<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) MANAGED
SECTORS FUND
ANNUAL REPORT o AUGUST 31, 2000
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MUTUAL FUND GIFT KITS (see page 35)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 10
Portfolio of Investments .................................................. 14
Financial Statements ...................................................... 20
Notes to Financial Statements ............................................. 27
Independent Auditors' Report .............................................. 33
Trustees and Officers ..................................................... 37
MFS ORIGINAL RESEARCH(R)
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,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- make us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company, one-
security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flows, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as front-line workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flows, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes each manager will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in it's
January 10, 2000 issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people tend to stick around -- the average
MFS tenure of our portfolio managers is 11 years, with over 16 years in the
investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 35 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance,
by finding opportunities before they are generally recognized by the market and
by avoiding mistakes whenever possible. Original Research does, we believe, make
a difference.
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)
September 15, 2000
A prospectus containing more complete information on any MFS product, including
all charges and expenses, can be obtained from your investment professional.
Please read it carefully before you invest or send money. 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 year ended August 31, 2000, Class A shares of the fund provided a total
return of 60.26%, Class B shares 59.15%, Class C shares 59.30%, and Class I
shares 60.76%. These returns include the reinvestment of distributions but
exclude the effects of any sales charges and compare to a 16.32% return over the
same period for the Standard & Poor's 500 Composite Index (the S&P 500), a
popular, unmanaged index of common stock total return performance. During the
same period, the average multi-cap growth fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance, returned 61.35%.
Q. WHAT FACTORS HAVE CONTRIBUTED TO THE FUND'S PERFORMANCE THIS YEAR?
A. A recovery among many technology leaders was one of the main positive
contributors to fund performance. Among the best-performing parts of the
technology sector were software, networking and telecommunications, and
electronics. Another positive factor was the merger and consolidation
activity in the financial services sector. This helped the valuations of
many of the stocks we owned, particularly the investment banks, which seem
to be joining forces to reach the critical mass necessary to take on bigger
deals. We expect the consolidation theme in financial services to continue.
Offsetting some of these positives was a decline in many telecommunications
services stocks, which turned in disappointing results due to the higher
cost of doing business. We also saw slower-than-expected sales in
broadcasting and media companies, as well as in the retail sector.
Q. HOW HAVE YOU TAKEN ADVANTAGE OF THE FUND'S INVESTMENT FLEXIBILITY?
A. Since this is an all-cap fund, we have been able to pursue the best
companies regardless of their size. In addition, because the fund is
nondiversified, we have overweighted our best ideas in what we feel are the
best industry sectors. This flexibility has allowed us to build significant
positions in small-cap and mid-cap companies. As a result, we have been able
to tap what we think are great opportunities in some of the smaller generic
drug companies such as Teva and Andrx.
Recently, we have focused on more mid-cap and smaller large-cap companies
because we believe they offer a better combination of upside earnings
potential and attractive valuations than some of their very large
counterparts. We continue to look for companies that we think can grow at a
good pace for the long term, such as those in the Internet infrastructure
software and high-end networking parts of the market. In these sectors, some
of our holdings that have generated positive revenues and exceeded their
annual earnings estimates are CIENA, Juniper, Extreme Networks, and Check
Point.
Q. WHERE HAVE YOU FOUND THE TYPES OF LEADING COMPANIES YOU WANT TO OWN?
A. Our focus on companies with strong franchises in high growth markets has led
us to many stocks in technology and health care, though the leadership in
technology has narrowed significantly. We believe that corporate America has
come under tremendous pressure to quickly become more efficient by using the
Internet and business-to-business (B2B) applications. Rather than trusting
smaller B2B companies, large corporations are turning to service providers
with proven products, large market shares, and a well-established customer
base for their B2B solutions. As a result, leadership in the technology
sector has come from well-established companies like Ariba and Check Point,
which are both involved in Internet infrastructure software. We have also
seen good performance from companies such as Nortel Networks and CIENA that
we believe will continue to benefit from increased spending on
telecommunications equipment. Among health care stocks, we have found
opportunities in the genetics research and pharmaceutical markets,
especially in companies like Abgenix -- one of only two companies that has
patented a mouse with human genes -- and Genentech, an emerging
pharmaceutical company that our research shows has the best pipeline of
potential blockbuster drugs. In the financial services sector, we have done
well with some of the investment banks, which benefited from a wave of
merger and acquisition activity. Lehman Brothers, Merrill Lynch, Bear
Stearns, and Morgan Stanley Dean Witter have been among our strongest
performers in this sector. In addition, more favorable pricing among
property and casualty insurance companies such as American International
Group has us hoping for better than-expected earnings and stronger
performance.
