properties, Inc. 300 7,031
Patriot American Hospitality, Inc. 1,100 14,850
Post Properties, Inc. 125 4,750
Prentiss Properties Trust* 686 15,349
Prime Group Realty Trust 892 13,547
Prime Retail, Inc. 179 1,678
Public Storage, Inc. 333 7,784
Simon Debartolo Group, Inc. 470 13,659
SL Green Realty Corp. 200 3,850
Sovran Self Storage, Inc. 270 6,007
Spieker Properties, Inc. 125 4,445
Starwood Hotels and Resorts 383 13,979
Storage Trust Realty 204 4,424
Sun Communities, Inc. 288 9,414
Tanger Factory Outlet Centers, Inc. 200 5,238
Tower Realty Trust, Inc. 213 4,486
TriNet Corporate Realty Trust, Inc. 331 9,516
United Dominion Realty Trust, Inc. 360 4,185
Urban Shopping Centers, Inc. 208 6,604
Vornado Realty Trust 239 7,499
Walden Residential Properties, Inc. 207 4,683
Westfield America, Inc. 400 6,350
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $587,871) $467,508
- -------------------------------------------------------------------------------
Convertible Preferred Stock - 0.2%
- -------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.2%
Prime Retail, Inc. 8.5% (Identified Cost, $1,188) 60 $ 1,009
- -------------------------------------------------------------------------------
Short-Term Obligations - 8.6%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 9/01/98, at
Amortized Cost $45 $ 45,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $634,059) $513,517
Other Assets, Less Liabilities - 1.1% 5,471
- -------------------------------------------------------------------------------
Net Assets - 100.0% $518,988
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
<CAPTION>
- -----------------------------------------------------------------------------------------------------
CORE SPECIAL BLUE
GROWTH OPPORTUNITIES CHIP
AUGUST 31, 1998 FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost, $2,687,140,
$3,597,147, and $532,867, respectively) $2,708,745 $3,366,601 $615,009
Cash 1,273 5,520 2,662
Foreign currency, at value (identified cost, $234,
$1,613 and $0, respectively) 238 1,618 --
Receivable for Fund shares sold 111,557 -- --
Receivable for investments sold 166,953 56,455 --
Interest and dividends receivable 1,024 9,100 849
Deferred organization expenses 1,017 1,039 --
Other assets 19 -- 5
---------- ---------- --------
Total assets $2,990,826 $3,440,333 $618,525
---------- ---------- --------
Liabilities:
Payable for investments purchased $ 59,456 $ 57,334 $ --
Payable to affiliates -
Investment adviser 7,969 -- --
Shareholder servicing agent fee 4 343 --
Administrative fee 29 4 --
Accrued expenses and other liabilities 14,268 12,651 81
---------- ---------- --------
Total liabilities $ 81,726 $ 70,332 $ 81
---------- ---------- --------
Net assets $2,909,100 $3,370,001 $618,444
---------- ---------- --------
Net assets consist of:
Paid-in capital $2,494,599 $3,011,479 $434,740
Unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities in foreign currencies 21,657 (230,519) 82,142
Accumulated undistributed net realized gain on
investments and foreign currency transactions 392,844 577,558 101,562
Accumulated undistributed net investment income -- 11,483 --
---------- ---------- --------
Total $2,909,100 $3,370,001 $618,444
========== ========== ========
Shares of beneficial interest outstanding:
Class A 103,501 159,207 40,206
Class I 97,796 132,570 8,822
---------- ---------- --------
Total shares of beneficial interest outstanding 201,297 291,777 49,028
---------- ---------- --------
Net assets:
Class A $1,494,563 $1,835,658 $507,143
Class I 1,414,537 1,534,343 111,301
---------- ---------- --------
Total net assets $2,909,100 $3,370,001 $618,444
========== ========== ========
Class A shares:
Net asset value, offering price, and redemption
price per share (net assets / shares of
beneficial interest outstanding) $14.44 $11.53 $12.61
====== ====== ======
Class I shares:
Net asset value, offering price, and redemption
price per share (net assets / shares of
beneficial interest outstanding) $14.46 $11.57 $12.62
====== ====== ======
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Assets and Liabilities - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------
CONVERTIBLE SCIENCE AND REAL ESTATE
SECURITIES TECHNOLOGY INVESTMENT
AUGUST 31, 1998 FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments, at value (identified cost, $558,723,
$2,782,025, and $634,059, respectively) $552,373 $2,870,809 $513,517
Cash -- 10,849 1,682
Foreign currency, at value (identified cost, $8,
$32 and $0, respectively) 8 33 --
Receivable for investments sold 16,348 -- 21,032
Interest and dividends receivable 2,467 216 761
Other assets -- 8,726 --
-------- ---------- --------
Total assets $571,196 $2,890,633 $536,992
-------- ---------- --------
Liabilities:
Payable for investments purchased $ 3,956 $ 37,342 $ 17,931
Payable to affiliates -
Shareholder servicing agent fee -- 29 --
Administrative fee -- 4 --
Accrued expenses and other liabilities 74 12,067 73
-------- ---------- --------
Total liabilities $ 4,030 $ 49,442 $ 18,004
-------- ---------- --------
Net assets $567,166 $2,841,191 $518,988
======== ========== ========
Net assets consist of:
Paid-in capital $520,720 $2,642,932 $630,589
Unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities in foreign currencies (6,350) 88,787 (120,542)
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions 41,325 109,472 (1,341)
Accumulated undistributed net investment income 11,471 -- 10,282
-------- ---------- --------
Total $567,166 $2,841,191 $518,988
======== ========== ========
Shares of beneficial interest outstanding:
Class A 52,817 90,921 54,053
Class I 210 156,264 8,790
-------- ---------- --------
Total shares of beneficial interest outstanding 53,027 247,185 62,843
-------- ---------- --------
Net assets:
Class A $564,922 $1,044,739 $446,395
Class I 2,244 1,796,452 72,593
-------- ---------- --------
Total net assets $567,166 $2,841,191 $518,988
======== ========== ========
Class A shares:
Net asset value, offering price, and redemption
price per share (net assets / shares of
