<PAGE>
Annual Report
[LOGO] MFS(SM) for Year Ended
INVESTMENT MANAGEMENT December 31, 1997
MFS(R) GROWTH OPPORTUNITIES FUND
[Graphic Omitted]
THE ROTH IRA IS NOW AVAILABLE (see page 31)
<PAGE>
TABLE OF CONTENTS
Letter to Shareholders .................................................... 1
A Discussion with the Portfolio Manager ................................... 4
Portfolio Manager's Profile ............................................... 7
Fund Facts ................................................................ 8
Performance Summary ....................................................... 8
Portfolio Concentration ................................................... 11
Tax Form Summary .......................................................... 11
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
Independent Auditors' Report .............................................. 30
Roth IRA .................................................................. 31
The MFS Family of Funds(R) ................................................ 32
Trustees and Officers ..................................................... 33
HIGHLIGHTS
o FOR THE 12 MONTHS ENDED DECEMBER 31, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 23.28%, CLASS B SHARES
22.27%, AND CLASS I SHARES 24.65%. (SEE PERFORMANCE SUMMARY FOR MORE
INFORMATION.)
o THE FUND'S UNDERPERFORMANCE RELATIVE TO ITS BENCHMARK CAN MAINLY BE
ATTRIBUTED TO THE PERFORMANCE OF ITS TECHNOLOGY HOLDINGS, WHICH WERE
SEVERELY IMPACTED BY THE ASIAN ECONOMIC AND CURRENCY CRISIS IN THE LATTER
PART OF THE YEAR.
o AT THE SAME TIME, THE FUND'S LEISURE, FINANCIAL SERVICES, AND RETAILING
HOLDINGS HELPED PERFORMANCE.
o THE FUND SEEKS COMPANIES WITH GOOD EARNINGS GROWTH, GOOD MANAGEMENT TEAMS,
POSITIVE OVERALL TRENDS FOR THEIR INDUSTRIES, STRONG BALANCE SHEETS, AND
GOOD VALUATIONS.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE>
[Photo of A. Keith Brodkin] MFS Mourns Chairman's Passing
A. Keith Brodkin It is with deep regret that we inform you of the
death on February 2, 1998, of A. Keith Brodkin,
Chairman and Chief Executive Officer of MFS
Investment Management(SM). Mr. Brodkin joined MFS
in 1970 and made enormous contributions to the
organization, including helping to build the
firm's investment staff, which will continue to
manage all of the MFS investment portfolios. His
leadership, friendship, and wise counsel will be
sorely missed.
continued on page 3
LETTER TO SHAREHOLDERS
Dear Shareholders:
Thanks to a sustained period of relative stability and moderate growth, the
U.S. economy has produced thousands of new jobs, inflation has remained under
control, and the investment climate has -- for the most part -- been
favorable. The increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. The rapid
pace of growth seen in the first quarter slowed to an annual rate of 3.3% in
the second quarter and 3.5% in the third. We believe this economic momentum
will carry well into the first quarter of 1998 as a result of lower interest
rates and continuing growth in the money supply. While U.S. economic growth
continues to be impressive, events in the Pacific Rim will somewhat offset
that and, therefore, markets are likely to continue to focus on Federal
Reserve Board activity.
The extreme volatility seen in the U.S. equity market in the fall was, we
believe, the consequence of overvaluations that had been evident for some
months. As a result, the stock market has been vulnerable to some type of
correction and has been impacted in the near term by chaotic market conditions
in the Pacific Rim. In the face of all this, however, the equity
market continues to exhibit surprising strength, much of it the result of
continued gains in corporate earnings, a trend that could be an important
indicator of the market's future direction. Certainly the situation throughout
Asia bears close scrutiny because it appears to be clearly deflationary and
raises the prospect of trade wars developing throughout the area. We are not
convinced that U.S. markets have escaped totally from October's volatility.
Thus, not only is the near-term outlook for profits being adjusted for the
Asian crisis, we also believe equity valuations have risen to a point where a
cautious investment approach seems warranted, with a need for particular
attention to be paid to the effect of Pacific Rim volatility on the earnings
of U.S. companies.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
President, MFS Investment Management
January 12, 1998
JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED
MFS IN 1983. AFTER FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO
MANAGER, HE WAS NAMED CHIEF EQUITY OFFICER IN 1987 AND PRESIDENT AND A
MEMBER OF THE BOARD IN 1993.
