UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4777
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MFS SERIES TRUST I
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: August 31
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Date of reporting period: February 28, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
SEMIANNUAL REPORT
MFS(R) STRATEGIC GROWTH FUND
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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EXPENSE TABLE 3
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PORTFOLIO OF INVESTMENTS 5
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STATEMENT OF ASSETS AND LIABILITIES 9
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STATEMENT OF OPERATIONS 12
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STATEMENTS OF CHANGES IN NET ASSETS 13
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FINANCIAL HIGHLIGHTS 14
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NOTES TO FINANCIAL STATEMENTS 23
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 35
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PROXY VOTING POLICIES AND INFORMATION 35
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QUARTERLY PORTFOLIO DISCLOSURE 35
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CONTACT INFORMATION BACK COVER
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THE 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.
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NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
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2/28/07
AGF-SEM
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around the
globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets and
a reason investors should make sure they have an investment plan that can ride
out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you in
your investment decisions and that there is no sense in reacting to short- term
volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss. Investing
and planning for the long term require diligence and patience, two traits that
in our experience are essential to capitalizing on the many opportunities the
financial markets can offer -- through both up and down economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 97.6%
Cash & Other Net Assets 2.4%
TOP TEN HOLDINGS
Cisco Systems, Inc. 3.3%
------------------------------------------------
Adobe Systems, Inc. 2.9%
------------------------------------------------
News Corp., "A" 2.6%
------------------------------------------------
Roche Holding AG 2.5%
------------------------------------------------
Lockheed Martin Corp. 2.3%
------------------------------------------------
Intel Corp. 2.2%
------------------------------------------------
United Technologies Corp. 2.1%
------------------------------------------------
American Express Co. 2.1%
------------------------------------------------
UBS AG 2.1%
------------------------------------------------
Google, Inc., "A" 2.1%
------------------------------------------------
EQUITY SECTORS
Technology 21.6%
------------------------------------------------
Health Care 19.8%
------------------------------------------------
Financial Services 12.1%
------------------------------------------------
Industrial Goods & Services 7.8%
------------------------------------------------
Special Products & Services 6.9%
------------------------------------------------
Retailing 6.6%
------------------------------------------------
Leisure 6.3%
------------------------------------------------
Consumer Staples 5.3%
------------------------------------------------
Utilities & Communications 4.6%
------------------------------------------------
Energy 3.0%
------------------------------------------------
Basic Materials 2.0%
------------------------------------------------
Autos & Housing 1.6%
------------------------------------------------
Percentages are based on net assets as of 2/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period, September 1, 2006
through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2006 through February
28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides
information about hypothetical account values and hypothetical expenses based
on the fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
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Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
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Actual 1.23% $1,000.00 $1,085.70 $ 6.36
A ------------------------------------------------------------------------
Hypothetical (h) 1.23% $1,000.00 $1,018.70 $ 6.16
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Actual 1.88% $1,000.00 $1,082.60 $ 9.71
B -------------------------------------------------------------------------
Hypothetical (h) 1.88% $1,000.00 $1,015.47 $ 9.39
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Actual 1.88% $1,000.00 $1,082.40 $ 9.71
C ------------------------------------------------------------------------
Hypothetical (h) 1.88% $1,000.00 $1,015.47 $ 9.39
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Actual 0.88% $1,000.00 $1,088.00 $ 4.56
I ------------------------------------------------------------------------
Hypothetical (h) 0.88% $1,000.00 $1,020.43 $ 4.41
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Actual 1.38% $1,000.00 $1,085.10 $ 7.13
R -------------------------------------------------------------------------
Hypothetical (h) 1.38% $1,000.00 $1,017.95 $ 6.90
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Actual 1.98% $1,000.00 $1,082.20 $10.22
R1 ------------------------------------------------------------------------
Hypothetical (h) 1.98% $1,000.00 $1,014.98 $ 9.89
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Actual 1.63% $1,000.00 $1,084.00 $ 8.42
R2 ------------------------------------------------------------------------
Hypothetical (h) 1.63% $1,000.00 $1,016.71 $ 8.15
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Actual 1.53% $1,000.00 $1,084.50 $ 7.91
R3 -------------------------------------------------------------------------
Hypothetical (h) 1.53% $1,000.00 $1,017.21 $ 7.65
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Actual 1.27% $1,000.00 $1,086.30 $ 6.57
R4 ------------------------------------------------------------------------
Hypothetical (h) 1.27% $1,000.00 $1,018.50 $ 6.36
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Actual 0.97% $1,000.00 $1,087.50 $ 5.02
R5 ------------------------------------------------------------------------
Hypothetical (h) 0.97% $1,000.00 $1,019.98 $ 4.86
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Actual 1.48% $1,000.00 $1,084.90 $ 7.65
529A ------------------------------------------------------------------------
Hypothetical (h) 1.48% $1,000.00 $1,017.46 $ 7.40
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Actual 2.13% $1,000.00 $1,081.70 $10.99
529B ------------------------------------------------------------------------
Hypothetical (h) 2.13% $1,000.00 $1,014.23 $10.64
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Actual 2.13% $1,000.00 $1,081.00 $10.99
529C ------------------------------------------------------------------------
Hypothetical (h) 2.13% $1,000.00 $1,014.23 $10.64
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(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset
classes.
Common Stocks - 97.6%
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ISSUER SHARES/PAR VALUE ($)
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Aerospace - 4.4%
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Lockheed Martin Corp. 369,950 $ 35,988,736
United Technologies Corp. 510,510 33,504,771
--------------
$ 69,493,507
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Apparel Manufacturers - 2.8%
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Coach, Inc. (a) 333,790 $ 15,754,888
LVMH Moet Hennessy Louis Vuitton S.A. 70,130 7,768,933
NIKE, Inc., "B" 200,800 20,977,576
--------------
$ 44,501,397
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Automotive - 1.6%
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Harman International Industries, Inc. 249,490 $ 24,739,428
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Biotechnology - 6.8%
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Amgen, Inc. (a) 325,210 $ 20,897,995
Celgene Corp. (a)(l) 371,160 19,782,828
Genentech, Inc. (a) 234,260 19,764,516
Genzyme Corp. (a) 445,480 27,530,664
Gilead Sciences, Inc. (a) 100,180 7,168,881
Millipore Corp. (a) 173,710 12,423,739
--------------
$ 107,568,623
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Broadcasting - 3.6%
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Grupo Televisa S.A., ADR 532,960 $ 14,544,478
News Corp., "A" 1,846,440 41,600,293
--------------
$ 56,144,771
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Brokerage & Asset Managers - 4.0%
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Charles Schwab Corp. 1,338,960 $ 24,743,981
Chicago Mercantile Exchange Holdings, Inc., "A" 29,930 16,136,161
Goldman Sachs Group, Inc. 105,070 21,182,112
--------------
$ 62,062,254
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Business Services - 4.7%
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Amdocs Ltd. (a) 625,690 $ 21,655,131
Cognizant Technology Solutions Corp., "A" (a) 243,550 21,968,210
First Data Corp. 1,188,760 30,349,043
--------------
$ 73,972,384
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Chemicals - 2.0%
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Monsanto Co. 598,510 $ 31,535,492
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Computer Software - 3.3%
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Adobe Systems, Inc. (a) 1,178,376 $ 46,251,258
Oracle Corp. (a) 385,700 6,337,051
--------------
$ 52,588,309
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Computer Software - Systems - 1.3%
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Apple Computer, Inc. (a) 244,580 $ 20,693,914
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Consumer Goods & Services - 2.2%
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eBay, Inc. (a) 613,510 $ 19,669,131
Western Union Co. 691,660 14,988,272
--------------
$ 34,657,403
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Electrical Equipment - 2.0%
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Rockwell Automation, Inc. 515,390 $ 32,000,565
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Electronics - 7.4%
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Applied Materials, Inc. 1,355,180 $ 25,165,693
Intel Corp. 1,712,250 33,988,163
Marvell Technology Group Ltd. (a) 1,220,120 25,036,862
Samsung Electronics Co. Ltd., GDR 43,852 13,166,563
SanDisk Corp. (a)(l) 510,060 18,576,385
--------------
$ 115,933,666
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Food & Beverages - 3.6%
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Nestle S.A. 76,802 $ 28,626,171
PepsiCo, Inc. 443,730 28,021,550
--------------
$ 56,647,721
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Gaming & Lodging - 1.3%
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International Game Technology 499,320 $ 20,596,950
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General Merchandise - 1.1%
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Costco Wholesale Corp. 304,310 $ 17,007,886
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Health Maintenance Organizations - 1.1%
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UnitedHealth Group, Inc. 334,810 $ 17,477,082
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Insurance - 0.3%
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Aflac, Inc. 103,560 $ 4,888,032
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Internet - 2.1%
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Google, Inc., "A" (a) 71,660 $ 32,207,587
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Leisure & Toys - 1.4%
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Electronic Arts, Inc. (a) 424,100 $ 21,383,122
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Machinery & Tools - 1.4%
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Deere & Co. 197,920 $ 21,458,486
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Major Banks - 3.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Bank of New York Co., Inc. 674,370 $ 27,392,909
State Street Corp. 452,640 29,652,446
--------------
$ 57,045,355
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Medical Equipment - 6.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc. (a)(l) 582,440 $ 22,447,238
Cytyc Corp. (a) 814,520 24,679,956
Medtronic, Inc. 492,540 24,804,314
St. Jude Medical, Inc. (a) 594,960 23,590,164
--------------
$ 95,521,672
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Network & Telecom - 6.3%
- ----------------------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (a) 1,972,210 $ 51,159,127
Juniper Networks, Inc. (a) 1,060,150 20,047,437
Nokia Corp., ADR 246,500 5,381,095
QUALCOMM, Inc. 387,130 15,593,596
Research In Motion Ltd. (a) 43,050 6,053,261
--------------
$ 98,234,516
- ----------------------------------------------------------------------------------------------------------------------------------
Oil Services - 3.0%
- ----------------------------------------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 431,110 $ 24,844,869
National-Oilwell Varco, Inc. (a) 245,980 17,130,047
Schlumberger Ltd. 87,110 5,470,508
--------------
$ 47,445,424
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Other Banks & Diversified Financials - 4.2%
- ----------------------------------------------------------------------------------------------------------------------------------
American Express Co. 581,480 $ 33,068,768
UBS AG 549,540 32,444,842
--------------
$ 65,513,610
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Personal Computers & Peripherals - 1.2%
- ----------------------------------------------------------------------------------------------------------------------------------
EMC Corp. (a) 727,880 $ 10,153,926
Network Appliance, Inc. (a) 221,870 8,579,713
--------------
$ 18,733,639
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Pharmaceuticals - 5.8%
- ----------------------------------------------------------------------------------------------------------------------------------
Allergan, Inc. 254,400 $ 28,419,024
GlaxoSmithKline PLC 851,720 23,914,619
Roche Holding AG (l) 219,020 39,091,128
--------------
$ 91,424,771
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Specialty Stores - 2.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Lowe's Cos., Inc. 769,900 $ 25,067,944
Staples, Inc. 686,410 17,860,389
--------------
$ 42,928,333
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Telecommunications - Wireless - 1.6%
- ----------------------------------------------------------------------------------------------------------------------------------
America Movil S.A. de C.V., "L", ADR 580,660 $ 25,432,908
- ----------------------------------------------------------------------------------------------------------------------------------
Telephone Services - 3.0%
- ----------------------------------------------------------------------------------------------------------------------------------
American Tower Corp., "A" (a) 741,400 $ 28,721,836
AT&T, Inc. 108,100 3,978,080
Qwest Communications International, Inc. (a)(l) 1,622,180 14,404,958
--------------
$ 47,104,874
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Tobacco - 1.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Altria Group, Inc. 310,280 $ 26,150,398
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TOTAL COMMON STOCKS (IDENTIFIED COST, $1,434,132,246) $1,533,094,079
- ----------------------------------------------------------------------------------------------------------------------------------
Short-Term Obligations - 2.6%
- ----------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, due 3/01/07,
at Amortized Cost and Value (y) $40,466,000 $ 40,466,000
- ----------------------------------------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 5.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost
and Net Asset Value 88,657,330 $ 88,657,330
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $1,563,255,576) $1,662,217,409
- ----------------------------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (5.8)% (91,298,077)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $1,570,919,332
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(a) Non-income producing security.
(l) All or a portion of this security is on loan.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
GDR Global Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets
and liabilities comprising the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------------------
Investments, at value, including $85,592,836 of securities
on loan (identified cost, $1,563,255,576) $1,662,217,409
Cash 288
Receivable for investments sold 5,760,971
Receivable for fund shares sold 1,212,960
Interest and dividends receivable 1,013,796
Other assets 31,877
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Total assets $1,670,237,301
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $8,167,004
Payable for fund shares reacquired 1,614,697
Collateral for securities loaned, at value 88,657,330
Payable to affiliates
Management fee 56,682
Shareholder servicing costs 387,705
Distribution and service fees 22,790
Administrative services fee 1,548
Program manager fees 14
Retirement plan administration and services fees 29
Payable for independent trustees' compensation 67,922
Accrued expenses and other liabilities 342,248
- ------------------------------------------------------------------------------------------------------------------
Total liabilities $99,317,969
- ------------------------------------------------------------------------------------------------------------------
Net assets $1,570,919,332
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------------------
Paid-in capital $2,790,905,300
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 98,962,755
Accumulated net realized gain (loss) on investments and
foreign currency transactions (1,315,037,280)
Accumulated net investment loss (3,911,443)
- ------------------------------------------------------------------------------------------------------------------
Net assets $1,570,919,332
- ------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 76,468,379
- ------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $393,078,912
Shares outstanding 19,264,201
- ------------------------------------------------------------------------------------------------------------------
Net asset value per share $20.40
- ------------------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value
per share) $21.64
- ------------------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $209,852,823
Shares outstanding 10,891,909
- ------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.27
- ------------------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $59,546,919
Shares outstanding 3,085,197
- ------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.30
- ------------------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $902,566,381
Shares outstanding 42,932,724
- ------------------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $21.02
- ------------------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $2,480,310
Shares outstanding 122,277
- ------------------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.28
- ------------------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $444,305
Shares outstanding 23,116
- ------------------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $19.22
- ------------------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $817,624
Shares outstanding 42,258
- ------------------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $19.35
- ------------------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $905,663
Shares outstanding 44,962
- ------------------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.14
- ------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $166,422
Shares outstanding 8,163
- ------------------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.39
- ------------------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $57,013
Shares outstanding 2,781
- ------------------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.50
- ------------------------------------------------------------------------------------------------------------------
Class 529A shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $615,412
Shares outstanding 30,473
- ------------------------------------------------------------------------------------------------------------------
Net asset value per share $20.20
- ------------------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $21.43
- ------------------------------------------------------------------------------------------------------------------
Class 529B shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $170,936
Shares outstanding 8,965
- ------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.07
- ------------------------------------------------------------------------------------------------------------------
Class 529C shares
- ------------------------------------------------------------------------------------------------------------------
Net assets $216,612
Shares outstanding 11,353
- ------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.08
- ------------------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering prices of Class A and Class 529A shares are reduced. A contingent
deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class 529B, and Class 529C
shares.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT LOSS
- ------------------------------------------------------------------------------------------------------------------
Income
Dividends $5,285,035
Interest 1,385,907
- ------------------------------------------------------------------------------------------------------------------
Total investment income $6,670,942
- ------------------------------------------------------------------------------------------------------------------
Expenses
Management fee $5,924,305
Distribution and service fees 2,239,519
Program manager fees 1,273
Shareholder servicing costs 1,206,591
Administrative services fee 140,253
Retirement plan administration and services fees 3,840
Independent trustees' compensation 26,766
Custodian fee 223,869
Shareholder communications 81,245
Auditing fees 22,457
Legal fees 22,996
Miscellaneous 98,293
- ------------------------------------------------------------------------------------------------------------------
Total expenses $9,991,407
- ------------------------------------------------------------------------------------------------------------------
Fees paid indirectly (59,704)
Reduction of expenses by investment adviser (795,386)
- ------------------------------------------------------------------------------------------------------------------
Net expenses $9,136,317
- ------------------------------------------------------------------------------------------------------------------
Net investment loss $(2,465,375)
- ------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $46,577,311
Foreign currency transactions (13,823)
- ------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions $46,563,488
- ------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $87,282,201
Translation of assets and liabilities
in foreign currencies (2,030)
- ------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments
and foreign currency translation $87,280,171
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency $133,843,659
- ------------------------------------------------------------------------------------------------------------------
Change in net assets from operations $131,378,284
- ------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS FROM OPERATIONS
- ----------------------------------------------------------------------------------------------------------------
Net investment loss $(2,465,375) $(8,556,709)
Net realized gain (loss) on investments and foreign currency transactions 46,563,488 32,807,606
Net unrealized gain (loss) on investments and foreign currency translation 87,280,171 (19,497,489)
- ----------------------------------------------------------------------------------------------------------------
Change in net assets from operations $131,378,284 $4,753,408
- ----------------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(96,180,527) $(97,585,909)
- ----------------------------------------------------------------------------------------------------------------
Total change in net assets $35,197,757 $(92,832,501)
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
At beginning of period 1,535,721,575 1,628,554,076
At end of period (including accumulated net investment
loss of $3,911,443 and $1,446,068, respectively) $1,570,919,332 $1,535,721,575
- ----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period and
the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results for a
single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an
investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $18.79 $18.76 $16.62 $16.57 $14.03 $19.22
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.04) $(0.10) $0.01 $(0.08) $(0.07) $(0.13)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.65 0.13 2.13 0.13 2.61 (4.97)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.61 $0.03 $2.14 $0.05 $2.54 $(5.10)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $-- $-- $-- $-- $-- $(0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.40 $18.79 $18.76 $16.62 $16.57 $14.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 8.57(n) 0.16 12.88 0.30(b) 18.10(j) (26.70)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.33(a) 1.36 1.38 1.37 1.41 1.45
Expenses after expense reductions (f) 1.23(a) 1.27 1.28 1.32 N/A N/A
Net investment income (loss) (0.38)(a) (0.53) 0.05 (0.46) (0.46) (0.74)
Portfolio turnover 32 171 69 80 72 116
Net assets at end of period (000 Omitted) $393,079 $414,113 $518,618 $563,761 $673,767 $731,283
- ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $17.80 $17.88 $15.95 $16.00 $13.65 $18.80
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.10) $(0.22) $(0.10) $(0.19) $(0.16) $(0.24)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.57 0.14 2.03 0.14 2.51 (4.82)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.47 $(0.08) $1.93 $(0.05) $2.35 $(5.06)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $-- $-- $-- $-- $-- $(0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.27 $17.80 $17.88 $15.95 $16.00 $13.65
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 8.26(n) (0.45) 12.10 (0.31)(b) 17.22(j) (27.08)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.98(a) 2.02 2.02 2.02 2.06 2.10
Expenses after expense reductions (f) 1.88(a) 1.92 1.92 1.97 N/A N/A
Net investment loss (1.03)(a) (1.19) (0.60) (1.10) (1.12) (1.39)
Portfolio turnover 32 171 69 80 72 116
Net assets at end of period (000 Omitted) $209,853 $247,488 $381,085 $427,364 $505,090 $490,326
- ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $17.83 $17.92 $15.98 $16.03 $13.67 $18.84
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.10) $(0.22) $(0.10) $(0.19) $(0.16) $(0.24)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.57 0.13 2.04 0.14 2.52 (4.84)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.47 $(0.09) $1.94 $(0.05) $2.36 $(5.08)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $-- $-- $-- $-- $-- $(0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.30 $17.83 $17.92 $15.98 $16.03 $13.67
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 8.24(n) (0.50) 12.14 (0.31)(b) 17.26(j) (27.13)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.98(a) 2.02 2.02 2.02 2.06 2.10
Expenses after expense reductions (f) 1.88(a) 1.93 1.92 1.97 N/A N/A
Net investment loss (1.03)(a) (1.19) (0.58) (1.10) (1.12) (1.39)
Portfolio turnover 32 171 69 80 72 116
Net assets at end of period (000 Omitted) $59,547 $66,664 $89,290 $114,023 $141,307 $148,930
- ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $19.32 $19.22 $16.97 $16.86 $14.24 $19.41
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.00)(w) $(0.03) $0.07 $(0.01) $(0.01) $(0.07)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.70 0.13 2.18 0.12 2.63 (5.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.70 $0.10 $2.25 $0.11 $2.62 $(5.08)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $-- $-- $-- $-- $-- $(0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.02 $19.32 $19.22 $16.97 $16.86 $14.24
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.80(n) 0.52 13.26 0.65(b) 18.40(j) (26.37)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.98(a) 1.02 1.01 1.01 1.06 1.10
Expenses after expense reductions (f) 0.88(a) 0.92 0.91 0.96 N/A N/A
Net investment income (loss) (0.03)(a) (0.17) 0.35 (0.06) (0.10) (0.39)
Portfolio turnover 32 171 69 80 72 116
Net assets at end of period (000 Omitted) $902,566 $801,583 $633,593 $405,006 $163,758 $26,193
- ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $18.69 $18.68 $16.58 $16.55 $13.92
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.05) $(0.13) $(0.03) $(0.09) $(0.06)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.64 0.14 2.13 0.12 2.69
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $1.59 $0.01 $2.10 $0.03 $2.63
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.28 $18.69 $18.68 $16.58 $16.55
- ----------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.51(n) 0.05 12.67 0.18(b) 18.89(j)(n)
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.48(a) 1.51 1.53 1.49 1.60(a)
Expenses after expense reductions (f) 1.38(a) 1.41 1.43 1.44 N/A
Net investment loss (0.53)(a) (0.68) (0.16) (0.52) (0.60)(a)
Portfolio turnover 32 171 69 80 72
Net assets at end of period (000 Omitted) $2,480 $2,582 $3,784 $1,982 $221
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.76 $17.87 $17.19
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.11) $(0.23) $(0.08)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.57 0.12 0.76
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $1.46 $(0.11) $0.68
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.22 $17.76 $17.87
- ----------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.22(n) (0.62) 3.96(n)
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.18(a) 2.22 2.23(a)
Expenses after expense reductions (f) 1.98(a) 2.03 2.13(a)
Net investment loss (1.13)(a) (1.27) (1.06)(a)
Portfolio turnover 32 171 69
Net assets at end of period (000 Omitted) $444 $362 $204
- ----------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.85 $17.89 $17.19
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.07) $(0.16) $(0.05)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.57 0.12 0.75
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $1.50 $(0.04) $0.70
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.35 $17.85 $17.89
- ----------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.40(n) (0.22) 4.07(n)
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.88(a) 1.92 1.95(a)
Expenses after expense reductions (f) 1.63(a) 1.67 1.85(a)
Net investment loss (0.78)(a) (0.89) (0.80)(a)
Portfolio turnover 32 171 69
Net assets at end of period (000 Omitted) $818 $751 $133
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $18.57 $18.60 $16.55 $16.99
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.07) $(0.16) $(0.10) $(0.10)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.64 0.13 2.15 (0.34)
- ---------------------------------------------------------------------------------------------------------
Total from investment operations $1.57 $(0.03) $2.05 $(0.44)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.14 $18.57 $18.60 $16.55
- ---------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.45(n) (0.16) 12.39 (2.59)(b)(n)
- ---------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.73(a) 1.77 1.78 1.71(a)
Expenses after expense reductions (f) 1.53(a) 1.58 1.68 1.66(a)
Net investment loss (0.68)(a) (0.83) (0.53) (0.74)(a)
Portfolio turnover 32 171 69 80
Net assets at end of period (000 Omitted) $906 $1,073 $822 $309
- ---------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $18.77 $18.75 $17.98
- ----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.03) $(0.11) $(0.03)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.65 0.13 0.80
- ----------------------------------------------------------------------------------------------------
Total from investment operations $1.62 $0.02 $0.77
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $20.39 $18.77 $18.75
- ----------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.63(n) 0.11 4.28(n)
- ----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.37(a) 1.43 1.45(a)
Expenses after expense reductions (f) 1.27(a) 1.33 1.35(a)
Net investment loss (0.36)(a) (0.58) (0.37)(a)
Portfolio turnover 32 171 69
Net assets at end of period (000 Omitted) $166 $52 $52
- ----------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $18.85 $18.78 $17.98
- ----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.01) $(0.06) $(0.01)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.66 0.13 0.81
- ----------------------------------------------------------------------------------------------------
Total from investment operations $1.65 $0.07 $0.80
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $20.50 $18.85 $18.78
- ----------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.75(n) 0.37 4.45(n)
- ----------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.07(a) 1.13 1.15(a)
Expenses after expense reductions (f) 0.97(a) 1.03 1.05(a)
Net investment loss (0.13)(a) (0.29) (0.07)(a)
Portfolio turnover 32 171 69
Net assets at end of period (000 Omitted) $57 $52 $52
- ----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------
CLASS 529A 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $18.62 $18.63 $16.55 $16.52 $14.03 $13.89
- -----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.06) $(0.15) $(0.04) $(0.12) $(0.10) $(0.01)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.64 0.14 2.12 0.15 2.59 0.15
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.58 $(0.01) $2.08 $0.03 $2.49 $0.14
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.20 $18.62 $18.63 $16.55 $16.52 $14.03
- -----------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 8.49(n) (0.05) 12.57 0.18(b) 17.75(j) 1.01(n)
- -----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.58(a) 1.62 1.62 1.61 1.67 1.70(a)
Expenses after expense reductions (f) 1.48(a) 1.52 1.52 1.56 N/A N/A
Net investment loss (0.63)(a) (0.77) (0.25) (0.68) (0.69) (0.74)(a)
Portfolio turnover 32 171 69 80 72 116
Net assets at end of period (000 Omitted) $615 $531 $481 $394 $225 $5
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------
CLASS 529B 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $17.63 $17.76 $15.88 $15.97 $13.65 $13.52
- -----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.12) $(0.26) $(0.15) $(0.22) $(0.19) $(0.02)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.56 0.13 2.03 0.13 2.51 0.15
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.44 $(0.13) $1.88 $(0.09) $2.32 $0.13
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.07 $17.63 $17.76 $15.88 $15.97 $13.65
- -----------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 8.17(n) (0.73) 11.84 (0.56)(b) 17.00(j) 0.96(n)
- -----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.23(a) 2.27 2.27 2.25 2.33 2.35(a)
Expenses after expense reductions (f) 2.13(a) 2.17 2.17 2.20 N/A N/A
Net investment loss (1.28)(a) (1.42) (0.88) (1.31) (1.37) (1.39)(a)
Portfolio turnover 32 171 69 80 72 116
Net assets at end of period (000 Omitted) $171 $164 $151 $143 $79 $5
- -----------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------
CLASS 529C 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $17.65 $17.78 $15.90 $15.99 $13.67 $13.54
- -----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.12) $(0.26) $(0.16) $(0.22) $(0.19) $(0.02)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.55 0.13 2.04 0.13 2.51 0.15
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.43 $(0.13) $1.88 $(0.09) $2.32 $0.13
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.08 $17.65 $17.78 $15.90 $15.99 $13.67
- -----------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 8.10(n) (0.73) 11.82 (0.56)(b) 16.97(j) 0.96(n)
- -----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.23(a) 2.27 2.27 2.25 2.30 2.35(a)
Expenses after expense reductions (f) 2.13(a) 2.17 2.17 2.20 N/A N/A
Net investment loss (1.28)(a) (1.43) (0.91) (1.29) (1.35) (1.38)(a)
Portfolio turnover 32 171 69 80 72 116
Net assets at end of period (000 Omitted) $217 $307 $290 $221 $58 $5
- -----------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less
than $0.01.
(a) Annualized.
(b) The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The
non-recurring accrual did not have a material impact on the net asset value per share based on shares outstanding on
the day the proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(i) For the period from the class' inception, December 31, 2002 (Class R), July 31, 2002 (Classes 529A, 529B, and 529C),
October 31, 2003 (Class R3) and April 1, 2005 (Classes R1, R2, R4, and R5) through the stated period end.
(j) The fund's net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.01 per share based on shares
outstanding on the day the proceeds were received. Excluding the effect of this payment from the ending net asset
value per share, the Class A, Class B, Class C, Class I, Class R, Class 529A, Class 529B and Class 529C total
returns for the year ended August 31, 2003 would have been lower by approximately 0.08%, 0.09%, 0.08%, 0.09%, 0.08%,
0.09%, 0.09%, and 0.09%, respectively.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be
lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Strategic Growth Fund (the fund) is a 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 U.S.
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, including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the market
or exchange on which they are primarily traded. For securities held short for
which there were no sales reported for the day, the position is generally
valued at the last quoted daily ask quotation as reported by an independent
pricing service on the market or exchange on which such securities are
primarily traded. Short-term instruments with a maturity at issuance of 60 days
or less may be valued at amortized cost, which approximates market value.
Open-end investment companies are generally valued at their net asset value per
share. Securities and other assets generally valued on the basis of information
from an independent pricing service may also be valued at a broker-dealer bid
quotation. The values of foreign securities and other assets and liabilities
expressed in foreign currencies are converted to U.S. dollars using the mean of
bid and asked prices for rates reported by an independent pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any
fair valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the fund's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. In addition, investments may be valued at fair
value if the adviser determines that an investment's value has been materially
affected by events occurring after the close of the exchange or market on which
the investment is principally traded (such as foreign exchange or market) and
prior to the determination of the fund's net asset value, or after the halting
of trading of a specific security where trading does not resume prior to the
close of the exchange or market on which the security is principally traded.
Events that occur on a frequent basis after foreign markets close (such as
developments in foreign markets and significant movements in the U.S. markets)
and prior to the determination of the fund's net asset value may be deemed to
have a material affect on the value of securities traded in foreign markets.
Accordingly, the fund's foreign equity securities may often be valued at fair
value. The adviser may rely on independent pricing services or other
information (such as the correlation with price movements of similar securities
in the same or other markets; the type, cost and investment characteristics of
the security; the business and financial condition of the issuer; and trading
and other market data) to assist in determining whether to fair value and at
what value to fair value an investment. The value of an investment for purposes
of calculating the fund's net asset value can differ depending on the source
and method used to determine value. When fair valuation is used, the value of
investments used to determine the fund's net asset value may differ from quoted
or published prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the fund, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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"), as
lending agent, 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 cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
On loans collateralized by cash, the cash collateral is invested in a money
market fund or short-term securities. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the fund and the lending agent. On loans collateralized by
U.S. Treasury securities, a fee is received from the Borrower, and is allocated
between the fund and the lending agent. Net 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.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to the ex-
dividend date. Dividend and interest payments received in additional securities
are recorded on the ex-dividend or ex-interest date in an amount equal to the
value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds
received from litigation involving its portfolio holdings are reflected in
realized gain/loss in the Statement of Operations, or in unrealized gain/loss
if the security is still held by the fund. Any other proceeds from litigation
not related to portfolio holdings are reflected as other income in the
Statement of Operations.
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. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the fund in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to net operating losses, defaulted bonds,
and wash sale loss deferrals.
The fund declared no distributions for the year ended August 31, 2006.
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $1,568,544,563
----------------------------------------------------------
Gross appreciation $133,585,031
Gross depreciation (39,912,185)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $93,672,846
AS OF 8/31/06
Capital loss carryforwards (1,346,311,781)
Other temporary differences (1,443,116)
Net unrealized appreciation (depreciation) (3,609,355)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of August 31, 2006, the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
8/31/09 $(172,262,091)
8/31/10 (844,273,922)
8/31/11 (299,742,793)
8/31/12 (30,032,975)
-------------------------------------------------
$(1,346,311,781)
The availability of a portion of the capital loss carryforwards, which were
acquired on June 10, 2005, in connection with the Managed Sectors Fund merger,
may be limited in a given year.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management is
evaluating the application of the Interpretation to the fund, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on the fund's financial statements.
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 and Class 529B
shares will convert to Class A and Class 529A shares, respectively,
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the fund. The management fee is computed daily and paid monthly at
an annual rate of 0.75% of the fund's average daily net assets. As part of a
settlement agreement with the New York Attorney General concerning market timing
and related matters, MFS has agreed to reduce the management fee to 0.65% of the
fund's average daily net assets for the period March 1, 2004 through February
28, 2009. For the six months ended February 28, 2007, this waiver amounted to
$789,907 and is reflected as a reduction of total expenses in the Statement of
Operations. The management fee incurred for the six months ended February 28,
2007 was equivalent to an annual effective rate of 0.65% of the fund's average
daily net assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $16,419 and $121 for the six months ended February
28, 2007, as its portion of the initial sales charge on sales of Class A and
Class 529A shares of the fund, respectively.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the distribution
and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee
paid to MFD. MFD may subsequently pay all, or a portion, of the distribution
and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $723,688
Class B 0.75% 0.25% 1.00% 1.00% 1,177,008
Class C 0.75% 0.25% 1.00% 1.00% 323,032
Class R 0.25% 0.25% 0.50% 0.50% 6,446
Class R1 0.50% 0.25% 0.75% 0.75% 1,518
Class R2 0.25% 0.25% 0.50% 0.50% 2,008
Class R3 0.25% 0.25% 0.50% 0.50% 2,484
Class R4 -- 0.25% 0.25% 0.25% 86
Class 529A 0.25% 0.25% 0.50% 0.35% 993
Class 529B 0.75% 0.25% 1.00% 1.00% 855
Class 529C 0.75% 0.25% 1.00% 1.00% 1,401
- --------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $2,239,519
(d) In accordance with the distribution plan for certain classes, the fund pays distribution and/or
service fees up to these annual percentage rates of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the distribution plan for the six
months ended February 28, 2007 based on each class' average daily net assets. 0.10% of the Class 529A
distribution fee is currently being paid by the fund. Payment of the remaining 0.15% of the Class
529A distribution fee is not yet in effect and will be implemented on such date as the fund's Board
of Trustees may determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within 12 months
of purchase. Class B and Class 529B shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within six years of
purchase. All contingent deferred sales charges are paid to MFD and during the
six months ended February 28, 2007, were as follows:
AMOUNT
Class A $7,305
Class B 177,828
Class C 2,314
Class 529B 278
Class 529C --
The fund has entered into and may from time to time enter into contracts with
program managers and other parties which administer the tuition programs
through which an investment in the fund's 529 share classes is made. The fund
has entered into an agreement with MFD pursuant to which MFD receives an annual
fee of up to 0.35% of the average daily net assets attributable to each 529
share class. The fee is based on average daily net assets and is currently
established at 0.25% annually of average daily net assets of the fund's 529
share classes. The fee may only be increased with the approval of the Board of
Trustees who oversees the fund. The services provided by MFD, or a third party
with which MFD contracts, include recordkeeping and tax reporting and account
services, as well as services designed to maintain the program's compliance
with the Internal Revenue Code and other regulatory requirements. Program
manager fees for the six months ended February 28, 2007, were as follows:
AMOUNT
Class 529A $709
Class 529B 214
Class 529C 350
--------------------------------------------------
Total Program Manager Fees $1,273
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as shareholder
servicing agent calculated as a percentage of the average daily net assets of
the fund as determined periodically under the supervision of the fund's Board
of Trustees. For the six months ended February 28, 2007, the fee was $602,073,
which equated to 0.0762% annually of the fund's average daily net assets.
Effective January 1, 2007, MFSC has entered into a sub-accounting agreement
with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of MFSC, on
behalf of the fund to provide omnibus account services to the fund. MFSC pays
SRS both an asset based fee and a per account charge of the assets held in the
omnibus account. The fund then reimburses MFSC for the sub- accounting fees
paid to SRS. For the six months ended February 28, 2007, the sub-accounting fee
for SRS was $31,790, which equated to 0.0040% annually of the fund's average
daily net assets. MFSC also receives payment from the fund for out-of-pocket
and sub-accounting expenses. For the six months ended February 28, 2007, these
out-of-pocket and sub-accounting costs amounted to $403,103. The fund may also
pay shareholder servicing related costs directly to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500. The administrative services fee incurred for the six
months ended February 28, 2007 was equivalent to an annual effective rate of
0.0178% of the fund's average daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares, and
may be provided directly by MFS or by a third party. MFS may subsequently pay
all, or a portion, of the retirement plan administration and services fee to
affiliated or unaffiliated third parties. For the six months ended February 28,
2007, the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily
net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $911
Class R2 0.40% 0.25% 1,607
Class R3 0.25% 0.15% 1,242
Class R4 0.15% 0.15% 52
Class R5 0.10% 0.10% 28
- --------------------------------------------------------------------------------
Total Retirement Plan Administration and Services Fees $3,840
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $1,302 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and additional
compensation to Board and Committee chairpersons. The fund does not pay
compensation directly to trustees or officers of the fund who are also officers
of the investment adviser, 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, MFD, and MFSC.
The fund has an unfunded, defined benefit plan for certain retired independent
trustees which resulted in a pension expense of $763. The fund also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $5,573. Both amounts are included in
independent trustees' compensation for the six months ended February 28, 2007.
The liability for deferred retirement benefits payable to certain independent
trustees under both plans amounted to $61,164 at February 28, 2007, and is
included in payable for independent trustees' compensation.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
independent trustees previously were allowed to elect to defer receipt of all
or a portion of their annual compensation. Trustees are no longer allowed to
defer compensation under the Plan. Amounts previously deferred are treated as
though equivalent dollar amounts had been invested in shares of the fund or
other MFS funds selected by the trustee. Deferred amounts represent an
unsecured obligation of the fund until distributed in accordance with the Plan.
Included in other assets and payable for independent trustees' compensation is
$3,923 of deferred trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $6,250. MFS has agreed to reimburse the fund for a portion of
the payments made by the funds to Tarantino LLC in the amount of $4,177, which
is shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office space,
other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$486,318,949 and $578,570,760, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07(h) 8/31/06(h)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 1,679,323 $34,024,626 4,377,994 $83,738,691
Class B 271,945 5,146,624 831,375 15,209,822
Class C 78,373 1,494,684 260,061 4,776,584
Class I 2,271,955 47,457,818 8,989,008 177,217,230
Class R 9,182 181,372 25,065 477,701
Class R1 21,638 424,969 11,694 218,511
Class R2 37,923 754,220 39,226 724,819
Class R3 46,657 957,556 29,585 549,177
Class R4 5,382 112,156 -- --
Class 529A 4,184 84,282 7,044 131,184
Class 529B 692 13,163 1,519 27,095
Class 529C 979 18,485 3,416 63,535
- --------------------------------------------------------------------------------------------------
4,428,233 $90,669,955 14,575,987 $283,134,349
Shares reacquired
Class A (4,459,074) $(90,066,607) (9,985,755) $(191,838,092)
Class B (3,287,214) (62,705,721) (8,233,984) (149,909,261)
Class C (732,682) (13,990,811) (1,504,250) (27,523,677)
Class I (825,834) (17,052,910) (463,984) (9,172,412)
Class R (25,034) (501,011) (89,429) (1,705,603)
Class R1 (18,874) (371,654) (2,748) (49,551)
Class R2 (37,744) (751,011) (4,590) (80,306)
Class R3 (59,463) (1,213,577) (16,005) (305,472)
Class R4 -- -- -- --
Class 529A (2,255) (44,438) (4,306) (80,216)
Class 529B (1,028) (19,481) (693) (12,635)
Class 529C (7,029) (133,261) (2,322) (43,033)
- ----------------------------------------------------------------------------------------------------
(9,456,231) $(186,850,482) (20,308,066) $(380,720,258)
Net change
Class A (2,779,751) $(56,041,981) (5,607,761) $(108,099,401)
Class B (3,015,269) (57,559,097) (7,402,609) (134,699,439)
Class C (654,309) (12,496,127) (1,244,189) (22,747,093)
Class I 1,446,121 30,404,908 8,525,024 168,044,818
Class R (15,852) (319,639) (64,364) (1,227,902)
Class R1 2,764 53,315 8,946 168,960
Class R2 179 3,209 34,636 644,513
Class R3 (12,806) (256,021) 13,580 243,705
Class R4 5,382 112,156 -- --
Class 529A 1,929 39,844 2,738 50,968
Class 529B (336) (6,318) 826 14,460
Class 529C (6,050) (114,776) 1,094 20,502
- ----------------------------------------------------------------------------------------------------
(5,027,998) $(96,180,527) (5,732,079) $(97,585,909)
(h) Class R5 had no operating activity.
The fund is one of several mutual funds in which the MFS funds-of-funds may
invest. The MFS funds-of-funds do not invest in the underlying MFS funds for
the purpose of exercising management or control. At the end of the period, the
MFS Aggressive Growth Allocation Fund, MFS Conservative Allocation Fund, MFS
Growth Allocation Fund and MFS Moderate Allocation Fund were the owners of
record of approximately 16%, 2%, 24%, and 14%, respectively, of the value of
outstanding voting shares. In addition, the MFS Lifetime 2010 Fund, MFS
Lifetime 2020 Fund, MFS Lifetime 2030 Fund and the MFS Lifetime 2040 Fund were
each the owners of record of less than 1% of the value of outstanding voting
shares.
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve funds
rate plus 0.35%. In addition, a commitment fee, based on the average daily,
unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$4,840 and $0, respectively, and are included in miscellaneous expense on the
Statement of Operations.
(7) SUBSEQUENT EVENTS
Effective March 31, 2007, Class 529A, Class 529B, and Class 529C shares of the
MFS Strategic Growth Fund were terminated.
On February 28, 2007, the Trustees of the fund approved the proposed Agreement
and Plan of Reorganization, whereby MFS Strategic Growth Fund would be
reorganized in MFS Core Growth Fund. The Agreement and Plan of Reorganization
provides for the transfer of the assets of the MFS Strategic Growth Fund to the
MFS Core Growth Fund and the assumption by the MFS Core Growth Fund of the
liabilities of the MFS Strategic Growth Fund in exchange solely for shares of
beneficial interest in the MFS Core Growth Fund. Immediately following the
transfer, the MFS Core Growth Fund shares received by the MFS Strategic Growth
Fund will be distributed to shareholders, pro rata, and the MFS Strategic
Growth Fund will be liquidated and terminated. If approved by shareholders, it
is expected that the reorganization will occur on or around June 22, 2007.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA 02205-5824
1-800-637-8255
24 hours a day OVERNIGHT MAIL
MFS Service Center, Inc.
