<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) MANAGED
SECTORS FUND
SEMIANNUAL REPORT o FEBRUARY 29, 2000
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MUTUAL FUND GIFT KITS (see page 30)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 19
Notes to Financial Statements ............................................. 25
Trustees and Officers ..................................................... 33
MFS(R) ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no
doubt that Internet-delivered information and brokerage services enable
individual investors to be well informed and to trade at bargain prices. But
we believe the numbers and facts argue that, for most of us, mutual funds
purchased through an investment professional will continue to be one of the
best products for long-term investing in this new millennium.
According to a survey by the Investment Company Institute, the national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of
course that doesn't tell us how well they did owning those funds or stocks,
but another statistic gives us a clue. In the third quarter of 1999, during a
period of volatility in the greatest bull market in history, a quarter of the
7,500 stocks tracked by Morningstar, a popular rating service, lost more than
20% of their value. But during the same period, fewer than 1% of the mutual
funds tracked by Morningstar -- 6 out of 10,000 funds -- were down by a
similar amount.(2) So an investor's chance of picking one of those losing
stocks was about 25 times greater than his or her chance of picking an equally
losing fund.
The numbers also show that a majority of Americans seek professional advice
when buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through an investment professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up as well as down markets. And for many
investors, working with an investment professional may be the best way to
develop a plan. Although the Internet abounds with calculators for developing
all sorts of investment plans, none has your investment professional's high
level of experience and an understanding of your unique situation. And no
calculator can counsel you during a down market, when you may be tempted to
abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns dozens
or even hundreds of holdings is better positioned to survive a disappointment
in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost inevitable
part of investing. Few mutual funds, of course, are going to be up when the
overall market is down. But as the numbers above from the third quarter of
1999 demonstrate, mutual funds may be less likely to suffer the extreme
downturns experienced by a large number of individual holdings when the market
heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights. The
diversification and professional management of mutual funds help make them
inherently less risky than individual stock picking, and funds are available
in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
March 15, 2000
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(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore
Sun's Dollars and Sense Conference, 10/99. In the period 7/1/99 through
9/ 30/99, of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or
more; of the 10,000 mutual funds tracked by Morningstar, six lost 20% or
more. Mutual fund results are at net asset value; if sales charges had
been reflected, results would have been lower.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Toni Y. Shimura]
Toni Y. Shimura
For the six months ended February 29, 2000, Class A shares of the Fund
provided a total return of 86.93%, Class B shares 86.25%, and Class I shares
87.18%. These returns, which include the reinvestment of any distributions but
exclude the effects of any sales charges, compare to a 4.11% return over the
same period for the Fund's benchmark, the Standard & Poor's 500 Composite
Index (the S&P 500), a popular, unmanaged index of common stock total return
performance. The Fund's returns also compare to a 56.37% return for the
average multi-cap growth fund tracked by Lipper Inc., an independent firm that
reports mutual fund performance.
Q. HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS?
A. We are pleased to report that the Fund has shown impressive performance,
both absolutely and as compared to our benchmarks. We attribute this success
to our underlying investment philosophy. Our goal for the portfolio is to
try to identify the best companies in the best industries -- companies that
are leaders in industries that are experiencing accelerating growth driven
by positive secular trends. We actively seek out such high- growth
companies, especially those we believe have the potential for generating
positive earnings surprises that exceed company predictions or Wall Street
expectations. We generally focus on four or five sectors at any one time.
Q. WHAT SPECIFIC AREAS DROVE THE FUND'S RECENT OUTPERFORMANCE?
A. Over the past six months, we have tended to focus on three general areas:
telecommunications, technology with a telecommunications focus, and emerging
pharmaceuticals and biotechnology. Furthermore, in our search for companies
with the strongest relative earnings growth, we avoided companies whose
earnings growth rates were slowing or plateauing -- for example, financial
services, where higher interest rates could put a damper on earnings, as
well as many of the traditional steady earners such as drugstores,
supermarkets, and office supply stores. It was our concern that the market
would perceive these industries as being vulnerable to online- related
competition. Our decision to underweight these areas freed up resources to
invest in faster-growing companies and industries that we feel might benefit
from a recovery in global growth.
Q. COULD YOU ELABORATE ON YOUR INVESTMENTS IN THE TELECOMMUNICATIONS AREA?
A. In telecommunications, we have sought out companies in the United States,
Europe, and Japan, where we anticipated an accelerating shift to wireless
communications. Cellular companies we own shares of include Bouygues, one of
the largest French cellular operators; Sonera, one of the leading Finnish
cellular companies; and VoiceStream, one of the few remaining U.S. wireless
entities not yet owned by a large telecommunications company. Although we
believe each of these companies can continue to do well on its own, we
expect that some of them may become acquisition targets for larger companies
aiming for global cellular coverage. If that occurs, we feel our portfolio
may benefit from the takeover premium that has often affected stock prices
in this industry.