<PAGE>
- --------------------------------------------------------------------------------
IN MEMORIAM
A. KEITH BRODKIN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT
On February 2, 1998, Keith Brodkin, a friend and leader to everyone at
MFS, died unexpectedly at age 62. His thoughtful letters to shareholders
on the markets and economy have been an integral part of MFS shareholder
reports like this one for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager,
managing the bond portion of MFS(R) Total Return Fund. He went on to
manage our first pure bond fund, MFS(R) Bond Fund, when it was
introduced in 1974, and he was considered a pioneer in the art of active
bond management.
Keith was named President and Chief Investment Officer of MFS in 1987
and four years later became Chairman and Chief Executive Officer. During
his stewardship, MFS has achieved significant growth in total assets
under management, rising from some $25 billion in 1991 to the over $70
billion today entrusted to us by three million individual and
institutional investors worldwide. Under Keith's leadership, MFS has
carefully but steadily built its domestic and international investment
capabilities through the introduction of a range of new products and a
still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of
charitable endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
- --------------------------------------------------------------------------------
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Paul M. McMahon]
Paul M. McMahon
For the 12 months ended December 31, 1997, Class A shares of the Fund provided
a total return of 23.28%, Class B shares 22.27%, and Class I shares 24.65%.
These returns, which include the reinvestment of distributions but exclude the
effects of any sales charges, compare to a 33.36% return for the Standard &
Poor's 500 Composite Index (the S&P 500) for the same period. The S&P 500 is a
popular, unmanaged index of common stock total return performance.
Q. WHAT DO YOU SEE AS SOME OF THE REASONS FOR THE FUND'S UNDERPERFORMANCE
VERSUS ITS BENCHMARK OVER THE PAST YEAR?
A. Relative to growth stock funds in general, the difference was not so great.
The S&P 500 was by far the best-performing index last year, but the average
growth fund (as measured by Lipper Analytical Services, Inc., an
independent firm that reports mutual fund performance) returned 25.30%. The
Fund was actually doing quite well through October, but it does have a
fairly cyclical exposure to technology stocks, which hurt performance. I
believe that, over time, technology is still the place to be, but near term
there is concern about the impact of the Asian markets on economic growth.
Japan is the largest component of the Asian market and that's already been
relatively weak, so the rate of change is not overly significant. It's
mostly the Asian tiger countries that have seen the tremendous falloff.
However, the market's perception of the impact was a lot more negative than
mine, and it hit technology stocks pretty severely. At the same time, the
Fund's leisure, financial services, and retailing holdings helped
performance. Also, the miscellaneous holdings, primarily represented by
Tyco International, helped.
Q. AND WHAT DO YOU SEE FOR THE ASIAN MARKETS GOING INTO 1998?
A. I think it's going to take a while to turn around. These countries need to
dramatically restructure themselves, as Mexico and Argentina did a few
years ago. But for political leaders to take strong, negative medicine is
very difficult, and it takes a while to convince them that it is necessary.
We're already seeing some countries, like South Korea, taking the right
steps. Ultimately, I think the other countries will take steps to
restructure their economies and get them back on the right track.
Q. COULD YOU TALK ABOUT THE FUND'S OVERALL INVESTMENT PHILOSOPHY
AND STRATEGY?
A. The objective of the Fund is to seek growth of capital. We try to do that
by focusing on companies in terms of five key factors. The first is good
earnings growth. Second, we look for quality management. Third, we look for
positive secular trends, which is why we're staying with technology.
Fourth, we look for companies that are in good financial shape; that is,
that have good balance sheets and are generating positive cash flows.
Fifth, we try to invest in companies during periods of valuation weakness,
which is another reason why I've been adding to the Fund's technology
holdings lately, despite the pullback for this sector.
Q. COULD YOU EXPAND A LITTLE BIT ON WHY YOU LIKE TECHNOLOGY
GOING FORWARD?
A. To begin with, the United States is probably the strongest economic engine
in the world, in that we have the most competitive society. The big
investment in technology has been a major reason for that and is critical
to the success of most U.S. companies, whether it's in pharmaceuticals,
financial services, or any business that needs to stay competitive, lower
costs, and increase productivity. As the world becomes a global
marketplace, other countries, such as Japan and Germany, are going to have
to step up their spending on technology to stay competitive. So while I
think we'll still see some moderation in growth for this sector in the
early part of 1998, after that I think this industry should come back
fairly strongly.