beneficial interest outstanding) $10.70 $11.49 $8.26
====== ====== =====
Class I shares:
Net asset value, offering price, and redemption
price per share (net assets / shares of
beneficial interest outstanding) $10.69 $11.50 $8.26
====== ====== =====
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Operations
<CAPTION>
- ----------------------------------------------------------------------------------------------------
CORE SPECIAL BLUE
GROWTH OPPORTUNITIES CHIP
YEAR ENDED AUGUST 31, 1998 FUND FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss):
Income -
Dividends $ 19,037 $ 19,730 $ 10,529
Interest 7,006 15,685 304
Foreign taxes withheld (304) (737) (43)
--------- --------- --------
Total investment income $ 25,739 $ 34,678 $ 10,790
--------- --------- --------
Expenses -
Management fee $ 23,926 $ 29,491 $ 5,010
Shareholder servicing agent fee 3,747 4,568 914
Distribution and service fee (Class A) 6,932 10,440 2,764
Administrative fee 456 564 110
Custodian fee 3,022 4,310 2,953
Printing 6,460 1,912 3,200
Postage 234 93 225
Auditing fees 10,100 7,565 9,700
Legal fees 1,434 1,534 955
Amortization of organization expenses 434 434 --
Registration fee -- 3,369 --
Miscellaneous 3,622 -- 3,329
--------- --------- --------
Total expenses $ 60,367 $ 64,280 $ 29,160
Fees paid indirectly (1,054) (1,666) (276)
Reduction of expenses by investment adviser,
distributor, and shareholder servicing agent (32,099) (41,836) (17,323)
--------- --------- --------
Net expenses $ 27,214 $ 20,778 $ 11,561
--------- --------- --------
Net investment income (loss) $ (1,475) $ 13,900 $ (771)
--------- --------- --------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 536,019 $ 754,135 $109,472
Securities sold short -- 13,386 --
Foreign currency transactions 116 32 --
--------- --------- --------
Net realized gain on investments and
foreign currency transactions $ 536,135 $ 767,553 $109,472
--------- --------- --------
Change in unrealized appreciation (depreciation) -
Investments $(261,156) $(833,005) $(13,799)
Securities sold short -- 4,407 --
Translation of assets and liabilities in foreign
currencies 45 (146) --
--------- --------- --------
Net unrealized loss on investments and foreign
currency translation $(261,111) $(828,744) $(13,799)
--------- --------- --------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 275,024 $ (61,191) $ 95,673
--------- --------- --------
Increase (decrease) in net assets from
operations $ 273,549 $ (47,291) $ 94,902
========= ========= ========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Operations - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------
CONVERTIBLE SCIENCE AND REAL ESTATE
SECURITIES TECHNOLOGY INVESTMENT
YEAR ENDED AUGUST 31, 1998 FUND FUND FUND*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss):
Income -
Dividends $ 17,323 $ 9,553 $ 13,484
Interest 8,742 10,641 1,199
Foreign taxes withheld -- (130) --
-------- --------- ---------
Total investment income $ 26,065 $ 20,064 $ 14,683
-------- --------- ---------
Expenses -
Management fee $ 4,367 $ 22,302 $ 2,666
Shareholder servicing agent fee 790 3,519 301
Distribution and service fee (Class A) 3,166 5,418 827
Administrative fee 96 429 39
Custodian fee 2,872 3,912 82
Printing 1,438 5,821 1,598
Postage 58 221 29
Auditing fees 9,400 9,800 5,700
Legal fees 1,844 -- 3,581
Registration fees 7,755 3,057 4,000
Miscellaneous 284 921 824
-------- --------- ---------
Total expenses $ 32,070 $ 55,400 $ 19,647
Fees paid indirectly (187) (786) (47)
Reduction of expenses by investment adviser,
distributor and shareholder servicing agent (21,812) (29,167) (15,199)
-------- --------- ---------
Net expenses $ 10,071 $ 25,447 $ 4,401
-------- --------- ---------
Net investment income (loss) $ 15,994 $ (5,383) $ 10,282
-------- --------- ---------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 55,792 $ 188,275 $ (1,341)
Foreign currency transactions (22) (20) --
-------- --------- ---------
Net realized gain (loss) on investments and
foreign currency transactions $ 55,770 $ 188,255 $ (1,341)
-------- --------- ---------
Change in unrealized (depreciation) on investments
and translation of assets and liabilities in
foreign currencies $(77,977) $(287,231) $(120,542)
-------- --------- ---------
Net realized and unrealized loss on investments
and foreign currency $(22,207) $ (98,976) $(121,883)
-------- --------- ---------
Decrease in net assets from operations $ (6,213) $(104,359) $(111,601)
======== ========= =========
*For the period from the commencement of the Fund's investment operations, March 17, 1998, through
August 31, 1998.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
CORE GROWTH FUND AUGUST 31, 1998 AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (1,475) $ 200,677
Net realized gain on investments and foreign
currency transactions 536,135 147,772
Net unrealized gain (loss) on investments and
foreign currency translation (261,111) 264,818
---------- ----------
Increase in net assets from operations $ 273,549 $ 613,267
---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (81,330) $ --
From net investment income (Class I) (123,670) --
From net realized gain on investments and foreign
currency transactions (Class A) (97,297) (106,559)
From net realized gain on investments and foreign
currency transactions (Class I) (147,949) --
---------- ----------
Total distributions declared to shareholders $ (450,246) $ (106,559)
---------- ----------
Net increase in net assets from Fund share
transactions $ 329,677 $1,563,262
---------- ----------
Total increase in net assets $ 152,980 $2,069,970
Net assets:
At beginning of period 2,756,120 686,150
---------- ----------
At end of period (including accumulated
undistributed net investment income of $0 and
$200,552, respectively) $2,909,100 $2,756,120
========== ==========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statements of Changes in Net Assets - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SPECIAL OPPORTUNITIES FUND AUGUST 31, 1998 AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 13,900 $ 27,650