Q. WHAT TECHNOLOGY INVESTMENTS CONTRIBUTED TO PERFORMANCE DURING THE PERIOD?
A. In the area of technology, our premier holding has been QUALCOMM. This
company owns patents for the Code Division Multiple Access (CDMA) technology
standard used for wireless communications in many parts of the world. As a
result of its patent position, QUALCOMM gets a royalty on the communications
chips and on the handsets sold. Since a large part of its revenue comes from
licensing its patents, the company's earnings have benefited from high
margins and high barriers to entry. However, despite its intellectual
property strength, the company's stock had languished in recent years, in
part because of an ongoing lawsuit with Ericsson over technology standards.
Believing that the lawsuit would be settled in QUALCOMM's favor, we began to
invest in it early last year. When the lawsuit was in fact settled
favorably, and when global wireless growth turned out to be greater than
expected, the stock responded spectacularly, amply rewarding our early
endorsement. Since wireless penetration is only at about 30% of telephone
users in the United States, as compared to 50% - 60% in Europe, we believe
that there will continue to be strong demand for products using QUALCOMM's
technology(1). We further anticipate that business in this industry will
expand in the future, as more devices and technologies become available for
accessing data over the Internet. Thus, we continue to look to the
telecommunications-related technology sector to find fast-growing, dynamic
companies.
Q. COULD YOU GIVE AN EXAMPLE THAT ILLUSTRATES HOW YOU FEEL MFS ORIGINAL
RESEARCH(R) HAS UNCOVERED OPPORTUNITY IN BIOTECHNOLOGY COMPANIES?
A. In the biotechnology area, our research identified MedImmune as a company
with great potential for accelerating growth. Its drug Synagis is used to
treat a common form of viral pneumonia in premature infants; it may also be
useful for treating lung-impaired elderly patients. Most importantly, our
investigation has led us to conclude that no competition exists or is
anticipated. In our opinion, the potential worldwide market for this product
alone is $2.5 billion. Since MedImmune's sales in 1999 were less than $400
million, we believe there is considerable potential for earnings growth over
the next few years. We continue to seek out emerging pharmaceutical
companies positioned as MedImmune is, with effective products directed
toward a substantial but underserved market. We believe the health care
sector is likely to provide exciting opportunities for the foreseeable
future.
Q. HOW IS THE PORTFOLIO POSITIONED FOR THE REST OF 2000 AND BEYOND?
A. Going forward, we believe that the Fund's challenge will be to continue its
winning performance despite a more demanding environment of fluctuating
interest rates and high stock valuations. To try to accomplish this, we will
continue with our present strategy of investing in what we see as the best
companies in the fastest-growing industries, looking for stocks where we
believe positive earnings surprises are likely and watching out for
overpriced stocks where an earnings shortfall may prove damaging. We will
continue to emphasize those sectors that we believe offer the greatest
opportunity, as we have done with telecommunications, technology, and health
care. In our view, this year holds the potential for a corrective period,
especially with increasing interest rates. A correction may be precipitous,
since valuations in many stocks are so extended. However, our focus on those
special companies with robust growth in dynamic industries may allow us to
hold to a successful course despite economic uncertainties.
/s/ Toni Y. Shimura
Toni Y. Shimura
Portfolio Manager
(1) Source: MFS research.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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TONI Y. SHIMURA IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND PORTFOLIO MANAGER OF MFS(R) MANAGED SECTORS FUND AND THE MANAGED
SECTORS SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS. SHE IS
ALSO A PORTFOLIO MANAGER OF MFS(R) GLOBAL GROWTH FUND, MFS(R) EMERGING
GROWTH SERIES (PART OF MFS(R) VARIABLE INSURANCE TRUST(SM)), AND THE
GLOBAL GROWTH SERIES AND THE EMERGING GROWTH SERIES, BOTH OFFERED
THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS.
MS. SHIMURA JOINED MFS IN 1987 AS A RESEARCH ANALYST. SHE WAS NAMED
INVESTMENT OFFICER IN 1990, ASSISTANT VICE PRESIDENT IN 1991, VICE
PRESIDENT IN 1992, PORTFOLIO MANAGER IN 1993, AND SENIOR VICE PRESIDENT
IN 1999. MS. SHIMURA IS A GRADUATE OF WELLESLEY COLLEGE AND THE SLOAN
SCHOOL OF MANAGEMENT OF THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, COMPANY-ORIENTED,
BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your investment professional, or by calling MFS
at 1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS TO PROVIDE CAPITAL APPRECIATION. DIVIDEND
INCOME, IF ANY, IS INCIDENTAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 20, 1993
CLASS B DECEMBER 29, 1986
CLASS I JANUARY 2, 1997
SIZE: $925.1 MILLION NET ASSETS AS OF FEBRUARY 29, 2000
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PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes to
Performance Summary.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH FEBRUARY 29, 2000
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return
Excluding Sales Charge +86.93% +107.63% +190.59% +338.76% +646.19%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Excluding Sales Charge -- +107.63% + 42.70% + 34.41% + 22.26%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Including Sales Charge -- + 95.69% + 39.91% + 32.83% + 21.54%
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return
Excluding Sales Charge +86.25% +106.28% +184.91% +323.96% +618.03%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Excluding Sales Charge -- +106.28% + 41.77% + 33.50% + 21.79%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Including Sales Charge -- +102.28% + 41.27% + 33.37% + 21.79%
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return
Excluding Sales Charge +87.18% +108.44% +193.55% +337.84% +641.54%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
Excluding Sales Charge -- +108.44% + 43.18% + 34.36% + 22.18%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance
Including Sales Charge takes into account the deduction of the applicable
contingent deferred sales charge (CDSC), which declines over six years from 4%
to 0%. Class I shares have no sales charge and are only available to certain
institutional investors.