Q. HAVE YOU MADE ANY SHIFTS IN THE FUND'S HOLDINGS?
A. We have added to the fund's energy holdings, particularly in the independent
power production part of the sector. We have seen some of these companies,
such as Calpine, generate dynamic earnings growth. We also made very
significant changes in our telecommunications services positions by
eliminating or reducing our holdings in WorldCom, Vodafone, Nextel, Sprint
PCS, and many of our European cellular names. Though our significant
weightings in telecommunications services helped us late last year, the
landscape in this industry has changed drastically, and we no longer feel as
positive about the profitability outlook for these companies.
Q. HOW HAVE YOU POSITIONED THE PORTFOLIO GOING FORWARD?
A. We have been investing in what we believe to be the best long-term growth
stories that we've been able to identify, in much more diverse markets. We
believe that many companies enabling B2B commerce will be long-term winners,
given industry estimates that B2B commerce could go from $400 billion today
to approximately $7 trillion over the next four years. In health care, we
have identified a lot of opportunities in the genetics research and emerging
pharmaceutical markets, as well as in generic drug companies, which we
believe are well positioned to capture market share from the traditional
branded pharmaceutical companies. We have significantly increased our
weighting in financial services based on our belief that we're close to a
peak in interest rates, which would be favorable for these companies. We
think that asset-gathering financial institutions such as Northern Trust and
PNC Financial will present good investment opportunities going forward.
Finally, though we scaled back our telecommunications services holdings
following major fundamental disappointments, we still believe in the
long-term potential for telecommunications equipment companies that offer
next-generation equipment.
Overall, we have positioned the portfolio rather aggressively, focusing more
on growth stocks than the more defensive stocks we owned mid-year. We
maintain our long-term belief that stock prices will follow earnings growth
and cash flow. And although we want to own the current leaders that are
showing strong and accelerating growth, our real focus is on owning the next
generation leaders; that is, the companies that we feel could become the
next Cisco or Microsoft.
Q. WHAT IS YOUR OUTLOOK?
A. We expect continued market volatility, so we believe a long- rather than
short-term perspective is better at this point. We do expect continued
consolidation and narrowing in market leadership. Next to technology, we
expect health care to be the best part of the market, given the exciting
developments in genetics research and their impact on new drug development.
On a positive note, we have seen signs that the economy is slowing, and we
anticipate few additional interest rate increases. Once interest rates
finally peak, we feel the environment will be very favorable for aggressive
growth stock investing.
/s/ Toni Y. Shimura
Toni Y. Shimura
Portfolio Manager
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.
<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 THE MANAGED SECTORS AND GLOBAL GROWTH PORTFOLIOS OF OUR
MUTUAL FUNDS AND VARIABLE ANNUITIES. SHE IS ALSO A PORTFOLIO MANAGER OF THE
EMERGING GROWTH PORTFOLIOS OF OUR VARIABLE ANNUITIES.
TONI JOINED MFS IN 1987 AS A RESEARCH ANALYST. SHE WAS NAMED VICE PRESIDENT IN
1992, PORTFOLIO MANAGER IN 1993, AND SENIOR VICE PRESIDENT IN 1999. SHE 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.
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 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.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 20, 1993
CLASS B DECEMBER 29, 1986
CLASS C JUNE 1, 2000
CLASS I JANUARY 2, 1997
SIZE: $851.4 MILLION NET ASSETS AS OF AUGUST 31, 2000
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the fund's
original share class in comparison to various market indicators. Performance
results include any applicable contingent deferred sales charges and reflect the
percentage change in net asset value, including the 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.) It is not possible to invest directly
in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended August 31, 2000)
MFS Managed S&P 500
Sectors Fund Composite
- Class B Index
--------------------------------------------------------------------------------
8/90 $10,000 $10,000
8/92 14,383 13,696
8/94 17,445 16,642
8/96 22,532 23,997
8/98 26,245 36,484
8/00 64,279 59,338
TOTAL RATES OF RETURN THROUGH AUGUST 31, 2000
CLASS A
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge +60.26% +103.48% +204.31% +570.22%
------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge +60.26% + 26.72% + 24.93% + 20.95%
------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge +51.05% + 24.24% + 23.46% + 20.24%
------------------------------------------------------------------------------
CLASS B
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge +59.15% + 99.57% +194.31% +542.79%
------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge +59.15% + 25.90% + 24.10% + 20.45%
------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge +55.15% + 25.27% + 23.93% + 20.45%
------------------------------------------------------------------------------
CLASS C
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge +59.30% + 99.76% +194.59% +543.39%
------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge +59.30% + 25.94% + 24.12% + 20.46%
------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge +58.30% + 25.94% + 24.12% + 20.46%
------------------------------------------------------------------------------
CLASS I
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge +60.76% +105.61% +205.50% +567.23%
------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge +60.76% + 27.16% + 25.03% + 20.90%
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COMPARATIVE INDICES(+)
1 Year 3 Years 5 Years 10 Years
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Average multi-cap growth fund+ +61.35% + 31.32% + 26.31% + 21.50%
--------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index# +16.32% + 20.69% + 24.04% + 19.49%
--------------------------------------------------------------------------------
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
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
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class A, Class C, 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. Class C blended performance has been adjusted to take into account the
lower CDSC applicable to Class C 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 in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. RECENT RETURNS WERE
PRIMARILY ACHIEVED DURING FAVORABLE MARKET CONDITIONS, WHICH MAY OR MAY NOT BE
REPEATED. 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.