Q. WHILE TECHNOLOGY IS THE LARGEST SECTOR, THE FUND'S TWO LARGEST HOLDINGS ARE
TYCO INTERNATIONAL AND HFS, NOW CALLED CENDANT CORP. TELL US ABOUT THESE
COMPANIES.
A. Tyco has all the qualities that I'm looking for. It has very strong
earnings growth, about 20% per year. It also has high-quality management, a
good balance sheet, and positive secular trends in its businesses, such as
fire safety, which continues to see strong growth both in installation and
service. I still see good earnings growth for this company, and its
valuation is still reasonable.
Q. AND WHAT ABOUT CENDANT?
A. The company has gone through a number of consolidations and acquisitions.
Most recently, it consolidated with CUC International, a consumer
membership club and Internet shopping company, and with this merger,
changed its name to Cendant Corp. We believe the company's earnings growth
should run 25% to 30% per year over the next couple of years, while its
price-to-earnings ratio is in the mid-20s, so it still has good growth in
relation to its value. It's a very well-managed company and has significant
positive cash flow. Finally, we believe its businesses, including
membership clubs, rental cars, hotels, and real estate, should all do well.
The company mostly owns franchises, which means minimal investment and a
lot of positive cash flow. Also, there are several cross-synergies here, by
which one company generates huge numbers of customer files that can then be
used to generate leads across a range of businesses.
Q. FINANCIAL SERVICES IS ANOTHER IMPORTANT WEIGHTING FOR THE FUND. COULD YOU
TALK ABOUT SOME OF THE COMPANIES YOU LIKE IN THIS SECTOR?
A. Financial services companies have benefited from good earnings and lower
interest rates. One holding we like is the Federal Home Loan Mortgage
Corp., or Freddie Mac, a secondary home mortgage finance company. Another
is Finova Corp., a middle-market lender that has performed well.
Q. HAVE YOU SIGNIFICANTLY INCREASED OR DECREASED POSITIONS IN ANY OTHER
SECTORS THIS YEAR?
A. We did significantly decrease the Fund's industrial goods and services
position because the earnings outlook seemed to be slowing for a number of
these companies. At the same time, there was a moderate increase in the
Fund's retailing holdings, in which we found some companies, such as CVS
Corp., generating good growth and steady earnings.
Q. EARLIER, YOU SAID THE LEISURE SECTOR HAD DONE WELL. COULD YOU TALK ABOUT
SOME STOCKS HERE THAT YOU LIKE?
A. In the radio area, companies such as Clear Channel Communications
and Jacor Communications were very strong performers. There's a lot
of consolidation activity going on in this industry, and the leading
players can assemble more stations and create a better product to sell
to advertisers. In the larger markets, this means a company can present a
potential advertiser with a package of different radio stations in the same
market. Also, the robust economy has helped radio stations raise
advertising rates.
Q. APART FROM TECHNOLOGY, ARE THERE ANY STOCKS OR SECTORS THAT DID NOT PERFORM
AS WELL AS YOU WOULD HAVE LIKED?
A. Wisconsin Central Corp. was a major disappointment. It missed its earnings
by a few pennies, and the market drove the stock down. But
we still think the company has high-quality management and high
credibility, and we feel they'll be able to turn it around.
Q. WHAT KIND OF INVESTMENT ENVIRONMENT DO YOU ANTICIPATE GOING FORWARD, AND
HOW MIGHT THIS AFFECT SOME OF YOUR INVESTMENTS IN THE FUND?
A. I think we're still going to see decent economic growth, although it could
slow in the first half of 1998. But that means interest rates should come
down, which should support current price-to-earnings ratios. However, more
moderate growth in the first half could lead to some earnings
disappointments, so the key is to focus on companies that can deliver the
earnings.
/s/ Paul M. McMahon
Paul M. McMahon
Portfolio Manager
PORTFOLIO MANAGER'S PROFILE
PAUL M. MCMAHON JOINED THE MFS RESEARCH DEPARTMENT IN 1981 AS AN INDUSTRY
SPECIALIST AND WAS NAMED INVESTMENT OFFICER IN 1983, ASSISTANT VICE PRESIDENT
-- INVESTMENTS IN 1984, VICE PRESIDENT -- INVESTMENTS IN 1986, AND SENIOR
VICE PRESIDENT IN 1992. A GRADUATE OF HOLY CROSS COLLEGE AND THE AMOS TUCK
SCHOOL OF BUSINESS ADMINISTRATION OF DARTMOUTH COLLEGE, HE HAS MANAGED MFS(R)
GROWTH OPPORTUNITIES FUND SINCE 1992.