ACCOUNT SERVICE AND 500 Boylston Street
LITERATURE Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Semiannual report
MFS(R) CORE EQUITY FUND
LETTER FROM THE CEO 1
- ---------------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------------
EXPENSE TABLE 3
- ---------------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ---------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 14
- ---------------------------------------------------------
STATEMENT OF OPERATIONS 17
- ---------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 18
- ---------------------------------------------------------
FINANCIAL HIGHLIGHTS 19
- ---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 29
- ---------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 39
- ---------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 39
- ---------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 39
- ---------------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------------
THE 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.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
RGI-SEM
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts canbe guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 99.3%
Cash & Other Net Assets 0.7%
TOP TEN HOLDINGS
Exxon Mobil Corp. 2.9%
-------------------------------------------------
Altria Group, Inc. 2.5%
-------------------------------------------------
Wyeth 1.8%
-------------------------------------------------
JPMorgan Chase & Co. 1.6%
-------------------------------------------------
Bank of America Corp. 1.6%
-------------------------------------------------
Eli Lilly & Co. 1.5%
-------------------------------------------------
AT&T, Inc. 1.5%
-------------------------------------------------
Rockwell Automation, Inc. 1.3%
-------------------------------------------------
Countrywide Financial Corp. 1.3%
-------------------------------------------------
United Technologies Corp. 1.3%
-------------------------------------------------
EQUITY SECTORS
Financial Services 21.7%
-------------------------------------------------
Technology 13.9%
-------------------------------------------------
Health Care 12.0%
-------------------------------------------------
Energy 8.0%
-------------------------------------------------
Utilities & Communications 7.8%
-------------------------------------------------
Industrial Goods & Services 6.7%
-------------------------------------------------
Retailing 6.4%
-------------------------------------------------
Consumer Staples 6.4%
-------------------------------------------------
Leisure 6.0%
-------------------------------------------------
Basic Materials 4.5%
-------------------------------------------------
Special Products & Services 2.2%
-------------------------------------------------
Autos & Housing 1.9%
-------------------------------------------------
Transportation 1.8%
-------------------------------------------------
Percentages are based on net assets as of 02/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 1.32% $1,000.00 $1,119.40 $6.94
A ---------------------------------------------------------------------------
Hypothetical(h) 1.32% $1,000.00 $1,018.25 $6.61
- --------------------------------------------------------------------------------
Actual 1.97% $1,000.00 $1,115.20 $10.33
B ---------------------------------------------------------------------------
Hypothetical(h) 1.97% $1,000.00 $1,015.03 $9.84
- --------------------------------------------------------------------------------
Actual 1.97% $1,000.00 $1,115.10 $10.33
C ---------------------------------------------------------------------------
Hypothetical(h) 1.97% $1,000.00 $1,015.03 $9.84
- --------------------------------------------------------------------------------
Actual 0.97% $1,000.00 $1,120.70 $5.10
I ---------------------------------------------------------------------------
Hypothetical(h) 0.97% $1,000.00 $1,019.98 $4.86
- --------------------------------------------------------------------------------
Actual 1.47% $1,000.00 $1,118.40 $7.72
R ---------------------------------------------------------------------------
Hypothetical(h) 1.47% $1,000.00 $1,017.50 $7.35
- --------------------------------------------------------------------------------
Actual 2.07% $1,000.00 $1,114.90 $10.85
R1 ---------------------------------------------------------------------------
Hypothetical(h) 2.07% $1,000.00 $1,014.53 $10.34
- --------------------------------------------------------------------------------
Actual 1.72% $1,000.00 $1,117.30 $9.03
R2 ---------------------------------------------------------------------------
Hypothetical(h) 1.72% $1,000.00 $1,016.27 $8.60
- --------------------------------------------------------------------------------
Actual 1.62% $1,000.00 $1,117.30 $8.50
R3 ---------------------------------------------------------------------------
Hypothetical(h) 1.62% $1,000.00 $1,016.76 $8.10
- --------------------------------------------------------------------------------
Actual 1.37% $1,000.00 $1,118.90 $7.20
R4 ---------------------------------------------------------------------------
Hypothetical(h) 1.37% $1,000.00 $1,018.00 $6.85
- --------------------------------------------------------------------------------
Actual 1.07% $1,000.00 $1,120.00 $5.62
R5 ---------------------------------------------------------------------------
Hypothetical(h) 1.07% $1,000.00 $1,019.49 $5.36
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Common Stocks - 99.3%
- ----------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------
Aerospace - 2.7%
- ----------------------------------------------------------------------------------------------
Lockheed Martin Corp. 19,900 $ 1,935,872
Precision Castparts Corp. 15,490 1,409,125
United Technologies Corp. 46,440 3,047,857
------------
$ 6,392,854
- ----------------------------------------------------------------------------------------------
Apparel Manufacturers - 0.9%
- ----------------------------------------------------------------------------------------------
NIKE, Inc., "B" 16,170 $ 1,689,280
Under Armour, Inc. (a) 12,060 554,157
------------
$ 2,243,437
- ----------------------------------------------------------------------------------------------
Automotive - 1.2%
- ----------------------------------------------------------------------------------------------
Harley-Davidson, Inc. 9,250 $ 609,575
Johnson Controls, Inc. 16,340 1,532,692
Sauer-Danfoss, Inc. (l) 22,910 846,295
------------
$ 2,988,562
- ----------------------------------------------------------------------------------------------
Biotechnology - 2.2%
- ----------------------------------------------------------------------------------------------
Amgen, Inc. (a) 38,160 $ 2,452,162
Celgene Corp. (a) 14,020 747,266
Genzyme Corp. (a) 10,940 676,092
Human Genome Sciences, Inc. (a) 30,160 331,760
Millipore Corp. (a) 11,360 812,467
Neurochem, Inc. (a)(l) 13,510 197,922
------------
$ 5,217,669
- ----------------------------------------------------------------------------------------------
Broadcasting - 2.3%
- ----------------------------------------------------------------------------------------------
News Corp., "A" 107,140 $ 2,413,864
Viacom, Inc., "B" (a) 54,180 2,115,187
Walt Disney Co. 30,600 1,048,356
------------
$ 5,577,407
- ----------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 3.4%
- ----------------------------------------------------------------------------------------------
Affiliated Managers Group, Inc. (a)(l) 6,010 $ 682,135
Chicago Mercantile Exchange Holdings, Inc., "A" 1,711 922,451
Franklin Resources, Inc. 4,280 502,429
Goldman Sachs Group, Inc. 8,990 1,812,384
Lazard Ltd. (l) 37,410 1,926,241
Legg Mason, Inc. (l) 22,140 2,274,664
------------
$ 8,120,304
- ----------------------------------------------------------------------------------------------
Business Services - 1.2%
- ----------------------------------------------------------------------------------------------
Cognizant Technology Solutions Corp., "A" (a) 8,400 $ 757,680
Fidelity National Information Services, Inc. 11,900 546,805
First Data Corp. 27,070 691,097
Global Payments, Inc. 12,370 475,874
Satyam Computer Services Ltd., ADR (l) 16,840 363,070
------------
$ 2,834,526
- ----------------------------------------------------------------------------------------------
Cable TV - 0.8%
- ----------------------------------------------------------------------------------------------
Cablevision Systems Corp., "A" 23,600 $ 695,256
Comcast Corp., "Special A" (a) 45,270 1,152,122
------------
$ 1,847,378
- ----------------------------------------------------------------------------------------------
Chemicals - 1.2%
- ----------------------------------------------------------------------------------------------
Monsanto Co. 52,860 $ 2,785,193
- ----------------------------------------------------------------------------------------------
Computer Software - 3.7%
- ----------------------------------------------------------------------------------------------
Adobe Systems, Inc. (a) 56,270 $ 2,208,598
CommVault Systems, Inc. (a) 20,410 339,418
McAfee, Inc. (a) 39,360 1,185,523
MSC.Software Corp. (a)(l) 89,176 1,199,417
Oracle Corp. (a) 153,050 2,514,612
salesforce.com, Inc. (a)(l) 4,310 186,451
Symantec Corp. (a) 44,150 754,965
Transaction Systems Architects, Inc. (a) 13,780 486,434
------------
$ 8,875,418
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 2.1%
- ----------------------------------------------------------------------------------------------
Apple Computer, Inc. (a) 15,810 $ 1,337,684
Hewlett-Packard Co. 58,090 2,287,584
International Business Machines Corp. 16,500 1,534,665
------------
$ 5,159,933
- ----------------------------------------------------------------------------------------------
Construction - 0.7%
- ----------------------------------------------------------------------------------------------
D.R. Horton, Inc. (l) 15,060 $ 382,072
Masco Corp. 42,470 1,267,730
------------
$ 1,649,802
- ----------------------------------------------------------------------------------------------
Consumer Goods & Services - 3.2%
- ----------------------------------------------------------------------------------------------
Avon Products, Inc. 38,140 $ 1,398,212
eBay, Inc. (a) 17,580 563,615
Estee Lauder Cos., Inc., "A" 32,400 1,551,312
ITT Educational Services, Inc. (a) 7,900 631,842
Monster Worldwide, Inc. (a) 13,200 658,152
Physicians Formula Holdings, Inc. (a) 3,370 68,175
Scotts Miracle-Gro Co. 51,080 2,253,139
Strayer Education, Inc. 4,010 472,739
------------
$ 7,597,186
- ----------------------------------------------------------------------------------------------
Containers - 0.5%
- ----------------------------------------------------------------------------------------------
Crown Holdings, Inc. (a) 20,150 $ 460,226
Owens-Illinois, Inc. (a) 22,780 541,253
Smurfit-Stone Container Corp. (a) 26,650 328,861
------------
$ 1,330,340
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 1.9%
- ----------------------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., "A" 6,970 $ 300,686
Rockwell Automation, Inc. 51,900 3,222,471
Tyco International Ltd. 32,040 987,793
------------
$ 4,510,950
- ----------------------------------------------------------------------------------------------
Electronics - 3.5%
- ----------------------------------------------------------------------------------------------
Applied Materials, Inc. 41,380 $ 768,427
ASML Holding N.V. (a) 27,930 686,519
Hittite Microwave Corp. (a)(l) 14,040 588,838
Intel Corp. 138,170 2,742,675
Intersil Corp., "A" 19,490 515,511
Marvell Technology Group Ltd. (a) 63,110 1,295,017
NetLogic Microsystems, Inc. (a)(l) 23,470 585,342
SanDisk Corp. (a) 35,220 1,282,712
------------
$ 8,465,041
- ----------------------------------------------------------------------------------------------
Energy - Independent - 2.0%
- ----------------------------------------------------------------------------------------------
Apache Corp. 12,670 $ 868,275
CONSOL Energy, Inc. 11,900 424,473
Devon Energy Corp. 15,890 1,044,132
EOG Resources, Inc. 16,870 1,142,774
Occidental Petroleum Corp. 30,210 1,395,098
------------
$ 4,874,752
- ----------------------------------------------------------------------------------------------
Energy - Integrated - 4.8%
- ----------------------------------------------------------------------------------------------
Chevron Corp. 40,390 $ 2,771,158
Exxon Mobil Corp. 97,062 6,957,404
Hess Corp. 35,530 1,884,867
------------
$ 11,613,429
- ----------------------------------------------------------------------------------------------
Engineering - Construction - 0.6%
- ----------------------------------------------------------------------------------------------
North American Energy Partners, Inc. (a) 70,650 $ 1,351,535
- ----------------------------------------------------------------------------------------------
Food & Beverages - 1.7%
- ----------------------------------------------------------------------------------------------
General Mills, Inc. 16,780 $ 945,721
Kellogg Co. 23,850 1,190,592
PepsiCo, Inc. 21,789 1,375,975
Tyson Foods, Inc., "A" 36,520 666,490
------------
$ 4,178,778
- ----------------------------------------------------------------------------------------------
Food & Drug Stores - 1.0%
- ----------------------------------------------------------------------------------------------
CVS Corp. 28,960 $ 909,634
Kroger Co. 26,240 673,581
SUPERVALU, Inc. 25,770 952,459
------------
$ 2,535,674
- ----------------------------------------------------------------------------------------------
Forest & Paper Products - 0.2%
- ----------------------------------------------------------------------------------------------
MeadWestvaco Corp. 18,450 $ 561,803
- ----------------------------------------------------------------------------------------------
Gaming & Lodging - 0.9%
- ----------------------------------------------------------------------------------------------
Hilton Hotels Corp. 21,170 $ 747,301
International Game Technology 16,760 691,350
Penn National Gaming, Inc. (a)(l) 10,180 474,693
Royal Caribbean Cruises Ltd. (l) 4,170 169,010
------------
$ 2,082,354
- ----------------------------------------------------------------------------------------------
General Merchandise - 1.6%
- ----------------------------------------------------------------------------------------------
Family Dollar Stores, Inc. 40,490 $ 1,172,995
Federated Department Stores, Inc. 43,170 1,927,972
Stage Stores, Inc. 34,715 761,300
------------
$ 3,862,267
- ----------------------------------------------------------------------------------------------
Health Maintenance Organizations - 1.2%
- ----------------------------------------------------------------------------------------------
UnitedHealth Group, Inc. 33,920 $ 1,770,624
WellPoint, Inc. (a) 13,910 1,104,315
------------
$ 2,874,939
- ----------------------------------------------------------------------------------------------
Insurance - 3.7%
- ----------------------------------------------------------------------------------------------
Aflac, Inc. 19,470 $ 918,984
Allied World Assurance Co. Holdings Ltd. 25,690 1,071,016
Chubb Corp. 31,360 1,600,928
Genworth Financial, Inc., "A" 37,070 1,311,166
MetLife, Inc. 26,290 1,660,214
Prudential Financial, Inc. 3,560 323,746
Travelers Cos., Inc. 41,010 2,081,668
------------
$ 8,967,722
- ----------------------------------------------------------------------------------------------
Internet - 0.9%
- ----------------------------------------------------------------------------------------------
CNET Networks, Inc. (a)(l) 87,850 $ 771,323
Google, Inc., "A" (a) 2,390 1,074,186
Move, Inc. (a) 73,660 439,750
------------
$ 2,285,259
- ----------------------------------------------------------------------------------------------
Leisure & Toys - 0.5%
- ----------------------------------------------------------------------------------------------
Electronic Arts, Inc. (a) 8,390 $ 423,024
Scientific Games Corp. (a)(l) 8,300 271,410
THQ, Inc. (a) 13,790 444,176
------------
$ 1,138,610
- ----------------------------------------------------------------------------------------------
Machinery & Tools - 1.5%
- ----------------------------------------------------------------------------------------------
Deere & Co. 21,520 $ 2,333,198
Eaton Corp. 16,890 1,368,259
------------
$ 3,701,457
- ----------------------------------------------------------------------------------------------
Major Banks - 6.2%
- ----------------------------------------------------------------------------------------------
Bank of America Corp. 75,034 $ 3,816,980
Bank of New York Co., Inc. 61,320 2,490,818
JPMorgan Chase & Co. 79,660 3,935,204
PNC Financial Services Group, Inc. 11,450 839,400
State Street Corp. 41,260 2,702,943
SunTrust Banks, Inc. 13,970 1,177,811
------------
$ 14,963,156
- ----------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.9%
- ----------------------------------------------------------------------------------------------
Cardinal Health, Inc. 4,570 $ 320,311
Healthcare Services Group, Inc. (l) 24,920 698,757
McKesson Corp. 5,860 326,754
MWI Veterinary Supply, Inc. (a) 25,800 800,574
------------
$ 2,146,396
- ----------------------------------------------------------------------------------------------
Medical Equipment - 2.3%
- ----------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc. (a)(l) 22,710 $ 875,243
Aspect Medical Systems, Inc. (a)(l) 66,430 1,072,845
Boston Scientific Corp. (a) 88,550 1,444,251
Cooper Cos., Inc. (l) 11,210 514,427
Cyberonics, Inc. (a)(l) 24,390 499,507
St. Jude Medical, Inc. (a) 17,770 704,581
Thoratec Corp. (a)(l) 23,740 466,491
------------
$ 5,577,345
- ----------------------------------------------------------------------------------------------
Metals & Mining - 0.8%
- ----------------------------------------------------------------------------------------------
BHP Billiton PLC 78,190 $ 1,568,268
Inmet Mining Corp. 9,560 481,943
------------
$ 2,050,211
- ----------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.8%
- ----------------------------------------------------------------------------------------------
Williams Co., Inc. 75,170 $ 2,027,335
- ----------------------------------------------------------------------------------------------
Network & Telecom - 2.3%
- ----------------------------------------------------------------------------------------------
Cisco Systems, Inc. (a) 110,550 $ 2,867,667
NICE Systems Ltd., ADR (a) 33,560 1,148,759
Nortel Networks Corp. (a) 26,776 802,744
Sonus Networks, Inc. (a)(l) 80,230 616,969
------------
$ 5,436,139
- ----------------------------------------------------------------------------------------------
Oil Services - 1.2%
- ----------------------------------------------------------------------------------------------
Dresser-Rand Group, Inc. (a) 29,290 $ 760,661
National-Oilwell Varco, Inc. (a) 5,380 374,663
Natural Gas Services Group, Inc. (a)(l) 25,450 335,940
Noble Corp. 20,000 1,404,400
------------
$ 2,875,664
- ----------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 5.8%
- ----------------------------------------------------------------------------------------------
American Express Co. 50,580 $ 2,876,485
Bank of Hawaii Corp. 20,210 1,045,261
Commerce Bancorp, Inc. (l) 77,540 2,591,387
Countrywide Financial Corp. 80,660 3,087,665
Fannie Mae 32,080 1,819,898
SLM Corp. 59,950 2,555,069
------------
$ 13,975,765
- ----------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 1.4%
- ----------------------------------------------------------------------------------------------
EMC Corp. (a) 140,500 $ 1,959,975
Network Appliance, Inc. (a) 20,300 785,001
Nuance Communications, Inc. (a) 40,500 570,645
------------
$ 3,315,621
- ----------------------------------------------------------------------------------------------
Pharmaceuticals - 5.4%
- ----------------------------------------------------------------------------------------------
Allergan, Inc. 18,740 $ 2,093,445
Bristol-Myers Squibb Co. 72,720 1,919,081
Eli Lilly & Co. 67,460 3,551,094
Endo Pharmaceuticals Holdings, Inc. (a) 16,960 529,322
Medicis Pharmaceutical Corp., "A" (l) 10,660 387,598
Wyeth 90,980 4,450,742
------------
$ 12,931,282
- ----------------------------------------------------------------------------------------------
Printing & Publishing - 0.4%
- ----------------------------------------------------------------------------------------------
New York Times Co., "A" (l) 36,880 $ 912,042
- ----------------------------------------------------------------------------------------------
Railroad & Shipping - 0.7%
- ----------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 15,100 $ 1,195,769
Norfolk Southern Corp. 8,780 416,172
------------
$ 1,611,941
- ----------------------------------------------------------------------------------------------
Real Estate - 2.6%
- ----------------------------------------------------------------------------------------------
Alesco Financial, Inc., REIT 130,390 $ 1,406,908
BRE Properties, Inc., "A", REIT (l) 19,720 1,308,422
Macerich Co., REIT 12,310 1,152,216
Maguire Properties, Inc., REIT 27,110 1,058,917
Tanger Factory Outlet Centers, Inc., REIT 31,900 1,281,742
------------
$ 6,208,205
- ----------------------------------------------------------------------------------------------
Restaurants - 1.1%
- ----------------------------------------------------------------------------------------------
Chipotle Mexican Grill, Inc., "A" (a)(l) 4,730 $ 283,753
Panera Bread Co. (a)(l) 12,340 755,578
Red Robin Gourmet Burgers, Inc. (a)(l) 24,760 977,525
Texas Roadhouse, Inc., "A" (a)(l) 35,450 519,343
------------
$ 2,536,199
- ----------------------------------------------------------------------------------------------
Specialty Chemicals - 1.8%
- ----------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 22,630 $ 1,693,177
Albemarle Corp. 6,630 542,666
Cytec Industries, Inc. 8,560 503,499
Praxair, Inc. 27,120 1,673,033
------------
$ 4,412,375
- ----------------------------------------------------------------------------------------------
Specialty Stores - 2.9%
- ----------------------------------------------------------------------------------------------
Advance Auto Parts, Inc. 10,990 $ 413,774
Aeropostale, Inc. (a) 13,430 492,075
Cost Plus, Inc. (a)(l) 11,350 121,899
Dick's Sporting Goods, Inc. (a) 23,690 1,239,935
Lowe's Cos., Inc. 74,090 2,412,370
Staples, Inc. 28,000 728,560
Urban Outfitters, Inc. (a)(l) 34,880 865,722
Williams-Sonoma, Inc. 21,300 719,088
------------
$ 6,993,423
- ----------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.5%
- ----------------------------------------------------------------------------------------------
Rogers Communications, Inc., "B" 36,780 $ 1,200,479
- ----------------------------------------------------------------------------------------------
Telephone Services - 3.0%
- ----------------------------------------------------------------------------------------------
AT&T, Inc. 96,140 $ 3,537,952
Qwest Communications International, Inc. (a)(l) 142,140 1,262,203
TELUS Corp. (non-voting shares) 52,690 2,490,022
------------
$ 7,290,177
- ----------------------------------------------------------------------------------------------
Tobacco - 2.5%
- ----------------------------------------------------------------------------------------------
Altria Group, Inc. 72,640 $ 6,122,099
- ----------------------------------------------------------------------------------------------
Trucking - 1.1%
- ----------------------------------------------------------------------------------------------
FedEx Corp. 8,420 $ 961,396
UTi Worldwide, Inc. (l) 56,610 1,706,225
------------
$ 2,667,621
- ----------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.5%
- ----------------------------------------------------------------------------------------------
Constellation Energy Group, Inc. 8,970 $ 705,670
Dominion Resources, Inc. 13,560 1,159,787
DPL, Inc. 25,850 779,895
Edison International 13,010 610,429
Entergy Corp. 13,800 1,362,060
FPL Group, Inc. 22,990 1,358,019
NRG Energy, Inc. (a) 19,110 1,265,846
Public Service Enterprise Group, Inc. 14,340 1,074,066
------------
$ 8,315,772
- ----------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $214,139,965) $239,193,818
- ----------------------------------------------------------------------------------------------
Short-Term Obligations - 0.5%
- ----------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, due 3/01/07, at
Amortized Cost and Value (y) $ 1,226,000 $ 1,226,000
- ----------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 8.6%
- ----------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 20,729,487 $ 20,729,487
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $236,095,452) $261,149,305
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (8.4)% (20,339,619)
- ----------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $240,809,686
- ----------------------------------------------------------------------------------------------
(a) Non-income producing security.
(l) All or a portion of this security is on loan.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
REIT Real Estate Investment Trust
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets
and liabilities comprising the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value including $21,179,933 of securities on
loan (identified cost, $236,095,452) $261,149,305
Cash 12,453
Receivable for investments sold 1,194,202
Receivable for fund shares sold 232,910
Interest and dividends receivable 767,740
Other assets 5,789
- ------------------------------------------------------------------------------------------------------
Total assets $263,362,399
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for investments purchased $1,389,052
Payable for fund shares reacquired 231,786
Collateral for securities loaned, at value (c) 20,729,487
Payable to affiliates
Management fee 8,708
Shareholder servicing costs 60,222
Distribution and service fees 6,774
Administrative services fee 282
Retirement plan administration and services fees 269
Payable for independent trustees' compensation 39,236
Accrued expenses and other liabilities 86,897
- ------------------------------------------------------------------------------------------------------
Total liabilities $22,552,713
- ------------------------------------------------------------------------------------------------------
Net assets $240,809,686
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------
Paid-in capital $202,268,479
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 25,053,853
Accumulated net realized gain (loss) on investments and foreign
currency transactions 13,122,680
Undistributed net investment income 364,674
- ------------------------------------------------------------------------------------------------------
Net assets $240,809,686
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 12,951,896
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $135,316,510
Shares outstanding 7,149,296
- ------------------------------------------------------------------------------------------------------
Net asset value per share $18.93
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $20.08
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $45,975,497
Shares outstanding 2,593,293
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $17.73
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $17,224,317
Shares outstanding 975,695
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $17.65
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $6,504,188
Shares outstanding 332,358
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $19.57
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $4,838,613
Shares outstanding 257,511
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.79
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $494,089
Shares outstanding 27,957
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $17.67
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $910,386
Shares outstanding 51,129
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $17.81
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $2,287,323
Shares outstanding 122,536
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.67
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $27,196,007
Shares outstanding 1,438,822
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.90
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $62,756
Shares outstanding 3,299
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $19.02
- ------------------------------------------------------------------------------------------------------
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.
(c) Non-cash collateral not included.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $2,210,945
Interest 109,449
Foreign taxes withheld (5,391)
- ------------------------------------------------------------------------------------------------------
Total investment income $2,315,003
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $839,643
Distribution and service fees 649,010
Shareholder servicing costs 205,127
Administrative services fee 26,946
Retirement plan administration and services fees 24,488
Independent trustees' compensation 9,863
Custodian fee 55,079
Shareholder communications 27,568
Auditing fees 22,457
Legal fees 3,742
Miscellaneous 63,880
- ------------------------------------------------------------------------------------------------------
Total expenses $1,927,803
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (10,917)
Reduction of expenses by investment adviser (2,358)
- ------------------------------------------------------------------------------------------------------
Net expenses $1,914,528
- ------------------------------------------------------------------------------------------------------
Net investment income $400,475
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $16,719,116
Foreign currency transactions 911
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $16,720,027
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $12,494,028
Translation of assets and liabilities in foreign currencies (39)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $12,493,989
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $29,214,016
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $29,614,491
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions,
and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) $400,475 $(135,899)
Net realized gain (loss) on investments and foreign
currency transactions 16,720,027 22,210,793
Net unrealized gain (loss) on investments and foreign
currency translation 12,493,989 (8,617,492)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $29,614,491 $13,457,402
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions
Class A $(10,891,644) $(6,566,925)
Class B (3,614,424) (3,172,137)
Class C (1,273,576) (835,667)
Class I (376,619) (151,657)
Class R (399,070) (292,512)
Class R1 (34,465) (6,519)
Class R2 (64,230) (2,469)
Class R3 (96,597) (54,897)
Class R4 (1,876,812) (2,358)
Class R5 (4,256) (2,358)
- ------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(18,631,693) $(11,087,499)
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(17,658,250) $4,102,717
- ------------------------------------------------------------------------------------------------------
Total change in net assets $(6,675,452) $6,472,620
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period 247,485,138 241,012,518
At end of period (including undistributed net investment
income of $364,674 and accumulated net investment loss
of $35,801) $240,809,686 $247,485,138
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $18.17 $17.88 $15.35 $13.97 $12.51 $15.15
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.05 $0.03 $0.03 $0.03 $0.04 $0.00(w)
Net realized and unrealized
gain (loss) on investments and
foreign currency 2.10 1.06 2.50 1.35 1.42 (2.38)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.15 $1.09 $2.53 $1.38 $1.46 $(2.38)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $(1.39) $(0.80) $-- $-- $-- $(0.26)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.93 $18.17 $17.88 $15.35 $13.97 $12.51
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 11.94(n) 6.25 16.48 9.88(b) 11.67 (16.00)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.32(a) 1.37 1.41 1.38 1.47 1.37
Expenses after expense reductions (f) 1.32(a) 1.36 1.41 1.38 N/A N/A
Net investment income 0.48(a) 0.15 0.17 0.22 0.29 0.03
Portfolio turnover 46 138 81 116 121 100
Net assets at end of period
(000 Omitted) $135,317 $146,355 $141,808 $67,415 $53,704 $50,366
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $17.16 $17.03 $14.71 $13.48 $12.14 $14.81
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.09) $(0.08) $(0.06) $(0.04) $(0.09)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.98 1.02 2.40 1.29 1.38 (2.32)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.96 $0.93 $2.32 $1.23 $1.34 $(2.41)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions $(1.39) $(0.80) $-- $-- $-- $(0.26)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.73 $17.16 $17.03 $14.71 $13.48 $12.14
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 11.52(n) 5.60 15.77 9.12(b) 11.04 (16.57)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.97(a) 2.02 2.06 2.02 2.12 2.02
Expenses after expense reductions (f) 1.97(a) 2.02 2.06 2.02 N/A N/A
Net investment loss (0.19)(a) (0.50) (0.47) (0.43) (0.36) (0.62)
Portfolio turnover 46 138 81 116 121 100
Net assets at end of period
(000 Omitted) $45,975 $49,192 $71,088 $73,395 $75,007 $73,146
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $17.09 $16.97 $14.66 $13.43 $12.10 $14.76
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.01) $(0.09) $(0.08) $(0.06) $(0.04) $(0.09)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.96 1.01 2.39 1.29 1.37 (2.31)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.95 $0.92 $2.31 $1.23 $1.33 $(2.40)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions $(1.39) $(0.80) $-- $-- $-- $(0.26)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.65 $17.09 $16.97 $14.66 $13.43 $12.10
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 11.51(n) 5.56 15.76 9.16(b) 10.99 (16.56)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.97(a) 2.02 2.06 2.02 2.12 2.02
Expenses after expense reductions (f) 1.97(a) 2.02 2.06 2.02 N/A N/A
Net investment loss (0.17)(a) (0.50) (0.48) (0.43) (0.35) (0.62)
Portfolio turnover 46 138 81 116 121 100
Net assets at end of period
(000 Omitted) $17,224 $16,613 $17,898 $15,990 $15,325 $17,521
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $18.72 $18.33 $15.68 $14.22 $12.69 $15.31
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.09 $0.09 $0.09 $0.09 $0.08 $0.06
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.15 1.10 2.56 1.37 1.45 (2.42)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.24 $1.19 $2.65 $1.46 $1.53 $(2.36)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions $(1.39) $(0.80) $-- $-- $-- $(0.26)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.57 $18.72 $18.33 $15.68 $14.22 $12.69
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.07(n) 6.66 16.90 10.27(b) 12.06 (15.70)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.97(a) 1.01 1.09 1.03 1.12 1.02
Expenses after expense reductions (f) 0.97(a) 1.01 1.09 1.03 N/A N/A
Net investment income 0.88(a) 0.50 0.51 0.56 0.65 0.38
Portfolio turnover 46 138 81 116 121 100
Net assets at end of period
(000 Omitted) $6,504 $4,763 $3,170 $460 $398 $428
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $18.06 $17.80 $15.31 $13.96 $11.98
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.03 $0.00(w) $0.00(w) $0.02 $(0.00)(w)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.09 1.06 2.49 1.33 1.98(g)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.12 $1.06 $2.49 $1.35 $1.98
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.39) $(0.80) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.79 $18.06 $17.80 $15.31 $13.96
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.84(n) 6.11 16.26 9.67(b) 16.53(n)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.47(a) 1.51 1.56 1.49 1.74(a)
Expenses after expense reductions (f) 1.47(a) 1.51 1.56 1.49 N/A
Net investment income (loss) 0.31(a) 0.00(w) 0.03 0.13 (0.04)(a)
Portfolio turnover 46 138 81 116 121
Net assets at end of period (000 Omitted) $4,839 $5,446 $5,888 $3,030 $17
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.11 $17.01 $16.25
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.10) $(0.04)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.97 1.00 0.80(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.95 $0.90 $0.76
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(1.39) $(0.80) $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.67 $17.11 $17.01
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.49(n) 5.43 4.68(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.17(a) 2.20 2.23(a)
Expenses after expense reductions (f) 2.07(a) 2.11 2.23(a)
Net investment loss (0.22)(a) (0.61) (0.63)(a)
Portfolio turnover 46 138 81
Net assets at end of period (000 Omitted) $494 $441 $55
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.20 $17.03 $16.25
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.01 $(0.05) $(0.02)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.99 1.02 0.80(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.00 $0.97 $0.78
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(1.39) $(0.80) $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.81 $17.20 $17.03
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.73(n) 5.85 4.80(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.87(a) 1.90 1.93(a)
Expenses after expense reductions (f) 1.72(a) 1.75 1.93(a)
Net investment income (loss) 0.10(a) (0.29) (0.33)(a)
Portfolio turnover 46 138 81
Net assets at end of period (000 Omitted) $910 $780 $52
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $17.97 $17.74 $15.29 $14.57
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.03 $(0.03) $(0.04) $0.03
Net realized and unrealized gain (loss) on investments
and foreign currency 2.06 1.06 2.49 0.69(g)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.09 $1.03 $2.45 $0.72
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(1.39) $(0.80) $-- $--
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.67 $17.97 $17.74 $15.29
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.73(n) 5.96 16.02 4.94(b)(n)
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.72(a) 1.77 1.81 1.80(a)
Expenses after expense reductions (f) 1.62(a) 1.67 1.81 1.80(a)
Net investment income (loss) 0.29(a) (0.15) (0.22) (0.27)(a)
Portfolio turnover 46 138 81 116
Net assets at end of period (000 Omitted) $2,287 $1,193 $948 $616
- ---------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $18.15 $17.88 $17.02
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.04 $0.05 $0.01
Net realized and unrealized gain (loss) on investments and
foreign currency 2.10 1.02 0.85(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.14 $1.07 $0.86
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(1.39) $(0.80) $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.90 $18.15 $17.88
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.89(n) 6.14 5.05(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.37(a) 1.37 1.43(a)
Expenses after expense reductions (f) 1.37(a) 1.37 1.43(a)
Net investment income 0.44(a) 0.27 0.17(a)
Portfolio turnover 46 138 81
Net assets at end of period (000 Omitted) $27,196 $22,646 $53
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $18.24 $17.90 $17.02
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.07 $0.07 $0.03
Net realized and unrealized gain (loss) on investments and
foreign currency 2.10 1.07 0.85(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.17 $1.14 $0.88
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(1.39) $(0.80) $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.02 $18.24 $17.90
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 12.00(n) 6.54 5.17(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.07(a) 1.12 1.13(a)
Expenses after expense reductions (f) 1.07(a) 1.12 1.13(a)
Net investment income 0.74(a) 0.40 0.47(a)
Portfolio turnover 46 138 81
Net assets at end of period (000 Omitted) $63 $56 $53
- ---------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less than $0.01.
(a) Annualized.
(b) The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The
non-recurring accrual did not have a material impact on the net asset value per share based on the shares outstanding on
the day the proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) The per share amount is not in accordance with the net realized and unrealized gain/loss for the period because of the
timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(i) For the period from the class' inception, December 31, 2002 (Class R), October 31, 2003 (Class R3), and April 1, 2005
(Classes R1, R2, R4, and R5) through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Core Equity Fund (the fund) is a 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 U.S.
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, including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the
market or exchange on which they are primarily traded. For securities held
short for which there were no sales reported for the day, the position is
generally valued at the last quoted daily ask quotation as reported by an
independent pricing service on the market or exchange on which such securities
are primarily traded. Short-term instruments with a maturity at issuance of 60
days or less may be valued at amortized cost, which approximates market value.
Open-end investment companies are generally valued at their net asset value
per share. Securities and other assets generally valued on the basis of
information from an independent pricing service may also be valued at a
broker-dealer bid quotation. The values of foreign securities and other assets
and liabilities expressed in foreign currencies are converted to U.S. dollars
using the mean of bid and asked prices for rates reported by an independent
pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any fair
valuation) to the adviser pursuant to valuation policies and procedures approved
by the Board. If the adviser determines that reliable market quotations are not
readily available, investments are valued at fair value as determined in good
faith by the adviser in accordance with such procedures under the oversight of
the Board of Trustees. Under the fund's valuation policies and procedures,
market quotations are not considered to be readily available for many types of
debt instruments and certain types of derivatives. These investments are
generally valued at fair value based on information from independent pricing
services. In addition, investments may be valued at fair value if the adviser
determines that an investment's value has been materially affected by events
occurring after the close of the exchange or market on which the investment is
principally traded (such as foreign exchange or market) and prior to the
determination of the fund's net asset value, or after the halting of trading of
a specific security where trading does not resume prior to the close of the
exchange or market on which the security is principally traded. Events that
occur on a frequent basis after foreign markets close (such as developments in
foreign markets and significant movements in the U.S. markets) and prior to the
determination of the fund's net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
fund's foreign equity securities may often be valued at fair value. The adviser
may rely on independent pricing services or other information (such as the
correlation with price movements of similar securities in the same or other
markets; the type, cost and investment characteristics of the security; the
business and financial condition of the issuer; and trading and other market
data) to assist in determining whether to fair value and at what value to fair
value an investment. The value of an investment for purposes of calculating the
fund's net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published prices
for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for
measuring fair value and expanded disclosures about fair value measurements.
Management is evaluating the application of the Statement to the fund, and
believes the impact will be limited to expanded disclosures resulting from the
adoption of this Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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"), as
lending agent, 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 cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
On loans collateralized by cash, the cash collateral is invested in a money
market fund or short-term securities. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder
is allocated between the fund and the lending agent. On loans collateralized
by U.S. Treasury securities, a fee is received from the Borrower, and is
allocated between the fund and the lending agent. Net 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 28,
2007, the value of securities loaned was $21,179,933. These loans were
collateralized by cash of $20,729,487 and U.S. Treasury obligations of
$992,700.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the
normal course of business, the fund enters into agreements with service
providers that may contain indemnification clauses. The fund's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with U.S. generally accepted accounting principles. All discount is accreted for
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded when the fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Dividend and
interest payments received in additional securities are recorded on the
ex-dividend or ex-interest date in an amount equal to the value of the security
on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received
from litigation involving its portfolio holdings are reflected in realized
gain/loss in the Statement of Operations, or in unrealized gain/loss if the
security is still held by the fund. Any other proceeds from litigation not
related to portfolio holdings are reflected as other income in the Statement of
Operations.
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. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue
Code, and to distribute all of its taxable income, including realized capital
gains. Accordingly, no provision for federal income tax is required in the
financial statements. Foreign taxes, if any, have been accrued by the fund in
the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value per
share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions for
financial statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to net operating losses, wash sale loss
deferrals, and treating a portion of the proceeds from redemptions as a
distribution for tax purposes.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
8/31/06
Long-term capital gain $11,087,499
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $236,968,865
------------------------------------------------------------
Gross appreciation $27,501,379
Gross depreciation (3,320,939)
------------------------------------------------------------
Net unrealized appreciation (depreciation) $24,180,440
AS OF 8/31/06
Undistributed ordinary income $4,993,352
Undistributed long-term capital gain 10,977,092
Other temporary differences (98,447)
Net unrealized appreciation (depreciation) 11,686,412
The aggregate cost above includes prior fiscal year end tax adjustments.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. On December 22, 2006, the SEC delayed the
implementation of the Interpretation for regulated investment companies for an
additional six months. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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 MFS to
provide overall investment management and related administrative services and
facilities to the fund.
The management fee is computed daily and paid monthly at the following annual
rates:
First $500 million of average daily net assets 0.65%
Average daily net assets in excess of $500 million 0.55%
The management fee incurred for the six months ended February 28, 2007 was
equivalent to an annual effective rate of 0.65% of the fund's average daily
net assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $12,703 for the six months ended
February 28, 2007, as its portion of the initial sales charge on sales of
Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $267,248
Class B 0.75% 0.25% 1.00% 1.00% 242,483
Class C 0.75% 0.25% 1.00% 1.00% 85,151
Class R 0.25% 0.25% 0.50% 0.50% 13,398
Class R1 0.50% 0.25% 0.75% 0.75% 1,671
Class R2 0.25% 0.25% 0.50% 0.50% 2,136
Class R3 0.25% 0.25% 0.50% 0.50% 4,080
Class R4 -- 0.25% 0.25% 0.25% 32,843
- -----------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $649,010
(d) In accordance with the distribution plan for certain classes, the fund
pays distribution and/or service fees up to these annual percentage rates
of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the
distribution plan for the six months ended February 28, 2007 based on each
class' average daily net assets.
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 of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. All contingent
deferred sales charges are paid to MFD and during the six months ended
February 28, 2007, were as follows:
AMOUNT
Class A $542
Class B 27,400
Class C 354
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average daily
net assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the six months ended February 28, 2007, the fee
was $98,400, which equated to 0.0762% annually of the fund's average daily net
assets. Effective January 1, 2007, MFSC has entered into a sub-accounting
agreement with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of
MFSC, on behalf of the fund to provide omnibus account services to the fund.
MFSC pays SRS both an asset based fee and a per account charge of the assets
held in the omnibus account. The fund then reimburses MFSC for the sub-
accounting fees paid to SRS. For the six months ended February 28, 2007, the
sub-accounting fee for SRS was $18,086, which equated to 0.0140% annually of
the fund's average daily net assets. MFSC also receives payment from the fund
for out-of-pocket and sub-accounting expenses. For the six months ended
February 28, 2007, these out-of-pocket and sub-accounting costs amounted to
$62,813. The fund may also pay shareholder servicing related costs directly to
non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended
February 28, 2007 was equivalent to an annual effective rate of 0.0209% of the
fund's average daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares,
and may be provided directly by MFS or by a third party. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services
fee to affiliated or unaffiliated third parties. For the six months ended
February 28, 2007, the fund paid MFS an annual retirement plan administration
and services fee up to the following annual percentage rates of each class'
average daily net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $1,003
Class R2 0.40% 0.25% 1,708
Class R3 0.25% 0.15% 2,041
Class R4 0.15% 0.15% 19,706
Class R5 0.10% 0.10% 30
- --------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $24,488
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $1,673 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to trustees or officers of the fund who are also
officers of the investment adviser, 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, MFD, and MFSC.
The fund has an unfunded, defined benefit plan for certain retired independent
trustees which resulted in a pension expense of $690. The fund also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $3,618. Both amounts are included in
independent trustees' compensation for the six months ended February 28, 2007.