Net realized gain on investments and foreign
currency transactions 767,553 307,876
Net unrealized gain (loss) on investments and
foreign currency translation (828,744) 557,043
---------- ----------
Increase (decrease) in net assets from
operations $ (47,291) $ 892,569
---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (16,329) $ (8,950)
From net investment income (Class I) (13,660) --
From net realized gain on investments and foreign
currency transactions (Class A) (236,984) (232,385)
From net realized gain on investments and foreign
currency transactions (Class I) (198,261) --
---------- ----------
Total distributions declared to shareholders $ (465,234) $ (241,335)
---------- ----------
Net increase (decrease) in net assets from Fund
share transactions $ (72,285) $1,044,942
---------- ----------
Total increase (decrease) in net assets $ (584,810) $1,696,176
Net assets:
At beginning of period 3,954,811 2,258,635
---------- ----------
At end of period (including accumulated
undistributed net investment income of $11,483
and $28,543, respectively) $3,370,001 $3,954,811
========== ==========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
BLUE CHIP FUND AUGUST 31, 1998 AUGUST 31, 1997*
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (771) $ 1,194
Net realized gain on investments and foreign
currency transactions 109,472 12,379
Net unrealized gain (loss) on investments and
foreign currency translation (13,799) 95,941
--------- --------
Net increase in net assets from operations $ 94,902 $109,514
--------- --------
Distribution declared to shareholders -
From net investment income (Class A) $ (848) $ --
From net investment income (Class I) (392) --
From net realized gain on investments and foreign
currency transactions (Class A) (13,308) --
From net realized gain on investments and foreign
currency transactions (Class I) (6,164) --
--------- --------
Total distribution declared to shareholders $ (20,712) $ --
--------- --------
Net increase (decrease) in net assets from Fund
share transactions $(183,235) $617,975
--------- --------
Total increase (decrease) in net assets $(109,045) $727,489
Net assets:
At beginning of period 727,489 --
--------- --------
At end of period (including accumulated
undistributed net investment income of $0 and
$1,204, respectively) $ 618,444 $727,489
========= ========
*For the period from the commencement of the Fund's investment operations, January 2, 1997,
through August 31, 1997.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
CONVERTIBLE SECURITIES FUND AUGUST 31, 1998 AUGUST 31, 1997*
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 15,994 $ 12,104
Net realized gain (loss) on investments and
foreign currency transactions 55,770 (1,195)
Net unrealized gain (loss) on investments and
foreign currency translation (77,977) 71,627
-------- --------
Increase (decrease) in net assets from
operations $ (6,213) $ 82,536
-------- --------
Distributions declared to shareholders -
From net investment income (Class A) $(15,475) $ --
From net investment income (Class I) (1,099) --
From net realized gain on investments and foreign
currency transactions (Class A) (12,390) --
From net realized gain on investments and foreign
currency transactions (Class I) (880) --
-------- --------
Total distributions declared to shareholders $(29,844) $ --
-------- --------
Net increase (decrease) in net assets from Fund
share transactions $(37,304) $557,991
-------- --------
Total increase (decrease) in net assets $(73,361) $640,527
Net assets:
At beginning of period 640,527 --
-------- --------
At end of period (including accumulated
undistributed net investment income of $11,471
and $12,106, respectively) $567,166 $640,527
======== ========
*For the period from the commencement of the Fund's investment operations, January 2, 1997,
through August 31, 1997.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
SCIENCE AND TECHNOLOGY FUND AUGUST 31, 1998 AUGUST 31, 1997*
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income (loss) $ (5,383) $ 176,024
Net realized gain (loss) on investments and
foreign currency transactions 188,255 (69,411)
Net unrealized gain (loss) on investments and
foreign currency translation (287,231) 376,018
---------- ----------
Increase (decrease) in net assets from
operations $ (104,359) $ 482,631
---------- ----------
Distributions declared to shareholders -
From net investment income (Class A) $ (64,127) $ --
From net investment income (Class I) (115,896) --
---------- ----------
Total distributions declared to shareholders $ (180,023) $ --
---------- ----------
Net increase in net assets from Fund share
transactions $ 606,823 $2,036,119
---------- ----------
Total increase in net assets $ 322,441 $2,518,750
Net assets:
At beginning of period $2,518,750 --
---------- ----------
At end of period (including accumulated
undistributed net investment income of $0 and
$176,158, respectively) $2,841,191 $2,518,750
========== ==========
*For the period from the commencement of the Fund's investment operations, January 2, 1997,
through August 31, 1997.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets - continued
- --------------------------------------------------------------------------------
PERIOD ENDED
REAL ESTATE INVESTMENT FUND AUGUST 31, 1998*
- --------------------------------------------------------------------------------
Increase in net assets:
From operations -
Net investment income $ 10,282
Net realized loss on investments (1,341)
Net unrealized loss on investments (120,542)
---------
Decrease in net assets from operations $(111,601)
---------
Net increase in net assets from Fund share transactions $ 630,589
---------
Total increase in net assets $ 518,988
Net assets:
At beginning of period --
---------
At end of period (including accumulated undistributed net
investment income of $10,282) $ 518,988
=========
*For the period from the commencement of the Fund's investment operations,
March 17, 1998, through August 31, 1998.