Class A and I share performance includes the performance of the Fund's Class B
shares for the periods prior to their inception (blended performance). Class A
blended performance has been adjusted to take into account the initial sales
charge applicable to Class A shares rather than the CDSC applicable to Class B
shares. Class I blended performance has been adjusted to account for the fact
that Class I shares have no sales charge. These blended performance figures
have not been adjusted to take into account differences in class-specific
operating expenses. Because operating expenses for Class A and I shares are
lower than those of Class B shares, the blended Class A and I share
performance is lower than it would have been had Class A and I shares been
offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers,
without which the restults would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and capital
gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
The Fund may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
See the prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF FEBRUARY 29, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 47.4%
UTILITIES & COMMUNICATIONS 21.8%
HEALTH CARE 16.9%
ENERGY 2.9%
LEISURE 2.0%
<TABLE>
TOP 10 STOCK HOLDINGS
<S> <C>
ORACLE CORP. 4.6% SONERA OYJ 2.0%
Database software developer and manufacturer Finish cellular network company
JDS UNIPHASE CORP. 4.6% CIENA CORP. 2.0%
Developer and manufacturer of fiber-optic Optical networking equipment company
communications components
ARM HOLDINGS PLC 2.0%
QUALCOMM INC. 3.2% British microprocessor design and licensing
Communications technologies and products company company
BOUYGUES S.A. 2.4% IMMUNEX CORP. 1.9%
French cellular network company Biopharmaceutical manufacturer
NORTEL NETWORKS CORP. 2.2% SUN MICROSYSTEMS INC. 1.8%
Designer and developer of data and telephone Computer systems company
networks
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 29, 2000
<CAPTION>
Stocks - 91.9%
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ISSUER SHARES VALUE
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<S> <C> <C>
Energy - 2.9%
Baker Hughes, Inc. 44,400 $ 1,148,850
BJ Services Co.* 16,400 935,825
Cooper Cameron Corp.* 27,600 1,524,900
ENSCO International, Inc. 96,400 2,916,100
Global Marine, Inc.* 40,000 897,500
Halliburton Co. 51,500 1,966,656
Nabors Industries, Inc.* 68,400 2,453,850
Noble Drilling Corp.* 125,000 4,500,000
Schlumberger Ltd. 1,400 103,425
Smith International, Inc.* 63,400 3,974,388
Transocean Sedco Forex, Inc.* 95,500 3,766,281
Weatherford International, Inc.* 66,800 3,006,000
------------
$ 27,193,775
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Financial Services
eSPEED, Inc.* 1,400 $ 86,713
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Industrial Goods & Services - 0.9%
Caminus Corp.* 1,010 $ 23,861
Teletech Holdings, Inc.* 27,300 1,033,987
Vivendi (France) 60,000 7,057,211
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$ 8,115,059
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Leisure - 2.0%
AT&T Corp.* 17,000 $ 888,250
Classic Communications, Inc.* 1,210 26,015
Clear Channel Communications, Inc.* 813 54,166
EchoStar Communications Corp.* 25,600 2,918,400
Grupo Television S.A. de C.V., GDR (Mexico)* 40,900 3,141,631
Harris Interactive, Inc.* 460 4,485
L90, Inc.* 3,930 81,793
Lifeminders.com, Inc.* 430 22,844
Mediacom Communications Corp.* 8,360 142,643
Mediaplex, Inc.* 530 44,255
Sirius Satellite Radio, Inc.* 14,700 896,700
Spanish Broadcasting Systems, Inc.* 4,050 77,456
United Pan - Europe Communications N.V. (Netherlands)* 25,100 4,952,306
UnitedGlobalCom, Inc.* 48,700 5,089,150
------------
$ 18,340,094
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Health Care - 16.9%
Abgenix, Inc.* 15,200 $ 4,896,300
Alkermes, Inc.* 58,400 11,205,500
Amgen, Inc.* 42,500 2,897,969
Antigenics Inc.* 880 39,600
Aspect Medical Systems, Inc.* 1,030 67,851
Aurora Biosciences Corp.* 19,000 2,033,000
Biogen, Inc.* 64,600 6,972,763
BioSource International, Inc.* 66,800 1,603,200
Celgene Corp.* 67,200 11,121,600
Cell Genesys, Inc.* 18,400 715,300
Cephalon, Inc. 35,100 2,333,053
Chiron Corp.* 18,600 930,000
Curagen Corp. 8,000 1,828,000
Cyberonics, Inc.* 24,100 614,550
Cytogen Corp. 161,400 2,824,500
Digene Corp. 15,100 681,388
eBenX, Inc.* 290 16,276
Emisphere Technologies, Inc. 13,100 734,419
Enzo Biochem, Inc.* 16,500 1,307,625
Gene Logic, Inc.* 75,800 9,048,625
Genentech, Inc.* 45,100 8,698,662
Human Genome Sciences, Inc.* 10,800 2,357,100