The liability for deferred retirement benefits payable to certain independent
trustees under both plans amounted to $38,255 at February 28, 2007, and is
included in payable for independent trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $1,042. MFS has agreed to reimburse the fund for a portion
of the payments made by the funds to Tarantino LLC in the amount of $685,
which is shown as a reduction of total expenses in the Statement of
Operations. Additionally, MFS has agreed to bear all expenses associated with
office space, other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$102,447,452 and $114,090,728, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 829,580 $15,807,910 2,443,666 $43,867,932
Class B 196,611 3,528,073 811,627 13,942,781
Class C 82,591 1,471,733 262,041 4,460,022
Class I 77,013 1,510,950 125,891 2,329,642
Class R 18,026 343,081 111,566 1,994,369
Class R1 23,132 415,774 26,009 443,322
Class R2 10,978 199,913 44,042 755,492
Class R3 91,341 1,710,951 35,849 633,797
Class R4 560,289 10,586,348 1,555,647 28,508,981
Class R5 -- -- 3 81
- -----------------------------------------------------------------------------------------------------------
1,889,561 $35,574,733 5,416,341 $96,936,419
Shares issued to shareholders in
reinvestment of distributions
Class A 552,558 $10,288,631 355,194 $6,254,963
Class B 183,409 3,202,316 171,172 2,860,279
Class C 61,738 1,073,622 42,451 706,380
Class I 16,270 312,870 6,859 124,080
Class R 21,583 399,070 16,688 292,512
Class R1 1,980 34,465 395 6,519
Class R2 3,664 64,230 148 2,469
Class R3 5,148 94,569 3,146 54,897
Class R4 100,759 1,873,116 134 2,358
Class R5 228 4,256 134 2,358
- -----------------------------------------------------------------------------------------------------------
947,337 $17,347,145 596,321 $10,306,815
Shares reacquired
Class A (2,286,229) $(44,148,056) (2,675,775) $(47,849,495)
Class B (654,131) (11,756,232) (2,289,768) (38,886,362)
Class C (140,860) (2,515,805) (387,175) (6,483,150)
Class I (15,394) (300,214) (51,250) (948,111)
Class R (83,594) (1,576,298) (157,462) (2,824,272)
Class R1 (22,918) (407,541) (3,855) (64,830)
Class R2 (8,845) (161,714) (1,935) (31,647)
Class R3 (40,370) (766,058) (26,032) (463,349)
Class R4 (469,669) (8,948,210) (311,276) (5,589,225)
Class R5 -- -- (4) (76)
- -----------------------------------------------------------------------------------------------------------
(3,722,010) $(70,580,128) (5,904,532) $(103,140,517)
Net change
Class A (904,091) $(18,051,515) 123,085 $2,273,400
Class B (274,111) (5,025,843) (1,306,969) (22,083,302)
Class C 3,469 29,550 (82,683) (1,316,748)
Class I 77,889 1,523,606 81,500 1,505,611
Class R (43,985) (834,147) (29,208) (537,391)
Class R1 2,194 42,698 22,549 385,011
Class R2 5,797 102,429 42,255 726,314
Class R3 56,119 1,039,462 12,963 225,345
Class R4 191,379 3,511,254 1,244,505 22,922,114
Class R5 228 4,256 133 2,363
- ----------------------------------------------------------------------------------------------------------
(885,112) $(17,658,250) 108,130 $4,102,717
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$769 and $0, respectively, and are included in miscellaneous expense on the
Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site at
http://www.sec.gov, and copies of this information may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov or by writing the Public Reference Section at the
above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Semiannual report
MFS(R) CORE GROWTH FUND
LETTER FROM THE CEO 1
- ---------------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------------
EXPENSE TABLE 3
- ---------------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ---------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 11
- ---------------------------------------------------------
STATEMENT OF OPERATIONS 14
- ---------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 15
- ---------------------------------------------------------
FINANCIAL HIGHLIGHTS 16
- ---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 27
- ---------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 38
- ---------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 38
- ---------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 38
- ---------------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------------
THE 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.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
CGF-SEM
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 95.5%
Cash & Other Net Assets 4.5%
TOP TEN HOLDINGS
Cisco Systems, Inc. 2.6%
------------------------------------------------
Roche Holding AG 2.1%
------------------------------------------------
General Electric Co. 2.1%
------------------------------------------------
Oracle Corp. 2.0%
------------------------------------------------
Nestle S.A. 1.9%
------------------------------------------------
America Movil S.A. de C.V., "L", ADR 1.8%
------------------------------------------------
United Technologies Corp. 1.7%
------------------------------------------------
PepsiCo, Inc. 1.7%
------------------------------------------------
Wyeth 1.7%
------------------------------------------------
News Corp., "A" 1.7%
------------------------------------------------
EQUITY SECTORS
Health Care 22.9%
------------------------------------------------
Technology 19.4%
------------------------------------------------
Financial Services 9.2%
------------------------------------------------
Retailing 8.1%
------------------------------------------------
Industrial Goods & Services 8.0%
------------------------------------------------
Consumer Staples 7.8%
------------------------------------------------
Special Products & Services 5.9%
------------------------------------------------
Leisure 5.3%
------------------------------------------------
Energy 2.8%
------------------------------------------------
Basic Materials 2.1%
------------------------------------------------
Utilities & Communications 1.8%
------------------------------------------------
Transportation 1.4%
------------------------------------------------
Autos & Housing 0.8%
------------------------------------------------
Percentages are based on net assets as of 2/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides
information about hypothetical account values and hypothetical expenses based
on the fund's actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 1.28% $1,000.00 $1,082.10 $6.61
A ---------------------------------------------------------------------------
Hypothetical (h) 1.28% $1,000.00 $1,018.45 $6.41
- --------------------------------------------------------------------------------
Actual 1.93% $1,000.00 $1,078.50 $9.95
B ---------------------------------------------------------------------------
Hypothetical (h) 1.93% $1,000.00 $1,015.22 $9.64
- --------------------------------------------------------------------------------
Actual 1.93% $1,000.00 $1,078.50 $9.95
C ---------------------------------------------------------------------------
Hypothetical (h) 1.93% $1,000.00 $1,015.22 $9.64
- --------------------------------------------------------------------------------
Actual 0.93% $1,000.00 $1,083.90 $4.81
I ---------------------------------------------------------------------------
Hypothetical (h) 0.93% $1,000.00 $1,020.18 $4.66
- --------------------------------------------------------------------------------
Actual 1.03% $1,000.00 $1,083.10 $5.32
W ---------------------------------------------------------------------------
Hypothetical (h) 1.03% $1,000.00 $1,019.69 $5.16
- --------------------------------------------------------------------------------
Actual 1.43% $1,000.00 $1,081.30 $7.38
R ---------------------------------------------------------------------------
Hypothetical (h) 1.43% $1,000.00 $1,017.70 $7.15
- --------------------------------------------------------------------------------
Actual 2.03% $1,000.00 $1,078.00 $10.46
R1 ---------------------------------------------------------------------------
Hypothetical (h) 2.03% $1,000.00 $1,014.73 $10.14
- --------------------------------------------------------------------------------
Actual 1.68% $1,000.00 $1,079.40 $8.66
R2 ---------------------------------------------------------------------------
Hypothetical (h) 1.68% $1,000.00 $1,016.46 $8.40
- --------------------------------------------------------------------------------
Actual 1.58% $1,000.00 $1,080.10 $8.15
R3 ---------------------------------------------------------------------------
Hypothetical (h) 1.58% $1,000.00 $1,016.96 $7.90
- --------------------------------------------------------------------------------
Actual 1.33% $1,000.00 $1,081.60 $6.86
R4 ---------------------------------------------------------------------------
Hypothetical (h) 1.33% $1,000.00 $1,018.20 $6.66
- --------------------------------------------------------------------------------
Actual 1.03% $1,000.00 $1,083.00 $5.32
R5 ---------------------------------------------------------------------------
Hypothetical (h) 1.03% $1,000.00 $1,019.69 $5.16
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund.
It is categorized by broad-based asset classes.
Common Stocks - 95.5%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Aerospace - 3.4%
- ----------------------------------------------------------------------------------------------------
Boeing Co. 36,600 $ 3,194,082
Embraer-Empresa Brasileira de Aeronautica S.A., ADR 98,910 4,485,569
Precision Castparts Corp. 59,200 5,385,424
United Technologies Corp. 210,600 13,821,678
------------
$ 26,886,753
- ----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.3%
- ----------------------------------------------------------------------------------------------------
Diageo PLC 103,600 $ 2,043,338
- ----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 3.1%
- ----------------------------------------------------------------------------------------------------
Coach, Inc. (a) 100,700 $ 4,753,040
LVMH Moet Hennessy Louis Vuitton S.A. (l) 39,800 4,409,005
NIKE, Inc., "B" 105,700 11,042,479
Phillips-Van Heusen Corp. 82,900 4,546,236
------------
$ 24,750,760
- ----------------------------------------------------------------------------------------------------
Automotive - 0.8%
- ----------------------------------------------------------------------------------------------------
Harman International Industries, Inc. 64,000 $ 6,346,240
- ----------------------------------------------------------------------------------------------------
Biotechnology - 3.7%
- ----------------------------------------------------------------------------------------------------
Amgen, Inc. (a) 163,740 $ 10,521,932
Celgene Corp. (a)(l) 110,000 5,863,000
Genentech, Inc. (a) 18,900 1,594,593
Genzyme Corp. (a) 188,130 11,626,434
------------
$ 29,605,959
- ----------------------------------------------------------------------------------------------------
Broadcasting - 1.7%
- ----------------------------------------------------------------------------------------------------
News Corp., "A" 584,500 $ 13,168,785
- ----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 4.1%
- ----------------------------------------------------------------------------------------------------
Charles Schwab Corp. 87,000 $ 1,607,760
Chicago Mercantile Exchange Holdings, Inc., "A" 5,700 3,073,041
E*TRADE Financial Corp. (a) 104,000 2,401,360
Franklin Resources, Inc. 49,900 5,857,761
Goldman Sachs Group, Inc. 39,600 7,983,360
Mellon Financial Corp. 214,900 9,333,107
Morgan Stanley 32,000 2,397,440
------------
$ 32,653,829
- ----------------------------------------------------------------------------------------------------
Business Services - 4.8%
- ----------------------------------------------------------------------------------------------------
Accenture Ltd., "A" 193,700 $ 6,915,090
Amdocs Ltd. (a) 236,200 8,174,882
Automatic Data Processing, Inc. 124,400 6,193,876
Fidelity National Information Services, Inc. 180,900 8,312,355
First Data Corp. 330,000 8,424,900
------------
$ 38,021,103
- ----------------------------------------------------------------------------------------------------
Cable TV - 1.4%
- ----------------------------------------------------------------------------------------------------
Comcast Corp., "A" (a) 422,550 $ 10,867,986
- ----------------------------------------------------------------------------------------------------
Chemicals - 0.8%
- ----------------------------------------------------------------------------------------------------
Monsanto Co. 120,800 $ 6,364,952
- ----------------------------------------------------------------------------------------------------
Computer Software - 5.4%
- ----------------------------------------------------------------------------------------------------
Adobe Systems, Inc. (a) 304,300 $ 11,943,775
Autodesk, Inc. (a) 96,500 3,970,975
Microsoft Corp. (a) 394,400 11,110,248
Oracle Corp. (a) 972,200 15,973,246
------------
$ 42,998,244
- ----------------------------------------------------------------------------------------------------
Computer Software - Systems - 1.3%
- ----------------------------------------------------------------------------------------------------
Apple Computer, Inc. (a) 47,800 $ 4,044,358
Dell, Inc. (a) 86,500 1,976,525
Hewlett-Packard Co. 100,900 3,973,442
------------
$ 9,994,325
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 4.4%
- ----------------------------------------------------------------------------------------------------
Avon Products, Inc. 95,200 $ 3,490,032
Colgate-Palmolive Co. 155,900 10,501,424
eBay, Inc. (a) 121,800 3,904,908
Procter & Gamble Co. 192,300 12,209,127
Western Union Co. 239,700 5,194,299
------------
$ 35,299,790
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 3.7%
- ----------------------------------------------------------------------------------------------------
Danaher Corp. 28,600 $ 2,048,904
General Electric Co. 479,800 16,754,616
Rockwell Automation, Inc. 177,000 10,989,930
------------
$ 29,793,450
- ----------------------------------------------------------------------------------------------------
Electronics - 4.0%
- ----------------------------------------------------------------------------------------------------
Applied Materials, Inc. 115,000 $ 2,135,550
ASML Holding N.V. (a) 195,500 4,805,390
Intel Corp. 595,700 11,824,645
Marvell Technology Group Ltd. (a) 129,900 2,665,548
National Semiconductor Corp. 79,500 2,036,790
Texas Instruments, Inc. 258,000 7,987,680
------------
$ 31,455,603
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 1.1%
- ----------------------------------------------------------------------------------------------------
Devon Energy Corp. 61,000 $ 4,008,310
Occidental Petroleum Corp. 47,500 2,193,550
XTO Energy, Inc. 48,800 2,521,008
------------
$ 8,722,868
- ----------------------------------------------------------------------------------------------------
Food & Beverages - 3.6%
- ----------------------------------------------------------------------------------------------------
Nestle S.A 40,910 $ 15,248,257
PepsiCo, Inc. 210,120 13,269,078
------------
$ 28,517,335
- ----------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.7%
- ----------------------------------------------------------------------------------------------------
CVS Corp. 190,500 $ 5,983,605
- ----------------------------------------------------------------------------------------------------
Gaming & Lodging - 1.6%
- ----------------------------------------------------------------------------------------------------
Harrah's Entertainment, Inc. 29,300 $ 2,475,557
International Game Technology 96,100 3,964,125
Royal Caribbean Cruises Ltd. (l) 148,200 6,006,546
------------
$ 12,446,228
- ----------------------------------------------------------------------------------------------------
General Merchandise - 1.5%
- ----------------------------------------------------------------------------------------------------
Target Corp. 199,960 $ 12,303,539
- ----------------------------------------------------------------------------------------------------
Health Maintenance Organizations - 2.5%
- ----------------------------------------------------------------------------------------------------
UnitedHealth Group, Inc. 231,400 $ 12,079,080
WellPoint, Inc. (a) 101,400 8,050,146
------------
$ 20,129,226
- ----------------------------------------------------------------------------------------------------
Insurance - 1.6%
- ----------------------------------------------------------------------------------------------------
Aflac, Inc. 110,800 $ 5,229,760
Prudential Financial, Inc. 82,200 7,475,268
------------
$ 12,705,028
- ----------------------------------------------------------------------------------------------------
Internet - 2.2%
- ----------------------------------------------------------------------------------------------------
Google, Inc., "A" (a) 26,445 $ 11,885,705
Yahoo!, Inc. (a) 179,800 5,548,628
------------
$ 17,434,333
- ----------------------------------------------------------------------------------------------------
Leisure & Toys - 0.6%
- ----------------------------------------------------------------------------------------------------
Electronic Arts, Inc. (a) 98,330 $ 4,957,799
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 0.9%
- ----------------------------------------------------------------------------------------------------
Deere & Co. 65,300 $ 7,079,826
- ----------------------------------------------------------------------------------------------------
Major Banks - 1.5%
- ----------------------------------------------------------------------------------------------------
State Street Corp. 181,000 $ 11,857,310
- ----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.0%
- ----------------------------------------------------------------------------------------------------
Cardinal Health, Inc. 115,500 $ 8,095,395
Caremark Rx, Inc. 46,800 2,882,412
Cerner Corp. (a)(l) 25,000 1,302,750
IMS Health, Inc. 139,300 4,022,984
------------
$ 16,303,541
- ----------------------------------------------------------------------------------------------------
Medical Equipment - 6.6%
- ----------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc. (a)(l) 111,000 $ 4,277,940
Baxter International, Inc. 174,200 8,711,742
Cytyc Corp. (a) 133,100 4,032,930
DENTSPLY International, Inc. 188,900 5,957,906
Medtronic, Inc. 182,860 9,208,830
St. Jude Medical, Inc. (a) 116,100 4,603,365
Stryker Corp. 64,400 3,994,088
Thermo Electron Corp. (a) 260,700 11,801,889
------------
$ 52,588,690
- ----------------------------------------------------------------------------------------------------
Network & Telecom - 5.0%
- ----------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (a) 783,600 $ 20,326,584
Corning, Inc. (a) 99,500 2,052,685
Juniper Networks, Inc. (a) 316,500 5,985,015
Nokia Oyj 90,400 1,972,266
QUALCOMM, Inc. 241,860 9,742,121
------------
$ 40,078,671
- ----------------------------------------------------------------------------------------------------
Oil Services - 1.7%
- ----------------------------------------------------------------------------------------------------
Noble Corp. 57,400 $ 4,030,628
Schlumberger Ltd. 157,600 9,897,280
------------
$ 13,927,908
- ----------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 2.0%
- ----------------------------------------------------------------------------------------------------
American Express Co. 112,480 $ 6,396,738
SLM Corp. 62,300 2,655,226
UBS AG 109,678 6,505,673
------------
$ 15,557,637
- ----------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 1.5%
- ----------------------------------------------------------------------------------------------------
EMC Corp. (a) 848,550 $ 11,837,273
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals - 8.1%
- ----------------------------------------------------------------------------------------------------
Abbott Laboratories 162,400 $ 8,870,288
Allergan, Inc. 93,700 10,467,227
Johnson & Johnson 151,820 9,572,251
Roche Holding AG (l) 93,900 16,759,460
Teva Pharmaceutical Industries Ltd., ADR 160,200 5,696,712
Wyeth 270,000 13,208,400
------------
$ 64,574,338
- ----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.6%
- ----------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 60,300 $ 4,775,157
- ----------------------------------------------------------------------------------------------------
Specialty Chemicals - 1.3%
- ----------------------------------------------------------------------------------------------------
Bunge Ltd. 78,000 $ 6,190,080
Praxair, Inc. 65,700 4,053,033
------------
$ 10,243,113
- ----------------------------------------------------------------------------------------------------
Specialty Stores - 2.8%
- ----------------------------------------------------------------------------------------------------
Lowe's Cos., Inc. 303,200 $ 9,872,192
Nordstrom, Inc. 36,300 1,927,167
Staples, Inc. 387,500 10,082,750
------------
$ 21,882,109
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.8%
- ----------------------------------------------------------------------------------------------------
America Movil S.A. de C.V., "L", ADR 318,900 $ 13,967,820
- ----------------------------------------------------------------------------------------------------
Tobacco - 0.6%
- ----------------------------------------------------------------------------------------------------
Altria Group, Inc. 52,800 $ 4,449,984
- ----------------------------------------------------------------------------------------------------
Trucking - 0.8%
- ----------------------------------------------------------------------------------------------------
FedEx Corp. 52,600 $ 6,005,868
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $746,238,635) $758,580,323
- ----------------------------------------------------------------------------------------------------
Repurchase Agreements - 4.5%
- ----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., 5.32%, dated 2/28/07, due 3/01/07, total
to be received $35,425,234 (secured by various U.S. Treasury
and Federal Agency obligations and Mortgage Backed securities
in a jointly traded account), at Cost $35,420,000 $ 35,420,000
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 3.9%
- ----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 31,175,215 $ 31,175,215
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $812,833,850) $825,175,538
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (3.9)% (30,616,736)
- ----------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $794,558,802
- ----------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(l) All or a portion of this security is on loan.
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets and liabilities
comprising the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value, including $29,930,508 of securities on
loan (identified cost, $812,833,850) $825,175,538
Cash 925
Receivable for investments sold 37,233,111
Receivable for fund shares sold 773,603
Interest and dividends receivable 710,062
Other assets 30,819
- ------------------------------------------------------------------------------------------------------
Total assets $863,924,058
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for investments purchased $35,257,101
Payable for fund shares reacquired 2,272,258
Collateral for securities loaned, at value 31,175,215
Payable to affiliates
Management fee 28,698
Shareholder servicing costs 373,222
Distribution and service fees 21,642
Administrative services fee 819
Retirement plan administration and services fees 259
Payable for independent trustees' compensation 51,684
Accrued expenses and other liabilities 184,298
- ------------------------------------------------------------------------------------------------------
Total liabilities $69,365,256
- ------------------------------------------------------------------------------------------------------
Net assets $794,558,802
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------
Paid-in capital $794,148,088
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 12,341,516
Accumulated distributions in excess of net realized gain on
investments and foreign currency transactions (10,318,342)
Accumulated net investment loss (1,612,460)
- ------------------------------------------------------------------------------------------------------
Net assets $794,558,802
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 42,714,791
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $507,899,910
Shares outstanding 27,006,007
- ------------------------------------------------------------------------------------------------------
Net asset value per share $18.81
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $19.96
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $152,687,427
Shares outstanding 8,498,877
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $17.97
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $54,430,455
Shares outstanding 3,029,732
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $17.97
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $32,358,512
Shares outstanding 1,674,087
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $19.33
- ------------------------------------------------------------------------------------------------------
Class W shares
- ------------------------------------------------------------------------------------------------------
Net assets $325,166
Shares outstanding 17,249
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.85
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $4,382,238
Shares outstanding 234,250
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.71
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $421,736
Shares outstanding 23,521
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $17.93
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,067,690
Shares outstanding 59,198
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.04
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $2,638,687
Shares outstanding 141,986
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.58
- ------------------------------------------------------------------------------------------------------
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $418,185
Shares outstanding 22,257
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.79
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $37,928,796
Shares outstanding 2,007,627
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $18.89
- ------------------------------------------------------------------------------------------------------
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
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT LOSS
- ------------------------------------------------------------------------------------------------------
Income
Dividends $3,292,179
Interest 906,598
Other 16,241
Foreign taxes withheld (2,173)
- ------------------------------------------------------------------------------------------------------
Total investment income $4,212,845
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $3,040,591
Distribution and service fees 2,029,056
Shareholder servicing costs 751,929
Administrative services fee 75,120
Retirement plan administration and services fees 21,792
Independent trustees' compensation 16,164
Custodian fee 127,150
Shareholder communications 57,048
Auditing fees 22,589
Legal fees 11,293
Miscellaneous 67,736
- ------------------------------------------------------------------------------------------------------
Total expenses $6,220,468
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (30,581)
Reduction of expenses by investment adviser (410,146)
- ------------------------------------------------------------------------------------------------------
Net expenses $5,779,741
- ------------------------------------------------------------------------------------------------------
Net investment loss $(1,566,896)
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $60,672,542
Foreign currency transactions (16,181)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $60,656,361
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $4,525,945
Translation of assets and liabilities in foreign currencies (1,444)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign currency
translation $4,524,501
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $65,180,862
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $63,613,966
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions,
and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment loss $(1,566,896) $(4,365,228)
Net realized gain (loss) on investments and foreign
currency transactions 60,656,361 93,384,086
Net unrealized gain (loss) on investments and foreign
currency translation 4,524,501 (42,339,584)
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $63,613,966 $46,679,274
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions
Class A $(9,377,982) $--
Class B (3,077,555) --
Class C (1,080,532) --
Class I (633,987) --
Class W (1,875) --
Class R (106,755) --
Class R1 (10,327) --
Class R2 (20,208) --
Class R3 (40,450) --
Class R4 (5,764) --
Class R5 (670,116) --
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(15,025,551) $--
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(26,260,983) $(201,470,391)
- -------------------------------------------------------------------------------------------------------
Total change in net assets $22,327,432 $(154,791,117)
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 772,231,370 927,022,487
At end of period (including accumulated net investment
loss of $1,612,460 and $45,564, respectively) $794,558,802 $772,231,370
- -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $17.70 $16.82 $14.71 $14.41 $13.22 $16.89
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.02) $(0.05) $(0.01) $(0.07) $(0.07) $(0.12)
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.47 0.93 2.12 0.37 1.26 (3.55)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.45 $0.88 $2.11 $0.30 $1.19 $(3.67)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $(0.34) $-- $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.81 $17.70 $16.82 $14.71 $14.41 $13.22
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 8.21(n) 5.23 14.34 2.08(b) 9.00 (21.73)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.38(a) 1.44 1.38 1.41 1.42 1.43
Expenses after expense reductions(f) 1.28(a) 1.34 1.28 1.36 N/A 1.47(e)
Net investment loss (0.23)(a) (0.31) (0.08) (0.47) (0.52) (0.76)
Portfolio turnover 100 245 184 261 312 257
Net assets at end of period
(000 Omitted) $507,900 $504,761 $632,209 $404,511 $496,271 $417,986
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $16.98 $16.24 $14.30 $14.09 $13.01 $16.72
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.08) $(0.16) $(0.11) $(0.16) $(0.15) $(0.22)
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.41 0.90 2.05 0.37 1.23 (3.49)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.33 $0.74 $1.94 $0.21 $1.08 $(3.71)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $(0.34) $-- $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.97 $16.98 $16.24 $14.30 $14.09 $13.01
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 7.85(n) 4.56 13.57 1.49(b) 8.22 (22.13)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.03(a) 2.09 2.03 2.05 2.07 2.08
Expenses after expense reductions(f) 1.93(a) 1.99 1.93 2.00 N/A 2.12(e)
Net investment loss (0.88)(a) (0.96) (0.73) (1.11) (1.18) (1.41)
Portfolio turnover 100 245 184 261 312 257
Net assets at end of period
(000 Omitted) $152,687 $162,868 $201,513 $138,226 $155,602 $114,619
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $16.98 $16.23 $14.30 $14.10 $13.02 $16.73
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.08) $(0.16) $(0.11) $(0.16) $(0.15) $(0.22)
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.41 0.91 2.04 0.36 1.23 (3.49)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.33 $0.75 $1.93 $0.20 $1.08 $(3.71)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $(0.34) $-- $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.97 $16.98 $16.23 $14.30 $14.10 $13.02
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 7.85(n) 4.62 13.50 1.42(b) 8.29 (22.18)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.03(a) 2.09 2.03 2.05 2.07 2.08
Expenses after expense reductions (f) 1.93(a) 1.99 1.93 2.00 N/A 2.12(e)
Net investment loss (0.88)(a) (0.96) (0.69) (1.12) (1.18) (1.41)
Portfolio turnover 100 245 184 261 312 257
Net assets at end of period
(000 Omitted) $54,430 $58,523 $82,182 $91,225 $110,786 $82,441
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $18.15 $17.18 $14.98 $14.63 $13.37 $17.01
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.01 $0.00(w) $0.05 $(0.02) $(0.02) $(0.06)
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.51 0.97 2.15 0.37 1.28 (3.58)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.52 $0.97 $2.20 $0.35 $1.26 $(3.64)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $(0.34) $-- $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.33 $18.15 $17.18 $14.98 $14.63 $13.37
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.39(n) 5.65 14.69 2.39(b) 9.42 (21.40)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.03(a) 1.06 1.02 1.06 1.07 1.08
Expenses after expense reductions (f) 0.93(a) 0.96 0.92 1.01 N/A 1.12(e)
Net investment income (loss) 0.12(a) 0.03 0.32 (0.11) (0.16) (0.39)
Portfolio turnover 100 245 184 261 312 257
Net assets at end of period
(000 Omitted) $32,359 $34,998 $3,816 $4,136 $4,317 $4,403
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS
ENDED YEAR ENDED
CLASS W 2/28/07 8/31/06(i)
(UNAUDITED)
Net asset value, beginning of period $17.72 $18.35
- -----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.01 $(0.00)(w)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.46 (0.63)(g)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations $1.47 $(0.63)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(0.34) $--
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.85 $17.72
- -----------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.31(n) (3.43)(n)
- -----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.13(a) 1.18(a)
Expenses after expense reductions (f) 1.03(a) 1.08(a)
Net investment income (loss) 0.10(a) (0.03)(a)
Portfolio turnover 100 245
Net assets at end of period (000 Omitted) $325 $97
- -----------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $17.62 $16.77 $14.69 $14.41 $12.35
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.04) $(0.08) $(0.04) $(0.09) $(0.08)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.47 0.93 2.12 0.37 2.14(g)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.43 $0.85 $2.08 $0.28 $2.06
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(0.34) $-- $-- $-- $--
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.71 $17.62 $16.77 $14.69 $14.41
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.13(n) 5.07 14.16 1.94(b) 16.68(n)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.53(a) 1.59 1.54 1.56 1.65(a)
Expenses after expense reductions (f) 1.43(a) 1.49 1.44 1.51 N/A
Net investment loss (0.39)(a) (0.46) (0.25) (0.60) (0.82)(a)
Portfolio turnover 100 245 184 261 312
Net assets at end of period (000 Omitted) $4,382 $5,735 $5,904 $3,266 $1,869
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $16.95 $16.23 $15.35
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.09) $(0.17) $(0.08)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.41 0.89 0.96(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.32 $0.72 $0.88
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(0.34) $-- $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.93 $16.95 $16.23
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 7.80(n) 4.44 5.73(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.23(a) 2.28 2.35(a)
Expenses after expense reductions (f) 2.03(a) 2.09 2.25(a)
Net investment loss (0.99)(a) (1.07) (1.21)(a)
Portfolio turnover 100 245 184
Net assets at end of period (000 Omitted) $422 $506 $80
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.03 $16.25 $15.35
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.06) $(0.11) $(0.04)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.41 0.89 0.94(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.35 $0.78 $0.90
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(0.34) $-- $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.04 $17.03 $16.25
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 7.94(n) 4.80 5.86(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.93(a) 1.97 2.04(a)
Expenses after expense reductions (f) 1.68(a) 1.73 1.94(a)
Net investment loss (0.68)(a) (0.67) (0.67)(a)
Portfolio turnover 100 245 184
Net assets at end of period (000 Omitted) $1,068 $2,598 $437
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $17.52 $16.70 $14.67 $14.63
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.05) $(0.11) $(0.06) $(0.06)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.45 0.93 2.09 0.10(g)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.40 $0.82 $2.03 $0.04
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(0.34) $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.58 $17.52 $16.70 $14.67
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.01(n) 4.91 13.84 0.27(b)(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.78(a) 1.85 1.82 1.95(a)
Expenses after expense reductions (f) 1.58(a) 1.65 1.72 1.90(a)
Net investment loss (0.52)(a) (0.60) (0.48) (0.48)(a)
Portfolio turnover 100 245 184 261
Net assets at end of period (000 Omitted) $2,639 $1,804 $774 $105
- -------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.69 $16.81 $15.85
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.03) $(0.06) $(0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.47 0.94 0.99(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.44 $0.88 $0.96
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(0.34) $-- $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.79 $17.69 $16.81
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.16(n) 5.23 6.06(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.43(a) 1.48 1.56(a)
Expenses after expense reductions (f) 1.33(a) 1.38 1.46(a)
Net investment loss (0.27)(a) (0.36) (0.41)(a)
Portfolio turnover 100 245 184
Net assets at end of period (000 Omitted) $418 $286 $53
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.76 $16.83 $15.85
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.00(w) $(0.01) $(0.01)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.47 0.94 0.99(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.47 $0.93 $0.98
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(0.34) $-- $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.89 $17.76 $16.83
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 8.30(n) 5.53 6.18(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.13(a) 1.19 1.26(a)
Expenses after expense reductions (f) 1.03(a) 1.09 1.16(a)
Net investment income (loss) 0.05(a) (0.06) (0.11)(a)
Portfolio turnover 100 245 184
Net assets at end of period (000 Omitted) $37,929 $56 $53
- ---------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less
than $0.01.
(a) Annualized.
(b) The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The
non-recurring accrual resulted in an increase in the net asset value of $0.01 per share based on shares outstanding on the
day the proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(e) Ratio includes a reimbursement fee for expenses borne by MFS in prior years under the then existing expense reimbursement
agreement.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) The per share amount is not in accordance with the net realized and unrealized gain/loss for the period because of the
timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(i) For the period from the class' inception, December 31, 2002 (Class R), October 31, 2003 (Class R3), April 1, 2005 (Classes
R1, R2, R4, and R5) and May 1, 2006 (Class W) through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Core Growth Fund (the fund) is a 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 U.S.
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, including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales reported
that day, equity securities are generally valued at the last quoted daily bid
quotation as reported by an independent pricing service on the market or
exchange on which they are primarily traded. For securities held short for which
there were no sales reported for the day, the position is generally valued at
the last quoted daily ask quotation as reported by an independent pricing
service on the market or exchange on which such securities are primarily traded.
Short-term instruments with a maturity at issuance of 60 days or less may be
valued at amortized cost, which approximates market value. Open-end investment
companies are generally valued at their net asset value per share. Securities
and other assets generally valued on the basis of information from an
independent pricing service may also be valued at a broker-dealer bid quotation.
The values of foreign securities and other assets and liabilities expressed in
foreign currencies are converted to U.S. dollars using the mean of bid and asked
prices for rates reported by an independent pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any fair
valuation) to the adviser pursuant to valuation policies and procedures approved
by the Board. If the adviser determines that reliable market quotations are not
readily available, investments are valued at fair value as determined in good
faith by the adviser in accordance with such procedures under the oversight of
the Board of Trustees. Under the fund's valuation policies and procedures,
market quotations are not considered to be readily available for many types of
debt instruments and certain types of derivatives. These investments are
generally valued at fair value based on information from independent pricing
services. In addition, investments may be valued at fair value if the adviser
determines that an investment's value has been materially affected by events
occurring after the close of the exchange or market on which the investment is
principally traded (such as foreign exchange or market) and prior to the
determination of the fund's net asset value, or after the halting of trading of
a specific security where trading does not resume prior to the close of the
exchange or market on which the security is principally traded. Events that
occur on a frequent basis after foreign markets close (such as developments in
foreign markets and significant movements in the U.S. markets) and prior to the
determination of the fund's net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
fund's foreign equity securities may often be valued at fair value. The adviser
may rely on independent pricing services or other information (such as the
correlation with price movements of similar securities in the same or other
markets; the type, cost and investment characteristics of the security; the
business and financial condition of the issuer; and trading and other market
data) to assist in determining whether to fair value and at what value to fair
value an investment. The value of an investment for purposes of calculating the
fund's net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published prices
for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management is
evaluating the application of the Statement to the fund, and believes the impact
will be limited to expanded disclosures resulting from the adoption of this
Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The fund requires that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the fund to obtain those securities
in the event of a default under the repurchase agreement. The fund monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the fund under each such
repurchase agreement. The fund and other funds managed by Massachusetts
Financial Services Company (MFS), may utilize a joint trading account for the
purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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"), as
lending agent, 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 cash and/or U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned. State Street
provides the fund with indemnification against Borrower default. The fund bears
the risk of loss with respect to the investment of cash collateral. On loans
collateralized by cash, the cash collateral is invested in a money market fund
or short-term securities. A portion of the income generated upon investment of
the collateral is remitted to the Borrowers, and the remainder is allocated
between the fund and the lending agent. On loans collateralized by U.S. Treasury
securities, a fee is received from the Borrower, and is allocated between the
fund and the lending agent. Net 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.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising out
of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with U.S. generally accepted accounting principles. All discount is accreted for
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded when the fund is informed of the dividend if
such information is obtained subsequent to the ex- dividend date. Dividend and
interest payments received in additional securities are recorded on the
ex-dividend or ex-interest date in an amount equal to the value of the security
on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received
from litigation involving its portfolio holdings are reflected in realized
gain/loss in the Statement of Operations, or in unrealized gain/loss if the
security is still held by the fund. Any other proceeds from litigation not
related to portfolio holdings are reflected as other income in the Statement of
Operations.
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. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the fund in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value per
share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions for
financial statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to net operating losses, expiration of
capital loss carryforwards, and wash sale loss deferrals.
The tax character of distributions made during the current period will be
determined at fiscal year end.
The fund declared no distributions for the year ended August 31, 2006.
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $822,811,993
------------------------------------------------------------
Gross appreciation $22,324,427
Gross depreciation (19,960,882)
------------------------------------------------------------
Net unrealized appreciation (depreciation) $2,363,545
AS OF 8/31/06
Undistributed ordinary income 5,724,975
Undistributed long-term capital gain 9,296,863
Capital loss carryforwards (59,221,280)
Other temporary differences (1,815,859)
Net unrealized appreciation (depreciation) (2,162,400)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of August 31, 2006 the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
8/31/09 $(33,513,254)
8/31/10 (25,708,026)
------------------------------------------------------------
$(59,221,280)
The availability of a portion of the capital loss carryforwards, which were
acquired on June 3, 2005 in connection with the MFS Large Cap Growth Fund
merger, may be limited in a given year.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. On December 22, 2006, the SEC delayed the
implementation of the Interpretation for regulated investment companies for an
additional six months. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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 MFS to
provide overall investment management and related administrative services and
facilities to the fund.
The management fee is computed daily and paid monthly at an annual rate of
0.75% of the fund's average daily net assets.
As part of a settlement agreement with the New York Attorney General concerning
market timing and related matters, MFS has agreed to reduce the management fee
to 0.65% of the fund's average daily net assets for the period March 1, 2004
through February 28, 2009. For the six months ended February 28, 2007, this
waiver amounted to $405,413 and is reflected as a reduction of total expenses in
the Statement of Operations.
The management fee incurred for the six months ended February 28, 2007 was
equivalent to an annual effective rate of 0.65% of the fund's average daily net
assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $30,316 for the six months ended February 28,
2007, as its portion of the initial sales charge on sales of Class A shares of
the fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the distribution
and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee
paid to MFD. MFD may subsequently pay all, or a portion, of the distribution
and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $905,333
Class B 0.75% 0.25% 1.00% 1.00% 811,169
Class C 0.75% 0.25% 1.00% 1.00% 286,068
Class W 0.10% -- 0.10% 0.10% 68
Class R 0.25% 0.25% 0.50% 0.50% 14,482
Class R1 0.50% 0.25% 0.75% 0.75% 1,938
Class R2 0.25% 0.25% 0.50% 0.50% 4,236
Class R3 0.25% 0.25% 0.50% 0.50% 5,326
Class R4 -- 0.25% 0.25% 0.25% 436
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $2,029,056
(d) In accordance with the distribution plan for certain classes, the fund
pays distribution and/or service fees up to these annual percentage rates
of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the
distribution plan for the six months ended February 28, 2007 based on each
class' average daily net assets.
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 of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. All contingent
deferred sales charges are paid to MFD and during the six months ended
February 28, 2007, were as follows:
AMOUNT
Class A $4,292
Class B 116,874
Class C 6,532
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as shareholder
servicing agent calculated as a percentage of the average daily net assets of
the fund as determined periodically under the supervision of the fund's Board of
Trustees. For the six months ended February 28, 2007, the fee was $309,012,
which equated to 0.0762% annually of the fund's average daily net assets.
Effective January 1, 2007, MFSC has entered into a sub-accounting agreement with
SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of MFSC, on behalf
of the fund to provide omnibus account services to the fund. MFSC pays SRS both
an asset based fee and a per account charge of the assets held in the omnibus
account. The fund then reimburses MFSC for the sub- accounting fees paid to SRS.
For the six months ended February 28, 2007, the sub-accounting fee for SRS was
$43,811, which equated to 0.0108% annually of the fund's average daily net
assets. MFSC also receives payment from the fund for out-of-pocket and
sub-accounting expenses. For the six months ended February 28, 2007, these
out-of-pocket and sub-accounting costs amounted to $304,212. The fund may also
pay shareholder servicing related costs directly to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund. Under
an administrative services agreement, the fund partially reimburses MFS the
costs incurred to provide these services. The fund is charged a fixed amount
plus a fee based on calendar year average net assets. The fund's annual fixed
amount is $17,500.
The administrative services fee incurred for the six months ended February 28,
2007 was equivalent to an annual effective rate of 0.0185% of the fund's average
daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares, and
may be provided directly by MFS or by a third party. MFS may subsequently pay
all, or a portion, of the retirement plan administration and services fee to
affiliated or unaffiliated third parties. For the six months ended February 28,
2007, the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily net
assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $1,163
Class R2 0.40% 0.25% 3,373
Class R3 0.25% 0.15% 2,663
Class R4 0.15% 0.15% 262
Class R5 0.10% 0.10% 14,331
- --------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $21,792
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $2,594 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to trustees or officers of the fund who are also
officers of the investment adviser, 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, MFD, and MFSC.
The fund has an unfunded, defined benefit plan for certain retired independent
trustees which resulted in a pension expense of $336. The fund also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $5,780. Both amounts are included in
independent trustees' compensation for the six months ended February 28, 2007.
The liability for deferred retirement benefits payable to certain independent
trustees under both plans amounted to $50,058 at February 28, 2007, and is
included in payable for independent trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $3,262. MFS has agreed to reimburse the fund for a portion
of the payments made by the funds to Tarantino LLC in the amount of $2,139,
which is shown as a reduction of total expenses in the Statement of
Operations. Additionally, MFS has agreed to bear all expenses associated with
office space, other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$772,892,052 and $805,828,748, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06(i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 3,953,006 $73,410,643 6,430,188 $113,225,460
Class B 319,490 5,745,224 887,359 15,079,814
Class C 230,586 4,155,333 433,212 7,356,579
Class I 60,142 1,152,230 1,970,276 33,949,254
Class W 11,700 225,000 5,450 100,000
Class R 38,522 720,074 76,939 1,357,467
Class R1 15,663 288,055 29,696 489,931
Class R2 91,114 1,645,894 147,706 2,457,779
Class R3 162,729 3,086,456 88,327 1,546,974
Class R4 14,713 282,370 13,738 235,417
Class R5 2,074,480 38,136,011 4 75
- -----------------------------------------------------------------------------------------------------------
6,972,145 $128,847,290 10,082,895 $175,798,750
Shares issued to shareholders in
reinvestment of distributions
Class A 415,970 $7,845,192 -- $--
Class B 158,310 2,855,923 -- --
Class C 43,991 793,595 -- --
Class I 32,730 633,987 -- --
Class W 99 1,875 -- --
Class R 4,941 92,700 -- --
Class R1 573 10,327 -- --
Class R2 1,116 20,208 -- --
Class R3 2,169 40,450 -- --
Class R4 306 5,764 -- --
Class R5 17,732 335,669 -- --
- -----------------------------------------------------------------------------------------------------------
677,937 $12,635,690 -- $--
Shares reacquired
Class A (5,879,459) $(109,662,863) (15,505,829) $(271,914,439)
Class B (1,572,242) (28,394,937) (3,706,240) (62,822,571)
Class C (691,978) (12,409,919) (2,048,446) (35,022,100)
Class I (346,833) (6,727,514) (264,308) (4,682,666)
Class R (134,695) (2,546,319) (103,586) (1,796,528)
Class R1 (22,551) (415,116) (4,778) (79,351)
Class R2 (185,598) (3,355,859) (22,019) (382,432)
Class R3 (125,872) (2,389,344) (31,732) (556,427)
Class R4 (8,927) (172,549) (727) (12,551)
Class R5 (87,739) (1,669,543) (4) (76)
- -----------------------------------------------------------------------------------------------------------
(9,055,894) $(167,743,963) (21,687,669) $(377,269,141)
Net change
Class A (1,510,483) $(28,407,028) (9,075,641) $(158,688,979)
Class B (1,094,442) (19,793,790) (2,818,881) (47,742,757)
Class C (417,401) (7,460,991) (1,615,234) (27,665,521)
Class I (253,961) (4,941,297) 1,705,968 29,266,588
Class W 11,799 226,875 5,450 100,000
Class R (91,232) (1,733,545) (26,647) (439,061)
Class R1 (6,315) (116,734) 24,918 410,580
Class R2 (93,368) (1,689,757) 125,687 2,075,347
Class R3 39,026 737,562 56,595 990,547
Class R4 6,092 115,585 13,011 222,866
Class R5 2,004,473 36,802,137 -- (1)
- -----------------------------------------------------------------------------------------------------------
(1,405,812) $(26,260,983) (11,604,774) $(201,470,391)
(i) For the period from the class' inception, May 1, 2006 (Classes W), through the stated period end.