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
CORE GROWTH FUND 1998 1997 1996* 1998 1997**
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning
of period $15.82 $12.33 $10.00 $15.84 $12.99
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.01) $ 1.24 $(0.01) $(0.01) $ 1.50
Net realized and unrealized gain
on investments and foreign
currency transactions 1.26 3.93 2.34 1.26 1.35
------ ------ ------ ------ ------
Total from investment
operations $ 1.25 $ 5.17 $ 2.33 $ 1.25 $ 2.85
------ ------ ------ ------ ------
Less distributions declared
to shareholders -
From net investment income $(1.20) $ -- $ -- $(1.20) $ --
From net realized gain on
investments and foreign
currency transactions (1.43) (1.68) -- (1.43) --
------ ------ ------ ------ ------
Total distributions
declared to shareholders $(2.63) $(1.68) $ -- $(2.63) $ --
------ ------ ------ ------ ------
Net asset value - end of
period $14.44 $15.82 $12.33 $14.46 $15.84
====== ====== ====== ====== ======
Total return 8.75% 45.22% 23.30%++ 8.82% 21.94%++
Ratios (to average net assets)
/Supplemental data(S):
Expenses 0.89%## 1.45%## 1.50%+ 0.89%## 1.48%+##
Net investment income
(loss) (0.03)% 9.12% (0.11)%+ (0.06)% 14.08%+
Portfolio turnover 261% 1,043% 204% 261% 1,043%
Net assets at end of period
(000 omitted) $1,495 $1,061 $686 $1,415 $1,695
* For the period from the commencement of the Fund's investment operations, January 2, 1996, through August 31, 1996.
** For the period from the 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.
(S) The investment adviser and the distributor voluntarily waived their fees for the periods indicated. In addition, for the
period ended August 31, 1996, subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain the
expenses of the Fund, exclusive of management and distribution and service fees, at not more than 1.50% of the Fund's average
daily net assets. If these fees had been incurred by the Fund and other expenses had not been limited, the net investment
income (loss) per share and the ratios would have been:
Net investment income (loss) $(0.17) $ 1.06 $(0.18) $(0.13) $ 1.40
Ratios (to average net assets):
Expenses## 2.15% 2.82% 4.28%+ 1.65% 2.35%+
Net investment
income (loss) (1.29)% 7.75% (2.34)%+ (0.82)% 13.20%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
SPECIAL OPPORTUNITIES FUND 1998 1997 1996* 1998 1997**
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning
of period $13.62 $11.36 $10.00 $13.64 $11.39
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.05 $ 0.08 $ 0.06 $ 0.05 $ 0.11
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions (0.28) 3.35 1.30 (0.26) 2.14
------ ------ ------ ------ ------
Total from investment
operations $(0.23) $ 3.43 $ 1.36 $(0.21) $ 2.25
------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.12) $(0.04) $ -- $(0.12) $ --
From net realized gain on
investments and foreign
currency transactions (1.74) (1.13) -- (1.74) --
------ ------ ------ ------ ------
Total distributions declared
to shareholders $(1.86) $(1.17) $ -- $(1.86) $ --
------ ------ ------ ------ ------
Net asset value - end of period $11.53 $13.62 $11.36 $11.57 $13.64
====== ====== ====== ====== ======
Total return (1.50)% 31.84% 13.60%++ (1.50)% 19.75%++
Ratios (to average net assets)
/Supplemental data(S):
Expenses 0.57%## 0.74%## 1.50%+ 0.57%## 0.18%+##
Net investment income 0.36% 0.65% 0.78%+ 0.35% 1.26%+
Portfolio turnover 126% 161% 108% 126% 161%
Net assets at end of period
(000 omitted) $1,836 $1,920 $2,259 $1,534 $2,035
* For the period from the commencement of the Fund's investment operations, January 2, 1996, through August 31, 1996.