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 46.4%
HEALTH CARE 22.0%
FINANCIAL SERVICES 16.1%
UTILITIES & COMMUNICATIONS 7.7%
ENERGY 3.0%
TOP 10 STOCK HOLDINGS
NORTEL NETWORKS CORP. 4.6% CHECK POINT SOFTWARE TECHNOLOGIES LTD. 2.3%
Manufacturer of telecom Internet security software provider
infrastructure and optical
equipment EMC CORP. 2.0%
Provider of electronic data storage solutions
CORNING, INC. 3.4%
Optical equipment and cable SUN MICROSYSTEMS, INC. 1.9%
supplier to communications Computer systems company
industries
CALPINE CORP. 1.9%
CISCO SYSTEMS, INC. 3.1% Independent power company
Networking equipment company
ORACLE CORP. 1.8%
INTEL CORP. 3.0% Database software developer and manufacturer
Semiconductor manufacturer
CIENA CORP. 2.6%
Optical networking equipment company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 2000
Stocks - 99.1%
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ISSUER SHARES VALUE
--------------------------------------------------------------------------
Consumer Staples
Keebler Foods Co. 3,500 $ 160,344
Luxottica Group S.P.A., ADR (Italy) 10,100 154,025
------------
$ 314,369
--------------------------------------------------------------------------
Energy - 2.9%
Anadarko Petroleum Corp. 37,000 $ 2,433,490
Apache Corp. 39,600 2,494,800
Baker Hughes, Inc. 93,500 3,418,594
Diamond Offshore Drilling, Inc. 44,200 1,980,713
EOG Resources, Inc. 14,800 566,100
Global Marine, Inc.* 87,000 2,811,187
Halliburton Co. 2,000 106,000
Noble Drilling Corp.* 88,000 4,268,000
R & B Falcon Corp.* 30,700 874,950
Transocean Sedco Forex, Inc. 55,300 3,304,175
Weatherford International, Inc.* 60,700 2,849,106
------------
$ 25,107,115
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Financial Services - 16.6%
Ace Ltd. (Bermuda) 80,600 $ 2,831,075
AFLAC, Inc. (Japan) 28,100 1,517,400
American Express Co. 1,500 88,688
American International Group, Inc. 141,900 12,646,837
AXA Financial, Inc. 174,400 9,025,200
Bear Stearns Cos., Inc. 91,700 6,149,631
Capital One Financial Corp. 63,000 3,799,687
Charter One Financial, Inc. 3,600 85,500
Chubb Corp. 33,800 2,587,813
Citigroup, Inc. 208,400 12,165,350
Comerica, Inc. 62,800 3,536,425
Gallagher (Arthur J.) & Co. 71,400 3,498,600
Golden West Financial Corp. 119,000 5,667,375
Goldman Sachs Group, Inc. 53,400 6,838,537
Hartford Financial Services Group, Inc. 1,300 86,613
Household International, Inc. 46,600 2,236,800
Lehman Brothers Holdings, Inc. 57,200 8,294,000
Marsh & McLennan Cos., Inc. 54,600 6,483,750
MBNA Corp. 75,000 2,648,438
Mellon Financial Corp. 73,500 3,325,875
Merrill Lynch & Co., Inc. 76,900 11,150,500
Merrill Lynch Biotech Holding Co.* 26,300 5,310,956
Morgan Stanley Dean Witter & Co. 72,800 7,830,550
Northern Trust Corp. 33,100 2,790,744
PNC Bank Corp. 57,600 3,394,800
Providian Financial Corp. 69,700 8,011,144
Schwab (Charles) Corp. 40,000 1,527,500
State Street Corp. 800 94,200
Washington Mutual, Inc. 86,500 3,027,500
Xl Capital Ltd (Bermuda) 64,700 4,460,256
------------
$141,111,744
--------------------------------------------------------------------------
Healthcare - 21.2%
3 Dimensional Pharmaceutical Co.* 32,660 $ 1,269,658
Abbott Laboratories, Inc. 2,000 87,500
Abgenix, Inc.* 69,800 5,246,997
Alkermes, Inc.* 4,700 217,375
Allergan, Inc. 55,400 4,051,125
Alpharma, Inc. 25,500 1,443,938
Alza Corp.* 96,600 7,305,375
American Home Products Corp. 700 37,931
AmeriSource Health Corp., "A"* 10,600 368,350
Amgen, Inc.* 53,400 4,048,387
Amylin Pharmaceuticals, Inc.* 39,700 538,431