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$2,496 and $0, respectively, and are included in miscellaneous expense on the
Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site at
http://www.sec.gov, and copies of this information may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov or by writing the Public Reference Section at the
above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Semiannual report
MFS(R) NEW DISCOVERY FUND
LETTER FROM THE CEO 1
- ----------------------------------------------------------
PORTFOLIO COMPOSITION 2
- ----------------------------------------------------------
EXPENSE TABLE 3
- ----------------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ----------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 11
- ----------------------------------------------------------
STATEMENT OF OPERATIONS 14
- ----------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 16
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS 17
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 27
- ----------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 38
- ----------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 38
- ----------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 38
- ----------------------------------------------------------
CONTACT INFORMATION BACK COVER
- ----------------------------------------------------------
THE 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.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
NDF-SEM
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 99.5%
Cash & Other Net Assets 0.5%
TOP TEN HOLDINGS
NICE Systems Ltd., ADR 2.7%
------------------------------------------------
Transaction Systems Architects, Inc. 2.0%
------------------------------------------------
Advanced Medical Optics, Inc. 2.0%
------------------------------------------------
Hittite Microwave Corp. 2.0%
------------------------------------------------
Millipore Corp. 1.8%
------------------------------------------------
Red Robin Gourmet Burgers, Inc. 1.8%
------------------------------------------------
ARM Holdings PLC 1.8%
------------------------------------------------
Corporate Executive Board Co. 1.8%
------------------------------------------------
North American Energy Partners, Inc. 1.7%
------------------------------------------------
MWI Veterinary Supply, Inc. 1.7%
------------------------------------------------
EQUITY SECTORS
Health Care 23.2%
------------------------------------------------
Technology 22.2%
------------------------------------------------
Specialty Products & Services 10.2%
------------------------------------------------
Leisure 8.3%
------------------------------------------------
Retailing 8.3%
------------------------------------------------
Industrial Goods & Services 6.7%
------------------------------------------------
Financial Services 6.5%
------------------------------------------------
Energy 5.8%
------------------------------------------------
Basic Materials 2.4%
------------------------------------------------
Consumer Staples 1.9%
------------------------------------------------
Transportation 1.6%
------------------------------------------------
Utilities & Communications 1.2%
------------------------------------------------
Autos & Housing 1.2%
------------------------------------------------
Percentages are based on net assets as of 2/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- -------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 1.47% $1,000.00 $1,199.90 $8.02
A ---------------------------------------------------------------------------
Hypothetical (h) 1.47% $1,000.00 $1,017.50 $7.35
- --------------------------------------------------------------------------------
Actual 2.12% $1,000.00 $1,195.70 $11.54
B ---------------------------------------------------------------------------
Hypothetical (h) 2.12% $1,000.00 $1,014.28 $10.59
- --------------------------------------------------------------------------------
Actual 2.12% $1,000.00 $1,196.10 $11.54
C ---------------------------------------------------------------------------
Hypothetical (h) 2.12% $1,000.00 $1,014.28 $10.59
- --------------------------------------------------------------------------------
Actual 1.12% $1,000.00 $1,202.50 $6.12
I ---------------------------------------------------------------------------
Hypothetical (h) 1.12% $1,000.00 $1,019.24 $5.61
- --------------------------------------------------------------------------------
Actual 1.62% $1,000.00 $1,199.20 $8.83
R ---------------------------------------------------------------------------
Hypothetical (h) 1.62% $1,000.00 $1,016.76 $8.10
- --------------------------------------------------------------------------------
Actual 2.22% $1,000.00 $1,195.50 $12.08
R1 ---------------------------------------------------------------------------
Hypothetical (h) 2.22% $1,000.00 $1,013.79 $11.08
- --------------------------------------------------------------------------------
Actual 1.87% $1,000.00 $1,197.80 $10.19
R2 ---------------------------------------------------------------------------
Hypothetical (h) 1.87% $1,000.00 $1,015.52 $9.35
- --------------------------------------------------------------------------------
Actual 1.77% $1,000.00 $1,198.50 $9.65
R3 ---------------------------------------------------------------------------
Hypothetical (h) 1.77% $1,000.00 $1,016.02 $8.85
- --------------------------------------------------------------------------------
Actual 1.52% $1,000.00 $1,200.10 $8.29
R4 ---------------------------------------------------------------------------
Hypothetical (h) 1.52% $1,000.00 $1,017.26 $7.60
- --------------------------------------------------------------------------------
Actual 1.22% $1,000.00 $1,201.60 $6.66
R5 ---------------------------------------------------------------------------
Hypothetical (h) 1.22% $1,000.00 $1,018.74 $6.11
- --------------------------------------------------------------------------------
Actual 1.72% $1,000.00 $1,198.90 $9.38
529A ---------------------------------------------------------------------------
Hypothetical (h) 1.72% $1,000.00 $1,016.27 $8.60
- --------------------------------------------------------------------------------
Actual 2.37% $1,000.00 $1,195.30 $12.90
529B ---------------------------------------------------------------------------
Hypothetical (h) 2.37% $1,000.00 $1,013.04 $11.83
- --------------------------------------------------------------------------------
Actual 2.37% $1,000.00 $1,195.10 $12.90
529C ---------------------------------------------------------------------------
Hypothetical (h) 2.37% $1,000.00 $1,013.04 $11.83
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Common Stocks - 99.5%
- ----------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------
Airlines - 0.5%
- ----------------------------------------------------------------------------------------------
Allegiant Travel Co. (a) 128,040 $ 4,373,845
- ----------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.2%
- ----------------------------------------------------------------------------------------------
Castle Brands, Inc. (a) 185,570 $ 1,206,205
- ----------------------------------------------------------------------------------------------
Apparel Manufacturers - 1.1%
- ----------------------------------------------------------------------------------------------
Carter's, Inc. (a) 381,770 $ 9,173,934
- ----------------------------------------------------------------------------------------------
Biotechnology - 3.7%
- ----------------------------------------------------------------------------------------------
3SBio, Inc., ADR (a) 186,310 $ 2,638,150
CV Therapeutics, Inc. (a)(l) 310,000 3,958,700
Gen-Probe, Inc. (a)(l) 141,960 6,816,919
Keryx Biopharmaceuticals, Inc. (a) 136,850 1,560,090
Millipore Corp. (a) 207,010 14,805,355
-------------
$ 29,779,214
- ----------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.7%
- ----------------------------------------------------------------------------------------------
HFF, Inc., "A" (a) 289,900 $ 5,421,130
International Securities Exchange Holdings, Inc. 87,670 4,054,738
Thomas Weisel Partners Group (a)(l) 218,400 3,979,248
-------------
$ 13,455,116
- ----------------------------------------------------------------------------------------------
Business Services - 6.0%
- ----------------------------------------------------------------------------------------------
Bright Horizons Family Solutions, Inc. (a) 156,123 $ 6,257,410
Corporate Executive Board Co. (l) 186,900 14,542,689
CoStar Group, Inc. (a) 197,180 9,241,827
Global Payments, Inc. (l) 290,380 11,170,919
Ultimate Software Group, Inc. (a) 259,880 6,923,203
-------------
$ 48,136,048
- ----------------------------------------------------------------------------------------------
Chemicals - 1.0%
- ----------------------------------------------------------------------------------------------
Nalco Holding Co. 331,080 $ 7,912,812
- ----------------------------------------------------------------------------------------------
Computer Software - 5.7%
- ----------------------------------------------------------------------------------------------
CommVault Systems, Inc. (a) 269,980 $ 4,489,767
Guidance Software, Inc. (a) 295,175 3,819,565
MSC.Software Corp. (a) 365,321 4,913,567
Opsware, Inc. (a)(l) 1,254,930 9,261,383
TIBCO Software, Inc. (a) 803,680 7,273,304
Transaction Systems Architects, Inc. (a) 454,185 16,032,731
-------------
$ 45,790,317
- ----------------------------------------------------------------------------------------------
Computer Software - Systems - 0.3%
- ----------------------------------------------------------------------------------------------
Syntel, Inc. 56,950 $ 2,043,366
- ----------------------------------------------------------------------------------------------
Construction - 1.2%
- ----------------------------------------------------------------------------------------------
Dayton Superior Corp. (a) 285,580 $ 3,284,170
M.D.C. Holdings, Inc. (l) 131,370 6,707,752
-------------
$ 9,991,922
- ----------------------------------------------------------------------------------------------
Consumer Goods & Services - 5.3%
- ----------------------------------------------------------------------------------------------
Central Garden & Pet Co., "A" (a)(l) 652,190 $ 9,143,704
ITT Educational Services, Inc. (a) 106,960 8,554,661
Monster Worldwide, Inc. (a) 84,690 4,222,643
New Oriental Educational & Technology Group, ADR (a) 237,930 10,021,612
Strayer Education, Inc. 87,460 10,310,659
-------------
$ 42,253,279
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 2.0%
- ----------------------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., "A" 212,440 $ 9,164,662
WESCO International, Inc. (a) 98,310 6,560,226
-------------
$ 15,724,888
- ----------------------------------------------------------------------------------------------
Electronics - 9.8%
- ----------------------------------------------------------------------------------------------
ARM Holdings PLC 5,792,360 $ 14,586,245
ATMI, Inc. (a)(l) 300,550 9,990,282
Entegris, Inc. (a)(l) 817,276 9,104,455
FormFactor, Inc. (a)(l) 251,780 10,763,595
Hittite Microwave Corp. (a)(l) 375,350 15,742,179
Intersil Corp., "A" 311,910 8,250,020
NetLogic Microsystems, Inc. (a)(l) 254,300 6,342,242
Volterra Semiconductor Corp. (a)(l) 297,960 4,195,277
-------------
$ 78,974,295
- ----------------------------------------------------------------------------------------------
Energy - Independent - 3.3%
- ----------------------------------------------------------------------------------------------
EXCO Resources, Inc. (a)(l) 446,290 $ 7,774,372
Forest Oil Corp. (a)(l) 160,490 5,119,631
Goodrich Petroleum Corp. (a)(l) 168,650 5,769,517
Kodiak Oil & Gas Corp. (a) 691,290 3,802,095
Venoco, Inc. (a) 274,480 4,172,096
-------------
$ 26,637,711
- ----------------------------------------------------------------------------------------------
Engineering - Construction - 3.7%
- ----------------------------------------------------------------------------------------------
InfraSource Services, Inc. (a) 310,850 $ 7,622,042
North American Energy Partners, Inc. (a) 727,440 13,915,927
Quanta Services, Inc. (a)(l) 342,220 7,936,082
-------------
$ 29,474,051
- ----------------------------------------------------------------------------------------------
Food & Beverages - 0.6%
- ----------------------------------------------------------------------------------------------
Diamond Foods, Inc. (l) 301,149 $ 5,029,188
- ----------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
- ----------------------------------------------------------------------------------------------
Universal Forest Products, Inc. 120,500 $ 6,245,515
- ----------------------------------------------------------------------------------------------
Gaming & Lodging - 0.7%
- ----------------------------------------------------------------------------------------------
WMS Industries, Inc. (a)(l) 159,780 $ 5,980,565
- ----------------------------------------------------------------------------------------------
General Merchandise - 1.0%
- ----------------------------------------------------------------------------------------------
Stage Stores, Inc. 379,265 $ 8,317,281
- ----------------------------------------------------------------------------------------------
Internet - 1.6%
- ----------------------------------------------------------------------------------------------
CNET Networks, Inc. (a)(l) 897,840 $ 7,883,035
Move, Inc. (a)(l) 717,070 4,280,908
Vocus, Inc. (a) 38,293 759,733
-------------
$ 12,923,676
- ----------------------------------------------------------------------------------------------
Leisure & Toys - 1.8%
- ----------------------------------------------------------------------------------------------
Activision, Inc. (a)(l) 415,910 $ 6,954,015
THQ, Inc. (a)(l) 227,924 7,341,432
-------------
$ 14,295,447
- ----------------------------------------------------------------------------------------------
Machinery & Tools - 1.0%
- ----------------------------------------------------------------------------------------------
Ritchie Bros. Auctioneers, Inc. 138,400 $ 7,945,544
- ----------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 5.0%
- ----------------------------------------------------------------------------------------------
Healthcare Services Group, Inc. (l) 307,560 $ 8,623,982
IDEXX Laboratories, Inc. (a) 118,025 10,171,395
MWI Veterinary Supply, Inc. (a)(l) 429,790 13,336,384
VCA Antech, Inc. (a) 116,210 4,266,069
WebMD Health Corp. (a)(l) 72,840 3,918,064
-------------
$ 40,315,894
- ----------------------------------------------------------------------------------------------
Medical Equipment - 11.7%
- ----------------------------------------------------------------------------------------------
ABIOMED, Inc. (a)(l) 132,730 $ 1,855,565
Adams Respiratory Therapeutics, Inc. (a) 52,420 1,903,894
Advanced Medical Optics, Inc. (a)(l) 409,580 15,785,213
Aspect Medical Systems, Inc. (a)(l) 715,090 11,548,703
AtriCure, Inc. (a) 283,230 2,880,449
Conceptus, Inc. (a)(l) 439,810 8,259,632
Cyberonics, Inc. (a)(l) 448,320 9,181,594
Dexcom, Inc. (a)(l) 298,150 2,412,034
Haemonetics Corp. (a) 117,930 5,306,850
Mindray Medical International Ltd., ADR (a) 156,230 4,021,360
NxStage Medical, Inc. (a)(l) 195,420 2,393,895
Thoratec Corp. (a)(l) 637,820 12,533,163
Ventana Medical Systems, Inc. (a)(l) 169,190 6,809,898
Volcano Corp. (a) 459,520 8,735,475
-------------
$ 93,627,725
- ----------------------------------------------------------------------------------------------
Network & Telecom - 2.7%
- ----------------------------------------------------------------------------------------------
NICE Systems Ltd., ADR (a) 624,518 $ 21,377,251
- ----------------------------------------------------------------------------------------------
Oil Services - 2.5%
- ----------------------------------------------------------------------------------------------
Dresser-Rand Group, Inc. (a)(l) 421,210 $ 10,938,824
Natural Gas Services Group, Inc. (a)(l) 215,470 2,844,204
Universal Compression Holdings, Inc. (a) 95,380 6,385,691
-------------
$ 20,168,719
- ----------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 4.2%
- ----------------------------------------------------------------------------------------------
Accredited Home Lenders Holding Co. (a)(l) 225,660 $ 5,072,837
Commerce Bancorp, Inc. (l) 299,000 9,992,580
Nelnet, Inc., "A" (l) 158,200 4,086,306
New York Community Bancorp, Inc. (l) 441,030 7,382,842
Signature Bank (a) 223,720 6,872,678
-------------
$ 33,407,243
- ----------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 2.1%
- ----------------------------------------------------------------------------------------------
Mellanox Tecnologies Ltd. (a) 202,220 $ 4,331,552
Nuance Communications, Inc. (a)(l) 897,499 12,645,761
-------------
$ 16,977,313
- ----------------------------------------------------------------------------------------------
Pharmaceuticals - 2.8%
- ----------------------------------------------------------------------------------------------
Cadence Pharmaceuticals, Inc. (a)(l) 202,740 $ 2,891,072
Endo Pharmaceuticals Holdings, Inc. (a) 267,590 8,351,484
Medicis Pharmaceutical Corp., "A" (l) 274,510 9,981,184
Synta Pharmaceuticals Corp. (a) 160,070 1,365,397
-------------
$ 22,589,137
- ----------------------------------------------------------------------------------------------
Printing & Publishing - 0.5%
- ----------------------------------------------------------------------------------------------
Morningstar, Inc. (a)(l) 72,876 $ 3,733,437
- ----------------------------------------------------------------------------------------------
Real Estate - 0.6%
- ----------------------------------------------------------------------------------------------
Alesco Financial, Inc., REIT 425,210 $ 4,588,016
- ----------------------------------------------------------------------------------------------
Restaurants - 5.3%
- ----------------------------------------------------------------------------------------------
Chipotle Mexican Grill, Inc., "A" (a)(l) 90,280 $ 5,415,897
Panera Bread Co. (a) 138,660 8,490,152
Peet's Coffee & Tea, Inc. (a)(l) 150,260 3,809,091
Red Robin Gourmet Burgers, Inc. (a)(l) 372,410 14,702,747
Texas Roadhouse, Inc., "A" (a)(l) 715,310 10,479,292
-------------
$ 42,897,179
- ----------------------------------------------------------------------------------------------
Specialty Chemicals - 0.6%
- ----------------------------------------------------------------------------------------------
Innophos Holdings, Inc. 294,535 $ 4,862,773
- ----------------------------------------------------------------------------------------------
Specialty Stores - 6.2%
- ----------------------------------------------------------------------------------------------
A.C. Moore Arts & Crafts, Inc. (a)(l) 345,210 $ 6,759,212
CarMax, Inc. (a)(l) 100,920 5,318,484
Citi Trends, Inc. (a)(l) 130,510 5,467,064
Dick's Sporting Goods, Inc. (a)(l) 126,860 6,639,852
Hibbett Sports, Inc. (a)(l) 210,480 6,562,766
Monro Muffler Brake, Inc. 140,680 5,116,532
Susser Holdings Corp. (a) 204,540 3,685,811
Urban Outfitters, Inc. (a)(l) 395,370 9,813,083
-------------
$ 49,362,804
- ----------------------------------------------------------------------------------------------
Telephone Services - 1.2%
- ----------------------------------------------------------------------------------------------
Level 3 Communications, Inc. (a)(l) 1,524,360 $ 10,015,045
- ----------------------------------------------------------------------------------------------
Trucking - 1.1%
- ----------------------------------------------------------------------------------------------
Landstar Systems, Inc. 196,340 $ 8,774,435
- ----------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $725,141,543) $ 798,361,190
- ----------------------------------------------------------------------------------------------
Short-Term Obligations - 0.3%
- ----------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, due 3/01/07,
at Amortized Cost and Value (y) $ 1,971,000 $ 1,971,000
- ----------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 15.9%
- ----------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 127,861,535 $ 127,861,535
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $854,974,078) $ 928,193,725
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (15.7)% (125,849,593)
- ----------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 802,344,132
- ----------------------------------------------------------------------------------------------
(a) Non-income producing security.
(l) All or a portion of this security is on loan.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
REIT Real Estate Investment Trust
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets and liabilities
comprising the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value, including $124,380,392 of securities on
loan (identified cost, $854,974,078) $928,193,725
Cash 626
Receivable for investments sold 5,971,980
Receivable for fund shares sold 1,050,687
Interest and dividends receivable 119,621
Other assets 14,507
- ------------------------------------------------------------------------------------------------------
Total assets $935,351,146
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for investments purchased $835,734
Payable for fund shares reacquired 3,712,899
Collateral for securities loaned, at value 127,861,535
Payable to affiliates
Management fee 35,875
Shareholder servicing costs 362,425
Distribution and service fees 18,656
Administrative services fee 831
Program manager fees 34
Retirement plan administration and services fees 517
Payable for independent trustees' compensation 12,797
Accrued expenses and other liabilities 165,711
- ------------------------------------------------------------------------------------------------------
Total liabilities $133,007,014
- ------------------------------------------------------------------------------------------------------
Net assets $802,344,132
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------
Paid-in capital $821,598,064
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 73,219,557
Accumulated net realized gain (loss) on investments and foreign
currency transactions (87,793,435)
Accumulated net investment loss (4,680,054)
- ------------------------------------------------------------------------------------------------------
Net assets $802,344,132
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 39,680,648
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $429,868,002
Shares outstanding 21,121,872
- ------------------------------------------------------------------------------------------------------
Net asset value per share $20.35
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $21.59
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $123,067,484
Shares outstanding 6,352,041
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.37
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $47,424,443
Shares outstanding 2,444,486
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.40
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $105,464,013
Shares outstanding 5,018,435
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $21.02
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $11,794,171
Shares outstanding 582,961
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.23
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,825,271
Shares outstanding 94,470
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $19.32
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $696,788
Shares outstanding 35,843
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $19.44
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $6,045,892
Shares outstanding 300,592
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.11
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $3,338,000
Shares outstanding 164,227
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.33
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $70,376,149
Shares outstanding 3,442,786
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $20.44
- ------------------------------------------------------------------------------------------------------
Class 529A shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,835,482
Shares outstanding 91,188
- ------------------------------------------------------------------------------------------------------
Net asset value per share $20.13
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $21.36
- ------------------------------------------------------------------------------------------------------
Class 529B shares
- ------------------------------------------------------------------------------------------------------
Net assets $251,425
Shares outstanding 13,123
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.16
- ------------------------------------------------------------------------------------------------------
Class 529C shares
- ------------------------------------------------------------------------------------------------------
Net assets $357,012
Shares outstanding 18,624
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $19.17
- ------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering prices of Class A and Class 529A shares are reduced. A contingent
deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class 529B, and
Class 529C shares.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT LOSS
- -----------------------------------------------------------------------------------------------------
Income
Dividends $1,069,440
Income on securities loaned 424,894
Interest 69,306
Foreign taxes withheld (9,472)
- -----------------------------------------------------------------------------------------------------
Total investment income $1,554,168
- -----------------------------------------------------------------------------------------------------
Expenses
Management fee $3,633,704
Distribution and service fees 1,697,789
Program manager fees 2,939
Shareholder servicing costs 861,114
Administrative services fee 74,836
Retirement plan administration and services fees 45,051
Independent trustees' compensation 10,621
Custodian fee 150,550
Shareholder communications 66,784
Auditing fees 22,457
Legal fees 12,715
Miscellaneous 90,760
- -----------------------------------------------------------------------------------------------------
Total expenses $6,669,320
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (37,290)
Reduction of expenses by investment adviser (409,541)
- -----------------------------------------------------------------------------------------------------
Net expenses $6,222,489
- -----------------------------------------------------------------------------------------------------
Net investment loss $(4,668,321)
- -----------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $87,302,363
Foreign currency transactions (1,986)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $87,300,377
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $65,760,336
Translation of assets and liabilities in foreign currencies (88)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $65,760,248
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $153,060,625
- -----------------------------------------------------------------------------------------------------
Change in net assets from operations $148,392,304
- -----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment loss $(4,668,321) $(11,224,998)
Net realized gain (loss) on investments and foreign
currency transactions 87,300,377 95,718,425
Net unrealized gain (loss) on investments and foreign
currency translation 65,760,248 (76,087,256)
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $148,392,304 $8,406,171
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(136,289,511) $(212,974,517)
- -------------------------------------------------------------------------------------------------------
Redemption fees $1,642 $17,161
- -------------------------------------------------------------------------------------------------------
Total change in net assets $12,104,435 $(204,551,185)
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 790,239,697 994,790,882
At end of period (including accumulated net investment loss
of $4,680,054 and $11,733, respectively) $802,344,132 $790,239,697
- -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $16.96 $16.85 $13.53 $14.57 $11.99 $16.17
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.10) $(0.20) $(0.16) $(0.18) $(0.13) $(0.18)
Net realized and
unrealized gain (loss) on
investments and foreign
currency 3.49 0.31 3.48 (0.86) 2.71 (4.00)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $3.39 $0.11 $3.32 $(1.04) $2.58 $(4.18)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $-- $-- $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Redemption fees added to
paid-in capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.35 $16.96 $16.85 $13.53 $14.57 $11.99
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 19.99(n) 0.65 24.54 (7.14)(b) 21.52 (25.85)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.57(a) 1.57 1.57 1.51 1.58 1.58
Expenses after expense
reductions (f) 1.47(a) 1.47 1.47 1.51 N/A N/A
Net investment loss (1.07)(a) (1.12) (1.05) (1.20) (1.11) (1.21)
Portfolio turnover 47 99 112 122 104 102
Net assets at end of period
(000 Omitted) $429,868 $409,471 $603,396 $824,708 $1,004,473 $822,193
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $16.20 $16.20 $13.09 $14.19 $11.75 $15.95
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.16) $(0.30) $(0.25) $(0.27) $(0.21) $(0.28)
Net realized and
unrealized gain (loss) on
investments and foreign
currency 3.33 0.30 3.36 (0.83) 2.65 (3.92)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $3.17 $0.00 $3.11 $(1.10) $2.44 $(4.20)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $-- $-- $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Redemption fees added to
paid-in capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.37 $16.20 $16.20 $13.09 $14.19 $11.75
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 19.57(n) 0.00 23.76 (7.75)(b) 20.77 (26.33)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 2.22(a) 2.22 2.22 2.15 2.23 2.23
Expenses after expense
reductions (f) 2.12(a) 2.12 2.12 2.15 N/A N/A
Net investment loss (1.72)(a) (1.77) (1.70) (1.84) (1.76) (1.86)
Portfolio turnover 47 99 112 122 104 102
Net assets at end of period
(000 Omitted) $123,067 $132,519 $203,722 $231,653 $271,580 $232,792
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $16.22 $16.22 $13.10 $14.21 $11.77 $15.97
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.16) $(0.30) $(0.25) $(0.27) $(0.21) $(0.28)
Net realized and unrealized gain
(loss) on investments and
foreign currency 3.34 0.30 3.37 (0.84) 2.65 (3.92)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.18 $0.00 $3.12 $(1.11) $2.44 $(4.20)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions $-- $-- $-- $-- $-- $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Redemption fees added to
paid-in capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.40 $16.22 $16.22 $13.10 $14.21 $11.77
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 19.61(n) 0.00 23.82 (7.81)(b) 20.73 (26.34)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 2.22(a) 2.22 2.22 2.15 2.23 2.23
Expenses after expense
reductions (f) 2.12(a) 2.12 2.12 2.15 N/A N/A
Net investment loss (1.72)(a) (1.77) (1.70) (1.84) (1.76) (1.86)
Portfolio turnover 47 99 112 122 104 102
Net assets at end of period
(000 Omitted) $47,424 $47,293 $58,454 $67,102 $84,391 $87,271
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $17.48 $17.31 $13.85 $14.86 $12.19 $16.37
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.07) $(0.14) $(0.11) $(0.13) $(0.09) $(0.13)
Net realized and unrealized
gain (loss) on investments
and foreign currency 3.61 0.31 3.57 (0.88) 2.76 (4.05)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $3.54 $0.17 $3.46 $(1.01) $2.67 $(4.18)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign
currency transactions $-- $-- $-- $-- $-- $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-
in capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.02 $17.48 $17.31 $13.85 $14.86 $12.19
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 20.25(n) 0.98 24.98 (6.80)(b) 21.90 (25.58)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.22(a) 1.22 1.23 1.16 1.23 1.23
Expenses after expense
reductions (f) 1.12(a) 1.12 1.13 1.16 N/A N/A
Net investment loss (0.72)(a) (0.77) (0.70) (0.84) (0.75) (0.86)
Portfolio turnover 47 99 112 122 104 102
Net assets at end of period
(000 Omitted) $105,464 $119,053 $107,842 $103,031 $90,872 $47,641
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $16.87 $16.79 $13.50 $14.57 $11.38
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.12) $(0.22) $(0.18) $(0.20) $(0.11)
Net realized and unrealized gain (loss) on
investments and foreign currency 3.48 0.30 3.47 (0.87) 3.30
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.36 $0.08 $3.29 $(1.07) $3.19
- ----------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in
capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $--
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.23 $16.87 $16.79 $13.50 $14.57
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 19.92(n) 0.48 24.37 (7.34)(b) 28.03(n)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.72(a) 1.72 1.73 1.66 1.78(a)
Expenses after expense reductions (f) 1.62(a) 1.62 1.63 1.66 N/A
Net investment loss (1.22)(a) (1.27) (1.17) (1.32) (1.26)(a)
Portfolio turnover 47 99 112 122 104
Net assets at end of period (000 Omitted) $11,794 $11,691 $16,926 $7,262 $1,824
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $16.16 $16.18 $14.50
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.17) $(0.31) $(0.10)
Net realized and unrealized gain (loss) on investments
and foreign currency 3.33 0.29 1.78
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.16 $(0.02) $1.68
- --------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital (d) $0.00(w) $0.00(w) $0.00(w)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.32 $16.16 $16.18
- --------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 19.55(n) (0.12) 11.59(n)
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.42(a) 2.43 2.43(a)
Expenses after expense reductions (f) 2.22(a) 2.22 2.33(a)
Net investment loss (1.82)(a) (1.86) (1.69)(a)
Portfolio turnover 47 99 112
Net assets at end of period (000 Omitted) $1,825 $857 $206
- --------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $16.23 $16.19 $14.50
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.13) $(0.25) $(0.08)
Net realized and unrealized gain (loss) on investments
and foreign currency 3.34 0.29 1.77
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.21 $0.04 $1.69
- --------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital (d) $0.00(w) $0.00(w) $0.00(w)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.44 $16.23 $16.19
- --------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 19.78(n) 0.25 11.66(n)
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.12(a) 2.12 2.12(a)
Expenses after expense reductions (f) 1.87(a) 1.88 2.02(a)
Net investment loss (1.48)(a) (1.52) (1.02)(a)
Portfolio turnover 47 99 112
Net assets at end of period (000 Omitted) $697 $362 $135
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $16.78 $16.72 $13.47 $15.35
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.13) $(0.24) $(0.22) $(0.11)
Net realized and unrealized gain (loss) on
investments and foreign currency 3.46 0.30 3.47 (1.77)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.33 $0.06 $3.25 $(1.88)
- -------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.11 $16.78 $16.72 $13.47
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 19.85(n) 0.36 24.13 (12.25)(b)(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.97(a) 1.96 1.98 1.73(a)
Expenses after expense reductions (f) 1.77(a) 1.77 1.88 1.73(a)
Net investment loss (1.37)(a) (1.41) (1.42) (1.23)(a)
Portfolio turnover 47 99 112 122
Net assets at end of period (000 Omitted) $6,046 $4,417 $1,573 $454
- -------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $16.94 $16.84 $15.04
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.10) $(0.21) $(0.04)
Net realized and unrealized gain (loss) on investments
and foreign currency 3.49 0.31 1.84
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.39 $0.10 $1.80
- --------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital (d) $0.00(w) $0.00(w) $0.00(w)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.33 $16.94 $16.84
- --------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 20.01(n) 0.59 11.97(n)
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.62(a) 1.62 1.63(a)
Expenses after expense reductions (f) 1.52(a) 1.52 1.53(a)
Net investment loss (1.12)(a) (1.15) (0.66)(a)
Portfolio turnover 47 99 112
Net assets at end of period (000 Omitted) $3,338 $2,404 $334
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $17.01 $16.86 $15.04
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.08) $(0.15) $(0.04)
Net realized and unrealized gain (loss) on investments
and foreign currency 3.51 0.30 1.86
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.43 $0.15 $1.82
- --------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in capital (d) $0.00(w) $0.00(w) $0.00(w)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.44 $17.01 $16.86
- --------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 20.16(n) 0.89 12.10(n)
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.32(a) 1.32 1.32(a)
Expenses after expense reductions (f) 1.22(a) 1.22 1.22(a)
Net investment loss (0.82)(a) (0.84) (0.67)(a)
Portfolio turnover 47 99 112
Net assets at end of period (000 Omitted) $70,376 $59,999 $56
- --------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS 529A 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $16.79 $16.73 $13.47 $14.53 $11.99 $11.95
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.14) $(0.24) $(0.20) $(0.21) $(0.16) $(0.01)
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.48 0.30 3.46 (0.85) 2.70 0.05
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.34 $0.06 $3.26 $(1.06) $2.54 $0.04
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in
capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.13 $16.79 $16.73 $13.47 $14.53 $11.99
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 19.89(n) 0.36 24.20 (7.30)(b) 21.18 0.33(n)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.82(a) 1.83 1.83 1.75 1.84 1.83(a)
Expenses after expense reductions (f) 1.72(a) 1.72 1.73 1.75 N/A N/A
Net investment loss (1.32)(a) (1.37) (1.27) (1.43) (1.35) (1.20)(a)
Portfolio turnover 47 99 112 122 104 102
Net assets at end of period
(000 Omitted) $1,835 $1,630 $1,637 $390 $180 $10
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS 529B 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $16.03 $16.07 $13.02 $14.15 $11.75 $11.71
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.18) $(0.33) $(0.28) $(0.30) $(0.24) $(0.02)
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.31 0.29 3.33 (0.83) 2.64 0.06
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.13 $(0.04) $3.05 $(1.13) $2.40 $0.04
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in
capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.16 $16.03 $16.07 $13.02 $14.15 $11.75
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 19.53(n) (0.25) 23.43 (7.99)(b) 20.43 0.34(n)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.47(a) 2.47 2.47 2.40 2.49 2.48(a)
Expenses after expense reductions (f) 2.37(a) 2.37 2.37 2.40 N/A N/A
Net investment loss (1.97)(a) (2.02) (1.93) (2.07) (1.99) (1.87)(a)
Portfolio turnover 47 99 112 122 104 102
Net assets at end of period
(000 Omitted) $251 $211 $177 $135 $84 $6
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS 529C 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $16.04 $16.08 $13.03 $14.16 $11.77 $11.73
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.18) $(0.34) $(0.28) $(0.31) $(0.24) $(0.02)
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.31 0.30 3.33 (0.82) 2.63 0.06
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.13 $(0.04) $3.05 $(1.13) $2.39 $0.04
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees added to paid-in
capital (d) $0.00(w) $0.00(w) $0.00(w) $0.00(w) $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.17 $16.04 $16.08 $13.03 $14.16 $11.77
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 19.51(n) (0.25) 23.41 (7.98)(b) 20.31 0.34(n)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.47(a) 2.48 2.47 2.40 2.50 2.48(a)
Expenses after expense reductions (f) 2.37(a) 2.37 2.37 2.40 N/A N/A
Net investment loss (1.98)(a) (2.02) (1.93) (2.08) (1.99) (1.88)(a)
Portfolio turnover 47 99 112 122 104 102
Net assets at end of period
(000 Omitted) $357 $332 $333 $240 $147 $5
- ------------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(b) The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The
non-recurring accrual did not have a material impact on the net asset value per share based on the shares outstanding on
the day the proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(i) For the period from the class' inception, July 31, 2002 (Classes 529A, 529B, and 529C), December 31, 2002 (Class R),
October 31, 2003 (Class R3), and April 1, 2005 (Classes R1, R2, R4, and R5) through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS New Discovery Fund (the fund) is a 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 U.S.
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 will generally focus on securities of small size companies which may be
more volatile than those of larger companies. The fund can invest in foreign
securities, including securities of emerging market issuers. 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. The markets of
emerging markets countries are generally more volatile than the markets of
developed countries with more mature economies. All of the risks of investing in
foreign securities previously described are heightened when investing in
emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales reported
that day, equity securities are generally valued at the last quoted daily bid
quotation as reported by an independent pricing service on the market or
exchange on which they are primarily traded. For securities held short for which
there were no sales reported for the day, the position is generally valued at
the last quoted daily ask quotation as reported by an independent pricing
service on the market or exchange on which such securities are primarily traded.
Short-term instruments with a maturity at issuance of 60 days or less may be
valued at amortized cost, which approximates market value. Open-end investment
companies are generally valued at their net asset value per share. Securities
and other assets generally valued on the basis of information from an
independent pricing service may also be valued at a broker-dealer bid quotation.
The values of foreign securities and other assets and liabilities expressed in
foreign currencies are converted to U.S. dollars using the mean of bid and asked
prices for rates reported by an independent pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any fair
valuation) to the adviser pursuant to valuation policies and procedures approved
by the Board. If the adviser determines that reliable market quotations are not
readily available, investments are valued at fair value as determined in good
faith by the adviser in accordance with such procedures under the oversight of
the Board of Trustees. Under the fund's valuation policies and procedures,
market quotations are not considered to be readily available for many types of
debt instruments and certain types of derivatives. These investments are
generally valued at fair value based on information from independent pricing
services. In addition, investments may be valued at fair value if the adviser
determines that an investment's value has been materially affected by events
occurring after the close of the exchange or market on which the investment is
principally traded (such as foreign exchange or market) and prior to the
determination of the fund's net asset value, or after the halting of trading of
a specific security where trading does not resume prior to the close of the
exchange or market on which the security is principally traded. Events that
occur on a frequent basis after foreign markets close (such as developments in
foreign markets and significant movements in the U.S. markets) and prior to the
determination of the fund's net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
fund's foreign equity securities may often be valued at fair value. The adviser
may rely on independent pricing services or other information (such as the
correlation with price movements of similar securities in the same or other
markets; the type, cost and investment characteristics of the security; the
business and financial condition of the issuer; and trading and other market
data) to assist in determining whether to fair value and at what value to fair
value an investment. The value of an investment for purposes of calculating the
fund's net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published prices
for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management is
evaluating the application of the Statement to the fund, and believes the impact
will be limited to expanded disclosures resulting from the adoption of this
Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The fund requires that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the fund to obtain those securities
in the event of a default under the repurchase agreement. The fund monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the fund under each such
repurchase agreement. The fund and other funds managed by Massachusetts
Financial Services Company (MFS), may utilize a joint trading account for the
purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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"), as
lending agent, 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 cash and/or U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned. State Street
provides the fund with indemnification against Borrower default. The fund bears
the risk of loss with respect to the investment of cash collateral. On loans
collateralized by cash, the cash collateral is invested in a money market fund
or short-term securities. A portion of the income generated upon investment of
the collateral is remitted to the Borrowers, and the remainder is allocated
between the fund and the lending agent. On loans collateralized by U.S. Treasury
securities, a fee is received from the Borrower, and is allocated between the
fund and the lending agent. The dividend and interest income earned on the
securities loaned is accounted for in the same manner as other dividend and
interest income.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising out
of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
SHORT TERM FEES - For purchases made on or after April 1, 2005 and before
December 1, 2006, the fund charged a 1% redemption fee on proceeds from Class A,
Class B, Class C, and Class I shares redeemed or exchanged within 30 calendar
days following their acquisition. Due to systems limitations associated with the
transition from applying a 5 business day redemption fee to a 30 calendar day
redemption fee, the fund did not impose redemption fees with respect to
purchases made in March 2005 followed by redemptions made in April 2005. The
fund may change the redemption fee period in the future, including in connection
with Securities and Exchange Commission rule developments. Effective December 1,
2006, the fund no longer charges a redemption fee. See the fund's prospectus for
details. Any redemption fees charged are accounted for as an addition to
paid-in-capital.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with U.S. generally accepted accounting principles. All discount is accreted for
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded when the fund is informed of the dividend if
such information is obtained subsequent to the ex- dividend date. Dividend and
interest payments received in additional securities are recorded on the
ex-dividend or ex-interest date in an amount equal to the value of the security
on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received
from litigation involving its portfolio holdings are reflected in realized
gain/loss in the Statement of Operations, or in unrealized gain/loss if the
security is still held by the fund. Any other proceeds from litigation not
related to portfolio holdings are reflected as other income in the Statement of
Operations.
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. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the fund in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value per
share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions for
financial statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to net operating losses and wash sale loss
deferrals.
The fund declared no distributions for the year ended August 31, 2006.
The federal tax cost and the tax basis components of distributable earnings were
as follows:
AS OF 2/28/07
Cost of investments $856,273,895
------------------------------------------------------------
Gross appreciation $101,285,505
Gross depreciation (29,365,675)
------------------------------------------------------------
Net unrealized appreciation (depreciation) $71,919,830
AS OF 8/31/06
Capital loss carryforwards $(173,770,410)
Other temporary differences (35,320)
Net unrealized appreciation (depreciation) 6,159,494
The aggregate cost above includes prior fiscal year end tax adjustments.
As of August 31, 2006, the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
8/31/11 $(173,770,410)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management is
evaluating the application of the Interpretation to the fund, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on the fund's financial statements.
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 and
Class 529B shares will convert to Class A and Class 529A shares, respectively,
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the fund.
The management fee is computed daily and paid monthly at an annual rate of 0.90%
of the fund's average daily net assets. The investment adviser has agreed in
writing to reduce its management fee to 0.80% for the first $1.5 billion of
average daily net assets and 0.75% of average daily net assets in excess of $1.5
billion. This written agreement may be rescinded only upon consent of the fund's
Board of Trustees. This management fee reduction amounted to $403,745, which is
shown as a reduction of total expenses in the Statement of Operations. The
management fee incurred for the six months ended February 28, 2007 was
equivalent to an annual effective rate of 0.80% of the fund's average daily net
assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $15,895 and $241 for the six months ended February
28, 2007, as its portion of the initial sales charge on sales of Class A and
Class 529A shares of the fund, respectively.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the distribution
and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee
paid to MFD. MFD may subsequently pay all, or a portion, of the distribution
and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $744,466
Class B 0.75% 0.25% 1.00% 1.00% 651,377
Class C 0.75% 0.25% 1.00% 1.00% 242,445
Class R 0.25% 0.25% 0.50% 0.50% 30,762
Class R1 0.50% 0.25% 0.75% 0.75% 5,256
Class R2 0.25% 0.25% 0.50% 0.50% 1,186
Class R3 0.25% 0.25% 0.50% 0.50% 13,010
Class R4 -- 0.25% 0.25% 0.25% 3,295
Class 529A 0.25% 0.25% 0.50% 0.35% 3,102
Class 529B 0.75% 0.25% 1.00% 1.00% 1,180
Class 529C 0.75% 0.25% 1.00% 1.00% 1,710
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $1,697,789
(d) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees up
to these annual percentage rates of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the distribution plan for the six months ended
February 28, 2007 based on each class' average daily net assets. 0.10% of the Class 529A distribution fee is
currently being paid by the fund. Payment of the remaining 0.15% of the Class 529A distribution fee is not yet
in effect and will be implemented on such date as the fund's Board of Trustees may determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within 12
months of purchase. Class B and Class 529B shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within six
years of purchase. All contingent deferred sales charges are paid to MFD and
during the six months ended February 28, 2007, were as follows:
AMOUNT
Class A $10,213
Class B 73,853
Class C 1,317
Class 529B 126
Class 529C 8
The fund has entered into and may from time to time enter into contracts with
program managers and other parties which administer the tuition programs
through which an investment in the fund's 529 share classes is made. The fund
has entered into an agreement with MFD pursuant to which MFD receives an
annual fee of up to 0.35% of the average daily net assets attributable to each
529 share class. The fee is based on average daily net assets and is currently
established at 0.25% annually of average daily net assets of the fund's 529
share classes. The fee may only be increased with the approval of the Board of
Trustees who oversees the fund. The services provided by MFD, or a third party
with which MFD contracts, include recordkeeping and tax reporting and account
services, as well as services designed to maintain the program's compliance
with the Internal Revenue Code and other regulatory requirements. Program
manager fees for the six months ended February 28, 2007, were as follows:
AMOUNT
Class 529A $2,217
Class 529B 295
Class 529C 427
--------------------------------------------------
Total Program Manager Fees $2,939
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as shareholder
servicing agent calculated as a percentage of the average daily net assets of
the fund as determined periodically under the supervision of the fund's Board of
Trustees. For the six months ended February 28, 2007, the fee was $308,665,
which equated to 0.0764% annually of the fund's average daily net assets.
Effective January 1, 2007, MFSC has entered into a sub-accounting agreement with
SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of MFSC, on behalf
of the fund to provide omnibus account services to the fund. MFSC pays SRS both
an asset based fee and a per account charge of the assets held in the omnibus
account. The fund then reimburses MFSC for the sub- accounting fees paid to SRS.
For the six months ended February 28, 2007, the sub-accounting fee for SRS was
$99,061, which equated to 0.0245% annually of the fund's average daily net
assets. MFSC also receives payment from the fund for out-of-pocket and
sub-accounting expenses. For the six months ended February 28, 2007, these
out-of-pocket and sub-accounting costs amounted to $343,205. The fund may also
pay shareholder servicing related costs directly to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund. Under
an administrative services agreement, the fund partially reimburses MFS the
costs incurred to provide these services. The fund is charged a fixed amount
plus a fee based on calendar year average net assets. The fund's annual fixed
amount is $17,500. The administrative services fee incurred for the six months
ended February 28, 2007 was equivalent to an annual effective rate of 0.0185% of
the fund's average daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares, and
may be provided directly by MFS or by a third party. MFS may subsequently pay
all, or a portion, of the retirement plan administration and services fee to
affiliated or unaffiliated third parties. For the six months ended February 28,
2007, the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily net
assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $3,156
Class R2 0.40% 0.25% 949
Class R3 0.25% 0.15% 6,505
Class R4 0.15% 0.15% 1,977
Class R5 0.10% 0.10% 32,464
- -------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $45,051
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $3,658 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to independent
trustees in the form of a retainer, attendance fees, and additional compensation
to Board and Committee chairpersons. The fund does not pay compensation directly
to trustees or officers of the fund who are also officers of the investment
adviser, 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,
MFD, and MFSC. The fund has an unfunded, defined benefit plan for certain
retired independent trustees which resulted in a pension expense of $560. This
amount is included in independent trustees' compensation for the six months
ended February 28, 2007. The liability for deferred retirement benefits payable
to certain retired independent trustees amounted to $11,217 at February 28,
2007, and is included in payable for independent trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
funds and the sole member of Tarantino LLC. The funds can terminate the
Agreement with Tarantino LLC at any time under the terms of the Agreement. For
the six months ended February 28, 2007, the fee paid to Tarantino LLC was
$3,225. MFS has agreed to reimburse the fund for a portion of the payments made
by the funds to Tarantino LLC in the amount of $2,138, which is shown as a
reduction of total expenses in the Statement of Operations. Additionally, MFS
has agreed to bear all expenses associated with office space, other
administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$381,861,801 and $522,830,368, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 2,371,574 $45,628,418 7,953,074 $139,051,896
Class B 362,954 6,609,887 1,176,971 19,953,581
Class C 116,638 2,121,434 418,367 7,100,792
Class I 377,581 7,497,673 1,827,818 33,352,164
Class R 93,314 1,758,983 236,757 4,181,606
Class R1 105,964 1,968,913 61,944 999,073
Class R2 31,333 598,994 20,328 341,919
Class R3 321,623 6,389,511 243,261 4,169,079
Class R4 127,767 2,584,000 171,176 3,009,174
Class R5 510,471 9,877,025 4,426,023 77,317,122
Class 529A 3,300 62,494 11,358 199,860
Class 529B 645 11,618 2,886 46,842
Class 529C 2,081 37,412 3,525 58,773
- ----------------------------------------------------------------------------------------------------------
4,425,245 $85,146,362 16,553,488 $289,781,881
Shares reacquired
Class A (5,396,780) $(102,930,483) (19,617,262) $(340,453,738)
Class B (2,193,621) (39,862,911) (5,571,782) (93,109,606)
Class C (588,401) (10,776,360) (1,106,411) (18,501,073)
Class I (2,170,259) (43,105,706) (1,248,388) (22,194,362)
Class R (203,392) (3,896,986) (551,980) (9,634,623)
Class R1 (64,527) (1,224,481) (21,640) (361,890)
Class R2 (17,785) (340,715) (6,398) (104,910)
Class R3 (284,269) (5,667,990) (74,071) (1,264,874)
Class R4 (105,469) (2,110,228) (49,063) (884,331)
Class R5 (594,710) (11,256,371) (902,323) (15,966,127)
Class 529A (9,182) (176,549) (12,151) (209,557)
Class 529B (705) (13,027) (747) (12,139)
Class 529C (4,178) (74,066) (3,536) (59,168)
- ----------------------------------------------------------------------------------------------------------
(11,633,278) $(221,435,873) (29,165,752) $(502,756,398)
Net change
Class A (3,025,206) $(57,302,065) (11,664,188) $(201,401,842)
Class B (1,830,667) (33,253,024) (4,394,811) (73,156,025)
Class C (471,763) (8,654,926) (688,044) (11,400,281)
Class I (1,792,678) (35,608,033) 579,430 11,157,802
Class R (110,078) (2,138,003) (315,223) (5,453,017)
Class R1 41,437 744,432 40,304 637,183
Class R2 13,548 258,279 13,930 237,009
Class R3 37,354 721,521 169,190 2,904,205
Class R4 22,298 473,772 122,113 2,124,843
Class R5 (84,239) (1,379,346) 3,523,700 61,350,995
Class 529A (5,882) (114,055) (793) (9,697)
Class 529B (60) (1,409) 2,139 34,703
Class 529C (2,097) (36,654) (11) (395)
- ----------------------------------------------------------------------------------------------------------
(7,208,033) $(136,289,511) (12,612,264) $(212,974,517)
The fund is one of several mutual funds in which the MFS funds-of-funds may
invest. The MFS funds-of-funds do not invest in the underlying MFS funds for the
purpose of exercising management or control. At the end of the period, the MFS
Aggressive Growth Allocation Fund was the owner of record of approximately 8% of
the value of outstanding voting shares. In addition, the MFS Lifetime 2030 Fund
and the MFS Lifetime 2040 Fund were each the owners of record of less than 1% of
the value of outstanding voting shares.