IDEC Pharmaceuticals Corp.* 15,300 2,155,388
Immunex Corp.* 80,400 15,873,975
Inhale Therapeutic Systems Co. 4,400 445,500
Matrix Pharmaceuticals Co. 45,200 785,350
Medarex, Inc. 29,900 4,858,750
MedicaLogic, Inc.* 810 30,071
MedImmune, Inc. 56,100 11,135,850
Merrill Lynch Biotech HOLDRs Trust 38,600 8,388,262
Myriad Genetics, Inc. 21,100 3,259,950
Neoforma.com, Inc.* 1,790 106,505
Neurocrine Biosciences, Inc. 21,300 788,100
PE Corp. (Celera Genomics Group) 3,000 732,000
PE Corp. (PE Biosystems Group) 88,700 9,357,850
Pharmacopeia, Inc. 39,900 2,715,694
Pharmacyclics, Inc. 20,900 1,668,081
Protein Design Labs, Inc. 5,700 1,426,069
QLT Phototherapeutics, Inc. (Canada)* 18,100 1,291,888
Sepracor, Inc.* 79,500 8,059,312
Sequenom, Inc.* 1,890 222,311
Shire Pharmaceuticals Group PLC (United Kingdom)* 48,100 2,308,800
Targeted Genetics Corp. 47,200 1,008,900
Teva Pharmaceutical Industries Ltd., ADR (Israel) 56,600 2,440,875
Vical, Inc. 40,900 2,415,656
Waters Corp.* 13,200 1,294,425
Xoma Ltd. 39,200 362,600
------------
$156,059,443
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Retail
Fogdog, Inc.* 470 $ 4,318
Tickets.com, Inc.* 1,275 17,372
Webvan Group, Inc.* 870 9,896
------------
$ 31,586
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Technology - 47.4%
724 Solutions, Inc. (Canada) 8,490 $ 1,598,242
Airnet Commerce Corp.* 1,120 65,520
American Superconductor Corp. 13,200 911,625
Analog Devices, Inc.* 72,900 11,445,300
Applied Materials, Inc.* 63,900 11,689,706
Applied Micro Circuits Corp.* 8,100 2,228,006
Apropos Technology, Inc.* 370 17,714
ARM Holdings PLC (United Kingdom)* 212,500 16,027,219
ARM Holdings PLC, ADR (United Kingdom)* 56,800 13,269,900
ASM International N.V. (Netherlands)* 57,700 1,882,462
ASM Lithography Holding N.V. (Netherlands)* 50,300 6,444,687
Atmel Corp.* 22,800 1,128,600
Avanex Corp.* 1,170 243,799
Avenue A, Inc.* 900 64,800
Banyan Systems, Inc.* 5,900 196,175
BEA Systems, Inc.* 4,200 531,563
Business Objects S.A., ADR (France)* 14,400 1,654,200
Cabletron Systems, Inc.* 49,900 2,445,100
Caliper Technologies Corp.* 15,440 2,745,425
China Common Corp.* 200 24,575
Chordiant Software, Inc.* 690 24,150
CIENA Corp.* 106,500 17,020,031
Cisco Systems, Inc.* 27,400 3,621,937
Cobalt Networks, Inc.* 390 37,343
Computer Associates International, Inc. 1,100 70,744
Computer Network Technology Corp.* 8,100 203,006
Conductus, Inc.* 53,000 3,551,000
Corning, Inc. 23,200 4,361,600
Digital Insight Corp.* 825 51,975
Digital Lightwave, Inc.* 42,900 3,571,425
Digital Microwave Corp. 38,900 1,298,287
DigitalThink, Inc.* 780 31,785
Ditech Communications Corp. 21,150 2,310,637
Documentum, Inc.* 10,400 784,550
E Tek Dynamics, Inc.* 2,100 573,825
Edwards (J.D.) & Co.* 2,400 97,500
Electro Scientific Industries, Inc.* 8,300 470,506
Eloquent, Inc.* 490 16,476
EMS Technologies, Inc. 4,900 120,050
Entrust Technologies, Inc.* 31,000 2,735,750
eOn Communications Corp.* 1,860 42,083
Ericsson LM, ADR (Sweden) 151,900 14,582,400
Extensity, Inc.* 700 50,750
F-Secure Oyj (Finland)* 600 39,335
FirePond, Inc.* 440 42,873
Foundry Networks, Inc.* 1,250 174,609
FreeMarkets, Inc.* 240 41,805
Gilat Satellite Networks Ltd.* 9,800 1,469,387
I2 Technologies, Inc.* 48,600 7,946,100
Immersion Corp.* 360 13,995
Infonautics Corp.* 8,900 86,775
Inforte Corp.* 250 20,109
Intel Corp. 40,000 4,520,000
Intermagnetics General Corp.* 20,500 525,313
Intersil Holding Corp.* 1,730 102,719
InterWAVE Communications International Ltd. (Bermuda)* 1,950 125,531
ISG International Software Group Ltd. (Israel)* 20,600 499,550
JDS Uniphase Corp.* 147,313 38,835,390
Keynote Systems, Inc.* 575 94,156
Koninklijke Philips Electronics N.V., ADR (Netherlands) 9,400 1,800,100
Lam Research Corp.* 34,300 5,355,087
Lightspan Partnership, Inc.* 1,200 13,200
LSI Logic Corp.* 88,300 5,656,719
Manugistics Group, Inc.* 18,200 1,033,988
McAfee.com Corp.* 1,260 42,998
MDSI Mobile Data Solutions, Inc. (Canada)* 13,900 755,813
Mercury Interactive Corp.* 13,400 1,291,425
Micron Technology, Inc.* 35,000 3,432,187
Microsoft Corp.* 900 80,438
Motorola, Inc. 69,700 11,883,850
National Semiconductor Corp.* * 106,400 7,993,300
net.Genesis Corp.* 210 11,931
NetIQ Corp.* 675 45,309
Network Appliance, Inc.* 31,800 6,002,250
Network Solutions, Inc.* 9,200 2,966,425
Niku Corp.* 1,360 93,840
Nokia Corp., ADR (Finland) 76,198 15,111,016
Nortel Networks Corp. 170,800 19,044,200
Novellus Systems, Inc.* 61,700 3,659,581
Oak Technology, Inc.* 23,400 427,050
OnDisplay, Inc.* 150 13,500
Oracle Corp.* 526,200 39,070,350