Andrx Corp.* 110,600 9,622,200
Applied Molecular Evolution, Inc.* 530 17,059
Arthrocare Corp.* 7,200 320,400
Barr Laboratories, Inc.* 25,000 1,775,000
Beckman Coulter, Inc. 16,500 1,256,063
Biomet, Inc. 70,100 2,370,256
BioSource International, Inc.* 58,000 1,268,750
BioSphere Medical, Inc.* 400 4,575
Biovail Corp.* 34,700 2,222,969
Bristol-Myers Squibb Co. 37,200 1,971,600
Cardinal Health, Inc. 36,900 3,018,881
Celgene Corp.* 75,500 5,587,000
Cephalon, Inc.* 17,600 885,500
CIGNA Corp. 8,700 846,075
Dianon Systems, Inc.* 4,700 210,325
Discovery Partners International, Inc.* 200 4,175
Express Scripts, Inc.* 5,900 420,006
Forest Laboratories, Inc.* 11,800 1,154,925
Genentech, Inc.* 57,300 10,915,650
HCA Healthcare Co.* 98,900 3,412,050
Human Genome Sciences, Inc.* 16,500 2,754,469
Illumina Inc.* 72,140 3,228,265
Immunex Corp.* 107,700 5,411,925
IVAX Corp.* 80,900 2,801,163
Laboratory Corp.* 18,700 2,212,444
Large Scale Biology Corp.* 1,210 37,397
McKesson HBOC, Inc. 48,300 1,204,481
Medarex, Inc.* 39,600 4,375,800
Medimmune, Inc.* 97,000 8,160,125
Millennium Pharmaceuticals, Inc.* 21,700 3,105,812
Mylan Laboratories, Inc. 159,400 4,234,062
Myriad Genetics, Inc.* 5,100 713,363
Pain Therapeutics, Inc.* 46,930 903,403
PE Corp. - PE Biosystems Group 93,750 9,222,656
Pfizer, Inc. 9,825 424,931
Pharmacia Corp. 1,496 87,610
QIAGEN N.V. (Netherlands)* 26,500 1,265,375
Quest Diagnostics, Inc.* 63,000 7,796,250
Sepracor, Inc.* 58,600 6,446,000
Serono S.A. (Switzerland)* 412,130 11,797,221
Tenet Healthcare Corp.* 80,100 2,483,100
Teva Pharmaceutical Industries Ltd.
(Israel) 150,200 9,105,875
United Therapeutics Co.*## 58,300 4,783,014
Waters Corp.* 127,000 10,104,437
Watson Pharmaceuticals, Inc.* 90,300 5,570,381
------------
$180,128,085
--------------------------------------------------------------------------
Industrial Goods & Services - 2.4%
Capstone Turbine Corp.* 860 $ 79,389
Empresa Brasileira de Aeronautica S.A.,
ADR (Brazil)* 22,300 609,069
General Electric Co. 116,000 6,807,750
Leica Geosystems Co.* 820 249,084
Power One, Inc.* 61,150 9,688,453
Quanta Services, Inc.* 2,100 98,175
Tyco International Ltd. 57,400 3,271,800
------------
$ 20,803,720
--------------------------------------------------------------------------
Leisure - 0.6%
Acclaim Entertainment, Inc.* 14,732 $ 5,156
AT&T Corp., "A"* 1,800 38,475
EchoStar Communications Corp.* 25,000 1,218,750
Entravision Communications Corp.* 6,050 119,866
Viacom, Inc., "B"* 55,200 3,715,650
------------
$ 5,097,897
--------------------------------------------------------------------------
Retail - 1.6%
Abercrombie & Fitch Co.* 35,600 $ 825,475
Best Buy Co., Inc.* 59,300 3,661,775
Kroger Co.* 1,800 40,837
RadioShack Corp. 96,500 5,693,500
Safeway, Inc.* 30,400 1,499,100
Tiffany & Co. 33,800 1,406,925
Wal-Mart Stores, Inc. 1,700 80,644
------------
$ 13,208,256
--------------------------------------------------------------------------
Technology - 45.9%
ADC Telecommunications, Inc.* 92,102 $ 3,770,426
Alcatel Alsthom Compagnie, ADR (France) 118,900 9,853,837
Altera Corp.* 25,800 1,672,162
Analog Devices, Inc.* 500 50,250
Ariba, Inc.* 52,600 8,277,925
ARM Holdings PLC, ADR (United Kingdom)* 87,500 3,576,562
Art Technology Group, Inc.* 27,400 2,793,087
Avici Systems, Inc.* 620 92,884
BEA Systems, Inc.* 59,100 4,022,494
Broadcom Corp.* 1,700 425,000
Brocade Communications Systems, Inc.* 43,300 9,777,681
Business Objects S.A., ADR (France)* 7,800 893,100
Cabletron Systems, Inc.* 4,100 153,494
Check Point Software Technologies Ltd.