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have established
uncommitted borrowing arrangements with certain banks. Borrowings may be made
for temporary financing needs. Interest is charged to each fund, based on its
borrowings, generally at a rate equal to the Federal Reserve funds rate plus
0.35%. In addition, a commitment fee, based on the average daily, unused portion
of the committed line of credit, is allocated among the participating funds at
the end of each calendar quarter. For the six months ended February 28, 2007,
the fund's commitment fee and interest expense were $2,969 and $13,604,
respectively, and are included in miscellaneous expense on the Statement of
Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Semiannual report
MFS(R) RESEARCH INTERNATIONAL FUND
LETTER FROM THE CEO 1
- ---------------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------------
EXPENSE TABLE 3
- ---------------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ---------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 11
- ---------------------------------------------------------
STATEMENT OF OPERATIONS 14
- ---------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 16
- ---------------------------------------------------------
FINANCIAL HIGHLIGHTS 18
- ---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 33
- ---------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 45
- ---------------------------------------------------------
PROXY VOTING POLICIES AND
INFORMATION 45
- ---------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 45
- ---------------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------------
THE 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.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
RIF-SEM
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 98.7%
Cash & Other Net Assets 1.3%
TOP TEN HOLDINGS
HSBC Holdings PLC 3.1%
------------------------------------------------
Royal Dutch Shell PLC, "A" 2.3%
------------------------------------------------
Nestle S.A. 2.3%
------------------------------------------------
BHP Billiton PLC 2.1%
------------------------------------------------
E.ON AG 2.1%
------------------------------------------------
TOTAL S.A. 2.0%
------------------------------------------------
Royal Bank of Scotland Group PLC 2.0%
------------------------------------------------
Bayer AG 2.0%
------------------------------------------------
WPP Group PLC 2.0%
------------------------------------------------
UBS AG 2.0%
------------------------------------------------
EQUITY SECTORS
Financial Services 29.3%
------------------------------------------------
Utilities & Communications 10.8%
------------------------------------------------
Basic Materials 9.4%
------------------------------------------------
Energy 6.8%
------------------------------------------------
Autos & Housing 6.6%
------------------------------------------------
Health Care 6.6%
------------------------------------------------
Consumer Staples 6.5%
------------------------------------------------
Technology 6.0%
------------------------------------------------
Retailing 4.7%
------------------------------------------------
Leisure 4.7%
------------------------------------------------
Industrial Goods & Services 4.5%
------------------------------------------------
Special Products & Services 2.8%
------------------------------------------------
COUNTRY WEIGHTINGS
United Kingdom 21.3%
------------------------------------------------
Japan 16.3%
------------------------------------------------
France 13.0%
------------------------------------------------
Germany 12.1%
------------------------------------------------
Switzerland 9.9%
------------------------------------------------
Italy 3.9%
------------------------------------------------
South Korea 3.4%
------------------------------------------------
Netherlands 3.0%
------------------------------------------------
Norway 2.0%
------------------------------------------------
Other Countries 15.1%
------------------------------------------------
Percentages are based on net assets as of 2/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 1.33% $1,000.00 $1,105.50 $6.94
A ---------------------------------------------------------------------------
Hypothetical (h) 1.33% $1,000.00 $1,018.20 $6.66
- --------------------------------------------------------------------------------
Actual 1.98% $1,000.00 $1,102.20 $10.32
B ---------------------------------------------------------------------------
Hypothetical (h) 1.98% $1,000.00 $1,014.98 $9.89
- --------------------------------------------------------------------------------
Actual 1.98% $1,000.00 $1,102.10 $10.32
C ---------------------------------------------------------------------------
Hypothetical (h) 1.98% $1,000.00 $1,014.98 $9.89
- --------------------------------------------------------------------------------
Actual 0.98% $1,000.00 $1,107.70 $5.12
I ---------------------------------------------------------------------------
Hypothetical (h) 0.98% $1,000.00 $1,019.93 $4.91
- --------------------------------------------------------------------------------
Actual 1.07% $1,000.00 $1,107.40 $5.59
W ---------------------------------------------------------------------------
Hypothetical (h) 1.07% $1,000.00 $1,019.49 $5.36
- --------------------------------------------------------------------------------
Actual 1.48% $1,000.00 $1,104.90 $7.72
R ---------------------------------------------------------------------------
Hypothetical (h) 1.48% $1,000.00 $1,017.46 $7.40
- --------------------------------------------------------------------------------
Actual 2.07% $1,000.00 $1,101.70 $10.79
R1 ---------------------------------------------------------------------------
Hypothetical (h) 2.07% $1,000.00 $1,014.53 $10.34
- --------------------------------------------------------------------------------
Actual 1.72% $1,000.00 $1,103.50 $8.97
R2 ---------------------------------------------------------------------------
Hypothetical (h) 1.72% $1,000.00 $1,016.27 $8.60
- --------------------------------------------------------------------------------
Actual 1.62% $1,000.00 $1,103.90 $8.45
R3 ---------------------------------------------------------------------------
Hypothetical (h) 1.62% $1,000.00 $1,016.76 $8.10
- --------------------------------------------------------------------------------
Actual 1.37% $1,000.00 $1,105.30 $7.15
R4 ---------------------------------------------------------------------------
Hypothetical (h) 1.37% $1,000.00 $1,018.00 $6.85
- --------------------------------------------------------------------------------
Actual 1.07% $1,000.00 $1,106.80 $5.59
R5 ---------------------------------------------------------------------------
Hypothetical (h) 1.07% $1,000.00 $1,019.49 $5.36
- --------------------------------------------------------------------------------
Actual 1.58% $1,000.00 $1,104.10 $8.24
529A ---------------------------------------------------------------------------
Hypothetical (h) 1.58% $1,000.00 $1,016.96 $7.90
- --------------------------------------------------------------------------------
Actual 2.23% $1,000.00 $1,100.70 $11.62
529B ---------------------------------------------------------------------------
Hypothetical (h) 2.23% $1,000.00 $1,013.74 $11.13
- --------------------------------------------------------------------------------
Actual 2.23% $1,000.00 $1,100.80 $11.62
529C ---------------------------------------------------------------------------
Hypothetical (h) 2.23% $1,000.00 $1,013.74 $11.13
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Common Stocks - 98.7%
- --------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- --------------------------------------------------------------------------------------------------
Aerospace - 0.9%
- --------------------------------------------------------------------------------------------------
Finmeccanica S.p.A. (l) 1,319,840 $ 39,027,907
- --------------------------------------------------------------------------------------------------
Alcoholic Beverages - 1.7%
- --------------------------------------------------------------------------------------------------
Grupo Modelo S.A. de C.V., "C" 1,019,730 $ 5,241,223
Heineken N.V 900,350 44,372,520
Pernod Ricard S.A. (l) 106,127 21,902,773
---------------
$ 71,516,516
- --------------------------------------------------------------------------------------------------
Apparel Manufacturers - 2.8%
- --------------------------------------------------------------------------------------------------
Adidas AG (l) 1,172,530 $ 57,584,868
Li & Fung Ltd. 7,068,000 22,435,367
LVMH Moet Hennessy Louis Vuitton S.A. (l) 375,300 41,575,368
---------------
$ 121,595,603
- --------------------------------------------------------------------------------------------------
Automotive - 4.7%
- --------------------------------------------------------------------------------------------------
Bayerische Motoren Werke AG (l) 825,790 $ 47,974,395
Bridgestone Corp. 1,464,000 30,806,727
Continental AG 427,659 53,361,965
Honda Motor Co. Ltd. 1,796,400 67,101,225
---------------
$ 199,244,312
- --------------------------------------------------------------------------------------------------
Biotechnology - 0.7%
- --------------------------------------------------------------------------------------------------
Actelion Ltd. (a)(l) 132,960 $ 29,036,049
- --------------------------------------------------------------------------------------------------
Broadcasting - 3.4%
- --------------------------------------------------------------------------------------------------
Antena 3 de Television S.A. (l) 928,662 $ 20,801,329
Grupo Televisa S.A., ADR 402,330 10,979,586
Nippon Television Network Corp. 179,030 29,775,293
WPP Group PLC 5,815,170 84,379,596
---------------
$ 145,935,804
- --------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 0.6%
- --------------------------------------------------------------------------------------------------
EFG International (a) 679,690 $ 24,357,349
- --------------------------------------------------------------------------------------------------
Business Services - 0.9%
- --------------------------------------------------------------------------------------------------
Mitsubishi Corp. 1,628,500 $ 37,984,112
- --------------------------------------------------------------------------------------------------
Chemicals - 3.9%
- --------------------------------------------------------------------------------------------------
Bayer AG (l) 1,481,020 $ 85,177,916
Syngenta AG 249,824 44,158,374
Umicore 220,250 37,698,663
---------------
$ 167,034,953
- --------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.8%
- --------------------------------------------------------------------------------------------------
Cap Gemini S.A. (l) 518,680 $ 36,267,777
- --------------------------------------------------------------------------------------------------
Conglomerates - 1.9%
- --------------------------------------------------------------------------------------------------
Siemens AG 589,190 $ 62,167,372
Smiths Group PLC 1,043,820 21,110,252
---------------
$ 83,277,624
- --------------------------------------------------------------------------------------------------
Construction - 1.5%
- --------------------------------------------------------------------------------------------------
CEMEX S.A. de C.V., ADR (a) 242,566 $ 8,242,393
CRH PLC 1,064,440 44,432,116
Siam Cement Public Co. Ltd. 1,793,300 12,608,727
---------------
$ 65,283,236
- --------------------------------------------------------------------------------------------------
Consumer Goods & Services - 2.2%
- --------------------------------------------------------------------------------------------------
Kao Corp. (l) 1,558,000 $ 45,556,326
Kimberly-Clark de Mexico S.A. de C.V., "A" 1,963,480 8,226,042
Reckitt Benckiser PLC 773,760 40,245,638
---------------
$ 94,028,006
- --------------------------------------------------------------------------------------------------
Electrical Equipment - 2.2%
- --------------------------------------------------------------------------------------------------
OMRON Corp. 1,212,600 $ 34,022,074
Schneider Electric S.A. (l) 479,263 58,209,388
---------------
$ 92,231,462
- --------------------------------------------------------------------------------------------------
Electronics - 5.0%
- --------------------------------------------------------------------------------------------------
ARM Holdings PLC 7,978,370 $ 20,091,027
ASML Holding N.V. (a) 1,536,900 37,841,508
Konica Minolta Holdings, Inc. 2,114,500 27,125,927
Nippon Electric Glass Co. Ltd. 606,000 14,826,080
Royal Philips Electronics N.V 1,275,720 46,871,375
Samsung Electronics Co. Ltd. 91,088 54,844,320
Venture Corp. Ltd. 1,284,000 11,593,679
---------------
$ 213,193,916
- --------------------------------------------------------------------------------------------------
Energy - Integrated - 6.4%
- --------------------------------------------------------------------------------------------------
BG Group PLC 1,272,110 $ 17,284,680
Petroleo Brasileiro S.A., ADR 87,170 7,880,168
Royal Dutch Shell PLC, "A" 3,028,570 98,237,714
Sasol Ltd. 411,910 13,244,695
Statoil A.S.A. (l) 2,041,870 52,113,580
TOTAL S.A. (l) 1,279,540 86,371,561
---------------
$ 275,132,398
- --------------------------------------------------------------------------------------------------
Food & Beverages - 2.6%
- --------------------------------------------------------------------------------------------------
Nestle S.A 262,323 $ 97,774,838
Nong Shim Co. Ltd. 42,603 11,717,295
---------------
$ 109,492,133
- --------------------------------------------------------------------------------------------------
Food & Drug Stores - 1.0%
- --------------------------------------------------------------------------------------------------
Sundrug Co. Ltd. 675,300 $ 14,923,599
Tesco PLC 3,463,719 29,380,351
---------------
$ 44,303,950
- --------------------------------------------------------------------------------------------------
Furniture & Appliances - 0.4%
- --------------------------------------------------------------------------------------------------
Funai Electric Co. Ltd. (l) 189,700 $ 18,323,933
- --------------------------------------------------------------------------------------------------
Insurance - 1.9%
- --------------------------------------------------------------------------------------------------
AXA (l) 1,936,480 $ 82,395,882
- --------------------------------------------------------------------------------------------------
Internet - 0.2%
- --------------------------------------------------------------------------------------------------
Universo Online S.A., IPS (a) 1,626,300 $ 8,023,346
- --------------------------------------------------------------------------------------------------
Leisure & Toys - 1.3%
- --------------------------------------------------------------------------------------------------
Konami Corp. (l) 1,034,300 $ 27,533,550
NAMCO BANDAI Holdings, Inc. 1,821,900 26,913,557
---------------
$ 54,447,107
- --------------------------------------------------------------------------------------------------
Machinery & Tools - 1.4%
- --------------------------------------------------------------------------------------------------
Fanuc Ltd. 411,600 $ 36,801,555
GEA Group AG 1,010,810 23,269,938
---------------
$ 60,071,493
- --------------------------------------------------------------------------------------------------
Major Banks - 14.8%
- --------------------------------------------------------------------------------------------------
Barclays PLC 5,295,470 $ 76,942,593
BNP Paribas (l) 757,723 79,137,812
BOC Hong Kong Holdings Ltd. 17,776,500 43,002,432
Credit Agricole S.A. (l) 1,906,774 76,086,395
Deutsche Postbank AG 338,850 28,490,462
Erste Bank der Oesterreichischen Sparkassen AG (l) 439,308 32,641,692
Mitsubishi UFJ Financial Group, Inc. 4,835 59,656,047
Royal Bank of Scotland Group PLC 2,167,681 85,507,832
Standard Chartered PLC 1,018,870 28,567,851
Sumitomo Mitsui Financial Group, Inc. 6,620 64,337,024
UniCredito Italiano S.p.A. (l) 6,130,610 56,818,306
---------------
$ 631,188,446
- --------------------------------------------------------------------------------------------------
Metals & Mining - 3.9%
- --------------------------------------------------------------------------------------------------
BHP Billiton PLC 4,388,180 $ 88,014,331
POSCO 132,222 49,563,944
Steel Authority of India Ltd. 9,620,690 23,630,718
TMK OAO, GDR (a)(z) 159,700 5,270,100
---------------
$ 166,479,093
- --------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.9%
- --------------------------------------------------------------------------------------------------
Gaz de France (l) 412,901 $ 18,196,884
Tokyo Gas Co. Ltd. (l) 3,993,390 22,442,359
---------------
$ 40,639,243
- --------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.4%
- --------------------------------------------------------------------------------------------------
OAO Gazprom, ADR (l) 465,750 $ 18,965,340
- --------------------------------------------------------------------------------------------------
Oil Services - 0.4%
- --------------------------------------------------------------------------------------------------
Saipem S.p.A 611,910 $ 16,564,168
- --------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 12.0%
- --------------------------------------------------------------------------------------------------
Aeon Credit Service Co. Ltd. 2,183,300 $ 41,514,620
Akbank T.A.S 3,747,777 24,666,897
Banche Popolari Unite S.c.p.a. (l) 1,861,520 52,952,030
Banco Nossa Caixa S.A 469,100 8,839,046
Bank of Cyprus Public Co. Ltd. 1,106,496 16,484,079
CSU Cardsystem S.A. (a) 1,510,770 10,260,866
Hana Financial Group, Inc. 514,380 27,311,246
HSBC Holdings PLC 7,595,726 132,885,496
Sapporo Hokuyo Holdings, Inc. 1,024 10,644,131
Shinsei Bank Ltd. 4,115,000 22,047,748
SinoPac Holdings 30,674,000 15,358,189
Suncorp-Metway Ltd. (l) 3,123,600 53,574,414
UBS AG 1,421,678 84,328,423
Unibanco - Uniao de Bancos Brasileiros S.A., ADR 142,530 12,183,464
---------------
$ 513,050,649
- --------------------------------------------------------------------------------------------------
Pharmaceuticals - 5.9%
- --------------------------------------------------------------------------------------------------
Astellas Pharma, Inc. 933,700 $ 40,952,447
GlaxoSmithKline PLC 2,334,470 65,547,317
Novartis AG 1,088,370 60,626,333
Roche Holding AG (l) 468,450 83,609,893
---------------
$ 250,735,990
- --------------------------------------------------------------------------------------------------
Specialty Chemicals - 1.6%
- --------------------------------------------------------------------------------------------------
Linde AG 691,320 $ 70,437,299
- --------------------------------------------------------------------------------------------------
Specialty Stores - 0.9%
- --------------------------------------------------------------------------------------------------
NEXT PLC 915,190 $ 36,694,214
- --------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 3.0%
- --------------------------------------------------------------------------------------------------
America Movil S.A. de C.V., "L", ADR 398,460 $ 17,452,548
Philippine Long Distance Telephone Co. 394,900 18,877,412
Rogers Communications, Inc., "B" 621,420 20,282,809
Vodafone Group PLC 25,393,970 70,553,348
---------------
$ 127,166,117
- --------------------------------------------------------------------------------------------------
Telephone Services - 2.4%
- --------------------------------------------------------------------------------------------------
France Telecom S.A. (l) 1,270,300 $ 34,504,179
Telenor A.S.A. (l) 1,909,940 35,352,820
TELUS Corp. 659,680 31,778,558
---------------
$ 101,635,557
- --------------------------------------------------------------------------------------------------
Utilities - Electric Power - 4.1%
- --------------------------------------------------------------------------------------------------
British Energy Group PLC (a) 1,759,770 $ 14,304,966
CEZ AS 355,750 14,302,781
E.ON AG 669,360 87,798,100
Equatorial Energia S.A., IEU (a) 1,743,510 15,451,633
SUEZ S.A. (l) 439,008 21,269,987
Tohoku Electric Power Co., Inc. 849,200 22,677,867
---------------
$ 175,805,334
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $3,674,225,684) $ 4,221,566,318
- --------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.9%
- --------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- --------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, due 3/01/07, at
Amortized Cost and Value (y) $ 83,847,000 $ 83,847,000
- --------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 13.7%
- --------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and Net
Asset Value 584,876,053 $ 584,876,053
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $4,342,948,737) (k) $ 4,890,289,371
- --------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (14.3)% (613,302,143)
- --------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 4,276,987,228
- --------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(k) As of February 28, 2007, the fund had two securities that were fair valued, aggregating
$20,628,289 and 0.42% of market value, in accordance with the policies adopted by the Board
of Trustees.
(l) All or a portion of this security is on loan.
(y) The rate shown represents an annualized yield at time of purchase.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to
legal restrictions on resale. These securities generally may be resold in transactions exempt
from registration or to the public if the securities are subsequently registered. Disposal of
these securities may involve time-consuming negotiations and prompt sale at an acceptable
price may be difficult. The fund holds the following restricted security:
CURRENT
ACQUISITION ACQUISITION MARKET TOTAL % OF
RESTRICTED SECURITIES DATE COST VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------
TMK OAO, GDR 10/31/06-2/19/07 $3,543,463 $5,270,100 0.1%
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
GDR Global Depository Receipt
IEU International Equity Unit
IPS International Preference Stock
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets
and liabilities comprising the total value of the fund.
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value, including $557,276,508 of securities
on loan (identified cost, $4,342,948,737) $4,890,289,371
Cash 186,036
Foreign currency, at value (identified cost, $9,967,344) 9,616,578
Receivable for investments sold 40,040,017
Receivable for fund shares sold 14,934,281
Interest and dividends receivable 5,187,356
Other assets 69,937
- -------------------------------------------------------------------------------------------------------
Total assets $4,960,323,576
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Payable for investments purchased $83,383,190
Payable for fund shares reacquired 13,954,290
Collateral for securities loaned, at value (c) 584,876,053
Payable to affiliates
Management fee 183,826
Shareholder servicing costs 278,374
Distribution and service fees 57,406
Administrative services fee 3,356
Program manager fees 45
Retirement plan administration and services fees 1,438
Payable for independent trustees' compensation 35,747
Accrued expenses and other liabilities 562,623
- -------------------------------------------------------------------------------------------------------
Total liabilities $683,336,348
- -------------------------------------------------------------------------------------------------------
Net assets $4,276,987,228
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- -------------------------------------------------------------------------------------------------------
Paid-in capital $3,518,734,728
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies
(net of $40,970 deferred country tax) 547,076,719
Accumulated net realized gain (loss) on investments and
foreign currency transactions 216,292,749
Accumulated distributions in excess of net investment income (5,116,968)
- -------------------------------------------------------------------------------------------------------
Net assets $4,276,987,228
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 220,154,562
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,641,693,854
Shares outstanding 85,093,987
- -------------------------------------------------------------------------------------------------------
Net asset value per share $19.29
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset
value per share) $20.47
- -------------------------------------------------------------------------------------------------------
Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $198,462,539
Shares outstanding 10,749,949
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $18.46
- -------------------------------------------------------------------------------------------------------
Class C shares
- -------------------------------------------------------------------------------------------------------
Net assets $188,893,195
Shares outstanding 10,279,062
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $18.38
- -------------------------------------------------------------------------------------------------------
Class I shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,941,163,885
Shares outstanding 98,051,362
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $19.80
- -------------------------------------------------------------------------------------------------------
Class W shares
- -------------------------------------------------------------------------------------------------------
Net assets $2,948,696
Shares outstanding 152,960
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $19.28
- -------------------------------------------------------------------------------------------------------
Class R shares
- -------------------------------------------------------------------------------------------------------
Net assets $81,044,193
Shares outstanding 4,233,845
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $19.14
- -------------------------------------------------------------------------------------------------------
Class R1 shares
- -------------------------------------------------------------------------------------------------------
Net assets $2,924,953
Shares outstanding 160,250
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $18.25
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R2 shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,966,266
Shares outstanding 107,285
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $18.33
- -------------------------------------------------------------------------------------------------------
Class R3 shares
- -------------------------------------------------------------------------------------------------------
Net assets $23,527,268
Shares outstanding 1,243,349
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $18.92
- -------------------------------------------------------------------------------------------------------
Class R4 shares
- -------------------------------------------------------------------------------------------------------
Net assets $29,268,242
Shares outstanding 1,523,697
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $19.21
- -------------------------------------------------------------------------------------------------------
Class R5 shares
- -------------------------------------------------------------------------------------------------------
Net assets $161,880,163
Shares outstanding 8,387,255
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $19.30
- -------------------------------------------------------------------------------------------------------
Class 529A shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,918,017
Shares outstanding 100,358
- -------------------------------------------------------------------------------------------------------
Net asset value per share $19.11
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value
per share) $20.28
- -------------------------------------------------------------------------------------------------------
Class 529B shares
- -------------------------------------------------------------------------------------------------------
Net assets $503,034
Shares outstanding 27,639
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $18.20
- -------------------------------------------------------------------------------------------------------
Class 529C shares
- -------------------------------------------------------------------------------------------------------
Net assets $792,923
Shares outstanding 43,564
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $18.20
- -------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering prices of Class A and Class 529A
shares are reduced. A contingent deferred sales charge may be imposed on
redemptions of Class A, Class B, Class C, Class 529B, and Class 529C shares.
(c) Non-cash collateral not included.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT LOSS
- ------------------------------------------------------------------------------------------------------
Income
Dividends $20,174,494
Income on securities loaned 1,331,782
Interest 1,069,237
Foreign taxes withheld (1,484,058)
- ------------------------------------------------------------------------------------------------------
Total investment income $21,091,455
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $15,019,100
Distribution and service fees 4,720,425
Program manager fees 3,692
Shareholder servicing costs 2,207,735
Administrative services fee 292,955
Retirement plan administration and services fees 114,144
Independent trustees' compensation 30,628
Custodian fee 1,022,286
Shareholder communications 92,880
Auditing fees 23,895
Legal fees 44,320
Miscellaneous 147,420
- ------------------------------------------------------------------------------------------------------
Total expenses $23,719,480
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (126,825)
Reduction of expenses by investment adviser (21,123)
- ------------------------------------------------------------------------------------------------------
Net expenses $23,571,532
- ------------------------------------------------------------------------------------------------------
Net investment loss $(2,480,077)
- ------------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions (net of $287 country tax) $311,482,190
Foreign currency transactions (739,047)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $310,743,143
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments (net of $40,970 increase in deferred country tax) $76,081,628
Translation of assets and liabilities in foreign currencies (223,139)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $75,858,489
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $386,601,632
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $384,121,555
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) $(2,480,077) $30,991,305
Net realized gain (loss) on investments and foreign
currency transactions 310,743,143 379,594,014
Net unrealized gain (loss) on investments and foreign
currency translation 75,858,489 209,290,585
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $384,121,555 $619,875,904
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A $(16,967,603) $(7,372,365)
Class B (1,072,793) (226,370)
Class C (1,096,339) (254,257)
Class I (24,753,020) (9,060,373)
Class W (24,752) --
Class R (787,598) (303,000)
Class R1 (19,857) (2,858)
Class R2 (14,104) (1,155)
Class R3 (173,134) (29,271)
Class R4 (225,636) (1,034)
Class R5 (2,054,416) (523)
Class 529A (17,590) (4,962)
Class 529B (2,810) (80)
Class 529C (3,613) (10)
Statement of Changes in Net Assets - continued
From net realized gain on investments and
foreign currency transactions
Class A $(141,613,840) $(80,787,062)
Class B (19,000,322) (12,159,865)
Class C (17,352,910) (9,704,848)
Class I (163,196,758) (70,748,663)
Class W (166,668) --
Class R (7,397,422) (3,873,527)
Class R1 (244,118) (33,799)
Class R2 (125,262) (13,584)
Class R3 (1,606,783) (346,752)
Class R4 (1,723,640) (9,270)
Class R5 (14,271,300) (4,369)
Class 529A (171,279) (70,615)
Class 529B (44,384) (15,904)
Class 529C (75,790) (39,146)
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(414,203,741) $(195,063,662)
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $841,079,291 $931,454,179
- -------------------------------------------------------------------------------------------------------
Total change in net assets $810,997,105 $1,356,266,421
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 3,465,990,123 2,109,723,702
At end of period (including accumulated distributions in
excess of net investment income of $5,116,968 and
undistributed net investment income of $44,576,374) $4,276,987,228 $3,465,990,123
- -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $19.44 $16.65 $14.25 $11.53 $10.78 $12.25
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) (d) $(0.02) $0.19 $0.12 $0.10 $0.04 $(0.00)(w)
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.04 4.08 3.04 2.63 0.71 (1.47)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $2.02 $4.27 $3.16 $2.73 $0.75 $(1.47)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.23) $(0.12) $(0.08) $(0.01) $-- $--
From net realized gain on
investments and foreign
currency transactions (1.94) (1.36) (0.68) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(2.17) $(1.48) $(0.76) $(0.01) $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $19.29 $19.44 $16.65 $14.25 $11.53 $10.78
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.55(n) 27.18 22.67 23.65 6.96 (12.00)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.33(a) 1.43 1.52 1.61 1.80 1.86
Expenses after expense
reductions (f) 1.33(a) 1.43 1.55(e) 1.67(e) 1.75 1.77
Net investment income (loss) (0.23)(a) 1.06 0.80 0.75 0.36 (0.02)
Portfolio turnover 37 85 79 102 96 153
Net assets at end of period
(000 Omitted) $1,641,694 $1,344,754 $958,878 $593,574 $387,732 $313,418
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $18.63 $16.02 $13.76 $11.19 $10.54 $12.04
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) (d) $(0.08) $0.07 $0.01 $0.02 $(0.03) $(0.08)
Net realized and unrealized gain
(loss) on investments and
foreign currency 1.96 3.93 2.93 2.55 0.68 (1.42)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.88 $4.00 $2.94 $2.57 $0.65 $(1.50)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.11) $(0.03) $(0.00)(w) $-- $-- $--
From net realized gain on
investments and foreign currency
transactions (1.94) (1.36) (0.68) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(2.05) $(1.39) $(0.68) $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.46 $18.63 $16.02 $13.76 $11.19 $10.54
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.22(n) 26.36 21.77 22.97 6.17 (12.46)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.98(a) 2.08 2.17 2.25 2.45 2.51
Expenses after expense
reductions (f) 1.98(a) 2.08 2.20(e) 2.31(e) 2.40 2.42
Net investment income (loss) (0.88)(a) 0.40 0.08 0.12 (0.32) (0.69)
Portfolio turnover 37 85 79 102 96 153
Net assets at end of period
(000 Omitted) $198,463 $184,341 $141,515 $116,165 $88,177 $82,659
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $18.57 $15.98 $13.73 $11.17 $10.52 $12.02
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.08) $0.07 $0.02 $0.02 $(0.03) $(0.08)
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.95 3.92 2.92 2.54 0.68 (1.42)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.87 $3.99 $2.94 $2.56 $0.65 $(1.50)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.12) $(0.04) $(0.01) $-- $-- $--
From net realized gain on
investments and foreign currency
transactions (1.94) (1.36) (0.68) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(2.06) $(1.40) $(0.69) $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.38 $18.57 $15.98 $13.73 $11.17 $10.52
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.21(n) 26.38 21.84 22.92 6.18 (12.48)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.98(a) 2.08 2.17 2.25 2.45 2.51
Expenses after expense
reductions (f) 1.98(a) 2.08 2.20(e) 2.31(e) 2.40 2.42
Net investment income (loss) (0.88)(a) 0.41 0.13 0.15 (0.32) (0.09)
Portfolio turnover 37 85 79 102 96 153
Net assets at end of period
(000 Omitted) $188,893 $158,564 $109,347 $75,580 $46,022 $43,046
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $19.92 $17.02 $14.54 $11.75 $10.95 $12.39
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.01 $0.26 $0.19 $0.16 $0.10 $0.04
Net realized and unrealized
gain (loss) on investments and
foreign currency 2.10 4.17 3.10 2.66 0.70 (1.48)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.11 $4.43 $3.29 $2.82 $0.80 $(1.44)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.29) $(0.17) $(0.13) $(0.03) $-- $--
From net realized gain on
investments and foreign
currency transactions (1.94) (1.36) (0.68) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(2.23) $(1.53) $(0.81) $(0.03) $-- $--
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.80 $19.92 $17.02 $14.54 $11.75 $10.95
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.77(n) 27.61 23.09 24.05 7.31 (11.62)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 0.98(a) 1.08 1.17 1.26 1.45 1.51
Expenses after expense
reductions (f) 0.98(a) 1.08 1.20(e) 1.32(e) 1.40 1.42
Net investment income 0.12(a) 1.41 1.18 1.18 0.95 0.38
Portfolio turnover 37 85 79 102 96 153
Net assets at end of period
(000 Omitted) $1,941,164 $1,565,596 $851,484 $469,181 $232,328 $18,207
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS
ENDED YEAR ENDED
CLASS W 2/28/07 8/31/06(i)
(UNAUDITED)
Net asset value, beginning of period $19.45 $19.54
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income (d) $0.00(w) $0.04
Net realized and unrealized gain (loss) on investments
and foreign currency 2.06 (0.13)(g)
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $2.06 $(0.09)
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------
From net investment income $(0.29) $--
From net realized gain on investments and foreign
currency transactions (1.94) --
- ----------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(2.23) $--
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.28 $19.45
- ----------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.74(n) (0.46)(n)
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.07(a) 1.20(a)
Expenses after expense reductions (f) 1.07(a) 1.20(a)
Net investment income 0.01(a) 1.02(a)
Portfolio turnover 37 85
Net assets at end of period
(000 Omitted) $2,949 $1,033
- ----------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $19.29 $16.54 $14.20 $11.52 $10.32
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.04) $0.17 $0.11 $0.09 $(0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.04 4.05 3.01 2.61 1.21
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.00 $4.22 $3.12 $2.70 $1.20
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.21) $(0.11) $(0.10) $(0.02) $--
From net realized gain on investments and
foreign currency transactions (1.94) (1.36) (0.68) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(2.15) $(1.47) $(0.78) $(0.02) $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.14 $19.29 $16.54 $14.20 $11.52
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.49(n) 26.98 22.40 23.50 11.63(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.48(a) 1.58 1.66 1.75 1.95(a)
Expenses after expense reductions (f) 1.48(a) 1.58 1.69(e) 1.81(e) 1.90(a)
Net investment income (loss) (0.38)(a) 0.95 0.73 0.69 (0.09)(a)
Portfolio turnover 37 85 79 102 96
Net assets at end of period
(000 Omitted) $81,044 $69,507 $44,300 $19,596 $4,810
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $18.49 $16.02 $15.07
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.09) $0.11 $0.03
Net realized and unrealized gain (loss) on investments and
foreign currency 1.95 3.84 0.92
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $1.86 $3.95 $0.95
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.12) $--
From net realized gain on investments and foreign
currency transactions (1.94) (1.36) --
- -----------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(2.10) $(1.48) $--
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.25 $18.49 $16.02
- -----------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.17(n) 26.12 6.30(n)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.17(a) 2.26 2.36(a)
Expenses after expense reductions (f) 2.07(a) 2.16 2.39(a)(e)
Net investment income (loss) (0.97)(a) 0.65 0.46(a)
Portfolio turnover 37 85 79
Net assets at end of period
(000 Omitted) $2,925 $2,027 $171
- -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $18.59 $16.04 $15.07
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.06) $0.14 $0.06
Net realized and unrealized gain (loss) on investments and
foreign currency 1.96 3.89 0.91
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $1.90 $4.03 $0.97
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
From net investment income $(0.22) $(0.12) $--
From net realized gain on investments and foreign
currency transactions (1.94) (1.36) --
- -----------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(2.16) $(1.48) $--
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.33 $18.59 $16.04
- -----------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.35(n) 26.63 6.44(n)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.87(a) 1.96 2.04(a)
Expenses after expense reductions (f) 1.72(a) 1.82 2.07(a)(e)
Net investment income (loss) (0.64)(a) 0.83 1.12(a)
Portfolio turnover 37 85 79
Net assets at end of period
(000 Omitted) $1,966 $1,021 $178
- -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $19.11 $16.43 $14.16 $12.71
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.05) $0.15 $0.11 $0.02
Net realized and unrealized gain (loss) on
investments and foreign currency 2.01 4.01 2.96 1.46
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.96 $4.16 $3.07 $1.48
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.21) $(0.12) $(0.12) $(0.03)
From net realized gain on investments and
foreign currency transactions (1.94) (1.36) (0.68) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(2.15) $(1.48) $(0.80) $(0.03)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.92 $19.11 $16.43 $14.16
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.39(n) 26.79 22.13 11.69(n)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.72(a) 1.82 1.92 2.01(a)
Expenses after expense reductions (f) 1.62(a) 1.73 1.95(e) 2.07(a)(e)
Net investment income (loss) (0.54)(a) 0.83 0.74 0.18(a)
Portfolio turnover 37 85 79 102
Net assets at end of period
(000 Omitted) $23,527 $13,799 $2,357 $431
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $19.39 $16.65 $15.62
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.03) $0.25 $0.12
Net realized and unrealized gain (loss) on investments
and foreign currency 2.04 4.00 0.91
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $2.01 $4.25 $1.03
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
From net investment income $(0.25) $(0.15) $--
From net realized gain on investments and foreign
currency transactions (1.94) (1.36) --
- -----------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(2.19) $(1.51) $--
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.21 $19.39 $16.65
- -----------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.53(n) 27.07 6.59(n)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.37(a) 1.47 1.55(a)
Expenses after expense reductions (f) 1.37(a) 1.47 1.58(a)(e)
Net investment income (loss) (0.29)(a) 1.42 1.79(a)
Portfolio turnover 37 85 79
Net assets at end of period
(000 Omitted) $29,268 $12,796 $53
- -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $19.47 $16.67 $15.62
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.00(w) $0.33 $0.14
Net realized and unrealized gain (loss) on investments
and foreign currency 2.05 3.99 0.91
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $2.05 $4.32 $1.05
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
From net investment income $(0.28) $(0.16) $--
From net realized gain on investments and foreign
currency transactions (1.94) (1.36) --
- -----------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(2.22) $(1.52) $--
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.30 $19.47 $16.67
- -----------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.68(n) 27.50 6.72(n)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.08(a) 1.17 1.25(a)
Expenses after expense reductions (f) 1.07(a) 1.17 1.28(a)(e)
Net investment income 0.01(a) 1.82 2.09(a)
Portfolio turnover 37 85 79
Net assets at end of period
(000 Omitted) $161,880 $109,993 $53
- -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------
CLASS 529A 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $19.27 $16.53 $14.18 $11.50 $10.78 $10.66
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.05) $0.16 $0.10 $0.08 $0.03 $(0.00)(w)
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.03 4.04 3.01 2.61 0.69 0.12
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.98 $4.20 $3.11 $2.69 $0.72 $0.12
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.20) $(0.10) $(0.08) $(0.01) $-- $--
From net realized gain on
investments and foreign currency
transactions (1.94) (1.36) (0.68) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(2.14) $(1.46) $(0.76) $(0.01) $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.11 $19.27 $16.53 $14.18 $11.50 $10.78
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.41(n) 26.86 22.35 23.39 6.68 1.13(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.58(a) 1.68 1.76 1.85 2.05 2.11(a)
Expenses after expense reductions (f) 1.58(a) 1.68 1.79(e) 1.91(e) 2.00 2.02(a)
Net investment income (loss) (0.48)(a) 0.88 0.65 0.62 0.30 (0.20)(a)
Portfolio turnover 37 85 79 102 96 153
Net assets at end of period
(000 Omitted) $1,918 $1,552 $760 $332 $112 $11
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------
CLASS 529B 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $18.43 $15.88 $13.68 $11.17 $10.54 $10.42
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.10) $0.03 $(0.02) $(0.00)(w) $(0.05) $(0.00)(w)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.93 3.89 2.91 2.51 0.68 0.12
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.83 $3.92 $2.89 $2.51 $0.63 $0.12
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.12) $(0.01) $(0.01) $-- $-- $--
From net realized gain on
investments and foreign currency
transactions (1.94) (1.36) (0.68) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(2.06) $(1.37) $(0.69) $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.20 $18.43 $15.88 $13.68 $11.17 $10.54
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.07(n) 26.06 21.54 22.47 5.98 1.15(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.23(a) 2.33 2.42 2.50 2.70 2.76(a)
Expenses after expense reductions(f) 2.23(a) 2.33 2.45(e) 2.56(e) 2.65 2.67(a)
Net investment income (loss) (1.13)(a) 0.15 (0.13) (0.03) (0.43) (0.45)(a)
Portfolio turnover 37 85 79 102 96 153
Net assets at end of period
(000 Omitted) $503 $356 $174 $110 $41 $5
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------
CLASS 529C 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $18.40 $15.86 $13.66 $11.14 $10.52 $10.40
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.11) $0.03 $(0.01) $(0.00)(w) $(0.04) $(0.00)(w)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.94 3.87 2.90 2.52 0.66 0.12
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.83 $3.90 $2.89 $2.52 $0.62 $0.12
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.09) $(0.00)(w) $(0.01) $-- $-- $--
From net realized gain on
investments and foreign currency
transactions (1.94) (1.36) (0.68) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(2.03) $(1.36) $(0.69) $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.20 $18.40 $15.86 $13.66 $11.14 $10.52
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.08(n) 25.98 21.53 22.62 5.89 1.15(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.23(a) 2.33 2.42 2.49 2.70 2.76(a)
Expenses after expense reductions(f) 2.23(a) 2.33 2.45(e) 2.55(e) 2.65 2.67(a)
Net investment income (loss) (1.14)(a) 0.16 (0.07) (0.02) (0.36) (0.45)(a)
Portfolio turnover 37 85 79 102 96 153
Net assets at end of period
(000 Omitted) $793 $650 $454 $280 $81 $5
- -----------------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less than $0.01.
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(e) Ratio includes a reimbursement fee for expenses borne by MFS in prior years under the then existing expense reimbursement
agreement.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) The per share amount is not in accordance with the net realized and unrealized gain/loss for the period because of the
timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(i) For the period from the class' inception, July 31, 2002 (Classes 529A, 529B, and 529C), December 31, 2002 (Class R),
October 31, 2003 (Class R3), April 1, 2005 (Classes R1, R2, R4, and R5) and May 1, 2006 (Class W) through the stated period
end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Research International Fund (the fund) is a 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 U.S.
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, including securities of emerging market issuers.
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. The
markets of emerging markets countries are generally more volatile than the
markets of developed countries with more mature economies. All of the risks of
investing in foreign securities previously described are heightened when
investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales reported
that day, equity securities are generally valued at the last quoted daily bid
quotation as reported by an independent pricing service on the market or
exchange on which they are primarily traded. For securities held short for which
there were no sales reported for the day, the position is generally valued at
the last quoted daily ask quotation as reported by an independent pricing
service on the market or exchange on which such securities are primarily traded.
Short-term instruments with a maturity at issuance of 60 days or less may be
valued at amortized cost, which approximates market value. Open-end investment
companies are generally valued at their net asset value per share. Securities
and other assets generally valued on the basis of information from an
independent pricing service may also be valued at a broker-dealer bid quotation.