Organic, Inc.* 310 10,579
Peregrine Systems, Inc.* 24,800 1,354,700
Portal Software, Inc.* 11,000 826,375
Predictive Systems, Inc.* 150 9,113
PSINet, Inc.* 61,000 2,828,875
QLogic Corp.* 11,800 1,840,800
QUALCOMM, Inc.* 190,400 27,120,100
Quantum Effect Devices, Inc.* 890 85,774
RF Micro Devices, Inc.* 26,400 3,651,450
Sanmina Corp.* 500 58,531
SAP AG, ADR (Germany) 1,300 92,706
Siebel Systems, Inc.* 28,100 3,897,119
SkillSoft Corp.* 1,690 30,103
Smartdisk Corp. 250 14,219
Softbank Corp. (Japan) 1,400 2,038,959
SonicWall, Inc.* 380 34,390
Sony Corp. (Japan) 6,200 1,834,153
Sony Corp., ADR (Japan) 24,200 7,583,675
STMicroelectronics N.V. (Netherlands)* 19,800 3,960,000
Sun Microsystems, Inc.* 164,080 15,628,620
Taiwan Semiconductor Manufacturing Co. Ltd., ADR
(Taiwan)* 42,800 2,559,975
Tanning Technology Corp.* 900 38,813
Tekelec Co.* 50,900 2,621,350
Teradyne, Inc.* 53,900 4,689,300
Texas Instruments, Inc. 19,300 3,213,450
Thomson Multimedia (France)* 4,050 534,150
Triquint Semiconductor, Inc.* 11,300 1,341,875
Turnstone Systems, Inc.* 300 57,619
Veeco Instruments, Inc. 4,200 344,925
VeriSign, Inc.* 46,800 11,840,400
VERITAS Software Corp.* 69,950 13,841,356
Versatel Telecommunications Co. (Netherlands)* 42,400 2,571,216
VIA NET.WORKS, Inc. 27,360 1,805,760
ViaSat, Inc.* 6,200 483,600
Vicinity Corp.* 2,700 109,350
Vignette Corp.* 3,900 898,950
Virata Corp.* 390 57,525
webMethods, Inc.* 470 144,789
Wireless Facilities, Inc.* 430 53,320
Xilinx, Inc.* 73,900 5,893,525
Zi Corp. (Canada)* 53,000 1,752,312
------------
$438,318,433
- --------------------------------------------------------------------------------------------------------
Utilities & Communications - 21.8%
AirGate PCS, Inc.* 1,150 $ 112,700
Allegiance Telecom, Inc.* 36,000 3,559,500
Bouygues S.A. (France) 24,080 20,081,428
Calpine Corp.* 93,900 8,591,850
Carrier 1 International S.A. (Switzerland)* 2,750 429,506
China Telecom Hong Kong Ltd. ADR (Hong Kong)* 20,500 3,810,437
China Telecom Ltd. (Hong Kong) 822,000 7,578,446
Choice One Communications, Inc.* 1,560 93,600
Cypress Communications, Inc.* 2,460 57,349
Deltathree.com, Inc.* 480 20,100
Dobson Communications Corp. 5,020 95,380
FLAG Telecom Holdings Ltd. (Bermuda)* 84,420 2,416,522
France Telecom S.A. (France) 12,600 2,034,733
Global Crossing Ltd. (Bermuda)* 7,500 349,688
Global TeleSystems Group, Inc.* 5,770 144,250
GRIC Communications, Inc.* 270 18,934
Hikari Tsushin, Inc. (Japan) 500 951,211
iBasis, Inc.* 240 19,320
Intermedia Communications, Inc.* 46,300 2,931,369
KPN N.V. (Netherlands)* 74,800 9,522,742
Level 3 Communications, Inc.* 44,300 5,044,662
Metromedia Fiber Network, Inc., "A"* 112,730 8,104,230
MGC Communications, Inc.* 11,600 800,400
MobilCom AG (Germany) 83,400 11,236,728
NEXTEL Communications, Inc.* 75,700 10,351,975
Nextel Partners, Inc. 3,160 101,120
Olivetti S.p.A. (Italy)* 1,488,500 5,869,406
Omnipoint Corp.* 111,100 13,630,581
Powertel, Inc.* 41,200 3,857,350
PT Multimedia SGPS S.A. (Portugal)* 2,610 332,403
Qwest Communications International, Inc.* 9,700 449,838
SK Telecom Ltd., ADR (S. Korea)* 19,800 889,763
Sonera Oyj (Finland) 222,400 17,174,705
Sonera Oyj, ADR (Finland) 5,100 400,350
Sprint Corp. (PCS Group)* 74,200 3,839,850
Telecom Italia Mobile S.p.A. (Italy) 795,700 10,854,949
Telecom Italia S.p.A. (Italy) 442,400 7,766,888
Telecomunicacoes De Sao Paulo (Brazil) 46,400 1,586,300
Telefonica de Espana S.A., ADR (Spain) 30,900 2,678,644
Telefonica Publicidad e Informacion S.A. (Spain) 6,500 444,932
Telefonos de Mexico S.A., ADR (Mexico) 89,400 5,878,050
Thus PLC (United Kingdom)* 43,930 435,395
Time Warner Telecom, Inc. "A"* 24,200 1,863,400
Tritel, Inc.* 810 25,718
Vodafone AirTouch PLC (United Kingdom) 1,904,556 10,655,460
VoiceStream Wireless Corp.* 106,200 14,131,237
Western Wireless Corp.* 6,800 329,800
------------
$201,553,199
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $470,758,255) $849,698,302
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 10.1%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
MM
Federal Home Loan Bank, due 3/01/00 $ 73,620 $ 73,620,000
Federal Home Loan Mortgage, due 3/21/00 10,000 9,968,611
Student Loan Marketing Assn., due 3/01/00 10,195 10,195,000
- --------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 93,783,611
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $564,541,866) $943,481,913
Other Assets, Less Liabilities - (2.0%) (18,349,775)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $925,132,138
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