(Israel)* 134,300 19,582,619
CIENA Corp.* 97,800 21,681,037
Cisco Systems, Inc.* 380,900 26,139,262
Compaq Computer Corp. 26,600 906,063
Comverse Technology, Inc.* 500 45,969
Corning, Inc. 87,450 28,678,134
Corvis Corp.* 2,350 243,959
E.piphany, Inc.* 7,500 780,000
EMC Corp.* 171,400 16,797,200
Emulex Corp.* 6,000 628,125
Extreme Networks, Inc.* 93,900 8,738,569
Flextronics International Ltd.* 69,400 5,781,887
GlobeSpan, Inc.* 7,000 843,063
I2 Technologies, Inc.* 41,100 6,953,606
Informatica Corp.* 15,400 1,540,000
Intel Corp. 332,500 24,895,937
Intergrated Telecom Express, Inc.* 990 31,123
Interwoven, Inc.* 21,500 2,064,000
Jabil Circuit, Inc.* 10,300 657,269
JDS Uniphase Corp.* 5,526 687,901
Juniper Networks, Inc.* 69,300 14,812,875
Lightspan, Inc.* 1,200 4,256
Manugistics Group, Inc.* 5,900 517,725
Marvell Technology Group Ltd.* 700 49,963
Mercury Interactive Corp.* 54,800 6,695,875
Micron Technology, Inc.* 162,700 13,300,725
Microsoft Corp.* 6,400 446,800
Microtune, Inc.* 260 14,170
Motorola, Inc. 10,300 371,444
Netegrity, Inc.* 6,100 536,800
Netro Corp.* 20,000 1,652,500
Network Appliance, Inc.* 20,500 2,398,500
Network Engines, Inc.* 520 20,345
New Focus, Inc.* 560 77,315
Newport Corp. 10,000 1,590,000
Nortel Networks Corp. (Canada) 476,900 38,897,156
Oracle Corp.* 164,500 14,959,219
Peco II, Inc.* 270 10,530
Plantronics, Inc.* 8,400 419,475
PMC-Sierra, Inc.* 12,600 2,973,600
QLogic Corp.* 31,000 3,518,500
Rational Software Corp.* 32,600 4,195,212
Redback Networks, Inc.* 30,800 4,600,750
Research-In-Motion Ltd. 11,700 884,081
Resonate, Inc.* 200 8,813
Sandisk Corp.* 15,500 1,294,250
Sanmina Corp.* 32,040 3,780,720
SAP AG, ADR (Germany) 1,300 83,444
SCI Systems, Inc.* 17,600 1,086,800
Scientific-Atlanta, Inc. 52,700 4,107,306
SDL, Inc.* 1,600 635,700
Siebel Systems, Inc.* 55,200 10,919,250
Speechworks International, Inc.* 380 29,118
Sun Microsystems, Inc.* 127,580 16,194,686
Sycamore Networks, Inc.* 69,400 9,542,500
Talarian Corp.* 490 9,004
Tellabs, Inc.* 1,500 84,281
TIBCO Software, Inc.* 34,900 3,557,619
Triton Networks Systems, Inc.* 320 6,020
VeriSign, Inc.* 34,690 6,898,974
VERITAS Software Corp.* 34,900 4,207,631
Victor Company of Japan (Japan) 132,000 1,114,447
Xilinx, Inc.* 18,200 1,617,525
------------
$391,160,529
--------------------------------------------------------------------------
Transportation - 0.1%
Atlas Air, Inc.* 9,700 $ 419,525
--------------------------------------------------------------------------
Utilities & Communications - 7.6%
AES Corp.* 208,800 $ 13,311,000
Calpine Corp.* 161,300 15,968,700
Coastal Corp. 34,500 2,376,187
Conductus, Inc.* 30,000 581,719
Digital Lightwave, Inc.* 9,900 868,725
Duke Energy Corp. 32,200 2,408,962
Dynegy, Inc. 2,200 99,000
Enron Corp. 57,700 4,897,287
Global Crossing Ltd. (Bermuda)* 3,000 90,188
Leap Wireless International, Inc.* 5,800 460,375
Level 3 Communications, Inc.* 15,000 1,308,516
Metromedia Fiber Network, Inc., "A"* 245,960 9,823,027
MRV Communications, Inc.* 104,800 8,076,150
Reliant Energy, Inc. 55,500 2,060,437
Sprint Corp. (PCS Group)* 1,700 85,319
Tollgrade Communications, Inc.* 9,800 1,089,638
Tycom Ltd. (Bermuda)* 11,500 478,688
Vodafone AirTouch PLC (United Kingdom)* 187,656 757,435
Vodafone Group PLC (United Kingdom) 9,200 376,625
------------
$ 65,117,978
--------------------------------------------------------------------------
Other - 0.2%
Apollo Group, Inc.* 19,400 $ 791,762
Automatic Data Processing, Inc. 800 47,700
Computer Sciences Corp.* 600 47,438
First Data Corp. 900 42,919
Fiserv, Inc.* 8,300 449,756
------------
$ 1,379,575
--------------------------------------------------------------------------
Total Stocks (Identified Cost, $650,581,749) $843,848,793
--------------------------------------------------------------------------
Short-Term Obligations - 1.2%
--------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------
General Electric Capital Corp.,
due 09/01/00, at Amortized Cost $ 10,100 $ 10,100,000
--------------------------------------------------------------------------
Total Investments (Identified Cost, $660,681,749) $853,948,793
Other Assets, Less Liabilities - (0.3)% (2,557,572)
--------------------------------------------------------------------------
Net Assets - 100.0% $851,391,221
--------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
--------------------------------------------------------------------------
AUGUST 31, 2000
--------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $660,681,749) $853,948,793
Cash 23,934
Receivable for fund shares sold 779,691
Receivable for investments sold 16,686,599
Interest and dividends receivable 156,508
Other assets 4,330
------------
Total assets $871,599,855
------------
Liabilities:
Foreign currency, at value (identified cost, $52,257) $ 50,756
Payable for fund shares reacquired 1,251,465
Payable for investments purchased 18,659,043
Payable to affiliates -
Management fee 17,150