The values of foreign securities and other assets and liabilities expressed in
foreign currencies are converted to U.S. dollars using the mean of bid and asked
prices for rates reported by an independent pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any fair
valuation) to the adviser pursuant to valuation policies and procedures approved
by the Board. If the adviser determines that reliable market quotations are not
readily available, investments are valued at fair value as determined in good
faith by the adviser in accordance with such procedures under the oversight of
the Board of Trustees. Under the fund's valuation policies and procedures,
market quotations are not considered to be readily available for many types of
debt instruments and certain types of derivatives. These investments are
generally valued at fair value based on information from independent pricing
services. In addition, investments may be valued at fair value if the adviser
determines that an investment's value has been materially affected by events
occurring after the close of the exchange or market on which the investment is
principally traded (such as foreign exchange or market) and prior to the
determination of the fund's net asset value, or after the halting of trading of
a specific security where trading does not resume prior to the close of the
exchange or market on which the security is principally traded. Events that
occur on a frequent basis after foreign markets close (such as developments in
foreign markets and significant movements in the U.S. markets) and prior to the
determination of the fund's net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
fund's foreign equity securities may often be valued at fair value. The adviser
may rely on independent pricing services or other information (such as the
correlation with price movements of similar securities in the same or other
markets; the type, cost and investment characteristics of the security; the
business and financial condition of the issuer; and trading and other market
data) to assist in determining whether to fair value and at what value to fair
value an investment. The value of an investment for purposes of calculating the
fund's net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published prices
for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management is
evaluating the application of the Statement to the fund, and believes the impact
will be limited to expanded disclosures resulting from the adoption of this
Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The fund requires that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the fund to obtain those securities
in the event of a default under the repurchase agreement. The fund monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the fund under each such
repurchase agreement. The fund and other funds managed by Massachusetts
Financial Services Company (MFS), may utilize a joint trading account for the
purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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"), as
lending agent, 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 cash and/or U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned. State Street
provides the fund with indemnification against Borrower default. The fund bears
the risk of loss with respect to the investment of cash collateral. On loans
collateralized by cash, the cash collateral is invested in a money market fund
or short-term securities. A portion of the income generated upon investment of
the collateral is remitted to the Borrowers, and the remainder is allocated
between the fund and the lending agent. On loans collateralized by U.S. Treasury
securities, a fee is received from the Borrower, and is allocated between the
fund and the lending agent. 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 28, 2007, the value of securities loaned was
$557,276,508. These loans were collateralized by cash of $584,876,053 and U.S.
Treasury obligations of $460,000.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising out
of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with U.S. generally accepted accounting principles. All discount is accreted for
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded when the fund is informed of the dividend if
such information is obtained subsequent to the ex- dividend date. Dividend and
interest payments received in additional securities are recorded on the
ex-dividend or ex-interest date in an amount equal to the value of the security
on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received
from litigation involving its portfolio holdings are reflected in realized
gain/loss in the Statement of Operations, or in unrealized gain/loss if the
security is still held by the fund. Any other proceeds from litigation not
related to portfolio holdings are reflected as other income in the Statement of
Operations.
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. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the fund in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value per
share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions for
financial statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to passive foreign investment companies,
wash sale loss deferrals, foreign currency transactions, and treating a portion
of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
8/31/06
Ordinary income (including any short-term
capital gains) $104,557,669
Long-term capital gain 90,505,993
-------------------------------------------------------------
Total distributions $195,063,662
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $4,360,475,150
-------------------------------------------------------------
Gross appreciation $580,546,783
Gross depreciation (50,732,562)
-------------------------------------------------------------
Net unrealized appreciation (depreciation) $529,814,221
AS OF 8/31/06
Undistributed ordinary income $179,019,881
Undistributed long-term capital gain 155,812,624
Other temporary differences (189,443)
Net unrealized appreciation (depreciation) 453,691,624
The aggregate cost above includes prior fiscal year end tax adjustments.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. On December 22, 2006, the SEC delayed the
implementation of the Interpretation for regulated investment companies for an
additional six months. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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 and Class
529B shares will convert to Class A and Class 529A shares, respectively,
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the fund.
The management fee is computed daily and paid monthly at the following annual
rates:
First $1.0 billion of average daily net assets 0.90%
Next $1.0 billion of average daily net assets 0.80%
Average daily net assets in excess of $2.0 billion 0.70%
The management fee incurred for the six months ended February 28, 2007 was
equivalent to an annual effective rate of 0.78% of the fund's average daily
net assets.
The investment adviser has agreed in writing to pay a portion of the fund's
operating expenses, exclusive of management, distribution and service,
retirement plan administration and services, program manager, and certain
other fees and expenses, such that operating expenses do not exceed 0.40%
annually of the fund's average daily net assets. This written agreement will
continue through December 31, 2007 unless changed or rescinded by the fund's
Board of Trustees. For the six months ended February 28, 2007, the fund's
actual operating expenses did not exceed the limit and therefore, the
investment adviser did not pay any portion of the fund's expenses.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $95,684 and $703 for the six months ended
February 28, 2007, as its portion of the initial sales charge on sales of
Class A and Class 529A shares of the fund, respectively.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $2,605,294
Class B 0.75% 0.25% 1.00% 1.00% 964,204
Class C 0.75% 0.25% 1.00% 1.00% 869,925
Class W 0.10% -- 0.10% 0.10% 887
Class R 0.25% 0.25% 0.50% 0.50% 190,712
Class R1 0.50% 0.25% 0.75% 0.75% 9,359
Class R2 0.25% 0.25% 0.50% 0.50% 3,182
Class R3 0.25% 0.25% 0.50% 0.50% 43,934
Class R4 -- 0.25% 0.25% 0.25% 23,923
Class 529A 0.25% 0.25% 0.50% 0.35% 3,104
Class 529B 0.75% 0.25% 1.00% 1.00% 2,164
Class 529C 0.75% 0.25% 1.00% 1.00% 3,737
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $4,720,425
(d) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees up
to these annual percentage rates of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the distribution plan for the six months ended
February 28, 2007 based on each class' average daily net assets. 0.10% of the Class 529A distribution fee is
currently being paid by the fund. Payment of the remaining 0.15% of the Class 529A distribution fee is not yet
in effect and will be implemented on such date as the fund's Board of Trustees may determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within 12
months of purchase. Class B and Class 529B shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within six
years of purchase. All contingent deferred sales charges are paid to MFD and
during the six months ended February 28, 2007, were as follows:
AMOUNT
Class A $24,675
Class B 76,099
Class C 6,646
Class 529B 115
Class 529C 45
The fund has entered into and may from time to time enter into contracts with
program managers and other parties which administer the tuition programs
through which an investment in the fund's 529 share classes is made. The fund
has entered into an agreement with MFD pursuant to which MFD receives an
annual fee of up to 0.35% of the average daily net assets attributable to each
529 share class. The fee is based on average daily net assets and is currently
established at 0.25% annually of average daily net assets of the fund's 529
share classes. The fee may only be increased with the approval of the Board of
Trustees who oversees the fund. The services provided by MFD, or a third party
with which MFD contracts, include recordkeeping and tax reporting and account
services, as well as services designed to maintain the program's compliance
with the Internal Revenue Code and other regulatory requirements. Program
manager fees for the six months ended February 28, 2007, were as follows:
AMOUNT
Class 529A $2,217
Class 529B 541
Class 529C 934
--------------------------------------------------------
Total Program Manager Fees $3,692
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average daily
net assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the six months ended February 28, 2007, the fee
was $1,458,479, which equated to 0.0754% annually of the fund's average daily
net assets. Effective January 1, 2007, MFSC has entered into a sub-accounting
agreement with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of
MFSC, on behalf of the fund to provide omnibus account services to the fund.
MFSC pays SRS both an asset based fee and a per account charge of the assets
held in the omnibus account. The fund then reimburses MFSC for the sub-
accounting fees paid to SRS. For the six months ended February 28, 2007, the
sub-accounting fee for SRS was $141,417, which equated to 0.0073% annually of
the fund's average daily net assets. MFSC also receives payment from the fund
for out-of-pocket and sub-accounting expenses. For the six months ended
February 28, 2007, these out-of-pocket and sub-accounting costs amounted to
$495,073. The fund may also pay shareholder servicing related costs directly
to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500. The administrative services fee incurred for the six
months ended February 28, 2007 was equivalent to an annual effective rate of
0.0151% of the fund's average daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares,
and may be provided directly by MFS or by a third party. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services fee
to affiliated or unaffiliated third parties. For the six months ended
February 28, 2007, the fund paid MFS an annual retirement plan adminstration
and services fee up to the following annual percentage rates of each class'
average daily net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $5,615
Class R2 0.40% 0.25% 2,546
Class R3 0.25% 0.15% 21,967
Class R4 0.15% 0.15% 14,354
Class R5 0.10% 0.10% 69,662
- -------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $114,144
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $10,990 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to trustees or officers of the fund who are also
officers of the investment adviser, 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, MFD, and MFSC.
The fund has an unfunded, defined benefit plan for certain retired independent
trustees which resulted in a pension expense of $272. The fund also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $4,104. Both amounts are included
in independent trustees' compensation for the six months ended
February 28, 2007. The liability for deferred retirement benefits payable
to certain independent trustees under both plans amounted to $33,817
at February 28, 2007, and is included in payable for independent
trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $15,607. MFS has agreed to reimburse the fund for a portion
of the payments made by the funds to Tarantino LLC in the amount of $10,133,
which is shown as a reduction of total expenses in the Statement of
Operations. Additionally, MFS has agreed to bear all expenses associated with
office space, other administrative support, and supplies provided to
the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,829,770,683 and $1,425,475,547, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06(i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 22,575,976 $444,173,969 30,630,255 $556,734,183
Class B 1,608,134 30,234,231 3,401,167 59,298,455
Class C 1,888,447 35,345,960 3,025,371 52,468,875
Class I 13,560,111 274,083,251 30,755,216 581,780,278
Class W 103,780 2,048,509 53,111 1,031,086
Class R 1,107,345 21,737,537 1,713,782 30,827,673
Class R1 161,900 3,001,660 118,411 2,100,359
Class R2 109,278 2,040,737 46,997 846,131
Class R3 1,304,377 25,093,794 805,222 14,237,540
Class R4 1,562,547 30,585,112 737,220 13,528,900
Class R5 2,688,459 54,184,669 6,785,761 117,544,808
Class 529A 13,210 258,596 35,512 640,671
Class 529B 6,524 122,480 7,849 136,554
Class 529C 8,046 149,117 7,149 123,841
- ----------------------------------------------------------------------------------------------------------
46,698,134 $923,059,622 78,123,023 $1,431,299,354
Shares issued to shareholders in
reinvestment of distributions
Class A 5,693,666 $108,521,287 3,732,231 $62,253,599
Class B 925,951 16,907,886 649,122 10,424,911
Class C 693,008 12,598,865 441,721 7,067,535
Class I 9,490,387 185,442,163 4,619,694 78,765,784
Class W 9,678 184,179 -- --
Class R 395,202 7,477,210 234,859 3,891,575
Class R1 14,617 263,975 2,328 36,657
Class R2 7,691 139,366 922 14,739
Class R3 95,132 1,779,917 22,921 376,023
Class R4 102,687 1,948,996 619 10,304
Class R5 856,467 16,324,252 293 4,892
Class 529A 9,998 188,869 4,564 75,577
Class 529B 2,620 47,194 1,005 15,984
Class 529C 4,406 79,403 2,465 39,156
- ----------------------------------------------------------------------------------------------------------
18,301,510 $351,903,562 9,712,744 $162,976,736
Shares reacquired
Class A (12,357,124) $(244,543,532) (22,770,545) $(406,301,939)
Class B (1,677,925) (31,706,574) (2,987,955) (52,111,572)
Class C (842,701) (15,899,972) (1,768,974) (30,633,224)
Class I (3,596,258) (72,092,869) (6,808,899) (127,967,564)
Class W (13,609) (272,261) -- --
Class R (871,762) (17,049,113) (1,023,578) (18,415,220)
Class R1 (125,882) (2,329,361) (21,804) (394,455)
Class R2 (64,641) (1,199,105) (4,075) (70,219)
Class R3 (878,231) (16,918,318) (249,484) (4,380,146)
Class R4 (801,558) (15,757,626) (81,019) (1,516,299)
Class R5 (808,231) (15,955,217) (1,138,695) (20,875,810)
Class 529A (3,410) (65,630) (5,526) (98,083)
Class 529B (826) (15,818) (463) (8,063)
Class 529C (4,212) (78,497) (2,944) (49,317)
- ----------------------------------------------------------------------------------------------------------
(22,046,370) $(433,883,893) (36,863,961) $(662,821,911)
Net change
Class A 15,912,518 $308,151,724 11,591,941 $212,685,843
Class B 856,160 15,435,543 1,062,334 17,611,794
Class C 1,738,754 32,044,853 1,698,118 28,903,186
Class I 19,454,240 387,432,545 28,566,011 532,578,498
Class W 99,849 1,960,427 53,111 1,031,086
Class R 630,785 12,165,634 925,063 16,304,028
Class R1 50,635 936,274 98,935 1,742,561
Class R2 52,328 980,998 43,844 790,651
Class R3 521,278 9,955,393 578,659 10,233,417
Class R4 863,676 16,776,482 656,820 12,022,905
Class R5 2,736,695 54,553,704 5,647,359 96,673,890
Class 529A 19,798 381,835 34,550 618,165
Class 529B 8,318 153,856 8,391 144,475
Class 529C 8,240 150,023 6,670 113,680
- ----------------------------------------------------------------------------------------------------------
42,953,274 $841,079,291 50,971,806 $931,454,179
(i) For the period from the class' inception, May 1, 2006 (Class W), through the stated period end.
The fund is one of several mutual funds in which the MFS funds-of-funds may
invest. The MFS funds-of-funds do not invest in the underlying MFS funds for
the purpose of exercising management or control. At the end of the period, the
MFS International Diversification Fund, MFS Moderate Allocation Fund, MFS
Growth Allocation Fund, and MFS Aggressive Growth Allocation Fund were the
owners of record of approximately 17%, 5%, 9%, and 3%, respectively, of the
value of outstanding voting shares. In addition, the MFS Lifetime 2010 Fund,
MFS Lifetime 2020 Fund, MFS Lifetime 2030 Fund, MFS Lifetime 2040 Fund, and
MFS Conservative Allocation Fund were each the owners of record of less than
1% of the value of outstanding voting shares.
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$9,737 and $3,725, respectively, and are included in miscellaneous expense on
the Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site at
http://www.sec.gov, and copies of this information may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov or by writing the Public Reference Section at the
above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Semiannual report
MFS(R) TECHNOLOGY FUND
LETTER FROM THE CEO 1
- ---------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------
EXPENSE TABLE 3
- ---------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ---------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 8
- ---------------------------------------------------
STATEMENT OF OPERATIONS 11
- ---------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 12
- ---------------------------------------------------
FINANCIAL HIGHLIGHTS 13
- ---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 19
- ---------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 30
- ---------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 30
- ---------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 30
- ---------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------
THE 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.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
SCT-SEM
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 97.3%
Cash & Other Net Assets 2.7%
TOP TEN HOLDINGS
Intel Corp. 7.6%
------------------------------------------------
Cisco Systems, Inc. 6.7%
------------------------------------------------
Marvell Technology Group Ltd. 4.0%
------------------------------------------------
Google, Inc., "A" 3.7%
------------------------------------------------
Oracle Corp. 3.5%
------------------------------------------------
MSC Software Corp. 3.4%
------------------------------------------------
Adobe Systems, Inc. 3.3%
------------------------------------------------
Juniper Networks, Inc. 3.1%
------------------------------------------------
EMC Corp. 3.0%
------------------------------------------------
Qwest Communications
International, Inc. 2.8%
------------------------------------------------
TOP FIVE INDUSTRIES
Electronics 28.2%
------------------------------------------------
Computer Software 16.8%
------------------------------------------------
Network & Telecom 12.9%
------------------------------------------------
Business Services 7.6%
------------------------------------------------
Internet 7.4%
------------------------------------------------
Percentages are based on net assets as of 2/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides
information about hypothetical account values and hypothetical expenses based
on the fund's actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
- --------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 1.50% $1,000.00 $1,175.70 $8.09
A ----------------------------------------------------------------------------
Hypothetical (h) 1.50% $1,000.00 $1,017.36 $7.50
- --------------------------------------------------------------------------------
Actual 2.15% $1,000.00 $1,172.70 $11.58
B ----------------------------------------------------------------------------
Hypothetical (h) 2.15% $1,000.00 $1,014.13 $10.74
- --------------------------------------------------------------------------------
Actual 2.15% $1,000.00 $1,171.80 $11.58
C ----------------------------------------------------------------------------
Hypothetical (h) 2.15% $1,000.00 $1,014.13 $10.74
- --------------------------------------------------------------------------------
Actual 1.15% $1,000.00 $1,178.10 $6.21
I ----------------------------------------------------------------------------
Hypothetical (h) 1.15% $1,000.00 $1,019.09 $5.76
- --------------------------------------------------------------------------------
Actual 1.65% $1,000.00 $1,175.00 $8.90
R ----------------------------------------------------------------------------
Hypothetical (h) 1.65% $1,000.00 $1,016.61 $8.25
- --------------------------------------------------------------------------------
Actual 2.25% $1,000.00 $1,171.80 $12.12
R1 ----------------------------------------------------------------------------
Hypothetical (h) 2.25% $1,000.00 $1,013.64 $11.23
- --------------------------------------------------------------------------------
Actual 1.90% $1,000.00 $1,173.00 $10.24
R2 ----------------------------------------------------------------------------
Hypothetical (h) 1.90% $1,000.00 $1,015.37 $9.49
- --------------------------------------------------------------------------------
Actual 1.80% $1,000.00 $1,175.00 $9.71
R3 ----------------------------------------------------------------------------
Hypothetical (h) 1.80% $1,000.00 $1,015.87 $9.00
- --------------------------------------------------------------------------------
Actual 1.55% $1,000.00 $1,175.90 $8.36
R4 ----------------------------------------------------------------------------
Hypothetical (h) 1.55% $1,000.00 $1,017.11 $7.75
- --------------------------------------------------------------------------------
Actual 1.25% $1,000.00 $1,178.00 $6.75
R5 ----------------------------------------------------------------------------
Hypothetical (h) 1.25% $1,000.00 $1,018.60 $6.26
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund.
It is categorized by broad-based asset classes.
Common Stocks - 97.3%
- ----------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------------
Broadcasting - 3.7%
- ---------------------------------------------------------------------------------------------------------
Sirius Satellite Radio, Inc. (a)(l) 593,102 $ 2,164,822
XM Satellite Radio Holdings, Inc., "A" (a) 170,000 2,441,200
------------
$ 4,606,022
- ---------------------------------------------------------------------------------------------------------
Business Services - 7.6%
- ---------------------------------------------------------------------------------------------------------
Amdocs Ltd. (a) 69,910 $ 2,419,585
First Data Corp. 127,080 3,244,352
Global Payments, Inc. 67,720 2,605,188
Ultimate Software Group, Inc. (a)(l) 45,110 1,201,730
------------
$ 9,470,855
- ---------------------------------------------------------------------------------------------------------
Computer Software - 16.8%
- ---------------------------------------------------------------------------------------------------------
Adobe Systems, Inc. (a) 103,500 $ 4,062,375
Cognos, Inc. (a) 29,030 1,106,333
Hyperion Solutions Corp. (a) 22,500 963,900
McAfee, Inc. (a) 77,970 2,348,456
MSC.Software Corp. (a) 312,074 4,197,395
Oracle Corp. (a) 264,538 4,346,359
Salesforce.com, Inc. (a) 43,350 1,875,321
Symantec Corp. (a) 111,351 1,904,102
------------
$ 20,804,241
- ---------------------------------------------------------------------------------------------------------
Computer Software - Systems - 3.5%
- ---------------------------------------------------------------------------------------------------------
Cray, Inc. (a) 181,940 $ 2,432,538
Salary.com, Inc. (a) 165,470 1,869,811
------------
$ 4,302,349
- ---------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 2.0%
- ---------------------------------------------------------------------------------------------------------
ITT Educational Services, Inc. (a) 15,570 $ 1,245,289
Monster Worldwide, Inc. (a) 23,710 1,182,181
------------
$ 2,427,470
- ---------------------------------------------------------------------------------------------------------
Electronics - 28.2%
- ---------------------------------------------------------------------------------------------------------
Applied Materials, Inc. 149,880 $ 2,783,272
ASML Holding N.V. (a) 38,310 941,660
Atmel Corp. (a) 189,910 1,052,101
Fairchild Semiconductor International, Inc. (a) 40,200 752,142
Flextronics International Ltd. (a) 109,400 1,195,742
Intel Corp. 475,520 9,439,072
LSI Logic Corp. (a) 138,690 1,406,317
Marvell Technology Group Ltd. (a) 240,660 4,938,343
National Semiconductor Corp. 57,600 1,475,712
Nintendo Co. Ltd. (l) 9,600 2,555,565
Samsung Electronics Co. Ltd., GDR 5,151 1,546,588
SanDisk Corp. (a) 88,840 3,235,553
Sanmina-SCI Corp. (a) 281,200 1,043,252
Solectron Corp. (a) 319,900 1,030,078
Texas Instruments, Inc. 50,060 1,549,858
------------
$ 34,945,255
- ---------------------------------------------------------------------------------------------------------
Internet - 7.4%
- ---------------------------------------------------------------------------------------------------------
Baidu.com, Inc., ADR (a) 16,170 $ 1,725,339
Google, Inc., "A" (a) 10,175 4,573,154
Move, Inc. (a) 52,400 312,828
NHN Corp. 18,643 2,553,836
------------
$ 9,165,157
- ---------------------------------------------------------------------------------------------------------
Leisure & Toys - 2.7%
- ---------------------------------------------------------------------------------------------------------
Activision, Inc. (a) 73,910 $ 1,235,775
Ubisoft Entertainment S.A. (a)(l) 47,275 2,082,822
------------
$ 3,318,597
- ---------------------------------------------------------------------------------------------------------
Network & Telecom - 12.9%
- ---------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (a) 319,693 $ 8,292,836
Juniper Networks, Inc. (a) 201,830 3,816,605
Nokia Corp., ADR 76,620 1,672,615
Research In Motion Ltd. (a) 4,950 696,020
Sonus Networks, Inc. (a) 198,620 1,527,388
------------
$ 16,005,464
- ---------------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 6.1%
- ---------------------------------------------------------------------------------------------------------
EMC Corp. (a) 262,590 $ 3,663,130
Network Appliance, Inc. (a) 48,400 1,871,628
Seagate Technology LLC 35,840 964,096
Western Digital Corp. (a) 57,210 1,096,716
------------
$ 7,595,570
- ---------------------------------------------------------------------------------------------------------
Telephone Services - 6.4%
- ---------------------------------------------------------------------------------------------------------
Global Crossing Ltd. (a)(l) 92,020 $ 2,616,129
Level 3 Communications, Inc. (a)(l) 269,760 1,772,323
Qwest Communications International, Inc. (a)(l) 394,320 3,501,562
------------
$ 7,890,014
- ---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $122,683,744) $120,530,994
- ---------------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.8%
- ---------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ---------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, due 3/01/07,
at Amortized Cost and Value (y) $ 1,018,000 $ 1,018,000
- ---------------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 10.9%
- ---------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 13,554,073 $ 13,554,073
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $137,255,817) $135,103,067
- ---------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (9.0)% (11,159,194)
- ---------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $123,943,873
- ---------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(l) All or a portion of this security is on loan.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
GDR Global Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets
and liabilities comprising the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value, including $13,110,548 of securities on
loan (identified cost, $137,255,817) $135,103,067
Cash 79
Foreign currency, at value (identified cost, $1,442,837) 1,389,664
Receivable for investments sold 5,874,655
Receivable for fund shares sold 476,995
Interest and dividends receivable 69,792
Receivable from investment adviser 16,684
Other assets 2,750
- ------------------------------------------------------------------------------------------------------
Total assets $142,933,686
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for investments purchased $4,781,358
Payable for fund shares reacquired 443,631
Collateral for securities loaned, at value 13,554,073
Payable to affiliates
Management fee 5,186
Shareholder servicing costs 89,242
Distribution and service fees 4,365
Administrative services fee 169
Retirement plan administration and services fees 36
Payable for independent trustees' compensation 54,977
Accrued expenses and other liabilities 56,776
- ------------------------------------------------------------------------------------------------------
Total liabilities $18,989,813
- ------------------------------------------------------------------------------------------------------
Net assets $123,943,873
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------
Paid-in capital $428,679,721
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies (2,205,684)
Accumulated net realized gain (loss) on investments and foreign
currency transactions (301,763,420)
Accumulated net investment loss (766,744)
- ------------------------------------------------------------------------------------------------------
Net assets $123,943,873
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 10,606,677
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $58,276,394
Shares outstanding 4,892,218
- ------------------------------------------------------------------------------------------------------
Net asset value per share $11.91
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $12.64
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $40,423,950
Shares outstanding 3,542,331
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $11.41
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $14,066,018
Shares outstanding 1,234,710
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $11.39
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $4,085,412
Shares outstanding 333,660
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $12.24
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $3,858,038
Shares outstanding 326,404
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $11.82
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $339,485
Shares outstanding 29,817
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $11.39
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $905,408
Shares outstanding 78,974
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $11.46
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,306,939
Shares outstanding 111,266
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $11.75
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $609,740
Shares outstanding 51,244
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $11.90
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $72,489
Shares outstanding 6,053
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $11.98
- ------------------------------------------------------------------------------------------------------
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
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT LOSS
- ------------------------------------------------------------------------------------------------------
Income
Dividends $202,472
Interest 53,713
Income on securities loaned 43,159
Foreign taxes withheld (1,875)
- ------------------------------------------------------------------------------------------------------
Total investment income $297,469
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $445,205
Distribution and service fees 381,964
Shareholder servicing costs 174,592
Administrative services fee 14,728
Retirement plan administration and services fees 3,679
Independent trustees' compensation 14,281
Custodian fee 32,191
Shareholder communications 101,603
Auditing fees 22,457
Legal fees 1,766
Miscellaneous 53,069
- ------------------------------------------------------------------------------------------------------
Total expenses $1,245,535
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (3,949)
Reduction of expenses by investment adviser (177,373)
- ------------------------------------------------------------------------------------------------------
Net expenses $1,064,213
- ------------------------------------------------------------------------------------------------------
Net investment loss $(766,744)
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $19,188,200
Foreign currency transactions (5,853)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $19,182,347
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(463,326)
Translation of assets and liabilities in foreign currencies (1,905)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign currency
translation $(465,231)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $18,717,116
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $17,950,372
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment loss $(766,744) $(1,614,441)
Net realized gain (loss) on investments and foreign
currency transactions 19,182,347 21,168,444
Net unrealized gain (loss) on investments and foreign
currency translation (465,231) (4,992,797)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $17,950,372 $14,561,206
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $3,902,348 $(23,708,788)
- ------------------------------------------------------------------------------------------------------
Total change in net assets $21,852,720 $(9,147,582)
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period 102,091,153 111,238,735
At end of period (including accumulated net investment loss
of $766,744 and $0, respectively) $123,943,873 $102,091,153
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $10.13 $8.84 $7.70 $8.30 $6.25 $10.70
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.06) $(0.11) $(0.05) $(0.10) $(0.07) $(0.11)
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.84 1.40 1.19 (0.50) 2.12 (4.34)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.78 $1.29 $1.14 $(0.60) $2.05 $(4.45)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.91 $10.13 $8.84 $7.70 $8.30 $6.25
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 17.57(n) 14.59 14.81 (7.23)(b) 32.80 (41.53)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.79(a) 1.79 1.79 1.60 1.76 1.74
Expenses after expense reductions (f) 1.50(a) 1.50 1.51 1.50 1.52 1.51
Net investment loss (0.99)(a) (1.13) (0.56) (1.10) (1.05) (1.22)
Portfolio turnover 138 217 163 141 162 210
Net assets at end of period
(000 Omitted) $58,276 $43,313 $48,945 $75,786 $101,059 $53,142
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $9.73 $8.55 $7.50 $8.13 $6.16 $10.61
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.09) $(0.17) $(0.10) $(0.15) $(0.11) $(0.17)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.77 1.35 1.15 (0.48) 2.08 (4.28)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.68 $1.18 $1.05 $(0.63) $1.97 $(4.45)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.41 $9.73 $8.55 $7.50 $8.13 $6.16
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 17.27(n) 13.80 14.00 (7.75)(b) 31.98 (41.94)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.45(a) 2.44 2.44 2.25 2.42 2.39
Expenses after expense reductions (f) 2.15(a) 2.15 2.16 2.15 2.18 2.16
Net investment loss (1.64)(a) (1.79) (1.24) (1.74) (1.71) (1.87)
Portfolio turnover 138 217 163 141 162 210
Net assets at end of period
(000 Omitted) $40,424 $39,025 $43,765 $50,896 $61,353 $25,997
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $9.72 $8.54 $7.48 $8.12 $6.16 $10.61
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.09) $(0.17) $(0.10) $(0.15) $(0.11) $(0.17)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.76 1.35 1.16 (0.49) 2.07 (4.28)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.67 $1.18 $1.06 $(0.64) $1.96 $(4.45)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.39 $9.72 $8.54 $7.48 $8.12 $6.16
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 17.18(n) 13.82 14.17 (7.88)(b) 31.82 (41.94)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.45(a) 2.44 2.44 2.25 2.42 2.39
Expenses after expense reductions (f) 2.15(a) 2.15 2.16 2.15 2.18 2.16
Net investment loss (1.64)(a) (1.78) (1.22) (1.74) (1.71) (1.87)
Portfolio turnover 138 217 163 141 162 210
Net assets at end of period
(000 Omitted) $14,066 $11,659 $12,414 $15,367 $20,210 $10,476
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $10.39 $9.04 $7.85 $8.43 $6.33 $10.79
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $(0.04) $(0.08) $0.01 $(0.06) $(0.05) $(0.08)
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.89 1.43 1.18 (0.52) 2.15 (4.38)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.85 $1.35 $1.19 $(0.58) $2.10 $(4.46)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.24 $10.39 $9.04 $7.85 $8.43 $6.33
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 17.81(n) 14.93 15.16 (6.88)(b) 33.18 (41.33)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.45(a) 1.43 1.44 1.26 1.41 1.39
Expenses after expense reductions (f) 1.15(a) 1.15 1.16 1.16 1.17 1.16
Net investment income (loss) (0.64)(a) (0.78) 0.17 (0.70) (0.71) (0.87)
Portfolio turnover 138 217 163 141 162 210
Net assets at end of period (000 Omitted) $4,085 $3,492 $3,384 $13,404 $4,179 $3,045
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $10.06 $8.80 $7.67 $8.28 $6.16
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.06) $(0.13) $(0.07) $(0.10) $(0.08)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.82 1.39 1.20 (0.51) 2.20
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.76 $1.26 $1.13 $(0.61) $2.12
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.82 $10.06 $8.80 $7.67 $8.28
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 17.50(n) 14.32 14.73 (7.37)(b) 34.42(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.95(a) 1.93 1.94 1.76 1.88(a)
Expenses after expense reductions (f) 1.65(a) 1.65 1.66 1.66 1.64(a)
Net investment loss (1.14)(a) (1.28) (0.79) (1.21) (1.22)(a)
Portfolio turnover 138 217 163 141 162
Net assets at end of period (000 Omitted) $3,858 $3,047 $2,283 $1,266 $173
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $9.72 $8.55 $8.01
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.10) $(0.18) $(0.07)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.77 1.35 0.61(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.67 $1.17 $0.54
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.39 $9.72 $8.55
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 17.18(n) 13.68 6.74(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.65(a) 2.63 2.62(a)
Expenses after expense reductions (f) 2.25(a) 2.25 2.34(a)
Net investment loss (1.75)(a) (1.88) (1.90)(a)
Portfolio turnover 138 217 163
Net assets at end of period (000 Omitted) $339 $213 $64
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $9.77 $8.56 $8.01
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.07) $(0.15) $(0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.76 1.36 0.60(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.69 $1.21 $0.55
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.46 $9.77 $8.56
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 17.30(n) 14.14 6.87(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.33(a) 2.33 2.32(a)
Expenses after expense reductions (f) 1.90(a) 1.90 2.04(a)
Net investment loss (1.38)(a) (1.52) (1.60)(a)
Portfolio turnover 138 217 163
Net assets at end of period (000 Omitted) $905 $367 $85
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $10.00 $8.76 $7.66 $8.79
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.07) $(0.14) $(0.09) $(0.09)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.82 1.38 1.19 (1.04)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.75 $1.24 $1.10 $(1.13)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.75 $10.00 $8.76 $7.66
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 17.50(n) 14.16 14.36 (12.86)(b)(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.19(a) 2.18 2.19 2.01(a)
Expenses after expense reductions (f) 1.80(a) 1.80 1.91 1.91(a)
Net investment loss (1.28)(a) (1.41) (1.07) (1.47)(a)
Portfolio turnover 138 217 163 141
Net assets at end of period (000 Omitted) $1,307 $800 $192 $132
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $10.12 $8.85 $8.26
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.06) $(0.14) $(0.04)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.84 1.41 0.63(g)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.78 $1.27 $0.59
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.90 $10.12 $8.85
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 17.59(n) 14.35 7.14(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.82(a) 1.84 1.82(a)
Expenses after expense reductions (f) 1.55(a) 1.55 1.54(a)
Net investment loss (1.01)(a) (1.18) (1.10)(a)
Portfolio turnover 138 217 163
Net assets at end of period (000 Omitted) $610 $113 $54
- -------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $10.17 $8.86 $8.26
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (d) $(0.04) $(0.09) $(0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.85 1.40 0.63(g)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.81 $1.31 $0.60
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.98 $10.17 $8.86
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 17.80(n) 14.79 7.26(n)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.55(a) 1.53 1.52(a)
Expenses after expense reductions (f) 1.25(a) 1.25 1.24(a)
Net investment loss (0.75)(a) (0.88) (0.79)(a)
Portfolio turnover 138 217 163
Net assets at end of period (000 Omitted) $72 $62 $54
- ---------------------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less
than $0.01.
(a) Annualized.
(b) The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of
an administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund
sales. The non-recurring accrual did not have a material impact on the net asset value per share based on the
shares outstanding on the day the proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) The per share amount is not in accordance with the net realized and unrealized gain/loss for the period because
of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at
such time.
(i) For the period from the class' inception, December 31, 2002 (Class R), October 31, 2003 (Class R3), April 1,
2005 (Classes R1, R2, R4, and R5) through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Technology Fund (the fund) is a 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 U.S.
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, including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the
market or exchange on which they are primarily traded. For securities held
short for which there were no sales reported for the day, the position is
generally valued at the last quoted daily ask quotation as reported by an
independent pricing service on the market or exchange on which such securities
are primarily traded. Short-term instruments with a maturity at issuance of 60
days or less may be valued at amortized cost, which approximates market value.
Open-end investment companies are generally valued at their net asset value
per share. Securities and other assets generally valued on the basis of
information from an independent pricing service may also be valued at a
broker-dealer bid quotation. The values of foreign securities and other assets
and liabilities expressed in foreign currencies are converted to U.S. dollars
using the mean of bid and asked prices for rates reported by an independent
pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any
fair valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the fund's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. In addition, investments may be valued at fair
value if the adviser determines that an investment's value has been materially
affected by events occurring after the close of the exchange or market on
which the investment is principally traded (such as foreign exchange or
market) and prior to the determination of the fund's net asset value, or after
the halting of trading of a specific security where trading does not resume
prior to the close of the exchange or market on which the security is
principally traded. Events that occur on a frequent basis after foreign
markets close (such as developments in foreign markets and significant
movements in the U.S. markets) and prior to the determination of the fund's
net asset value may be deemed to have a material affect on the value of
securities traded in foreign markets. Accordingly, the fund's foreign equity
securities may often be valued at fair value. The adviser may rely on
independent pricing services or other information (such as the correlation
with price movements of similar securities in the same or other markets; the
type, cost and investment characteristics of the security; the business and
financial condition of the issuer; and trading and other market data) to
assist in determining whether to fair value and at what value to fair value an
investment. The value of an investment for purposes of calculating the fund's
net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published
prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for
measuring fair value and expanded disclosures about fair value measurements.
Management is evaluating the application of the Statement to the fund, and
believes the impact will be limited to expanded disclosures resulting from the
adoption of this Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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"), as
lending agent, 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 cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
On loans collateralized by cash, the cash collateral is invested in a money
market fund or short-term securities. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder
is allocated between the fund and the lending agent. On loans collateralized
by U.S. Treasury securities, a fee is received from the Borrower, and is
allocated between the fund and the lending agent. The dividend and interest
income earned on the securities loaned is accounted for in the same manner as
other dividend and interest income.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the
normal course of business, the fund enters into agreements with service
providers that may contain indemnification clauses. The fund's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to the ex-
dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds received
from litigation involving its portfolio holdings are reflected in realized
gain/loss in the Statement of Operations, or in unrealized gain/loss if the
security is still held by the fund. Any other proceeds from litigation not
related to portfolio holdings are reflected as other income in the Statement of
Operations.
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. This amount, for the six months ended February 28, 2007, is shown as
a reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue
Code, and to distribute all of its taxable income, including realized capital
gains. Accordingly, no provision for federal income tax is required in the
financial statements. Foreign taxes, if any, have been accrued by the fund in
the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to net operating losses and wash sale
loss deferrals.
The fund declared no distributions for the year ended August 31, 2006.
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $138,053,569
-------------------------------------------------------
Gross appreciation $4,849,634
Gross depreciation (7,800,136)
-------------------------------------------------------
Net unrealized appreciation (depreciation) $(2,950,502)
AS OF 8/31/06
Capital loss carryforwards $(320,056,572)
Other temporary differences (142,472)
Net unrealized appreciation (depreciation) (2,487,176)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of August 31, 2006, the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
8/31/08 $(7,419,613)
8/31/09 (113,374,272)
8/31/10 (119,907,823)
8/31/11 (74,891,618)
8/31/12 (4,463,246)
-------------------------------------------------------
$(320,056,572)
The availability of a portion of the capital loss carryforwards, which were
acquired on August 22, 2003 in connection with the MFS Global
Telecommunications Fund merger, may be limited in a given year.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. On December 22, 2006, the SEC delayed the
implementation of the Interpretation for regulated investment companies for an
additional six months. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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 MFS to
provide overall investment management and related administrative services and
facilities to the fund. 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
investment adviser has agreed in writing to reduce its management fee to 0.70%
of average daily net assets in excess of $1 billion. This written agreement
may be rescinded only upon consent of the fund's Board of Trustees. For the
six months ended February 28, 2007, the fund's average daily net assets did
not exceed $1 billion and therefore, the management fee was not reduced.
The investment adviser has agreed in writing to pay a portion of the fund's
operating expenses, exclusive of management, distribution and service,
retirement plan administration and services, and certain other fees and
expenses, such that operating expenses do not exceed 0.40% annually of the
fund's average daily net assets. This written agreement will continue through
December 31, 2007 unless changed or rescinded by the fund's Board of Trustees.
For the six months ended February 28, 2007, this reduction amounted to
$175,907 and is reflected as a reduction of total expenses in the Statement of
Operations.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $12,101 for the six months ended
February 28, 2007, as its portion of the initial sales charge on sales of
Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $95,273
Class B 0.75% 0.25% 1.00% 1.00% 205,701
Class C 0.75% 0.25% 1.00% 1.00% 66,213
Class R 0.25% 0.25% 0.50% 0.50% 8,756
Class R1 0.50% 0.25% 0.75% 0.75% 1,622
Class R2 0.25% 0.25% 0.50% 0.50% 1,436
Class R3 0.25% 0.25% 0.50% 0.50% 2,548
Class R4 -- 0.25% 0.25% 0.25% 415
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $381,964
(d) In accordance with the distribution plan for certain classes, the fund
pays distribution and/or service fees up to these annual percentage rates
of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the
distribution plan for the six months ended February 28, 2007 based on each
class' average daily net assets.
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 of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. All contingent
deferred sales charges are paid to MFD and during the six months ended
February 28, 2007, were as follows:
AMOUNT
Class A $1,094
Class B $30,106
Class C $1,094
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average daily
net assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the six months ended February 28, 2007, the fee
was $44,735 which equated to 0.0753% annually of the fund's average daily net
assets. Effective January 1, 2007, MFSC has entered into a sub-accounting
agreement with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of
MFSC, on behalf of the fund to provide omnibus account services to the fund.