** For the period from the 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.
(S) The investment adviser and the distributor voluntarily waived their fees, respectively, for the periods indicated. In
addition for the period ended August 31, 1996, subject to reimbursement by the Fund, the investment adviser voluntarily
agreed to maintain the expenses of the Fund, exclusive of management and distribution and service fees, at not more than
1.50% of the Fund's average daily net assets. If these fees had been incurred by the Fund and other exenses had not been
limited, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $(0.13) $(0.06) $(0.01) $(0.06) $ 0.01
Ratios (to average net assets):
Expenses## 1.87% 1.92% 2.97%+ 1.37% 1.36%+
Net investment income (loss) (0.94)% (0.53)% (0.16)%+ (0.45)% 0.08%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
BLUE CHIP FUND AUGUST 31, 1998 AUGUST 31, 1997* AUGUST 31, 1998 AUGUST 31, 1997*
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.77 $10.00 $11.77 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.01) $ 0.02 $(0.01) $ 0.02
Net realized and unrealized gain
on investments and foreign
currency transactions 1.20 1.75 1.21 1.75
------ ------ ------ ------
Total from investment
operations $ 1.19 $ 1.77 $ 1.20 $ 1.77
------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.02) $ -- $(0.02) $ --
From net realized gain on
investments and foreign
currency transactions (0.33) -- (0.33) --
------ ------ ------ ------
Total distributions declared
to shareholders $(0.35) -- $(0.35) --
------ ------ ------ ------
Net asset value - end of period $12.61 $11.77 $12.62 $11.77
====== ====== ====== ======
Total return 10.19% 17.70%++ 10.28% 17.70%++
Ratios (to average net assets)
/Supplemental data(S):
Expenses 1.50%### 1.50%+ 1.50%### 1.50%+
Net investment income (loss) (0.11)% 0.24%+ (0.08)% 0.24%+
Portfolio turnover 39% 32% 39% 32%
Net assets at end of period
(000 omitted) $507 $486 $111 $241
* For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
### The Fund's expenses without reduction for fees paid indirectly for both Class A and Class I for the period ended August
31, 1998 would have been 1.54%.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain the expenses of the Fund,
exclusive of management and distribution fees, at not more than 1.50% of the Fund's average daily net assets. The
investment adviser and the distributor voluntarily waived their fees for the periods indicated. If these fees had not been
waived and/or if actual expenses had been over/under this limitation, net investment loss per share and the ratios would
have been:
Net investment loss $(0.34) $(0.26) $(0.27) $(0.23)
Ratios (to average net assets):
Expenses## 3.93% 5.04%+ 3.43% 4.54%+
Net investment loss (2.50)% (3.25)%+ (1.97)% (2.80)%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
CONVERTIBLE SECURITIES FUND AUGUST 31, 1998 AUGUST 31, 1997* AUGUST 31, 1998 AUGUST 31, 1997*
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.48 $10.00 $11.47 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.29 $ 0.25 $ 0.30 $ 0.26
Net realized and unrealized gain
(loss) on investments (0.51) 1.23 (0.52) 1.21
------ ------ ------ ------
Total from investment operations $(0.22) $ 1.48 $(0.22) $ 1.47
------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.31) $ -- $(0.31) $ --
From net realized gain on investments
and foreign currency transactions (0.25) -- (0.25) --
------ ------ ------ ------
Total distributions declared
to shareholders $(0.56) $ -- $(0.56) $ --
------ ------ ------ ------
Net asset value - end of period $10.70 $11.48 $10.69 $11.47
====== ====== ====== ======
Total return (1.90)% 14.70%++ (2.00)% 14.60%++
Ratios (to average net assets)
/Supplemental data(S):
Expenses### 1.50% 1.50%+ 1.50% 1.50%+
Net investment income 2.38% 3.16%+ 2.38% 3.19%+
Portfolio turnover 89% 76% 89% 76%
Net assets at end of period
(000 omitted) $565 $577 $2 $64
* For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
### The Fund's expenses without reduction for fees paid indirectly for both Class A and Class I for the period ended August
31, 1998 would have been 1.53%.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain the expenses of the Fund,
exclusive of management and distribution fees, at not more than 1.50% of the Fund's average daily net assets. The
investment adviser and the distributor voluntarily waived their fees for the periods indicated. If these fees had not been
waived and if actual expenses had been over/under this limitation, the net investment income (loss) per share and the
ratios would have been:
Net investment income (loss) $(0.01) $(0.04) $ 0.01 $ --
Ratios (to average net assets):
Expenses## 4.81% 5.19%+ 4.31% 4.69%+
Net investment loss (0.93)% (0.53)%+ (0.43)% -- +
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
SCIENCE AND TECHNOLOGY FUND AUGUST 31, 1998 AUGUST 31, 1997* AUGUST 31, 1998 AUGUST 31, 1997*
- --------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $12.53 $10.00 $12.53 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.03) $ 0.84 $(0.02) $ 1.05
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (0.10) 1.69 (0.10) 1.48
------ ------ ------ ------
Total from investment operations $(0.13) $ 2.53 $(0.12) $ 2.53
------ ------ ------ ------
Less distributions declared to
shareholders from net
investment income $(0.91) $ -- $(0.91) $ --
------ ------ ------ ------
Net asset value - end of period $11.49 $12.53 $11.50 $12.53
====== ====== ====== ======
Total return (0.61)% 14.70%++ (0.61)% 25.30%++
Ratios (to average net assets)
/Supplemental data(S):
Expenses## 0.88% 1.40%+ 0.88% 1.41%+
Net investment income (loss) (0.19)% 10.73%+ (0.18)% 13.11%+
Portfolio turnover 29% 792% 29% 792%
Net assets at end of period
(000 omitted) $1,045 $882 $1,796 $1,637
* For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
(S) The investment adviser and the distributor voluntarily waived their fees for the periods indicated. If these fees had been
incurred by the Fund, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $(0.21) $ 0.73 $(0.20) $ 0.98
Ratios (to average net assets):
Expenses## 2.18% 2.77%+ 1.68% 2.28%+
Net investment income (loss) (1.49)% 9.36%+ (0.98)% 12.24%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PERIOD ENDED
REAL ESTATE INVESTMENT FUND AUGUST 31, 1998*
- -------------------------------------------------------------------------------------------------------
CLASS A CLASS I
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00 $10.00
------ ------
Income from investment operations# -
Net investment income(S) $ 0.17 $ 0.17
Net realized and unrealized loss on investments (1.91) (1.91)
------ ------
Total from investment operations $(1.74) $(1.74)
------ ------
Net asset value - end of period $ 8.26 $ 8.26
====== ======
Total return (17.40)%++ (17.40)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses### 1.65%+ 1.65%+
Net investment income 3.87%+ 3.76%+
Portfolio turnover 25% 25%
Net assets at end of period (000 omitted) $446 $73
* For the period from the commencement of the Fund's investment operations, March 17, 1998, through
August 31, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
### The Fund's expenses without reduction for fees paid indirectly for both Class A and Class I for the
period ended August 31, 1998 would have been 1.68%.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain the
expenses of the Fund, exclusive of management and distribution fees at not more than 1.65% of the
Fund's average daily net assets. The investment adviser and the distributor voluntarily waived their
fees for the period indicated. If these fees had been incurred by the Fund and other expenses had
not been limited, the net investment loss per share and the ratios would have been:
Net investment loss $(0.09) $(0.07)
Ratios (to average net assets):
Expenses## 7.39%+ 7.04%+
Net investment loss (1.87)%+ (1.63)%+
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Core Growth Fund, MFS Blue Chip Fund, MFS Convertible Securities Fund, MFS
Science and Technology Fund, and MFS Real Estate Investment Fund are
diversified series of MFS Series Trust I (the Trust), and MFS Special
Opportunities Fund is a non-diversified series of the Trust. The Trust is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts 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.