Shareholder servicing agent fee 2,287
Distribution and service fee 12,216
Administrative fee 400
Accrued expenses and other liabilities 215,317
------------
Total liabilities $ 20,208,634
------------
Net assets $851,391,221
============
Net assets consist of:
Paid-in capital $551,417,555
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 193,268,519
Accumulated undistributed net realized gain on
investments and foreign currency transactions 106,785,456
Accumulated net investment loss (80,309)
------------
Total $851,391,221
============
Shares of beneficial interest outstanding 39,633,504
==========
Class A shares:
Net asset value per share
(net assets of $600,531,458 / 27,993,621 shares of
beneficial interest outstanding) $21.45
======
Offering price per share (100 / 94.25 of net asset
value per share) $22.76
======
Class B shares:
Net asset value and offering price per share
(net assets of $243,419,857 / 11,294,573 shares of
beneficial interest outstanding) $21.55
======
Class C shares:
Net asset value and offering price per share
(net assets of $1,022,029 / 47,382 shares of
beneficial interest outstanding) $21.57
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $6,417,877 / 297,928 shares
of beneficial interest outstanding) $21.54
======
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, Class
B and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000
------------------------------------------------------------------------------
Net investment loss:
Income -
Interest $ 3,969,610
Dividends 1,457,385
Foreign taxes withheld (40,061)
------------
Total investment income $ 5,386,934
------------
Expenses -
Management fee $ 5,334,101
Trustees' compensation 32,100
Shareholder servicing agent fee 711,213
Distribution and service fee (Class A) 1,747,880
Distribution and service fee (Class B) 2,060,454
Distribution and service fee (Class C) 905
Administrative fee 102,280
Custodian fee 263,799
Printing 58,695
Postage 76,907
Auditing fees 32,144
Legal fees 5,894
Miscellaneous 378,292
------------
Total expenses $ 10,804,664
Fees paid indirectly (96,091)
------------
Net expenses $ 10,708,573
------------
Net investment loss $ (5,321,639)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $152,077,484
Foreign currency transactions (354,273)
------------
Net realized gain on investments and foreign
currency transactions $151,723,211
------------
Change in unrealized appreciation -
Investments $122,382,381
Translation of assets and liabilities in foreign currencies 1,562
------------
Net unrealized gain on investments and foreign
currency translation $122,383,943
------------
Net realized and unrealized gain on investments and
foreign currency $274,107,154
------------
Increase in net assets from operations $268,785,515
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
--------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment loss $ (5,321,639) $ (3,200,469)
Net realized gain on investments and foreign currency transactions 151,723,211 58,369,793
Net unrealized gain on investments and foreign currency translation 122,383,943 117,110,918
------------- -------------
Increase in net assets from operations $ 268,785,515 $ 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 $ 190,933,818 $ 7,189,745
------------- -------------
Total increase in net assets $ 394,733,739 $ 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 $80,309 and $70,006, respectively) $ 851,391,221 $ 456,657,482
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $14.95 $11.06 $16.81 $13.16 $15.55
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.11) $(0.08) $(0.12) $(0.13) $(0.08)
Net realized and unrealized gain (loss)
on investments and foreign currency 8.73 5.72 (2.49) 5.46 0.58
------ ------ ------ ------ ------
Total from investment operations $ 8.62 $ 5.64 $(2.61) $ 5.33 $ 0.50
------ ------ ------ ------ ------
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)
------ ------ ------ ------ ------
Net asset value - end of period $21.45 $14.95 $11.06 $16.81 $13.16
====== ====== ====== ====== ======
Total return(+) 60.26% 54.92% (18.04)% 43.92% 3.92%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.32% 1.36% 1.38% 1.43% 1.43%
Net investment loss (0.56)% (0.57)% (0.79)% (0.93)% (0.56)%
Portfolio turnover 495% 334% 112% 96% 117%
Net assets at end of period (000 Omitted) $600,531 $326,805 $227,348 $288,227 $207,504
# Per share data is 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.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS B
-----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $15.04 $11.08 $16.81 $13.14 $15.46
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.24) $(0.17) $(0.22) $(0.23) $(0.18)
Net realized and unrealized gain (loss)
on investments and foreign currency 8.78 5.75 (2.48) 5.47 0.58
------ ------ ------ ------ ------
Total from investment operations $ 8.54 $ 5.58 $(2.70) $ 5.24 $ 0.40