MFSC pays SRS both an asset based fee and a per account charge of the assets
held in the omnibus account. The fund then reimburses MFSC for the sub-
accounting fees paid to SRS. For the six months ended February 28, 2007, the
sub-accounting fee for SRS was $11,778, which equated to 0.0198% annually of
the fund's average daily net assets. MFSC also receives payment from the fund
for out-of-pocket and sub-accounting expenses. For the six months ended
February 28, 2007, these out-of-pocket and sub-accounting costs amounted to
$81,233. The fund may also pay shareholder servicing related costs directly to
non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended
February 28, 2007 was equivalent to an annual effective rate of 0.0248% of the
funds average daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares,
and may be provided directly by MFS or by a third party. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services fee
to affiliated or unaffiliated third parties. For the six months ended
February 28, 2007, the fund paid MFS an annual retirement plan administration
and services fee up to the following annual percentage rates of each class'
average daily net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $973
Class R2 0.40% 0.25% 1,148
Class R3 0.25% 0.15% 1,274
Class R4 0.15% 0.15% 249
Class R5 0.10% 0.10% 35
- -------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $3,679
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $1,156 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to trustees or officers of the fund who are also
officers of the investment adviser, 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, MFD, and MFSC. The fund has an unfunded, defined
benefit plan for certain retired independent trustees which resulted in a
pension expense of $270. The fund also has an unfunded retirement benefit
deferral plan for certain independent trustees which resulted in an expense of
$11,321. Both amounts are included in independent trustees' compensation for
the six months ended February 28, 2007. The liability for deferred retirement
benefits payable to certain independent trustees under both plans amounted to
$54,263 at February 28, 2007, and is included in payable for independent
trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $480. MFS has agreed to reimburse the fund for a portion of
the payments made by the funds to Tarantino LLC in the amount of $310, which
is shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office
space, other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$160,148,043 and $158,642,160, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 2,288,850 $26,675,802 936,633 $9,265,824
Class B 272,200 2,989,645 431,689 4,087,393
Class C 248,416 2,744,969 168,042 1,594,448
Class I 108,146 1,269,025 84,307 859,389
Class R 75,409 882,616 100,509 991,380
Class R1 34,389 359,424 24,284 239,333
Class R2 75,781 879,656 31,881 288,973
Class R3 170,702 2,002,402 97,787 947,694
Class R4 60,059 708,421 77,723 839,955
Class R5 -- -- 8 78
- ----------------------------------------------------------------------------------------------------------
3,333,952 $38,511,960 1,952,863 $19,114,467
Shares reacquired
Class A (1,673,551) $(19,686,910) (2,193,910) $(21,391,336)
Class B (739,679) (8,116,863) (1,538,128) (14,435,786)
Class C (213,685) (2,347,950) (421,535) (3,939,737)
Class I (110,514) (1,283,173) (122,505) (1,226,997)
Class R (52,052) (605,063) (57,043) (568,460)
Class R1 (26,492) (300,752) (9,866) (98,868)
Class R2 (34,395) (408,215) (4,276) (38,622)
Class R3 (139,487) (1,623,479) (39,636) (372,004)
Class R4 (20,008) (237,207) (72,583) (751,370)
Class R5 -- -- (8) (75)
- ----------------------------------------------------------------------------------------------------------
(3,009,863) $(34,609,612) (4,459,490) $(42,823,255)
Net change
Class A 615,299 $6,988,892 (1,257,277) $(12,125,512)
Class B (467,479) (5,127,218) (1,106,439) (10,348,393)
Class C 34,731 397,019 (253,493) (2,345,289)
Class I (2,368) (14,148) (38,198) (367,608)
Class R 23,357 277,553 43,466 422,920
Class R1 7,897 58,672 14,418 140,465
Class R2 41,386 471,441 27,605 250,351
Class R3 31,215 378,923 58,151 575,690
Class R4 40,051 471,214 5,140 88,585
Class R5 -- -- -- 3
- ----------------------------------------------------------------------------------------------------------
324,089 $3,902,348 (2,506,627) $(23,708,788)
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$371 and $601, respectively, and are included in miscellaneous expense on the
Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site at
http://www.sec.gov, and copies of this information may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov or by writing the Public Reference Section at the
above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
SEMIANNUAL REPORT
MFS(R) VALUE FUND
LETTER FROM THE CEO 1
- --------------------------------------------------------------
PORTFOLIO COMPOSITION 2
- --------------------------------------------------------------
EXPENSE TABLE 3
- --------------------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- --------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 10
- --------------------------------------------------------------
STATEMENT OF OPERATIONS 13
- --------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 14
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS 16
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 31
- --------------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 43
- --------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 43
- --------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 43
- --------------------------------------------------------------
CONTACT INFORMATION BACK COVER
- --------------------------------------------------------------
THE 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.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
EIF-SEM
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE
Common Stocks 98.8%
Cash & Other Net Assets 1.2%
TOP TEN HOLDINGS
Altria Group, Inc. 3.9%
------------------------------------------------
Lockheed Martin Corp. 3.9%
------------------------------------------------
Bank of America Corp. 3.9%
------------------------------------------------
Allstate Corp. 3.2%
------------------------------------------------
Citigroup, Inc. 3.2%
------------------------------------------------
MetLife, Inc. 3.1%
------------------------------------------------
Johnson & Johnson 2.7%
------------------------------------------------
Goldman Sachs Group, Inc. 2.6%
------------------------------------------------
Exxon Mobil Corp. 2.4%
------------------------------------------------
TOTAL S.A., ADR 2.2%
------------------------------------------------
EQUITY SECTORS
Financial Services 31.7%
------------------------------------------------
Industrial Goods & Services 11.4%
------------------------------------------------
Energy 11.3%
------------------------------------------------
Health Care 8.4%
------------------------------------------------
Consumer Staples 8.0%
------------------------------------------------
Utilities & Communications 7.9%
------------------------------------------------
Basic Materials 5.3%
------------------------------------------------
Retailing 3.4%
------------------------------------------------
Technology 3.3%
------------------------------------------------
Autos & Housing 3.0%
------------------------------------------------
Leisure 2.3%
------------------------------------------------
Transportation 1.8%
------------------------------------------------
Special Products & Services 1.0%
------------------------------------------------
Percentages are based on net assets as of 2/28/07.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2006 through February
28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides
information about hypothetical account values and hypothetical expenses based
on the fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 1.11% $1,000.00 $1,109.40 $5.81
A ------------------------------------------------------------------------
Hypothetical (h) 1.11% $1,000.00 $1,019.29 $5.56
- --------------------------------------------------------------------------------
Actual 1.76% $1,000.00 $1,106.10 $9.19
B -------------------------------------------------------------------------
Hypothetical (h) 1.76% $1,000.00 $1,016.07 $8.80
- --------------------------------------------------------------------------------
Actual 1.76% $1,000.00 $1,105.90 $9.19
C ------------------------------------------------------------------------
Hypothetical (h) 1.76% $1,000.00 $1,016.07 $8.80
- --------------------------------------------------------------------------------
Actual 0.76% $1,000.00 $1,111.20 $3.98
I ------------------------------------------------------------------------
Hypothetical (h) 0.76% $1,000.00 $1,021.03 $3.81
- --------------------------------------------------------------------------------
Actual 0.86% $1,000.00 $1,110.90 $4.50
W ------------------------------------------------------------------------
Hypothetical (h) 0.86% $1,000.00 $1,020.53 $4.31
- --------------------------------------------------------------------------------
Actual 1.26% $1,000.00 $1,108.80 $6.59
R ------------------------------------------------------------------------
Hypothetical (h) 1.26% $1,000.00 $1,018.55 $6.31
- --------------------------------------------------------------------------------
Actual 1.85% $1,000.00 $1,105.40 $9.66
R1 ------------------------------------------------------------------------
Hypothetical (h) 1.85% $1,000.00 $1,015.62 $9.25
- --------------------------------------------------------------------------------
Actual 1.50% $1,000.00 $1,107.20 $7.84
R2 ------------------------------------------------------------------------
Hypothetical (h) 1.50% $1,000.00 $1,017.36 $7.50
- --------------------------------------------------------------------------------
Actual 1.40% $1,000.00 $1,108.20 $7.32
R3 ------------------------------------------------------------------------
Hypothetical (h) 1.40% $1,000.00 $1,017.85 $7.00
- --------------------------------------------------------------------------------
Actual 1.15% $1,000.00 $1,109.40 $6.01
R4 ------------------------------------------------------------------------
Hypothetical (h) 1.15% $1,000.00 $1,019.09 $5.76
- --------------------------------------------------------------------------------
Actual 0.86% $1,000.00 $1,111.10 $4.50
R5 ------------------------------------------------------------------------
Hypothetical (h) 0.86% $1,000.00 $1,020.53 $4.31
- --------------------------------------------------------------------------------
Actual 1.36% $1,000.00 $1,107.80 $7.11
529A ------------------------------------------------------------------------
Hypothetical (h) 1.36% $1,000.00 $1,018.05 $6.80
- --------------------------------------------------------------------------------
Actual 2.01% $1,000.00 $1,104.50 $10.49
529B ------------------------------------------------------------------------
Hypothetical (h) 2.01% $1,000.00 $1,014.83 $10.04
- --------------------------------------------------------------------------------
Actual 2.01% $1,000.00 $1,104.50 $10.49
529C ------------------------------------------------------------------------
Hypothetical (h) 2.01% $1,000.00 $1,014.83 $10.04
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund.
It is categorized by broad-based asset classes.
Common Stocks - 98.8%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Aerospace - 7.5%
- ----------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 3,846,290 $ 374,167,091
Northrop Grumman Corp. (l) 2,839,380 204,009,453
United Technologies Corp. 2,231,870 146,477,628
--------------
$ 724,654,172
- ----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 1.1%
- ----------------------------------------------------------------------------------------------------
Diageo PLC 5,172,989 $ 102,028,637
- ----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 1.5%
- ----------------------------------------------------------------------------------------------------
Hanesbrands, Inc. (a)(l) 287,481 $ 8,224,831
NIKE, Inc., "B" 1,281,410 133,868,903
--------------
$ 142,093,734
- ----------------------------------------------------------------------------------------------------
Automotive - 0.5%
- ----------------------------------------------------------------------------------------------------
Johnson Controls, Inc. (l) 509,460 $ 47,787,348
- ----------------------------------------------------------------------------------------------------
Broadcasting - 1.7%
- ----------------------------------------------------------------------------------------------------
Viacom, Inc., "B" (a) 1,867,911 $ 72,923,245
Walt Disney Co. 1,372,730 47,029,730
WPP Group PLC 3,039,460 44,103,338
--------------
$ 164,056,313
- ----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 5.5%
- ----------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 535,790 $ 62,896,388
Goldman Sachs Group, Inc. 1,228,620 247,689,792
Lehman Brothers Holdings, Inc. 927,810 68,008,473
Mellon Financial Corp. 2,035,700 88,410,451
Merrill Lynch & Co., Inc. 706,830 59,147,534
--------------
$ 526,152,638
- ----------------------------------------------------------------------------------------------------
Business Services - 1.0%
- ----------------------------------------------------------------------------------------------------
Accenture Ltd., "A" 2,766,660 $ 98,769,762
- ----------------------------------------------------------------------------------------------------
Chemicals - 3.3%
- ----------------------------------------------------------------------------------------------------
Dow Chemical Co. 1,492,920 $ 65,389,896
Nalco Holding Co. 904,100 21,607,990
PPG Industries, Inc. 1,904,460 126,170,475
Syngenta AG 599,330 105,936,332
--------------
$ 319,104,693
- ----------------------------------------------------------------------------------------------------
Computer Software - 1.4%
- ----------------------------------------------------------------------------------------------------
Oracle Corp. (a) 7,903,150 $ 129,848,754
- ----------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.6%
- ----------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 1,355,260 $ 53,370,139
- ----------------------------------------------------------------------------------------------------
Construction - 2.5%
- ----------------------------------------------------------------------------------------------------
Masco Corp. 5,668,960 $ 169,218,456
Sherwin-Williams Co. 742,980 49,445,319
Toll Brothers, Inc. (a)(l) 760,010 22,693,899
--------------
$ 241,357,674
- ----------------------------------------------------------------------------------------------------
Containers - 0.2%
- ----------------------------------------------------------------------------------------------------
Smurfit-Stone Container Corp. (a) 1,547,940 $ 19,101,580
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 1.8%
- ----------------------------------------------------------------------------------------------------
Cooper Industries Ltd., "A" 148,760 $ 13,647,242
General Electric Co. 553,700 19,335,204
Rockwell Automation, Inc. (l) 1,091,750 67,786,757
W.W. Grainger, Inc. 947,930 73,132,800
--------------
$ 173,902,003
- ----------------------------------------------------------------------------------------------------
Electronics - 0.9%
- ----------------------------------------------------------------------------------------------------
Intel Corp. 4,551,510 $ 90,347,474
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 2.4%
- ----------------------------------------------------------------------------------------------------
Apache Corp. 1,000,780 $ 68,583,453
Devon Energy Corp. (l) 1,486,540 97,680,543
EOG Resources, Inc. 884,130 59,890,966
--------------
$ 226,154,962
- ----------------------------------------------------------------------------------------------------
Energy - Integrated - 8.6%
- ----------------------------------------------------------------------------------------------------
Chevron Corp. 977,024 $ 67,033,617
ConocoPhillips 2,537,380 165,995,400
Exxon Mobil Corp. 3,176,060 227,659,981
Hess Corp. 2,156,140 114,383,227
Royal Dutch Shell PLC, ADR 670,010 43,557,350
TOTAL S.A., ADR 3,121,000 210,105,720
--------------
$ 828,735,295
- ----------------------------------------------------------------------------------------------------
Food & Beverages - 3.0%
- ----------------------------------------------------------------------------------------------------
Kellogg Co. 2,105,430 $ 105,103,066
Nestle S.A 244,589 91,164,900
PepsiCo, Inc. 1,143,316 72,200,405
Tyson Foods, Inc., "A" (l) 1,048,580 19,136,585
--------------
$ 287,604,956
- ----------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.5%
- ----------------------------------------------------------------------------------------------------
CVS Corp. 1,575,990 $ 49,501,846
- ----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.4%
- ----------------------------------------------------------------------------------------------------
Bowater, Inc. (l) 353,090 $ 8,537,716
International Paper Co. 942,140 33,926,461
--------------
$ 42,464,177
- ----------------------------------------------------------------------------------------------------
General Merchandise - 1.4%
- ----------------------------------------------------------------------------------------------------
Federated Department Stores, Inc. 3,087,590 $ 137,891,769
- ----------------------------------------------------------------------------------------------------
Health Maintenance Organizations - 1.4%
- ----------------------------------------------------------------------------------------------------
UnitedHealth Group, Inc. 691,520 $ 36,097,344
WellPoint, Inc. (a) 1,288,790 102,317,038
--------------
$ 138,414,382
- ----------------------------------------------------------------------------------------------------
Insurance - 9.4%
- ----------------------------------------------------------------------------------------------------
Aflac, Inc. 844,980 $ 39,883,056
Allstate Corp. 5,156,910 309,724,015
Chubb Corp. 1,112,170 56,776,279
Genworth Financial, Inc., "A" 2,906,940 102,818,468
Hartford Financial Services Group, Inc. 1,009,915 95,497,562
MetLife, Inc. 4,689,450 296,138,767
--------------
$ 900,838,147
- ----------------------------------------------------------------------------------------------------
Leisure & Toys - 0.3%
- ----------------------------------------------------------------------------------------------------
Hasbro, Inc. (l) 1,067,880 $ 30,210,325
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 2.1%
- ----------------------------------------------------------------------------------------------------
Deere & Co. 1,694,116 $ 183,676,057
Eaton Corp. 248,950 20,167,440
--------------
$ 203,843,497
- ----------------------------------------------------------------------------------------------------
Major Banks - 8.8%
- ----------------------------------------------------------------------------------------------------
Bank of America Corp. 7,342,055 $ 373,490,338
Bank of New York Co., Inc. 3,533,020 143,511,272
PNC Financial Services Group, Inc. 1,723,540 126,352,717
SunTrust Banks, Inc. 2,405,210 202,783,255
--------------
$ 846,137,582
- ----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.3%
- ----------------------------------------------------------------------------------------------------
Caremark Rx, Inc. 518,500 $ 31,934,415
- ----------------------------------------------------------------------------------------------------
Network & Telecom - 0.4%
- ----------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (a) 1,393,740 $ 36,153,616
- ----------------------------------------------------------------------------------------------------
Oil Services - 0.3%
- ----------------------------------------------------------------------------------------------------
Noble Corp. 457,080 $ 32,096,158
- ----------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 8.0%
- ----------------------------------------------------------------------------------------------------
American Express Co. 1,543,510 $ 87,779,414
Citigroup, Inc. 6,068,950 305,875,080
Fannie Mae 2,973,020 168,659,425
Freddie Mac 823,850 52,874,693
UBS AG (l) 2,597,046 154,046,692
--------------
$ 769,235,304
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals - 6.7%
- ----------------------------------------------------------------------------------------------------
Abbott Laboratories 726,730 $ 39,693,993
Eli Lilly & Co. 1,579,380 83,138,563
Johnson & Johnson 4,106,950 258,943,198
Merck & Co., Inc. 2,351,760 103,853,722
Wyeth 3,241,790 158,588,367
--------------
$ 644,217,843
- ----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.3%
- ----------------------------------------------------------------------------------------------------
New York Times Co., "A" (l) 975,400 $ 24,121,642
- ----------------------------------------------------------------------------------------------------
Railroad & Shipping - 1.8%
- ----------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 1,372,060 $ 108,653,431
Norfolk Southern Corp. 1,401,440 66,428,256
--------------
$ 175,081,687
- ----------------------------------------------------------------------------------------------------
Specialty Chemicals - 1.4%
- ----------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 933,668 $ 69,857,040
Praxair, Inc. 1,122,060 69,219,881
--------------
$ 139,076,921
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.9%
- ----------------------------------------------------------------------------------------------------
Vodafone Group PLC 31,391,483 $ 87,216,541
- ----------------------------------------------------------------------------------------------------
Telephone Services - 2.3%
- ----------------------------------------------------------------------------------------------------
Embarq Corp. 906,559 $ 50,178,041
Sprint Nextel Corp. 5,796,590 111,758,255
TELUS Corp. (non-voting shares) 328,180 15,509,118
Verizon Communications, Inc. 1,158,080 43,346,934
--------------
$ 220,792,348
- ----------------------------------------------------------------------------------------------------
Tobacco - 3.9%
- ----------------------------------------------------------------------------------------------------
Altria Group, Inc. 4,442,180 $ 374,386,930
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 4.7%
- ----------------------------------------------------------------------------------------------------
Dominion Resources, Inc. 1,866,280 $ 159,622,928
Entergy Corp. 679,010 67,018,287
FPL Group, Inc. (l) 1,669,730 98,630,951
PPL Corp. 660,100 25,097,002
Public Service Enterprise Group, Inc. 301,630 22,592,087
TXU Corp. (l) 1,199,670 $ 79,358,170
--------------
$ 452,319,425
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $7,071,841,893) $9,511,004,689
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 1.7%
- ----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and Net
Asset Value 162,321,804 $ 162,321,804
- ----------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.3% (y)
- ----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, due 3/01/07 $101,894,000 $ 101,894,000
Old Line Funding LLC, 5.26%, due 3/19/07 (t) 17,463,000 17,417,072
Regency Markets No. 1 LLC, 5.27%, due 3/02/07 (t) 9,100,000 9,098,668
- ----------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST $ 128,409,740
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $7,362,573,437) $9,801,736,233
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.8)% (172,021,626)
- ----------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $9,629,714,607
- ----------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(l) All or a portion of this security is on loan.
(t) Security exempt from registration with the U.S. Securities and Exchange Commission under
Section 4(2) of the Securities Act of 1933.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets and liabilities comprising
the total value of the fund.
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value, including $158,629,747 of securities
on loan (identified cost, $7,362,573,437) $9,801,736,233
Cash 304
Receivable for investments sold 22,873,752
Receivable for fund shares sold 26,195,366
Interest and dividends receivable 21,400,651
Receivable from investment adviser 52,568
Other assets 153,127
- -------------------------------------------------------------------------------------------------------
Total assets $9,872,412,001
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Payable for investments purchased $55,939,646
Payable for fund shares reacquired 22,689,790
Collateral for securities loaned, at value 162,321,804
Payable to affiliates
Management fee 314,818
Shareholder servicing costs 841,427
Distribution and service fees 236,983
Administrative services fee 3,356
Program manager fees 104
Retirement plan administration and services fees 2,159
Payable for independent trustees' compensation 14,966
Accrued expenses and other liabilities 332,341
- -------------------------------------------------------------------------------------------------------
Total liabilities $242,697,394
- -------------------------------------------------------------------------------------------------------
Net assets $9,629,714,607
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- -------------------------------------------------------------------------------------------------------
Paid-in capital $7,047,537,750
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 2,439,164,830
Accumulated net realized gain (loss) on investments and
foreign currency transactions 129,094,013
Undistributed net investment income 13,918,014
- -------------------------------------------------------------------------------------------------------
Net assets $9,629,714,607
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 357,775,635
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $5,730,293,552
Shares outstanding 212,677,552
- -------------------------------------------------------------------------------------------------------
Net asset value per share $26.94
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per
share) $28.58
- -------------------------------------------------------------------------------------------------------
Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,148,702,813
Shares outstanding 42,917,671
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $26.77
- -------------------------------------------------------------------------------------------------------
Class C shares
- -------------------------------------------------------------------------------------------------------
Net assets $994,650,398
Shares outstanding 37,210,012
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $26.73
- -------------------------------------------------------------------------------------------------------
Class I shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,350,786,262
Shares outstanding 49,899,549
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $27.07
- -------------------------------------------------------------------------------------------------------
Class W shares
- -------------------------------------------------------------------------------------------------------
Net assets $22,804,936
Shares outstanding 846,475
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.94
- -------------------------------------------------------------------------------------------------------
Class R shares
- -------------------------------------------------------------------------------------------------------
Net assets $93,912,269
Shares outstanding 3,492,997
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.89
- -------------------------------------------------------------------------------------------------------
Class R1 shares
- -------------------------------------------------------------------------------------------------------
Net assets $8,458,071
Shares outstanding 317,613
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.63
- -------------------------------------------------------------------------------------------------------
Class R2 shares
- -------------------------------------------------------------------------------------------------------
Net assets $8,083,203
Shares outstanding 302,285
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.74
- -------------------------------------------------------------------------------------------------------
Class R3 shares
- -------------------------------------------------------------------------------------------------------
Net assets $61,292,853
Shares outstanding 2,287,400
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.80
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class R4 shares
- -------------------------------------------------------------------------------------------------------
Net assets $86,787,071
Shares outstanding 3,225,157
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.91
- -------------------------------------------------------------------------------------------------------
Class R5 shares
- -------------------------------------------------------------------------------------------------------
Net assets $116,469,233
Shares outstanding 4,319,216
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.97
- -------------------------------------------------------------------------------------------------------
Class 529A shares
- -------------------------------------------------------------------------------------------------------
Net assets $4,682,091
Shares outstanding 174,608
- -------------------------------------------------------------------------------------------------------
Net asset value per share $26.81
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per
share) $28.45
- -------------------------------------------------------------------------------------------------------
Class 529B shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,185,231
Shares outstanding 44,607
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $26.57
- -------------------------------------------------------------------------------------------------------
Class 529C shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,606,624
Shares outstanding 60,493
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $26.56
- -------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A and Class 529A shares are reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class
529B, and Class 529C shares.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses. It
also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $95,135,475
Interest 3,319,782
Foreign taxes withheld (652,851)
- ------------------------------------------------------------------------------------------------------
Total investment income $97,802,406
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $27,332,599
Distribution and service fees 20,556,919
Program manager fees 8,597
Shareholder servicing costs 6,167,994
Administrative services fee 303,734
Retirement plan administration and services fees 164,256
Independent trustees' compensation 60,191
Custodian fee 437,553
Shareholder communications 276,523
Auditing fees 22,589
Legal fees 118,254
Miscellaneous 285,667
- ------------------------------------------------------------------------------------------------------
Total expenses $55,734,876
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (327,290)
Reduction of expenses by investment adviser (472,502)
- ------------------------------------------------------------------------------------------------------
Net expenses $54,935,084
- ------------------------------------------------------------------------------------------------------
Net investment income $42,867,322
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $210,136,854
Foreign currency transactions (1,775)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $210,135,079
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $669,658,560
Translation of assets and liabilities in foreign currencies (4,156)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $669,654,404
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $879,789,483
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $922,656,805
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income $42,867,322 $101,398,166
Net realized gain (loss) on investments and foreign
currency transactions 210,135,079 303,639,543
Net unrealized gain (loss) on investments and foreign
currency translation 669,654,404 521,315,817
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $922,656,805 $926,353,526
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A $(39,929,473) $(56,268,368)
Class B (5,078,228) (6,779,390)
Class C (4,128,352) (4,984,908)
Class I (11,446,415) (15,180,640)
Class W (107,096) (388)
Class R (741,144) (1,084,796)
Class R1 (25,011) (14,051)
Class R2 (32,290) (12,119)
Class R3 (244,352) (160,191)
Class R4 (391,948) (168,024)
Class R5 (568,852) (571,771)
Class 529A (27,030) (32,149)
Class 529B (3,414) (2,874)
Class 529C (4,664) (4,307)
From net realized gain on investments and foreign
currency transactions
Class A $(161,744,414) $(217,446,760)
Class B (34,846,208) (58,304,573)
Class C (28,334,762) (41,125,028)
Class I (37,523,913) (44,433,140)
Class W (415,807) --
Class R (3,323,744) (5,057,671)
Class R1 (202,116) (65,732)
Class R2 (177,924) (32,165)
Class R3 (1,332,483) (644,654)
Class R4 (1,724,464) (108,618)
Class R5 (1,986,525) (2,214,112)
Class 529A (129,843) (147,960)
Class 529B (31,527) (34,246)
Class 529C (45,316) (54,564)
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(334,547,315) $(454,933,199)
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $665,923,066 $224,602,050
- -------------------------------------------------------------------------------------------------------
Total change in net assets $1,254,032,556 $696,022,377
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 8,375,682,051 7,679,659,674
At end of period (including undistributed net investment
income of $13,918,014 and $33,778,961, respectively) $9,629,714,607 $8,375,682,051
- -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $25.20 $23.81 $20.88 $18.03 $17.21 $19.28
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.14 $0.34 $0.28 $0.23 $0.24 $0.20
Net realized and
unrealized gain (loss) on
investments and foreign
currency 2.60 2.48 2.91 2.84 0.81 (2.05)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $2.74 $2.82 $3.19 $3.07 $1.05 $(1.85)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.20) $(0.29) $(0.26) $(0.22) $(0.23) $(0.15)
From net realized gain on
investments and foreign
currency transactions (0.80) (1.14) -- -- -- (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(1.00) $(1.43) $(0.26) $(0.22) $(0.23) $(0.22)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $26.94 $25.20 $23.81 $20.88 $18.03 $17.21
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.94(n) 12.36 15.36 17.13(b) 6.22 (9.64)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.12(a) 1.17 1.16 1.18 1.20 1.25
Expenses after expense
reductions (f) 1.11(a) 1.16 1.16 1.18 N/A N/A
Net investment income 1.05(a) 1.40 1.23 1.14 1.41 1.05
Portfolio turnover 13 26 24 42 55 48
Net assets at end of period
(000 Omitted) $5,730,294 $4,929,525 $4,554,484 $3,527,854 $3,039,085 $1,820,568
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $25.04 $23.66 $20.77 $17.94 $17.13 $19.19
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.05 $0.17 $0.13 $0.10 $0.12 $0.07
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.59 2.49 2.90 2.83 0.81 (2.02)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $2.64 $2.66 $3.03 $2.93 $0.93 $(1.95)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.11) $(0.14) $(0.14) $(0.10) $(0.12) $(0.04)
From net realized gain on
investments and foreign
currency transactions (0.80) (1.14) -- -- -- $(0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(0.91) $(1.28) $(0.14) $(0.10) $(0.12) $(0.11)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.77 $25.04 $23.66 $20.77 $17.94 $17.13
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.61(n) 11.66 14.61 16.35(b) 5.50 (10.20)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.77(a) 1.82 1.81 1.82 1.85 1.90
Expenses after expense
reductions (f) 1.76(a) 1.81 1.81 1.82 N/A N/A
Net investment income 0.38(a) 0.72 0.58 0.49 0.76 0.40
Portfolio turnover 13 26 24 42 55 48
Net assets at end of period
(000 Omitted) $1,148,703 $1,139,651 $1,262,029 $1,199,074 $1,069,389 $923,330
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $25.01 $23.64 $20.75 $17.93 $17.12 $19.18
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.05 $0.18 $0.13 $0.10 $0.12 $0.07
Net realized and unrealized
gain (loss) on investments and
foreign currency 2.58 2.47 2.90 2.82 0.81 (2.02)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.63 $2.65 $3.03 $2.92 $0.93 $(1.95)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.11) $(0.14) $(0.14) $(0.10) $(0.12) $(0.04)
From net realized gain on
investments and foreign currency
transactions (0.80) (1.14) -- -- -- (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.91) $(1.28) $(0.14) $(0.10) $(0.12) $(0.11)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.73 $25.01 $23.64 $20.75 $17.93 $17.12
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.59(n) 11.65 14.63 16.32(b) 5.52 (10.21)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.77(a) 1.82 1.81 1.82 1.85 1.90
Expenses after expense reductions (f) 1.76(a) 1.81 1.81 1.82 N/A N/A
Net investment income 0.39(a) 0.74 0.58 0.49 0.76 0.40
Portfolio turnover 13 26 24 42 55 48
Net assets at end of period
(000 Omitted) $994,650 $881,538 $863,486 $761,669 $648,318 $473,537
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------------------
CLASS I 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $25.32 $23.91 $20.95 $18.10 $17.27 $19.35
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.19 $0.43 $0.37 $0.30 $0.30 $0.27
Net realized and unrealized
gain (loss) on investments and
foreign currency 2.60 2.49 2.91 2.84 0.82 (2.06)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.79 $2.92 $3.28 $3.14 $1.12 $(1.79)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.24) $(0.37) $(0.32) $(0.29) $(0.29) $(0.22)
From net realized gain on
investments and foreign
currency transactions (0.80) (1.14) -- -- -- (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.04) $(1.51) $(0.32) $(0.29) $(0.29) $(0.29)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $27.07 $25.32 $23.91 $20.95 $18.10 $17.27
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.12(n) 12.78 15.78 17.47(b) 6.61 (9.35)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.77(a) 0.82 0.81 0.83 0.85 0.90
Expenses after expense reductions (f) 0.76(a) 0.81 0.81 0.83 N/A N/A
Net investment income 1.39(a) 1.77 1.59 1.50 1.76 1.40
Portfolio turnover 13 26 24 42 55 48
Net assets at end of period
(000 Omitted) $1,350,786 $1,162,665 $899,654 $593,364 $296,961 $76,932
- -------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS
ENDED YEAR ENDED
CLASS W 2/28/07 8/31/06(i)
(UNAUDITED)
Net asset value, beginning of period $25.20 $25.04
- ----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income (d) $0.18 $0.24
Net realized and unrealized gain (loss) on investments and
foreign currency 2.59 0.02(g)
- ----------------------------------------------------------------------------------------------------------
Total from investment operations $2.77 $0.26
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------
From net investment income $(0.23) $(0.10)
From net realized gain on investments and foreign
currency transactions (0.80) --
- ----------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.03) $(0.10)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.94 $25.20
- ----------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.09(n) 1.05(n)
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.87(a) 0.92(a)
Expenses after expense reductions (f) 0.86(a) 0.91(a)
Net investment income 1.37(a) 3.32(a)
Portfolio turnover 13 26
Net assets at end of period (000 Omitted) $22,805 $8,952
- ----------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED --------------------------------------------------------
CLASS R 2/28/07 2006 2005 2004 2003(i)
(UNAUDITED)
Net asset value, beginning of period $25.15 $23.76 $20.84 $18.01 $16.53
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.12 $0.30 $0.25 $0.21 $0.15
Net realized and unrealized gain (loss) on
investments and foreign currency 2.60 2.49 2.90 2.82 1.45
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.72 $2.79 $3.15 $3.03 $1.60
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.26) $(0.23) $(0.20) $(0.12)
From net realized gain on investments and
foreign currency transactions (0.80) (1.14) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.98) $(1.40) $(0.23) $(0.20) $(0.12)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.89 $25.15 $23.76 $20.84 $18.01
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.88(n) 12.22 15.21 16.92(b) 9.76(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.27(a) 1.31 1.31 1.33 1.42(a)
Expenses after expense reductions (f) 1.26(a) 1.31 1.31 1.33 N/A
Net investment income 0.88(a) 1.24 1.10 1.02 1.26(a)
Portfolio turnover 13 26 24 42 55
Net assets at end of period (000 Omitted) $93,912 $101,162 $85,302 $47,970 $14,583
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $24.93 $23.63 $23.17
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.04 $0.22 $0.09
Net realized and unrealized gain (loss) on investments and
foreign currency 2.57 2.39 0.42(g)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.61 $2.61 $0.51
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.11) $(0.17) $(0.05)
From net realized gain on investments and foreign
currency transactions (0.80) (1.14) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.91) $(1.31) $(0.05)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.63 $24.93 $23.63
- -------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.54(n) 11.51 2.21(n)
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.96(a) 2.02 2.04(a)
Expenses after expense reductions (f) 1.85(a) 1.92 2.04(a)
Net investment income 0.34(a) 0.93 0.89(a)
Portfolio turnover 13 26 24
Net assets at end of period (000 Omitted) $8,458 $4,639 $574
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $25.03 $23.67 $23.17
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.09 $0.30 $0.11
Net realized and unrealized gain (loss) on investments and
foreign currency 2.58 2.42 0.43(g)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.67 $2.72 $0.54
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.22) $(0.04)
From net realized gain on investments and foreign
currency transactions (0.80) (1.14) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.96) $(1.36) $(0.04)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.74 $25.03 $23.67
- -------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.72(n) 11.96 2.34(n)
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.66(a) 1.71 1.73(a)
Expenses after expense reductions (f) 1.50(a) 1.57 1.73(a)
Net investment income 0.68(a) 1.33 1.49(a)
Portfolio turnover 13 26 24
Net assets at end of period (000 Omitted) $8,083 $4,520 $732
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------------------------
CLASS R3 2/28/07 2006 2005 2004(i)
(UNAUDITED)
Net asset value, beginning of period $25.07 $23.71 $20.84 $18.73
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.10 $0.31 $0.21 $0.11
Net realized and unrealized gain (loss) on
investments and foreign currency 2.59 2.43 2.88 2.12
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.69 $2.74 $3.09 $2.23
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.24) $(0.22) $(0.12)
From net realized gain on investments and foreign
currency transactions (0.80) (1.14) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.96) $(1.38) $(0.22) $(0.12)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.80 $25.07 $23.71 $20.84
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.82(n) 12.03 14.91 11.93(b)(n)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.51(a) 1.56 1.57 1.59(a)
Expenses after expense reductions (f) 1.40(a) 1.47 1.57 1.59(a)
Net investment income 0.78(a) 1.27 0.93 0.80(a)
Portfolio turnover 13 26 24 42
Net assets at end of period (000 Omitted) $61,293 $30,001 $8,316 $414
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $25.17 $23.81 $23.29
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.14 $0.42 $0.15
Net realized and unrealized gain (loss) on investments and
foreign currency 2.59 2.39 0.44(g)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.73 $2.81 $0.59
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.19) $(0.31) $(0.07)
From net realized gain on investments and foreign
currency transactions (0.80) (1.14) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.99) $(1.45) $(0.07)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.91 $25.17 $23.81
- -------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 10.94(n) 12.33 2.53(n)
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.16(a) 1.22 1.23(a)
Expenses after expense reductions (f) 1.15(a) 1.22 1.23(a)
Net investment income 1.04(a) 1.80 1.94(a)
Portfolio turnover 13 26 24
Net assets at end of period (000 Omitted) $86,787 $46,731 $400
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $25.22 $23.83 $23.29
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.18 $0.45 $0.15
Net realized and unrealized gain (loss) on
investments and foreign currency 2.60 2.43 0.47(g)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.78 $2.88 $0.62
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.23) $(0.35) $(0.08)
From net realized gain on investments and foreign
currency transactions (0.80) (1.14) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.03) $(1.49) $(0.08)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.97 $25.22 $23.83
- -------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 11.11(n) 12.64 2.68(n)
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.87(a) 0.92 0.92(a)
Expenses after expense reductions (f) 0.86(a) 0.91 0.92(a)
Net investment income 1.39(a) 1.80 1.57(a)
Portfolio turnover 13 26 24
Net assets at end of period (000 Omitted) $116,469 $60,124 $51
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------
CLASS 529A 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $25.09 $23.71 $20.80 $18.00 $17.21 $16.84
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.10 $0.28 $0.23 $0.18 $0.20 $0.03
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.59 2.48 2.90 2.80 0.81 0.34
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.69 $2.76 $3.13 $2.98 $1.01 $0.37
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.17) $(0.24) $(0.22) $(0.18) $(0.22) $--
From net realized gain on investments
and foreign currency transactions (0.80) (1.14) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.97) $(1.38) $(0.22) $(0.18) $(0.22) $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.81 $25.09 $23.71 $20.80 $18.00 $17.21
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.78(n) 12.11 15.09 16.63(b) 5.98 2.20(n)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.37(a) 1.42 1.41 1.43 1.48 1.50(a)
Expenses after expense reductions (f) 1.36(a) 1.41 1.41 1.43 N/A N/A
Net investment income 0.79(a) 1.18 0.99 0.91 1.20 2.23(a)
Portfolio turnover 13 26 24 42 55 48
Net assets at end of period
(000 Omitted) $4,682 $3,947 $2,914 $1,673 $806 $10
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------
CLASS 529B 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $24.87 $23.52 $20.67 $17.87 $17.12 $16.76
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.13 $0.08 $0.05 $0.09 $0.02
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.56 2.45 2.87 2.81 0.80 0.34
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.58 $2.58 $2.95 $2.86 $0.89 $0.36
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.08) $(0.09) $(0.10) $(0.06) $(0.14) $--
From net realized gain on investments
and foreign currency transactions (0.80) (1.14) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.88) $(1.23) $(0.10) $(0.06) $(0.14) $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.57 $24.87 $23.52 $20.67 $17.87 $17.12
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.45(n) 11.39 14.32 16.03(b) 5.29 2.15(n)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.02(a) 2.06 2.06 2.07 2.13 2.15(a)
Expenses after expense reductions (f) 2.01(a) 2.06 2.06 2.07 N/A N/A
Net investment income 0.15(a) 0.53 0.34 0.27 0.52 1.33(a)
Portfolio turnover 13 26 24 42 55 48
Net assets at end of period
(000 Omitted) $1,185 $946 $655 $439 $181 $6
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------
CLASS 529C 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value, beginning of period $24.86 $23.51 $20.66 $17.86 $17.11 $16.75
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.12 $0.08 $0.05 $0.09 $0.02
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.56 2.46 2.87 2.81 0.80 0.34
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.58 $2.58 $2.95 $2.86 $0.89 $0.36
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.08) $(0.09) $(0.10) $(0.06) $(0.14) $--
From net realized gain on investments
and foreign currency transactions (0.80) (1.14) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.88) $(1.23) $(0.10) $(0.06) $(0.14) $--
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.56 $24.86 $23.51 $20.66 $17.86 $17.11
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 10.45(n) 11.39 14.32 16.03(b) 5.31 2.15(n)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.02(a) 2.06 2.06 2.07 2.13 2.15(a)
Expenses after expense reductions (f) 2.01(a) 2.06 2.06 2.07 N/A N/A
Net investment income 0.15(a) 0.51 0.36 0.26 0.55 1.75(a)
Portfolio turnover 13 26 24 42 55 48
Net assets at end of period
(000 Omitted) $1,607 $1,279 $1,062 $643 $352 $21
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
(a) Annualized.
(b) The fund's net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales. The non-recurring accrual did not have a material impact on the
net asset value per share based on the shares outstanding on the day the
proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) The per share amount is not in accordance with the net realized and
unrealized gain/loss for the period because of the timing of sales of fund
shares and the per share amount of realized and unrealized gains and losses
at such time.
(i) For the period from the class' inception, July 31, 2002 (Classes 529A,
529B, and 529C), December 31, 2002 (Class R), October 31, 2003 (Class R3),
April 1, 2005 (Classes R1, R2, R4, and R5) and May 1, 2006 (Class W)
through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have
been lower.
(s) From time to time the fund may receive proceeds from litigation
settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Value Fund (the fund) is a 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 U.S.
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, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the market
or exchange on which they are primarily traded. For securities held short for
which there were no sales reported for the day, the position is generally
valued at the last quoted daily ask quotation as reported by an independent
pricing service on the market or exchange on which such securities are
primarily traded. Short-term instruments with a maturity at issuance of 60 days
or less may be valued at amortized cost, which approximates market value.
Open-end investment companies are generally valued at their net asset value per
share. Securities and other assets generally valued on the basis of information
from an independent pricing service may also be valued at a broker-dealer bid
quotation. The values of foreign securities and other assets and liabilities
expressed in foreign currencies are converted to U.S. dollars using the mean of
bid and asked prices for rates reported by an independent pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the fund's investments (including any
fair valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the fund's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. In addition, investments may be valued at fair
value if the adviser determines that an investment's value has been materially
affected by events occurring after the close of the exchange or market on which
the investment is principally traded (such as foreign exchange or market) and
prior to the determination of the fund's net asset value, or after the halting
of trading of a specific security where trading does not resume prior to the
close of the exchange or market on which the security is principally traded.
Events that occur on a frequent basis after foreign markets close (such as
developments in foreign markets and significant movements in the U.S. markets)
and prior to the determination of the fund's net asset value may be deemed to
have a material affect on the value of securities traded in foreign markets.
Accordingly, the fund's foreign equity securities may often be valued at fair
value. The adviser may rely on independent pricing services or other
information (such as the correlation with price movements of similar securities
in the same or other markets; the type, cost and investment characteristics of
the security; the business and financial condition of the issuer; and trading
and other market data) to assist in determining whether to fair value and at
what value to fair value an investment. The value of an investment for purposes
of calculating the fund's net asset value can differ depending on the source
and method used to determine value. When fair valuation is used, the value of
investments used to determine the fund's net asset value may differ from quoted
or published prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the fund, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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"), as
lending agent, 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 cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
On loans collateralized by cash, the cash collateral is invested in a money
market fund or short-term securities. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the fund and the lending agent. On loans collateralized by
U.S. Treasury securities, a fee is received from the Borrower, and is allocated
between the fund and the lending agent. Net 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.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to the ex-
dividend date. Dividend and interest payments received in additional securities
are recorded on the ex-dividend or ex-interest date in an amount equal to the
value of the security on such date.
The fund may receive proceeds from litigation settlements. Any proceeds
received from litigation involving its portfolio holdings are reflected in
realized gain/loss in the Statement of Operations, or in unrealized gain/loss
if the security is still held by the fund. Any other proceeds from litigation
not related to portfolio holdings are reflected as other income in the
Statement of Operations.
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. This amount, for the six months ended February 28, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the fund in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to wash sale loss deferrals, treating a
portion of the proceeds from redemptions as a distribution for tax purposes,
and redemptions in-kind.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
8/31/06
Ordinary income (including any short-term
capital gains) $90,625,348
Long-term capital gain 364,307,851
------------------------------------------------------------
Total distributions $454,933,199
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $7,381,017,867
------------------------------------------------------------
Gross appreciation $2,492,735,755
Gross depreciation (72,017,389)
------------------------------------------------------------
Net unrealized appreciation (depreciation) $2,420,718,366
AS OF 8/31/06
Undistributed ordinary income $41,676,548
Undistributed long-term capital gain 201,335,214
Other temporary differences (4,200)
Net unrealized appreciation (depreciation) 1,751,059,805
The aggregate cost above includes prior fiscal year end tax adjustments.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management is
evaluating the application of the Interpretation to the fund, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on the fund's financial statements.
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 and Class 529B
shares will convert to Class A and Class 529A shares, respectively,
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the fund. The management fee is computed daily and paid monthly
at an annual rate of 0.60% of the fund's average daily net assets.
The investment adviser has agreed in writing to reduce its management fee to
0.55% of average daily net assets in excess of $7.5 billion. This written
agreement may be rescinded only upon consent of the fund's Board of Trustees.
This management fee reduction amounted to $418,128, which is shown as a
reduction of total expenses in the Statement of Operations.
The management fee incurred for the six months ended February 28, 2007 was
equivalent to an annual effective rate of 0.59% of the fund's average daily net
assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $251,232 and $1,520 for the six months ended
February 28, 2007, as its portion of the initial sales charge on sales of Class
A and Class 529A shares of the fund, respectively.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $9,474,480
Class B 0.75% 0.25% 1.00% 1.00% 5,827,599
Class C 0.75% 0.25% 1.00% 1.00% 4,735,496
Class W 0.10% -- 0.10% 0.10% 7,108
Class R 0.25% 0.25% 0.50% 0.50% 264,490
Class R1 0.50% 0.25% 0.75% 0.75% 24,392
Class R2 0.25% 0.25% 0.50% 0.50% 15,310
Class R3 0.25% 0.25% 0.50% 0.50% 112,860
Class R4 -- 0.25% 0.25% 0.25% 74,866
Class 529A 0.25% 0.25% 0.50% 0.35% 7,575
Class 529B 0.75% 0.25% 1.00% 1.00% 5,320
Class 529C 0.75% 0.25% 1.00% 1.00% 7,423
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $20,556,919
(d) In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees up
to these annual percentage rates of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the distribution plan for the six months ended
February 28, 2007 based on each class' average daily net assets. 0.10% of the Class 529A distribution fee is
currently being paid by the fund. Payment of the remaining 0.15% of the Class 529A distribution fee is not yet
in effect and will be implemented on such date as the fund's Board of Trustees may determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within 12
months of purchase. Class B and Class 529B shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within six
years of purchase. All contingent deferred sales charges are paid to MFD and
during the six months ended February 28, 2007, were as follows:
AMOUNT
Class A $51,703
Class B $564,266
Class C $16,279
Class 529B $198
Class 529C $38
The fund has entered into and may from time to time enter into contracts with
program managers and other parties which administer the tuition programs
through which an investment in the fund's 529 share classes is made. The fund
has entered into an agreement with MFD pursuant to which MFD receives an
annual fee of up to 0.35% of the average daily net assets attributable to each
529 share class. The fee is based on average daily net assets and is currently
established at 0.25% annually of average daily net assets of the fund's 529
share classes. The fee may only be increased with the approval of the Board of
Trustees who oversees the fund. The services provided by MFD, or a third party
with which MFD contracts, include recordkeeping and tax reporting and account
services, as well as services designed to maintain the program's compliance
with the Internal Revenue Code and other regulatory requirements. Program
manager fees for the six months ended February 28, 2007, were as follows:
AMOUNT
Class 529A $5,411
Class 529B 1,330
Class 529C 1,856
--------------------------------------------------
Total Program Manager Fees $8,597
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as shareholder
servicing agent calculated as a percentage of the average daily net assets of
the fund as determined periodically under the supervision of the fund's Board
of Trustees. For the six months ended February 28, 2007, the fee was
$3,452,540, which equated to 0.0757% annually of the fund's average daily net
assets. Effective January 1, 2007, MFSC has entered into a sub-accounting
agreement with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of
MFSC, on behalf of the fund to provide omnibus account services to the fund.