FEBRUARY 29, 2000
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $564,541,866) $943,481,913
Cash 2,418
Receivable for Fund shares sold 9,028,348
Receivable for investments sold 13,016,613
Interest and dividends receivable 43,050
Other assets 37,285
------------
Total assets $965,609,627
------------
Liabilities:
Payable for Fund shares reacquired $ 649,740
Payable for investments purchased 39,599,161
Payable to affiliates -
Management fee 18,161
Shareholder servicing agent fee 2,422
Distribution and service fee 12,984
Administrative fee 363
Accrued expenses and other liabilities 194,658
------------
Total liabilities $ 40,477,489
------------
Net assets $925,132,138
============
Net assets consist of:
Paid-in capital $457,591,857
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 378,942,722
Accumulated undistributed net realized gain on investments
and foreign currency transactions 91,189,656
Accumulated net investment loss (2,592,097)
------------
Total $925,132,138
============
Shares of beneficial interest outstanding 36,876,103
==========
Class A shares:
Net asset value per share
(net assets of $648,226,920 / 25,898,984 shares of
beneficial interest outstanding) $25.03
======
Offering price per share (100 / 94.25 of net asset value
per share) $26.56
======
Class B shares:
Net asset value and offering price per share
(net assets of $269,045,024 / 10,663,824 shares of
beneficial interest outstanding) $25.23
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $7,860,194 / 313,295 shares of beneficial
interest outstanding) $25.09
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 29, 2000
- --------------------------------------------------------------------------------
Net investment loss:
Income -
Interest $ 1,736,056
Dividends 245,213
Foreign taxes withheld (4,445)
------------
Total investment income $ 1,976,824
------------
Expenses -
Management fee $ 2,262,358
Trustees' compensation 20,886
Shareholder servicing agent fee 301,648
Distribution and service fee (Class A) 751,622
Distribution and service fee (Class B) 846,408
Administrative fee 32,544
Custodian fee 128,099
Printing 43,126
Postage 27,775
Auditing fees 2,294
Legal fees 1,598
Miscellaneous 123,903
------------
Total expenses $ 4,542,261
Fees paid indirectly (43,346)
------------
Net expenses $ 4,498,915
------------
Net investment loss $ (2,522,091)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $102,670,048
Foreign currency transactions (487,087)
------------
Net realized gain on investments and foreign currency
transactions $102,182,961
------------
Change in unrealized appreciation -
Investments $308,055,384
Translation of assets and liabilities in foreign currencies 2,762
------------
Net unrealized gain on investments and foreign currency
translation $308,058,146
------------
Net realized and unrealized gain on investments and
foreign currency $410,241,107
------------
Increase in net assets from operations $407,719,016
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment loss $ (2,522,091) $ (3,200,469)
Net realized gain on investments and foreign currency
transactions 102,182,961 58,369,793
Net unrealized gain on investments and
foreign currency translation 308,058,146 117,110,918
------------ ------------
Increase in net assets from operations $407,719,016 $172,280,242
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $(47,098,386) $(35,737,577)
From net realized gain on investments and foreign
currency transactions (Class B) (17,392,872) (13,583,022)
From net realized gain on investments and foreign
currency transactions (Class I) (494,336) (278,421)
------------ ------------
Total distributions declared to shareholders $(64,985,594) $(49,599,020)
------------ ------------
Net increase in net assets from Fund share transactions $125,741,234 $ 7,189,745
------------ ------------
Total increase in net assets $468,474,656 $129,870,967
Net assets:
At beginning of period 456,657,482 326,786,515
------------ ------------
At end of period (including accumulated net investment
loss of $2,592,097 and $70,006, respectively) $925,132,138 $456,657,482
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ---------------------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning
of period $14.95 $11.06 $16.81 $13.16 $15.55 $13.41
------ ------ ------ ------ ------ ------
Income from investment
operations# -
Net investment loss $(0.06) $(0.08) $(0.12) $(0.13) $(0.08) $(0.05)
Net realized and unrealized
gain (loss) on
investments and foreign