------ ------ ------ ------ ------
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)
------ ------ ------ ------ ------
Net asset value - end of period $21.55 $15.04 $11.08 $16.81 $13.14
====== ====== ====== ====== ======
Total return 59.15% 53.89% (18.52)% 42.95% 3.17%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.97% 2.01% 2.02% 2.11% 2.15%
Net investment loss (1.20)% (1.22)% (1.43)% (1.60)% (1.27)%
Portfolio turnover 495% 334% 112% 96% 117%
Net assets at end of period (000 Omitted) $243,420 $127,024 $97,682 $157,052 $129,858
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
------------------------------------------------------------------------------------------
PERIOD ENDED
AUGUST 31,
2000*
------------------------------------------------------------------------------------------
CLASS C
------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C>
Net asset value - beginning of period $19.62
------
Income from investment operations# -
Net investment loss $(0.08)
Net realized and unrealized gain on investments and foreign currency 2.03
------
Total from investment operations $ 1.95
------
Net asset value - end of period $21.57
======
Total return 59.30%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.97%+
Net investment loss (1.53)%+
Portfolio turnover 495%
Net assets at end of period (000 Omitted) $1,022
* For the period from the inception of Class C shares, June 1, 2000.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
------------------------------------- AUGUST 31,
2000 1999 1998 1997*
----------------------------------------------------------------------------------------------------------------------
CLASS I
----------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 14.99 $ 11.10 $ 16.86 $ 13.18
--------- --------- --------- ---------
Income from investment operations# -
Net investment loss $ (0.04) $ (0.03) $ (0.07) $ (0.07)
Net realized and unrealized gain (loss)
on investments and foreign currency 8.76 5.72 (2.50) 3.75
--------- --------- --------- ---------
Total from investment operations $ 8.72 $ 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 $ 21.54 $ 14.99 $ 11.10 $ 16.86
========= ========= ========= =========
Total return 60.76% 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 (0.21)% (0.21)% (0.44)% (0.65)%+
Portfolio turnover 495% 334% 112% 96%
Net assets at end of period (000 Omitted) $ 6,418 $ 2,829 $ 1,756 $ 2,349
* For the period from the inception of offering Class I shares, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from directed brokerage and certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(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 by 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 August 31, 2000, the value of securities loaned was $6,094,347. These loans
were collateralized by U.S. Treasury securities of $6,435,373.
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 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 $58,964 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 $37,127 under this agreement. These amounts are
shown as a reduction of total 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 only distributions in excess of tax basis earnings and profits are
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. During
the year ended August 31, 2000, $5,311,336 and $28,633,114 were reclassified to
accumulated net investment loss and paid-in capital, respectively, from
accumulated undistributed net realized gain on investments and foreign currency
transactions due to differences between book and tax accounting for currency
transactions, dividends, and the offset of net investment loss against
short-term capital gains. This change had no effect on the net assets or net
asset value per share.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that 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. Included in Trustees' compensation is a net
periodic pension expense of $14,985 for the year ended August 31, 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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$194,511 for the year ended August 31, 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, Class B, and Class C
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 $256,366 for the year ended August 31,
2000. Fees incurred under the distribution plan during the year ended August 31,
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 and Class C 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. The service fee is
intended to be consideration for services rendered by the dealer with respect to
Class B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $29,074 and $0 for Class
B and Class C shares, respectively for the year ended August 31, 2000. Fees
incurred under the distribution plan during the year ended August 31, 2000, were
1.00% of average daily net assets attributable to Class B on an annualized
basis.