MFSC pays SRS both an asset based fee and a per account charge of the assets
held in the omnibus account. The fund then reimburses MFSC for the sub-
accounting fees paid to SRS. For the six months ended February 28, 2007, the
sub-accounting fee for SRS was $244,568, which equated to 0.0054% annually of
the fund's average daily net assets. MFSC also receives payment from the fund
for out-of-pocket and sub-accounting expenses. For the six months ended
February 28, 2007, these out-of-pocket and sub-accounting costs amounted to
$2,069,568. The fund may also pay shareholder servicing related costs directly
to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended February 28,
2007 was equivalent to an annual effective rate of 0.0067% of the fund's
average daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares, and
may be provided directly by MFS or by a third party. MFS may subsequently pay
all, or a portion, of the retirement plan administration and services fee to
affiliated or unaffiliated third parties. For the six months ended February 28,
2007, the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily
net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $14,635
Class R2 0.40% 0.25% 12,249
Class R3 0.25% 0.15% 56,430
Class R4 0.15% 0.15% 44,919
Class R5 0.10% 0.10% 36,023
- -------------------------------------------------------------------------------
Total Retirement Plan Administration
and Services Fees $164,256
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $30,417 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and additional
compensation to Board and Committee chairpersons. The fund does not pay
compensation directly to trustees or officers of the fund who are also officers
of the investment adviser, 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, MFD, and MFSC.
The fund has an unfunded, defined benefit plan for certain retired independent
trustees which resulted in a pension expense of $555. This amount is included
in independent trustees' compensation for the six months ended February 28,
2007. The liability for deferred retirement benefits payable to certain retired
independent trustees amounted to $9,946 at February 28, 2007, and is included
in payable for independent trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $36,733. MFS has agreed to reimburse the fund for a portion
of the payments made by the funds to Tarantino LLC in the amount of $23,957,
which is shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office space,
other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,497,739,200 and $1,129,224,464, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06(i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 38,069,768 $1,015,918,178 60,803,749 $1,470,033,391
Class B 2,529,176 66,880,916 4,311,711 103,369,845
Class C 3,897,182 103,246,991 5,194,373 124,008,983
Class I 4,306,678 115,306,979 9,361,214 225,782,424
Class W 523,492 14,057,841 355,829 8,707,026
Class R 597,070 15,878,360 2,171,753 51,431,346
Class R1 322,180 8,633,989 219,186 5,288,225
Class R2 303,857 8,137,856 192,249 4,708,059
Class R3 2,207,413 59,170,233 1,329,770 31,972,342
Class R4 3,330,741 90,794,230 2,221,181 53,759,704
Class R5 2,164,600 58,905,364 2,712,139 63,685,240
Class 529A 18,909 502,735 36,431 876,014
Class 529B 6,197 163,281 9,630 228,856
Class 529C 10,981 286,965 8,588 204,251
- ------------------------------------------------------------------------------------------------------------
58,288,244 $1,557,883,918 88,927,803 $2,144,055,706
Shares issued to shareholders in
reinvestment of distributions
Class A 6,037,277 $159,746,219 9,462,744 $221,685,921
Class B 1,245,618 32,830,501 2,278,450 53,009,523
Class C 773,319 20,352,377 1,259,073 29,257,616
Class I 1,773,437 47,098,644 2,428,532 57,190,569
Class W 16,682 441,422 16 388
Class R 143,380 3,788,763 246,252 5,756,203
Class R1 8,655 227,127 3,439 79,783
Class R2 7,988 210,174 1,901 44,284
Class R3 59,481 1,568,209 34,444 803,843
Class R4 80,031 2,116,010 11,675 276,619
Class R5 269 7,116 138 3,249
Class 529A 5,948 156,809 7,720 180,072
Class 529B 1,334 34,940 1,606 37,120
Class 529C 1,909 49,980 2,549 58,871
- ------------------------------------------------------------------------------------------------------------
10,155,328 $268,628,291 15,738,539 $368,384,061
Shares reacquired
Class A (27,024,553) $(723,269,227) (65,973,843) $(1,589,756,950)
Class B (6,371,375) (169,064,056) (14,415,374) (346,071,665)
Class C (2,706,854) (71,751,900) (7,736,571) (185,371,128)
Class I (2,105,993) (56,370,985) (3,495,733) (85,149,119)
Class W (48,922) (1,300,761) (622) (15,405)
Class R (1,270,148) (34,161,470) (1,985,641) (48,501,782)
Class R1 (199,309) (5,364,717) (60,823) (1,476,315)
Class R2 (190,171) (5,123,694) (44,464) (1,089,173)
Class R3 (1,175,991) (31,867,794) (518,447) (12,427,593)
Class R4 (2,041,964) (55,862,536) (393,300) (9,578,895)
Class R5 (229,587) (6,125,712) (330,497) (8,024,795)
Class 529A (7,591) (198,905) (9,716) (232,975)
Class 529B (965) (25,604) (1,056) (25,650)
Class 529C (3,834) (101,782) (4,854) (116,272)
- ------------------------------------------------------------------------------------------------------------
(43,377,257) $(1,160,589,143) (94,970,941) $(2,287,837,717)
Net change
Class A 17,082,492 $452,395,170 4,292,650 $101,962,362
Class B (2,596,581) (69,352,639) (7,825,213) (189,692,297)
Class C 1,963,647 51,847,468 (1,283,125) (32,104,529)
Class I 3,974,122 106,034,638 8,294,013 197,823,874
Class W 491,252 13,198,502 355,223 8,692,009
Class R (529,698) (14,494,347) 432,364 8,685,767
Class R1 131,526 3,496,399 161,802 3,891,693
Class R2 121,674 3,224,336 149,686 3,663,170
Class R3 1,090,903 28,870,648 845,767 20,348,592
Class R4 1,368,808 37,047,704 1,839,556 44,457,428
Class R5 1,935,282 52,786,768 2,381,780 55,663,694
Class 529A 17,266 460,639 34,435 823,111
Class 529B 6,566 172,617 10,180 240,326
Class 529C 9,056 235,163 6,283 146,850
- ------------------------------------------------------------------------------------------------------------
25,066,315 $665,923,066 9,695,401 $224,602,050
(i) For the period from the class' inception, May 1, 2006 (Class W) through the stated period ended.
The fund is one of several mutual funds in which the MFS funds-of-funds may
invest. The MFS funds-of-funds do not invest in the underlying MFS funds for
the purpose of exercising management or control. At the end of the period, the
MFS Conservative Allocation Fund, MFS Moderate Allocation Fund, MFS Growth
Allocation Fund and MFS Aggressive Growth Allocation Fund were the owners of
record of approximately 1%, 3%, 4% and 2% respectively, of the value of
outstanding voting shares. In addition, the MFS Lifetime Retirement Income
Fund, the MFS Lifetime 2010 Fund, the MFS Lifetime 2020 Fund, the MFS Lifetime
2030 Fund and the MFS Lifetime 2040 Fund were each the owners of record of less
than 1% of the value of outstanding voting shares.
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve funds
rate plus 0.35%. In addition, a commitment fee, based on the average daily,
unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$25,387 and $0, respectively, and are included in miscellaneous expense on the
Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA 02205-5824
1-800-637-8255
24 hours a day OVERNIGHT MAIL
MFS Service Center, Inc.
ACCOUNT SERVICE AND 500 Boylston Street
LITERATURE Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Semiannual report
MFS(R) CASH RESERVE FUND
LETTER FROM THE CEO 1
- ----------------------------------------------------
PORTFOLIO COMPOSITION 2
- ----------------------------------------------------
EXPENSE TABLE 3
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 5
- ----------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 7
- ----------------------------------------------------
STATEMENT OF OPERATIONS 10
- ----------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 11
- ----------------------------------------------------
FINANCIAL HIGHLIGHTS 12
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 21
- ----------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 30
- ----------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 30
- ----------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 30
- ----------------------------------------------------
CONTACT INFORMATION BACK COVER
- ----------------------------------------------------
THE 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.
- ------------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ------------------------------------------------------------------------------
2/28/07
LMM-SEM
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. In February 2007 it hit
its all-time high of 12,787. Less than a week later, stocks sold off around
the globe. By March 5 the Dow was off 5.8%. That is a sign of volatile markets
and a reason investors should make sure they have an investment plan that can
ride out the peaks and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are inherently cyclical. In our view,
investors who remain committed to a long-term plan are more likely to achieve
their financial goals. We believe you should not let the headlines guide you
in your investment decisions and that there is no sense in reacting to short-
term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss.
Investing and planning for the long term require diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer -- through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
April 16, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE(u)
Commercial Paper 87.7%
Certificates of Deposit 13.4%
Cash & Other Net Assets (1.1)%
SHORT TERM CREDIT QUALITY (q)
Average Credit Quality
Short Term Bonds (a) A-1
------------------------------------------------
All holdings are rated "A-1"
MATURITY BREAKDOWN (u)
0 - 29 days 68.0%
------------------------------------------------
30 - 59 days 8.8%
------------------------------------------------
60 - 89 days 8.8%
------------------------------------------------
90 - 366 days 15.5%
------------------------------------------------
Other Assets Less Liabilities -1.1%
------------------------------------------------
(a) The average credit quality is based upon a market weighted average of
portfolio holdings that are rated by public rating agencies.
(q) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based on
the rating assigned by Fitch, Inc. If not rated by any of the three
agencies, the security is considered Not Rated. U.S. Treasuries and U.S.
Agency securities are included in the "A-1"-rating category. Percentages are
based on the total market value of investments as of 2/28/07.
(u) For purposes of this graphical presentation, accrued interest, where
applicable, is included.
From time to time "Other Assets Less Liabilities" may be negative due to
timing of cash receipts.
Percentages are based on net assets as of 2/28/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
EXPENSE TABLE
Fund expenses borne by the shareholders during the period,
September 1, 2006 through February 28, 2007
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1)
fees; and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period September 1, 2006 through
February 28, 2007.
ACTUAL EXPENSES
The first line for each share class in the following table provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the following table provides
information about hypothetical account values and hypothetical expenses based
on the fund's actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
- --------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 9/01/06-
Class Ratio 9/01/06 2/28/07 2/28/07
- --------------------------------------------------------------------------------
Actual 0.46% $1,000.00 $1,024.80 $2.31
A ---------------------------------------------------------------------------
Hypothetical (h) 0.46% $1,000.00 $1,022.51 $2.31
- --------------------------------------------------------------------------------
Actual 1.46% $1,000.00 $1,019.80 $7.31
B ---------------------------------------------------------------------------
Hypothetical (h) 1.46% $1,000.00 $1,017.55 $7.30
- --------------------------------------------------------------------------------
Actual 1.46% $1,000.00 $1,019.80 $7.31
C ---------------------------------------------------------------------------
Hypothetical (h) 1.46% $1,000.00 $1,017.55 $7.30
- --------------------------------------------------------------------------------
Actual 1.57% $1,000.00 $1,019.20 $7.86
R1 ---------------------------------------------------------------------------
Hypothetical (h) 1.57% $1,000.00 $1,017.01 $7.85
- --------------------------------------------------------------------------------
Actual 1.23% $1,000.00 $1,021.00 $6.16
R2 ---------------------------------------------------------------------------
Hypothetical (h) 1.23% $1,000.00 $1,018.70 $6.16
- --------------------------------------------------------------------------------
Actual 1.12% $1,000.00 $1,021.50 $5.61
R3 ---------------------------------------------------------------------------
Hypothetical (h) 1.12% $1,000.00 $1,019.24 $5.61
- --------------------------------------------------------------------------------
Actual 0.87% $1,000.00 $1,022.70 $4.36
R4 ---------------------------------------------------------------------------
Hypothetical (h) 0.87% $1,000.00 $1,020.48 $4.36
- --------------------------------------------------------------------------------
Actual 0.56% $1,000.00 $1,024.30 $2.81
R5 ---------------------------------------------------------------------------
Hypothetical (h) 0.56% $1,000.00 $1,022.02 $2.81
- --------------------------------------------------------------------------------
Actual 0.71% $1,000.00 $1,023.50 $3.56
529A ---------------------------------------------------------------------------
Hypothetical (h) 0.71% $1,000.00 $1,021.27 $3.56
- --------------------------------------------------------------------------------
Actual 1.71% $1,000.00 $1,018.50 $8.56
529B ---------------------------------------------------------------------------
Hypothetical (h) 1.71% $1,000.00 $1,016.31 $8.55
- --------------------------------------------------------------------------------
Actual 1.71% $1,000.00 $1,018.50 $8.56
529C ---------------------------------------------------------------------------
Hypothetical (h) 1.71% $1,000.00 $1,016.31 $8.55
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
2/28/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Certificates of Deposit - 13.3%
- ----------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------
Major Banks - 10.2%
- ----------------------------------------------------------------------------------------------
Barclays Bank PLC, NY, 5.31%, due 3/13/07 $ 7,200,000 $ 7,200,000
Royal Bank of Canada, New York Branch, 5.32%, due 6/21/07 12,700,000 12,700,000
UBS AG, Stamford, CT Branch, 5.355%, due 3/06/07 15,933,000 15,933,000
-------------
$ 35,833,000
- ----------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 3.1%
- ----------------------------------------------------------------------------------------------
Natexis Banques Populaires, NY, 5.34%, due 8/13/07 $ 11,000,000 $ 11,000,000
- ----------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT, AT AMORTIZED COST AND VALUE $ 46,833,000
- ----------------------------------------------------------------------------------------------
Commercial Paper - 87.7% (y)
- ----------------------------------------------------------------------------------------------
Asset Backed & Securitized - 4.0%
- ----------------------------------------------------------------------------------------------
Yorktown Capital LLC, 5.32%, due 3/01/07 (t) $ 1,968,000 $ 1,968,000
Yorktown Capital LLC, 5.255%, due 3/05/07 - 3/07/07 (t) 9,176,000 9,170,041
Yorktown Capital LLC, 5.25%, due 4/02/07 (t) 3,025,000 3,010,883
-------------
$ 14,148,924
- ----------------------------------------------------------------------------------------------
Automotive - 2.2%
- ----------------------------------------------------------------------------------------------
Toyota Motor Credit Corp., 5.2%, due 7/27/07 $ 7,740,000 $ 7,574,536
- ----------------------------------------------------------------------------------------------
Electrical Equipment - 3.1%
- ----------------------------------------------------------------------------------------------
General Electric Co., 5.215%, due 6/29/07 $ 11,230,000 $ 11,034,785
- ----------------------------------------------------------------------------------------------
Financial Institutions - 50.6%
- ----------------------------------------------------------------------------------------------
Barton Capital Corp., 5.25%, due 3/08/07 (t) $ 14,926,000 $ 14,910,763
Bryant Park Funding LLC, 5.24%, due 5/15/07 (t) 3,000,000 2,967,250
CAFCO LLC, 5.25%, due 3/02/07 - 3/07/07 (t) 9,090,000 9,085,656
CRC Funding LLC, 5.25%, due 3/09/07 (t) 10,050,000 10,038,275
CRC Funding LLC, 5.235%, due 5/30/07 (t) 4,067,000 4,013,773
Ciesco LLC, 5.25%, due 3/09/07 (t) 7,673,000 7,664,048
Citibank Credit Card Issuance Trust, 5.25%,
due 3/13/07 - 3/16/07 (t) 14,940,000 14,910,211
Edison Asset Securitization LLC, 5.23%, due 5/23/07 (t) 3,455,000 3,413,339
Falcon Asset Securitization Co. LLC, 5.32%, due 3/01/07 (t) 13,560,000 13,560,000
Falcon Asset Securitization Co. LLC, 5.25%, due 4/25/07 (t) 594,000 589,236
Govco, Inc., 5.24%, due 3/07/07 (t) 2,360,000 2,357,939
Govco, Inc., 5.245%, due 5/16/07 (t) 2,515,000 2,487,152
Jupiter Securitization Co. LLC, 5.32%, due 3/01/07 (t) 8,447,000 8,447,000
Kitty Hawk Funding Corp., 5.25%, due 3/30/07 (t) 14,820,000 14,757,324
Old Line Funding LLC, 5.26%, due 3/19/07 (t) 14,538,000 14,499,762
Ranger Funding Co. LLC, 5.25%, due 3/02/07 - 3/12/07 (t) 14,776,000 14,763,401
Regency Markets, No. 1 LLC, 5.26%, due 3/20/07 (t) 2,191,000 2,184,918
Regency Markets, No. 1 LLC, 5.25%, due 4/16/07 (t) 12,810,000 12,724,066
Scaldis Capital LLC, 5.25%, due 3/27/07 (t) 4,700,000 4,682,179
Thunder Bay Funding LLC, 5.25%, due 3/19/07 (t) 9,600,000 9,574,800
Windmill Funding Corp., 5.25%, due 3/01/07 (t) 10,549,000 10,549,000
-------------
$ 178,180,092
- ----------------------------------------------------------------------------------------------
Insurance - 1.9%
- ----------------------------------------------------------------------------------------------
MetLife, Inc., 5.24%, due 3/05/07 (t) $ 1,000,000 $ 999,418
MetLife, Inc., 5.25%, due 4/12/07 (t) 5,600,000 5,565,700
-------------
$ 6,565,118
- ----------------------------------------------------------------------------------------------
Major Banks - 10.0%
- ----------------------------------------------------------------------------------------------
Barclays U.S. Funding Corp., 5.24%, due 3/26/07 $ 5,410,000 $ 5,390,314
Barclays U.S. Funding Corp., 5.21%, due 7/09/07 1,630,000 1,599,333
HBOS Treasury Services PLC, 5.26%, due 3/05/07 2,825,000 2,823,349
HBOS Treasury Services PLC, 5.255%, due 3/21/07 390,000 388,861
HBOS Treasury Services PLC, 5.25%, due 4/30/07 2,450,000 2,428,563
HBOS Treasury Services PLC, 5.24%, due 5/10/07 8,700,000 8,611,357
Societe Generale North America, 5.25%, due 3/08/07 115,000 114,883
Societe Generale North America, 5.23%, due 3/29/07 13,961,000 13,904,210
-------------
$ 35,260,870
- ----------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 15.9%
- ----------------------------------------------------------------------------------------------
Citigroup Funding, Inc., 5.26%, due 3/20/07 $ 14,688,000 $ 14,647,224
DEPFA Bank PLC, 5.24%, due 5/22/07 (t) 7,426,000 7,337,367
DEPFA Bank PLC, 4.98%, due 12/21/07 (t) 7,000,000 6,714,342
Deutsche Bank Financial LLC, 5.33%, due 3/01/07 10,413,000 10,413,000
ING America Insurance Holdings, Inc., 5.26%, due 3/14/07 3,910,000 3,902,573
Svenska Handelsbanken, Inc., 5.23%, due 4/04/07 9,016,000 8,971,466
Svenska Handelsbanken, Inc., 5.245%, due 5/02/07 3,881,000 3,845,943
-------------
$ 55,831,915
- ----------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER, AT AMORTIZED COST AND VALUE $ 308,596,240
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT AMORTIZED COST AND VALUE $ 355,429,240
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.0)% (3,396,229)
- ----------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 352,033,011
- ----------------------------------------------------------------------------------------------
(t) Security exempt from registration with the U.S. Securities and Exchange Commission under
Section 4(2) of the Securities Act of 1933.
(y) The rate shown represents an annualized yield at time of purchase.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 2/28/07 (unaudited)
This statement represents your fund's balance sheet, which details the assets and liabilities
comprising the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at amortized cost and value $355,429,240
Cash 852
Receivable for fund shares sold 5,297,031
Interest receivable 541,083
Other assets 7,034
- ------------------------------------------------------------------------------------------------------
Total assets $361,275,240
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Distributions payable $48,329
Payable for fund shares reacquired 8,802,840
Payable to affiliates
Management fee 2,894
Shareholder servicing costs 228,188
Distribution and service fees 12,303
Administrative services fee 386
Program manager fees 45
Retirement plan administration and services fees 320
Payable for independent trustees' compensation 29,233
Accrued expenses and other liabilities 117,691
- ------------------------------------------------------------------------------------------------------
Total liabilities $9,242,229
- ------------------------------------------------------------------------------------------------------
Net assets $352,033,011
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------
Paid-in-capital $352,035,943
Accumulated net realized gain (loss) on investments (1,256)
Accumulated distributions in excess of net investment income (1,676)
- ------------------------------------------------------------------------------------------------------
Net assets $352,033,011
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 352,035,965
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $109,460,982
Shares outstanding 109,461,721
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $169,866,769
Shares outstanding 169,868,565
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $40,206,932
Shares outstanding 40,207,288
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $4,264,081
Shares outstanding 4,264,086
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $4,166,462
Shares outstanding 4,166,468
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $13,737,706
Shares outstanding 13,737,733
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $6,988,288
Shares outstanding 6,988,290
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $53,872
Shares outstanding 53,873
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $1.00
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
Class 529A shares
- ------------------------------------------------------------------------------------------------------
Net assets $2,314,977
Shares outstanding 2,314,991
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class 529B shares
- ------------------------------------------------------------------------------------------------------
Net assets $296,383
Shares outstanding 296,386
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $1.00
- ------------------------------------------------------------------------------------------------------
Class 529C shares
- ------------------------------------------------------------------------------------------------------
Net assets $676,559
Shares outstanding 676,564
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $1.00
- ------------------------------------------------------------------------------------------------------
A contingent deferred sales charge may be imposed on redemptions of Class B, Class C, Class 529B, and
Class 529C shares.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 2/28/07 (unaudited)
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Interest income $9,873,106
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $1,008,887
Distribution and service fees 1,235,257
Program manager fees 3,961
Shareholder servicing costs 378,421
Administrative services fee 36,441
Retirement plan administration and services fees 23,123
Independent trustees' compensation 7,292
Custodian fee 45,829
Shareholder communications 36,680
Auditing fees 15,477
Legal fees 5,615
Miscellaneous 50,814
- ------------------------------------------------------------------------------------------------------
Total expenses $2,847,797
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (15,290)
Reduction of expenses by investment adviser and distributor (745,605)
- ------------------------------------------------------------------------------------------------------
Net expenses $2,086,902
- ------------------------------------------------------------------------------------------------------
Net investment income $7,786,204
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $7,786,204
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income $7,786,204 $13,405,250
Net realized gain (loss) on investments -- (811)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $7,786,204 $13,404,439
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net investment income
Class A $(2,706,039) $(4,153,465)
Class B (3,830,585) (7,438,988)
Class C (865,218) (1,500,901)
Class R1 (43,033) (22,701)
Class R2 (43,014) (30,414)
Class R3 (185,366) (102,446)
Class R4 (91,259) (9,619)
Class R5 (1,279) (2,066)
Class 529A (51,919) (70,775)
Class 529B (5,504) (9,881)
Class 529C (12,210) (16,893)
- ------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(7,835,426) $(13,358,149)
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(52,617,452) $(18,098,331)
- ------------------------------------------------------------------------------------------------------
Total change in net assets $(52,666,674) $(18,052,041)
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period 404,699,685 422,751,726
At end of period (including accumulated distributions in
excess of net investment income of $1,676 and undistributed
net investment income of $47,546) $352,033,011 $404,699,685
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance for the semiannual period
and the past 5 fiscal years (or life of a particular share class, if shorter). Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on
an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 8/31
ENDED -----------------------------------------------------------------------
CLASS A 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.04 $0.02 $0.01 $0.01 $0.01
Net realized and unrealized
gain (loss) on investments -- (0.00)(w) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.04 $0.02 $0.01 $0.01 $0.01
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.04) $(0.02) $(0.01) $(0.01) $(0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.48(n) 4.19 2.11 0.58 0.69 1.49
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 0.86(a) 0.89 0.90 0.79 0.81 0.91
Expenses after expense reductions(f) 0.46(a) 0.49 0.50 0.55 0.71 0.81
Net investment income 4.93(a) 4.14 2.10 0.58 0.70 1.44
Net assets at end of period
(000 Omitted) $109,461 $114,481 $91,165 $101,287 $214,275 $242,230
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ---------------------------------------------------------------------------
CLASS B 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
Net realized and unrealized
gain (loss) on investments -- (0.00)(w) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.03) $(0.01) $(0.00)(w) $(0.00)(w) $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(t) 1.98(n) 3.16 1.10 0.06 0.06 0.49
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.86(a) 1.89 1.89 1.80 1.81 1.91
Expenses after expense
reductions (f) 1.46(a) 1.49 1.49 1.07 1.35 1.81
Net investment income 3.93(a) 3.09 1.03 0.06 0.06 0.50
Net assets at end of period
(000 Omitted) $169,867 $222,661 $280,361 $429,844 $647,269 $741,638
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ------------------------------------------------------------------------
CLASS C 2/28/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
Net realized and unrealized gain
(loss) on investments -- (0.00)(w) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.03) $(0.01) $(0.00)(w) $(0.00)(w) $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(t) 1.98(n) 3.15 1.10 0.06 0.06 0.49
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.86(a) 1.89 1.89 1.79 1.81 1.91
Expenses after expense reductions (f) 1.46(a) 1.49 1.49 1.07 1.36 1.81
Net investment income 3.93(a) 3.14 1.03 0.06 0.06 0.50
Net assets at end of period
(000 Omitted) $40,207 $56,456 $46,483 $80,482 $159,715 $159,254
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R1 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.03 $0.01
Net realized and unrealized gain (loss) on investments -- (0.00)(w) --
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.03 $0.01
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.03) $(0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 1.92(n) 3.04 0.59(n)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.07(a) 2.09 2.24(a)
Expenses after expense reductions (f) 1.57(a) 1.59 1.84(a)
Net investment income 3.80(a) 3.15 1.52(a)
Net assets at end of period (000 Omitted) $4,264 $898 $258
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R2 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.03 $0.01
Net realized and unrealized gain (loss) on investments -- (0.00)(w) --
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.03 $0.01
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.03) $(0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.10(n) 3.40 0.72(n)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.78(a) 1.79 1.93(a)
Expenses after expense reductions (f) 1.23(a) 1.25 1.53(a)
Net investment income 4.15(a) 3.40 1.97(a)
Net assets at end of period (000 Omitted) $4,166 $1,101 $604
- ----------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R3 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.04 $0.01
Net realized and unrealized gain (loss) on investments -- (0.01) --
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.03 $0.01
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.03) $(0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.15(n) 3.51 0.78(n)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.62(a) 1.63 1.83(a)
Expenses after expense reductions (f) 1.12(a) 1.13 1.43(a)
Net investment income 4.26(a) 3.73 2.10(a)
Net assets at end of period (000 Omitted) $13,738 $4,909 $1,179
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R4 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.04 $0.01
Net realized and unrealized gain (loss) on investments -- (0.00)(w) --
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.04 $0.01
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.04) $(0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.27(n) 3.77 0.93(n)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.28(a) 1.28 1.38(a)
Expenses after expense reductions (f) 0.87(a) 0.88 0.98(a)
Net investment income 4.50(a) 4.06 2.21(a)
Net assets at end of period (000 Omitted) $6,988 $1,019 $51
- ----------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED -------------------------
CLASS R5 2/28/07 2006 2005(i)
(UNAUDITED)
Net asset value, beginning of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.04 $0.01
Net realized and unrealized gain (loss) on investments -- (0.00)(w) --
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.04 $0.01
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.04) $(0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.43(n) 4.09 1.06(n)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.96(a) 0.99 1.08(a)
Expenses after expense reductions (f) 0.56(a) 0.59 0.68(a)
Net investment income 4.83(a) 4.03 2.51(a)
Net assets at end of period (000 Omitted) $54 $53 $51
- ----------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------
CLASS 529A 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.04 $0.02 $0.00(w) $0.00(w) $0.00(w)
Net realized and unrealized gain
(loss) on investments -- (0.00)(w) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.04 $0.02 $0.00(w) $0.00(w) $0.00(w)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.04) $(0.02) $(0.00)(w) $(0.00)(w) $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r) 2.35(n) 3.93 1.86 0.33 0.45 0.08(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.47(a) 1.49 1.50 1.39 1.41 1.26(a)
Expenses after expense reductions (f) 0.71(a) 0.74 0.75 0.80 0.96 1.16(a)
Net investment income 4.68(a) 3.92 1.93 0.34 0.33 1.04(a)
Net assets at end of period
(000 Omitted) $2,315 $2,135 $1,650 $1,140 $1,164 $30
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------
CLASS 529B 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
Net realized and unrealized gain
(loss) on investments -- (0.00)(w) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.03) $(0.01) $(0.00)(w) $(0.00)(w) $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(t) 1.85(n) 2.90 0.87 0.06 0.07 0.02(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.12(a) 2.14 2.13 2.03 2.06 2.16(a)
Expenses after expense reductions (f) 1.71(a) 1.74 1.73 1.08 1.25 2.06(a)
Net investment income 3.67(a) 2.88 0.87 0.07 0.06 0.23(a)
Net assets at end of period
(000 Omitted) $296 $297 $340 $339 $253 $5
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
SIX MONTHS YEARS ENDED 8/31
ENDED ----------------------------------------------------------------------
CLASS 529C 2/28/07 2006 2005 2004 2003 2002(i)
(UNAUDITED)
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
Net realized and unrealized gain
(loss) on investments -- (0.00)(w) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.02 $0.03 $0.01 $0.00(w) $0.00(w) $0.00(w)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.02) $(0.03) $(0.01) $(0.00)(w) $(0.00)(w) $(0.00)(w)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(t) 1.85(n) 2.90 0.87 0.06 0.07 0.02(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 2.12(a) 2.14 2.13 2.03 2.06 2.16(a)
Expenses after expense reductions (f) 1.71(a) 1.74 1.73 1.08 1.22 2.06(a)
Net investment income 3.68(a) 2.89 0.85 0.06 0.05 0.23(a)
Net assets at end of period
(000 Omitted) $677 $688 $611 $640 $512 $5
- -----------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(i) For the period from the class' inception, July 31, 2002 (Classes 529A, 529B, and 529C), and April 1, 2005 (Classes R1, R2,
R3, R4, and R5) through the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Cash Reserve Fund (the fund) is a 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 U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
INVESTMENT VALUATIONS - Money market instruments are valued at amortized cost,
which approximates market value. Amortized cost involves valuing an instrument
at its cost as adjusted for amortization of premium or accretion of discount
rather than its current market value. Each money market fund's use of
amortized cost is subject to the fund's compliance with Rule 2a-7 under the
Investment Company Act of 1940. The amortized cost value of an instrument can
be different from the market value of an instrument.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for
measuring fair value and expanded disclosures about fair value measurements.
Management is evaluating the application of the Statement to the fund, and
believes the impact will be limited to expanded disclosures resulting from the
adoption of this Statement in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the
normal course of business, the fund enters into agreements with service
providers that may contain indemnification clauses. The fund's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the fund that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized and accreted for financial statement purposes and
tax reporting purposes in accordance with generally accepted accounting
principles and federal tax regulations, respectively.
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. This amount, for the six months ended February 28, 2007, is shown as
a reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue
Code, and to distribute all of its taxable income, including realized capital
gains. Accordingly, no provision for federal income tax is required in the
financial statements. Foreign taxes, if any, have been accrued by the fund in
the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and
tax purposes.
During the year ended August 31, 2006, there were no significant adjustments
due to differences between book and tax accounting.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
8/31/06
Ordinary income (including any
short-term capital gains) $13,358,149
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 2/28/07
Cost of investments $355,429,240
----------------------------------------------------------
AS OF 8/31/06
Undistributed ordinary income $134,730
Capital loss carryforwards (445)
Post-October capital loss deferral (811)
Other temporary differences (87,184)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of August 31, 2006, the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
8/31/12 $(441)
8/31/13 (4)
----------------------------------------------------------
$(445)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. On December 22, 2006, the SEC delayed the
implementation of the Interpretation for regulated investment companies for an
additional six months. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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 the value
of settled shares outstanding 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 and Class 529B shares will convert to Class A and Class 529A
shares, respectively, approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the fund. The management fee is computed daily and paid monthly
at an annual rate of 0.55% of the fund's average daily net assets.
As part of a settlement agreement with the New York Attorney General
concerning market timing and related matters, MFS has agreed to reduce
the management fee to 0.15% of the fund's average daily net assets for the
period March 1, 2004 through February 28, 2009. For the six months ended
February 28, 2007, this waiver amounted to $733,736 and is reflected as a
reduction of total expenses in the Statement of Operations.
The management fee incurred for the six months ended February 28, 2007 was
equivalent to an annual effective rate of 0.15% of the fund's average daily
net assets.
DISTRIBUTOR - The Board of Trustees has adopted a distribution plan for
certain class shares pursuant to Rule 12b-1 of the Investment Company Act
of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.00% $--
Class B 0.75% 0.25% 1.00% 1.00% 967,518
Class C 0.75% 0.25% 1.00% 1.00% 218,688
Class R1 0.50% 0.25% 0.75% 0.75% 8,466
Class R2 0.25% 0.25% 0.50% 0.50% 5,154
Class R3 0.25% 0.25% 0.50% 0.50% 21,704
Class R4 -- 0.25% 0.25% 0.25% 5,072
Class 529A 0.25% 0.25% 0.50% 0.00% 3,870
Class 529B 0.75% 0.25% 1.00% 1.00% 1,484
Class 529C 0.75% 0.25% 1.00% 1.00% 3,301
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $1,235,257
(d) In accordance with the distribution plan for certain classes, the fund
pays distribution and/or service fees up to these annual percentage rates
of each class' average daily net assets.
(e) The annual effective rates represent actual fees incurred under the
distribution plan for the six months ended February 28, 2007 based on each
class' average daily net assets. Payment of the 0.25% annual Class A
service fee is not yet in effect and will be implemented on such date as
the fund's Board of Trustees may determine. Payment of the 0.10% annual
Class A distribution fee is not yet in effect and will be implemented on
such date as the fund's Board of Trustees may determine. 0.10% of the
Class 529A distribution fee is currently being waived under a written
waiver arrangement through January 1, 2008. Payment of 0.15% of the Class
529A distribution fee is not yet in effect and will be implemented on such
date as the fund's Board of Trustees may determine. For the six months
ended February 28, 2007, this waiver amounted to $1,106 and is reflected
as a reduction of total expenses in the Statement of Operations. 0.25% of
the Class 529A service fee is currently being waived under a written
waiver arrangement through January 1, 2008. For the six months ended
February 28, 2007, this waiver amounted to $2,764 and is reflected as a
reduction of total expenses in the Statement of Operations.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within 12
months of purchase. Class B and Class 529B shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within six
years of purchase. All contingent deferred sales charges are paid to MFD and
during the six months ended February 28, 2007, were as follows:
AMOUNT
Class A $298
Class B $247,312
Class C $8,093
Class 529B $5
Class 529C $--
The fund has entered into and may from time to time enter into contracts with
program managers and other parties which administer the tuition programs
through which an investment in the fund's 529 share classes is made. The fund
has entered into an agreement with MFD pursuant to which MFD receives an
annual fee of up to 0.35% of the average daily net assets attributable to each
529 share class. The fee is based on average daily net assets and is currently
established at 0.25% annually of average daily net assets of the fund's 529
share classes. The fee may only be increased with the approval of the Board of
Trustees who oversees the fund. The services provided by MFD, or a third party
with which MFD contracts, include recordkeeping and tax reporting and account
services, as well as services designed to maintain the program's compliance
with the Internal Revenue Code and other regulatory requirements. Program
manager fees for the six months ended February 28, 2007, were as follows:
AMOUNT
Class 529A $2,765
Class 529B 371
Class 529C 825
--------------------------------------------------
Total Program Manager Fees $3,961
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average daily
net assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the six months ended February 28, 2007, the fee
was $141,084, which equated to 0.0769% annually of the fund's average daily
net assets. Effective January 1, 2007, MFSC has entered into a sub-accounting
agreement with SunLife Retirement Services (U.S.), Inc. (SRS), an affiliate of
MFSC, on behalf of the fund to provide omnibus account services to the fund.
MFSC pays SRS both an asset based fee and a per account charge of the assets
held in the omnibus account. The fund then reimburses MFSC for the sub-
accounting fees paid to SRS. For the six months ended February 28, 2007, the
sub-accounting fee for SRS was $40,761 which equated to 0.0222% annually of
the fund's average daily net assets. MFSC also receives payment from the fund
for out-of-pocket and sub-accounting expenses. For the six months ended
February 28, 2007, these out-of-pocket and sub-accounting costs amounted to
$128,102. The fund may also pay shareholder servicing related costs directly
to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. The fund's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended
February 28, 2007 was equivalent to an annual effective rate of 0.0199% of the
fund's average daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain shares. These services
include various administrative, recordkeeping, and communication/educational
services with respect to the retirement plans which invest in these shares,
and may be provided directly by MFS or by a third party. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services fee
to affiliated or unaffiliated third parties. For the six months
ended February 28, 2007, the fund paid MFS an annual retirement plan
administration and services fee up to the following annual percentage rates of
each class' average daily net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $5,078
Class R2 0.40% 0.25% 4,123
Class R3 0.25% 0.15% 10,852
Class R4 0.15% 0.15% 3,043
Class R5 0.10% 0.10% 27
- -------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $23,123
(g) MFS has agreed in writing to waive a portion of the retirement plan
administration and services fee equal to 0.10% for Class R1 shares, 0.15%
for Class R2 shares, and 0.10% for Class R3 shares. This agreement will
continue until at least September 30, 2008. For the six months ended
February 28, 2007, this waiver amounted to $7,016 and is reflected as a
reduction of total expenses in the Statement of Operations.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to trustees or officers of the fund who are also
officers of the investment adviser, 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, MFD, and MFSC. The fund has an unfunded, defined
benefit plan for certain retired independent trustees which resulted in a
pension expense of $1,469. This amount is included in independent trustees'
compensation for the six months ended February 28, 2007. The liability for
deferred retirement benefits payable to certain retired independent trustees
amounted to $28,500 at February 28, 2007, and is included in payable for
independent trustees' compensation.
OTHER - This fund and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended February 28, 2007, the fee paid to
Tarantino LLC was $1,471. MFS has agreed to reimburse the fund for a portion
of the payments made by the funds to Tarantino LLC in the amount of $983,
which is shown as a reduction of total expenses in the Statement of
Operations. Additionally, MFS has agreed to bear all expenses associated with
office space, other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of money market securities, exclusive of securities
subject to repurchase agreements, aggregated $1,375,222,670 and
$1,433,629,000, respectively.
(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:
SIX MONTHS ENDED YEAR ENDED
2/28/07 8/31/06
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 39,384,346 $39,384,351 117,033,867 $117,033,876
Class B 44,225,679 44,225,680 172,309,994 172,309,994
Class C 17,060,978 17,060,979 66,947,131 66,947,131
Class R1 13,562,903 13,562,902 1,313,341 1,313,341
Class R2 17,244,022 17,244,022 861,517 861,516
Class R3 56,118,392 56,118,392 6,796,745 6,796,746
Class R4 27,708,991 27,708,991 1,072,464 1,072,464
Class 529A 542,687 542,686 886,031 886,031
Class 529B 32,569 32,569 243,462 243,463
Class 529C 85,719 85,719 366,108 366,108
- ----------------------------------------------------------------------------------------------------------
215,966,286 $215,966,291 367,830,660 $367,830,670
Shares issued to shareholders in
reinvestment of distributions
Class A 2,497,649 $2,497,649 3,783,600 $3,783,600
Class B 3,588,491 3,588,491 6,929,081 6,929,081
Class C 793,776 793,776 1,374,977 1,374,977
Class R1 34,991 34,991 22,173 22,174
Class R2 34,515 34,515 29,955 29,955
Class R3 160,458 160,458 99,631 99,631
Class R4 81,078 81,078 9,521 9,521
Class R5 1,279 1,279 2,066 2,066
Class 529A 51,882 51,882 70,755 70,755
Class 529B 5,480 5,480 9,850 9,850
Class 529C 12,206 12,206 16,827 16,827
- ----------------------------------------------------------------------------------------------------------
7,261,805 $7,261,805 12,348,436 $12,348,437
Shares reacquired
Class A (46,889,050) $(46,889,050) (97,513,708) $(97,513,708)
Class B (100,579,573) (100,579,584) (236,966,151) (236,966,174)
Class C (34,097,913) (34,097,914) (58,354,458) (58,354,459)
Class R1 (10,232,005) (10,232,005) (695,487) (695,487)
Class R2 (14,212,612) (14,212,612) (394,730) (394,730)
Class R3 (47,449,919) (47,449,919) (3,166,655) (3,166,655)
Class R4 (21,821,211) (21,821,211) (113,123) (113,123)
Class 529A (414,841) (414,841) (471,603) (471,603)
Class 529B (38,953) (38,953) (296,083) (296,084)
Class 529C (109,459) (109,459) (305,414) (305,415)
- ----------------------------------------------------------------------------------------------------------
(275,845,536) $(275,845,548) (398,277,412) $(398,277,438)
Net change
Class A (5,007,055) $(5,007,050) 23,303,759 $23,303,768
Class B (52,765,403) (52,765,413) (57,727,076) (57,727,099)
Class C (16,243,159) (16,243,159) 9,967,650 9,967,649
Class R1 3,365,889 3,365,888 640,027 640,028
Class R2 3,065,925 3,065,925 496,742 496,741
Class R3 8,828,931 8,828,931 3,729,721 3,729,722
Class R4 5,968,858 5,968,858 968,862 968,862
Class R5 1,279 1,279 2,066 2,066
Class 529A 179,728 179,727 485,183 485,183
Class 529B (904) (904) (42,771) (42,771)
Class 529C (11,534) (11,534) 77,521 77,520
- ----------------------------------------------------------------------------------------------------------
(52,617,445) $(52,617,452) (18,098,316) $(18,098,331)
(6) LINE OF CREDIT
The fund and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended February 28, 2007, the fund's commitment fee and interest expense were
$1,207 and $0, respectively, and are included in miscellaneous expense on the
Statement of Operations.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The fund's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site at
http://www.sec.gov, and copies of this information may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov or by writing the Public Reference Section at the
above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph (b)
of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 407(c)(2)(iv) of Regulation S-K (as required by Item
22(b)(15) of Schedule 14A), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act")) as conducted within 90 days of
the filing date of this report on Form N-CSR, the registrant's principal
financial officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by the report that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule
30a-2 under the Act (17 CFR 270.30a-2): Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification
furnished pursuant to this paragraph will not be deemed "filed" for the
purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise
subject to the liability of that section. Such certification will not be
deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Exchange Act, except to the extent that the registrant
specifically incorporates it by reference: Attached hereto.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST I
------------------------------------------------------------------
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: April 16, 2007
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
(Principal Executive Officer)
Date: April 16, 2007
--------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: April 16, 2007
--------------
* Print name and title of each signing officer under his or her signature.