currency 12.26 5.72 (2.49) 5.46 0.58 3.22
------ ------ ------ ------ ------ ------
Total from investment
operations $12.20 $ 5.64 $(2.61) $ 5.33 $ 0.50 $ 3.17
------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders from net
realized gain on
investments and foreign
currency transactions $(2.12) $(1.75) $(3.14) $(1.68) $(2.89) $(1.03)
------ ------ ------ ------ ------ ------
Net asset value - end of period $25.03 $14.95 $11.06 $16.81 $13.16 $15.55
====== ====== ====== ====== ====== ======
Total return(+) 86.93%++ 54.92% (18.04)% 43.92% 3.92% 26.12%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.32%+ 1.36% 1.38% 1.43% 1.43% 1.46%
Net investment loss (0.65)%+ (0.57)% (0.79)% (0.93)% (0.56)% (0.34)%
Portfolio turnover 210% 334% 112% 96% 117% 115%
Net assets at end of period
(000 omitted) $648,227 $326,805 $227,348 $288,227 $207,504 $178,367
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from directed brokerage and certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ---------------------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning
of period $15.04 $11.08 $16.81 $13.14 $15.46 $13.35
------ ------ ------ ------ ------ ------
Income from investment
operations# -
Net investment loss $(0.12) $(0.17) $(0.22) $(0.23) $(0.18) $(0.14)
Net realized and unrealized
gain (loss) on investments
and foreign currency 12.34 5.75 (2.48) 5.47 0.58 3.20
------ ------ ------ ------ ------ ------
Total from investment operations $12.22 $ 5.58 $(2.70) $ 5.24 $ 0.40 $ 3.06
------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders from net
realized gain on
investments and foreign
currency transactions $(2.03) $(1.62) $(3.03) $(1.57) $(2.72) $(0.95)
------ ------ ------ ------ ------ ------
Net asset value - end of period $25.23 $15.04 $11.08 $16.81 $13.14 $15.46
====== ====== ====== ====== ====== ======
Total return 86.25%++ 53.89% (18.52)% 42.95% 3.17% 25.19%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.97%+ 2.01% 2.02% 2.11% 2.15% 2.18%
Net investment loss (1.30)%+ (1.22)% (1.43)% (1.60)% (1.27)% (1.06)%
Portfolio turnover 210% 334% 112% 96% 117% 115%
Net assets at end of period
(000 omitted) $269,045 $127,024 $97,682 $157,052 $129,858 $199,773
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
SIX MONTHS ENDED -------------------------- AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS I
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $14.99 $11.10 $16.86 $13.18
------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.03) $(0.03) $(0.07) $(0.07)
Net realized and unrealized gain (loss) on
investments and foreign currency 12.30 5.72 (2.50) 3.75
------ ------ ------ ------
Total from investment operations $12.27 $ 5.69 $(2.57) $ 3.68
------ ------ ------ ------
Less distributions declared to shareholders from $
net realized gain on investments and foreign
currency transactions $(2.17) $(1.80) $(3.19) --
------ ------ ------ ------
Net asset value - end of period $25.09 $14.99 $11.10 $16.86
====== ====== ====== ======
Total return 87.18%++ 55.45% (17.72)% 27.92%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.97%+ 1.01% 1.02% 1.07%+
Net investment loss (0.34)%+ (0.21)% (0.44)% (0.65)%+
Portfolio turnover 210% 334% 112% 96%
Net assets at end of period (000 omitted) $7,860 $2,829 $1,756 $2,349
* For the period from the inception of offering Class I, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Managed Sectors Fund (the Fund) is a non-diversified series of MFS Series
Trust I (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The Fund
can invest in foreign securities. 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. 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 in good faith, at
fair value, by 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.
Security Loans - State Street Bank and Trust Company ("State Street") and
Chase Manhattan Bank ("Chase"), as lending agents, may loan the securities of
the Fund to certain qualified institutions (the "Borrowers") approved by the
Fund. The loans are collateralized at all times U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street and Chase provide the Fund with indemnification against Borrower
default.
On loans collateralized by U.S. Treasury securities, a fee is received from
the Borrower, and is allocated between the Fund and the lending agents. Income
from securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
At February 29, 2000, the value of securities loaned was $47,886,286. These
loans were collateralized by U.S. Treasury securities of $47,974,723.