Deferred Organization Expenses - Costs incurred by the Core Growth Fund and
the Special Opportunities Fund in connection with their organization have been
deferred and are being amortized on a straight-line basis over a five-year
period beginning on the date of commencement of Fund operations.
Forward Foreign Currency Exchange Contracts - Each Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. Each Fund may enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, each Fund may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. Each Fund may also use contracts in a manner intended
to protect foreign currency-denominated securities from declines in value due
to unfavorable exchange rate movements. For non-hedging purposes, each Fund
may enter into contracts with the intent of changing the relative exposure of
its portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
Short Sales - The Special Opportunities Fund, the Convertible Securities Fund,
and the Science and Technology Fund may enter into short sales. A short sale
transaction involves selling a security which the Fund does not own with the
intent of purchasing it later at a lower price. The Fund will realize a gain
if the security price decreases and a loss if the security price increases
between the date of the short sale and the date on which the Fund must replace
the borrowed security. Losses can exceed the proceeds from short sales and can
be greater than losses from the actual purchase of a security. The amount of
any gain will be decreased, and the amount of any loss increased, by the
amount of the premium, dividends, or interest the Fund may be required to pay
in connection with a short sale. Whenever the Fund engages in short sales, its
custodian segregates cash or marketable securities in an amount that, when
combined with the amount of proceeds from the short sale deposited with the
broker, at least equals the current market value of the security sold short.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
The Special Opportunities Fund and the Convertible Securities Fund can invest
up to 100% of its portfolio in high-yield securities rated below investment
grade. Investments in high-yield securities involve greater degrees of credit
and market risk than investments in higher-rated securities and tend to be
more sensitive to economic conditions.
These Funds use the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. Legal fees and other related expenses incurred to
preserve and protect the value of a security owned are added to the cost of
the security; other legal fees are expensed. Capital infusions, which are
generally non-recurring, incurred to protect or enhance the value of high-
yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - Each Fund's custody fee is calculated as a percentage of
the Fund's month end 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 - Each Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. Each Fund files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on 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. Each Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended August 31, 1998, the following amounts were reclassified among
accumulated undistributed net investment income, accumulated net realized gain
on investments, and paid-in capital due to differences between book and tax
accounting for currency transactions and net investment losses. These changes
had no effect on the net assets or net asset values per share.
<TABLE>
<CAPTION>
SPECIAL
INCREASE (DECREASE) CORE GROWTH FUND OPPORTUNITIES FUND BLUE CHIP FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paid-in capital $ (13) $ (128) $ --
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions $(5,910) $ 1,099 $(807)
Accumulated undistributed net investment income
(loss) $ 5,923 $ (971) $ 807
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE SCIENCE AND REAL ESTATE
INCREASE (DECREASE) SECURITIES FUND TECHNOLOGY FUND INVESTMENT FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paid-in capital $ 33 $ (10) $ --
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions $ 22 $(9,238) $ --
Accumulated undistributed net investment income
(loss) $ (55) $ 9,248 $ --
</TABLE>
At August 31, 1998, the Real Estate Investment Fund, for federal income tax
purposes, had a capital loss carryforward of $1,253 which may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on August 31, 2006.
Multiple Classes of Shares of Beneficial Interest - Each Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of each 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 - Each Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65% of
average daily net assets for the Blue Chip Fund and the Convertible Securities
Fund, at an annual rate of 0.75% of average daily net assets for the Core Growth
Fund, the Special Opportunities Fund and the Science and Technology Fund, and at
an annual rate of 1.00% of average daily net assets for the Real Estate
Investment Fund. The investment adviser has voluntarily agreed to waive its fee,
which is reflected as a reduction of expenses in the Statements of Operations.
The Blue Chip Fund, the Convertible Securities Fund and the Real Estate
Investment Fund have a temporary expense reimbursement agreement whereby MFS
has voluntarily agreed to pay all of each Fund's operating expenses, exclusive
of management, distribution, and service fees. The Blue Chip Fund, the
Convertible Securities Fund and the Real Estate Investment Fund, in turn will
pay MFS an expense reimbursement fee not greater than 1.50%, 1.50%, and 1.65%,
respectively, of average daily net assets. To the extent that the expense
reimbursement fee exceeds each Fund's actual expenses, the excess will be
applied to amounts paid by MFS in prior years. At August 31, 1998, the
aggregate unreimbursed expenses owed to MFS by each Fund amounted to:
CONVERTIBLE REAL ESTATE
BLUE CHIP FUND SECURITIES FUND INVESTMENT FUND
-------------------------------------------------------------
$19,393 $23,326 $11,706
Each 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 Trustees are currently
not receiving any payments for their services to each Fund.
Administrator - Each Fund has an administrative services agreement with MFS to
provide each Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Fund pays MFS an administrative fee
at the following annual percentages of each 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%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales on Class A shares of each Fund for the year
ended August 31, 1998.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's distribution plan provides that each Fund will pay MFD up to 0.50%
per annum (0.35% per annum in the case of the Real Estate Investment Fund) of
its average daily net assets attributable to Class A shares in order that MFD
may pay expenses on behalf of each Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25%
per annum of each Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer and a distribution fee
to MFD of up to 0.25% per annum (0.10% per annum in the case of the Real
Estate Investment Fund) of each Fund's average daily net assets attributable
to Class A shares. Distribution and service fees under the Class A
distribution plan are currently being waived.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase.