Certain Class A and Class C 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 year ended August 31, 2000,
were $2,017, $182,384, and $0 for Class A, Class B, and Class C 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
$3,339,865,405 and $3,177,926,437, 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 $682,610,318
------------
Gross unrealized appreciation $176,266,443
Gross unrealized depreciation (4,927,968)
------------
Net unrealized appreciation $171,338,475
============
(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:
<TABLE>
<CAPTION>
Class A shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
----------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 12,462,747 $ 266,260,079 15,037,594 $ 210,364,788
Shares issued to shareholders
in reinvestment of distributions 2,424,937 44,031,861 2,778,022 33,286,301
Shares reacquired (8,751,139) (185,835,171) (16,511,548) (230,622,701)
---------- -------------- ----------- -------------
Net increase 6,136,545 $ 124,456,769 1,304,068 $ 13,028,388
========== ============== =========== =============
<CAPTION>
Class B shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
----------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,842,417 $ 146,545,472 2,983,721 $ 41,919,434
Shares issued to shareholders
in reinvestment of distributions 894,017 16,390,166 1,073,220 12,986,121
Shares reacquired (4,888,471) (99,619,289) (4,428,148) (61,169,706)
---------- -------------- ----------- -------------
Net increase (decrease) 2,847,963 $ 63,316,349 (371,207) $ (6,264,151)
========== ============== =========== =============
<CAPTION>
Class C shares
PERIOD ENDED AUGUST 31, 2000*
-----------------------------------
SHARES AMOUNT
-----------------------------------
<S> <C> <C>
Shares sold 48,112 $ 975,845
Shares issued to shareholders
in reinvestment of distributions -- --
Shares reacquired (730) (15,480)
---------- --------------
Net increase 47,382 $ 960,365
========== ==============
<CAPTION>
Class I shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
----------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 482,791 $ 10,412,831 36,801 $ 535,362
Shares issued to shareholders
in reinvestment of distributions 27,191 494,336 23,260 278,422
Shares reacquired (400,721) (8,706,832) (29,641) (388,276)
---------- -------------- ----------- -------------
Net increase 109,261 $ 2,200,335 30,420 $ 425,508
========== ============== =========== =============
*For the period from the inception of Class C shares June 1, 2000, through August 31, 2000.
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. 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 year ended August 31,
2000, was $5,555.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of Series Trust I and the Shareholders of MFS Managed Sectors
Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Managed Sectors Fund, (one of a series constituting MFS Series Trust I);
including the portfolio of investments, as of August 31, 2000, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
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 auditing standards generally accepted
in the United States of America. 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. Our procedures included confirmation of
securities owned as of August 31, 2000, by correspondence with the custodian. 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
Managed Sectors Fund as of August 31, 2000, the results of its operations, the
changes in its net assets and the financial highlights for the respective stated
periods, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 5, 2000
<PAGE>
FEDERAL TAX INFORMATION
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 2000.
THE FUND HAS DESIGNATED $57,465,307 AS A CAPITAL GAIN DIVIDEND FOR THE YEAR
ENDED AUGUST 31, 2000.
FOR THE YEAR ENDED AUGUST 31, 2000, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS IS 18.20%.
<PAGE>
MFS(R) MANAGED SECTORS FUND
<TABLE>
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Marshall N. Cohan+ - Private Investor Mark E. Bradley*
Robert R. Flaherty*
Lawrence H. Cohn, M.D.+ - Chief of Cardiac Laura F. Healy*
Surgery, Brigham and Women's Hospital; Ellen Moynihan*
Professor of Surgery, Harvard Medical School
SECRETARY
The Hon. Sir J. David Gibbons, KBE+ - Chief Stephen E. Cavan*
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Colonial Insurance Company, Ltd. ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Abby M. O'Neill+ - Private Investor
CUSTODIAN
Walter E. Robb, III+ - President and Treasurer, State Street Bank and Trust Company
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting AUDITORS
Group, Inc. (office services) Deloitte & Touche LLP
Arnold D. Scott* - Senior Executive INVESTOR INFORMATION
Vice President, Director, and Secretary, For information on MFS mutual funds, call
MFS Investment Management your investment professional or, for an
information kit, call toll free: 1-800-637-2929
Jeffrey L. Shames* - Chairman and Chief any business day from 9 a.m. to 5 p.m.
Executive Officer, MFS Investment Eastern time (or leave a message anytime).
Management
INVESTOR SERVICE
J. Dale Sherratt+ - President, Insight Resources, MFS Service Center, Inc.
Inc. (acquisition planning specialists) P.O. Box 2281
Boston, MA 02107-9906
Ward Smith+ - Former Chairman (until 1994),
NACCO Industries (holding company) For general information, call toll free:
1-800-225-2606 any business day from
INVESTMENT ADVISER 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired,
Boston, MA 02116-3741 call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use
DISTRIBUTOR this service, your phone must be equipped with
MFS Fund Distributors, Inc. a Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges,
or stock and bond outlooks, call toll free:
CHAIRMAN AND PRESIDENT 1-800-MFS-TALK (1-800-637-8255) anytime
Jeffrey L. Shames* from a touch-tone telephone.
PORTFOLIO MANAGER WORLD WIDE WEB
Toni Y. Shimura* www.mfs.com
TREASURER
James O. Yost*
+ 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-2 10/00 65M 08/208/308/808