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 payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The 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. During the period, the Fund's custodian fees were reduced by $31,451
under this arrangement. The Fund has entered into a directed brokerage
agreement, under which the broker will credit the Fund a portion of the
commissions generated, to offset certain expenses of the Fund. For the period,
the Fund's custodian fees were reduced by $11,895 under this agreement. These
amounts are shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as distributions from paid-in
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.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of the Fund's average daily net assets.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $7,174
for the six months ended February 29, 2000.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$46,772 for the six months ended February 29, 2000, as its portion of the
sales charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A and Class B shares,
pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and a distribution fee to MFD
of up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $41,698 for the six months ended February
29, 2000. Fees incurred under the distribution plan during the six months ended
February 29, 2000, were 0.35% of average daily net assets attributable to Class
A shares on an annualized basis
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B shares.
MFD will pay to securities dealers that enter into a sales agreement with MFD
all or a portion of the service fee attributable to Class B shares. The
service fee is intended to be consideration for services rendered by the
dealer with respect to Class B shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $13,261,
for the six months ended February 29, 2000. Fees incurred under the
distribution plan during the six months ended February 29, 2000, 1.00% of
average daily net assets attributable to Class B shares, on an annualized
basis.
Certain Class A shares are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the six months ended February 29, 2000,
were $829, and $48,214 for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,204,525,795 and $1,172,994,324, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $564,541,866
------------
Gross unrealized appreciation $380,201,749
Gross unrealized depreciation (1,261,702)
------------
Net unrealized appreciation $378,940,047
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
Class A Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
Shares sold 4,997,146 $100,001,500 15,037,594 $210,364,788
Shares issued to
shareholders in
reinvestment of
distributions 2,419,578 43,914,475 2,778,022 33,286,301
Shares reacquired (3,374,816) (65,396,234) (16,511,548) (230,622,701)
--------- ------------ ---------- ------------
Net increase 4,041,908 $ 78,519,741 1,304,068 $ 13,028,388
========= ============ ========== ============
Class B Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold $ $
3,184,170 $ 65,004,000 2,983,721 $ 41,919,434
Shares issued to
shareholders in
reinvestment of
distributions 893,825 16,386,419 1,073,220 12,986,121
Shares reacquired (1,860,781) (36,533,344) (4,428,148) (61,169,706)
--------- ------------ ---------- ------------
Net increase
(decrease) 2,217,214 $ 44,857,075 (371,207) $ (6,264,151)
========= ============ ========== ============
Class I Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold 99,218 $ 1,904,750 36,801 $ 535,362
Shares issued to
shareholders in
reinvestment of
distributions 27,191 494,336 23,260 278,422
Shares reacquired (1,781) (34,668) (29,641) (388,276)
--------- ------------ ---------- ------------
Net increase 124,628 $ 2,364,418 30,420 $ 425,508
========= ============ ========== ============
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks u nder a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Fund shares. Interest is charged to each fund, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on
the average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated
to the Fund for the six months ended February 29, 2000, was $2,327. The Fund
had no significant borrowings during the period.
<PAGE>
<TABLE>
MFS(R) MANAGED SECTORS FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Richard B. Bailey+ - Private Investor; Former Mark E. Bradley*
Chairman and Director (until 1991), MFS Investment Ellen Moynihan*
Management(R) James O. Yost*
Marshall N. Cohan+ - Private Investor SECRETARY
Stephen E. Cavan*
Lawrence H. Cohn, M.D.+ - Chief of Cardiac
Surgery, Brigham and Women's Hospital; Professor ASSISTANT SECRETARY
of Surgery, Harvard Medical School James R. Bordewick, Jr.*
The Hon. Sir J. David Gibbons, KBE+ - Chief CUSTODIAN
Executive Officer, Edmund Gibbons Ltd.; Chairman, State Street Bank and Trust Company
Colonial Insurance Company, Ltd.
INVESTOR INFORMATION
Abby M. O'Neill+ - Private Investor For information on MFS mutual funds, call your
investment professional or, for an information
Walter E. Robb, III+ - President and Treasurer, kit, call toll free: 1-800-637-2929 any business
Benchmark Advisors, Inc. (corporate financial day from 9 a.m. to 5 p.m. Eastern time (or leave a
consultants); President, Benchmark Consulting message anytime).
Group, Inc. (office services)
INVESTOR SERVICE
Arnold D. Scott* - Senior Executive MFS Service Center, Inc.
Vice President, Director, and Secretary, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman and Chief For general information, call toll free:
Executive Officer, MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt+ - President, Insight Resources,
Inc. (acquisition planning specialists) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9
Ward Smith+ - Former Chairman (until 1994), NACCO a.m. to 5 p.m. Eastern time. (To use this service,
Industries (holding company) your phone must be equipped with a
Telecommunications Device for the Deaf.)
INVESTMENT ADVISER
Massachusetts Financial Services Company For share prices, account balances, exchanges, or
500 Boylston Street stock and bond outlooks, call toll free:
Boston, MA 02116-3741 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
DISTRIBUTOR
MFS Fund Distributors, Inc. WORLD WIDE WEB
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGER
Toni Y. Shimura*
TREASURER
W. Thomas London*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) MANAGED ------------
SECTORS FUND BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MMS-3 4/00 43M 08/208/808