There were no contingent deferred sales charges imposed on Class A shares of
each Fund during the year ended August 31, 1998.
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 each Fund's average daily net assets at an effective annual
rate of 0.1125%. Prior to January 1, 1998, the fee was calculated as a
percentage of each Fund's average daily net assets at an effective annual rate
of 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
<TABLE>
<CAPTION>
SPECIAL
CORE GROWTH FUND OPPORTUNITIES FUND BLUE CHIP FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases
- ---------
U.S. government securities $ 50,759 $ 39,932 $ --
---------- ---------- --------
Investments (non-U.S. government securities) $7,845,497 $4,561,719 $294,937
---------- ---------- --------
Sales
- -----
U.S. government securities $ 52,169 $ 8,531 $ --
---------- ---------- --------
Investments (non-U.S. government securities) $8,088,990 $4,764,222 $495,648
---------- ---------- --------
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE SCIENCE AND REAL ESTATE
SECURITIES FUND TECHNOLOGY FUND INVESTMENT FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases
- ---------
Investments (non-U.S. government securities) $ 573,792 $1,211,014 $728,254
---------- ---------- --------
Sales
- -----
Investments (non-U.S. government securities) $ 603,041 $ 787,810 $132,709
---------- ---------- --------
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by each Fund, as computed on a federal income tax basis, are
as follows:
<TABLE>
<CAPTION>
SPECIAL
CORE GROWTH FUND OPPORTUNITIES FUND BLUE CHIP FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate cost $2,687,140 $3,599,066 $532,949
---------- ---------- --------
Gross unrealized appreciation $ 264,518 $ 512,932 $115,971
Gross unrealized depreciation (242,913) (745,397) (33,911)
---------- ---------- --------
Net unrealized appreciation (depreciation) $ 21,605 $ (232,465) $ 82,060
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE SCIENCE AND REAL ESTATE
SECURITIES FUND TECHNOLOGY FUND INVESTMENT FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate cost $ 558,863 $2,793,692 $ 634,147
---------- ---------- ---------
Gross unrealized appreciation $ 58,479 $ 560,785 $ 38
Gross unrealized depreciation (64,969) (483,668) (120,668)
---------- ---------- ---------
Net unrealized appreciation (depreciation) $ (6,490) $ 77,117 $(120,630)
========== ========== =========
</TABLE>
(5) Shares of Beneficial Interest
Each Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1998
---------------------------------------------------------------------------------------
SPECIAL
CORE GROWTH FUND OPPORTUNITIES FUND BLUE CHIP FUND
------------------------ ----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 26,139 $ 410,338 4,292 $ 59,536 274 $ 3,617
Shares issued to
shareholders in
reinvestment of
distributions 13,095 178,614 21,613 253,304 1,150 14,153
Shares reacquired (2,765) (46,240) (7,623) (106,381) (2,534) (33,517)
------- ---------- ------- ---------- ------- ---------
Net increase
(decrease) 36,469 $ 542,712 18,282 $ 206,459 (1,110) $ (15,747)
======= ========== ======= ========== ======= =========
</TABLE>
<TABLE>
Class A Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1998
----------------------------------------------------------------------------------------
CONVERTIBLE SCIENCE AND REAL ESTATE
SECURITIES FUND TECHNOLOGY FUND INVESTMENT FUND*
------------------------ ------------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 49 $ 600 16,241 $ 224,443 54,068 $ 543,110
Shares issued to
shareholders in
reinvestment of
distributions 2,542 27,862 5,932 64,123 -- --
Shares reacquired (40) (506) (1,612) (21,835) (15) (149)
------- ---------- ------- ---------- ------- ---------
Net increase 2,551 $ 27,956 20,561 $ 266,731 54,053 $ 542,961
======= ========== ======= ========== ======= =========
*For the period from the commencement of the Fund's investment operations, March 17, 1998, through August 31, 1998.
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1998
---------------------------------------------------------------------------------------
SPECIAL
CORE GROWTH FUND OPPORTUNITIES FUND BLUE CHIP FUND
------------------------ ----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 9,354 $ 153,982 17,705 $ 250,453 4,857 $ 63,740
Shares issued to
shareholders in
reinvestment of
distributions 19,898 271,610 18,020 211,913 532 6,555
Shares reacquired (38,513) (638,627) (52,385) (741,110) (17,081) (237,783)
------- ---------- ------- ---------- ------- ---------
Net decrease (9,261) $ (213,035) (16,660) $ (278,744) (11,692) $(167,488)
======= ========== ======= ========== ======= =========
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1998
---------------------------------------------------------------------------------------
CONVERTIBLE SCIENCE AND REAL ESTATE
SECURITIES FUND TECHNOLOGY FUND INVESTMENT FUND*
------------------------ ----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 370 $ 4,496 47,806 $ 668,497 8,814 $ 87,856
Shares issued to
shareholders in
reinvestment of
distributions 180 1,976 10,721 115,891 -- --
Shares reacquired (5,895) (71,732) (32,870) (444,296) (24) (228)
------- ---------- ------- ---------- ------- ---------
Net increase
(decrease) (5,345) $ (65,260) 25,657 $ 340,092 8,790 $ 87,628
======= ========== ======= ========== ======= =========
</TABLE>
<TABLE>
Class A Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1997
---------------------------------------------------------------------------------------
SPECIAL
CORE GROWTH FUND OPPORTUNITIES FUND BLUE CHIP FUND**
------------------------ ----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 59,769 $ 808,314 80,611 $ 941,341 46,967 $ 474,750
Shares issued to
shareholders in
reinvestment of
distributions 8,292 106,552 21,566 241,330 -- --
Shares reacquired (56,691) (726,457) (160,079) (1,817,353) (5,651) (56,185)
------- ---------- ------- ---------- ------- ---------
Net increase
(decrease) 11,370 $ 188,409 (57,902) $ (634,682) 41,316 $ 418,565
======= ========== ======= ========== ======= =========
</TABLE>
<TABLE>
Class A Shares
<CAPTION>
PERIOD ENDED AUGUST 31, 1997**
-------------------------------------------------------
CONVERTIBLE SCIENCE AND
SECURITIES FUND** TECHNOLOGY FUND**
------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 50,444 $ 504,497 49,967 $ 474,749
Shares reacquired (178) (1,847) (5,651) (56,184)
------- ---------- ------- ---------
Net increase 50,266 $ 502,650 44,316 $ 418,565
======= ========== ======= =========
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1997
--------------------------------------------------------------------------------------------
SPECIAL
CORE GROWTH FUND OPPORTUNITIES FUND BLUE CHIP FUND**
---------------------------- ----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 113,207 $1,465,484 163,990 $1,857,489 24,471 $ 246,209
Shares reacquired (6,150) (90,631) (14,760) (177,865) (3,957) (46,799)
------- ---------- ------- ---------- ------- ---------
Net increase 107,057 $1,374,853 149,230 $1,679,624 20,514 $ 199,410
======= ========== ======= ========== ======= =========
*For the period from the commencement of the Fund's investment operations, March 17, 1998, through August 31, 1998.
**For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
PERIOD ENDED AUGUST 31, 1997**
-------------------------------------------------------
CONVERTIBLE SCIENCE AND
SECURITIES FUND** TECHNOLOGY FUND**
------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,555 $ 55,341 164,633 $1,659,463
Shares reacquired -- -- (34,025) (355,226)
------- ---------- ------- ----------
Net increase 5,555 $ 55,341 130,608 $1,304,237
======= ========== ======= ==========
**For the period from the commencement of the Fund's investment operations, January 2, 1997, through August 31, 1997.
</TABLE>
(6) Line of Credit
Each Fund and other affiliated funds participate in an $805 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 each Fund for the year ended August 31, 1998, was as follows:
CORE SPECIAL BLUE CONVERTIBLE SCIENCE AND REAL ESTATE
GROWTH OPPORTUNITIES CHIP SECURITIES TECHNOLOGY INVESTMENT
FUND FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------
$23 $26 $2 $4 $22 $ --
(7) Restricted Security
Each Fund may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At August 31,
1998, the Special Opportunities Fund owned the following restricted security
(constituting 0.04% of net assets) which may not be publicly sold without
registration under the Securities Act of 1933. The Fund does not have the
right to demand that such securities be registered. The value of this security
is determined by valuations furnished by dealers or by a pricing service, or
if not available, is valued at fair value as determined in good faith by or at
the direction of the Trustees.
<TABLE>
<CAPTION>
DESCRIPTION DATE OF ACQUISITION SHARES COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Special Opportunities Fund
Hong Leong Finance Ltd. 3/26/98 - 4/06/98 2,000 $3,191 $1,185
</TABLE>
(8) Subsequent Event (Unaudited)
On October 14, 1998, the Trustees voted to terminate and liquidate the Real
Estate Investment Fund effective October 30, 1998.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust I and Shareholders of MFS Core Growth
Fund, MFS Special Opportunities Fund, MFS Blue Chip Fund, MFS Convertible
Securities Fund, MFS Science and Technology Fund and MFS Real Estate
Investment Fund:
We have audited the accompanying statements of assets and liabilities of MFS
Core Growth Fund, MFS Special Opportunities Fund, MFS Blue Chip Fund, MFS
Convertible Securities Fund, MFS Science and Technology Fund and MFS Real
Estate Investment Fund (the Funds) (six of the portfolios constituting MFS
Series Trust I) including the schedules of portfolio investments as of August
31, 1998, and the related statements of operations, the statements of changes
in net assets and the financial highlights for the periods indicated herein.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 1998, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Core Growth Fund, MFS Special Opportunities Fund, MFS Blue Chip Fund, MFS
Convertible Securities Fund, MFS Science and Technology Fund and MFS Real
Estate Investment Fund at August 31, 1998, and the results their operations,
the changes in their net assets, and the financial highlights for the periods
indicated herein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
October 7, 1998
<PAGE>
FEDERAL TAX INFORMATION
In January 1999, shareholders will be mailed a Form 1099 reporting the federal
tax status of all distributions paid during the calendar year 1998.
The following Funds have designated capital gain dividends:
MFS Core Growth Fund $ 5,494
MFS Special Opportunities Fund $81,622
For the year ended August 31, 1998, the amount of distributions from income
eligible for the 70% dividends-received deduction for the Funds was:
FUND DIVIDENDS-RECEIVED DEDUCTION
- --------------------------------------------------------------------------------
MFS Core Growth Fund 2.64%
MFS Special Opportunities Fund 4.84%
MFS Blue Chip Fund 48.57%
MFS Convertible Securities Fund 91.49%
MFS Science and Technology Fund 4.16%
---------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) CORE GROWTH FUND
MFS(R) SPECIAL OPPORTUNITIES FUND
MFS(R) BLUE CHIP FUND
MFS(R) CONVERTIBLE SECURITIES FUND
MFS(R) SCIENCE AND TECHNOLOGY FUND
MFS(R) REAL ESTATE INVESTMENT FUND
[Logo] MFS(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(C) 1998 MFS FUND DISTRIBUTORS, INC. 500 BOYLSTON STREET, BOSTON, MA 02116-3741
INC-2 10/98 2.8M