<PAGE>
FUND FACTS
OBJECTIVE: THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK GROWTH
OF CAPITAL.
COMMENCEMENT OF INVESTMENT OPERATIONS: SEPTEMBER 9, 1970
CLASS INCEPTION: CLASS A SEPTEMBER 9, 1970
CLASS B SEPTEMBER 7, 1993
CLASS I JANUARY 2, 1997
SIZE: $982.7 MILLION NET ASSETS AS OF DECEMBER 31, 1997
PERFORMANCE SUMMARY
The information below and on the following page illustrates the historical
performance of MFS Growth Opportunities Fund -- Class A shares in comparison
to various market indicators. Class A share performance results reflect the
deduction of the 5.75% maximum sales charge; benchmark comparisons are
unmanaged and do not reflect any fees or expenses. The performance of other
share classes will be greater than or less than the line shown, based on
differences in charges and fees paid by shareholders investing in different
classes. It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-year period ended December 31, 1997)
MFS Growth Opportunities S&P 500 Consumer Price
Fund - Class A Composite Index Index - U.S.
$ 9,400 $10,000 $10,000
11,000 11,000 10,300
10,000 11,200 10,600
14,100 15,300 10,800
17,200 18,900 11,200
21,211 25,163 11,420
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 1997)
MFS Growth Opportunities S&P 500 Consumer Price
Fund - Class A Composite Index Index - U.S.
$ 9,400 $10,000 $10,000
13,200 15,400 10,900
15,500 19,400 11,900
19,300 23,000 12,600
24,900 32,100 13,300
37,458 52,567 14,034
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1997
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
MFS Growth Opportunities Fund (Class A)
including 5.75% sales charge (SEC results) +16.21% +23.95% +16.23% +14.12%
- ------------------------------------------------------------------------------------------------------------
MFS Growth Opportunities Fund (Class A)
at net asset value +23.28% +26.42% +17.61% +14.80%
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MFS Growth Opportunities Fund (Class B)
with CDSC (SEC results) +18.27% +24.63% +16.48% +14.35%
- ------------------------------------------------------------------------------------------------------------
MFS Growth Opportunities Fund (Class B)
at net asset value +22.27% +25.28% +16.69% +14.35%
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MFS Growth Opportunities Fund (Class I)
at net asset value +24.65% +26.46% +17.63% +14.81%
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Average growth fund+ +25.30% +25.11% +16.47% +15.93%
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Standard & Poor's 500 Composite Index* +33.36% +31.15% +20.27% +18.05%
- ------------------------------------------------------------------------------------------------------------
Consumer Price Index*# + 2.15% + 2.67% + 2.69% + 3.45%
- ------------------------------------------------------------------------------------------------------------
+ Source: Lipper Analytical Services, Inc.
* Source: CDA/Wiesenberger.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics and measures
the cost of living (inflation).
</TABLE>
All results are historical and assume the reinvestment of dividends and
capital gains. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
Past performance is no guarantee of future results.
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class I shares
("I"), which became available on January 2, 1997, have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance
has been adjusted to reflect the CDSC generally applicable to B rather than
the initial sales charge generally applicable to A.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of I. Because operating expenses
of A are greater than those of I, I performance generally would have been
higher than A performance. The A performance included in the I performance has
been adjusted to reflect the fact that I have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF DECEMBER 31, 1997
TOP 10 HOLDINGS (BEGINNING WITH THE LARGEST POSITION IN THE PORTFOLIO)
TYCO INTERNATIONAL LTD. PHILIP MORRIS COS., INC.
Manufacturer of fire protection, Tobacco, food, and beverage
packaging, and electronic equipment conglomerate
CENDANT CORP. CVS CORP.
Franchiser of hotel, real estate, Drug store chain
and consumer service companies
CADENCE DESIGN SYSTEMS, INC.
MICROSOFT CORP. Computer software and systems company
Computer software and systems
company CISCO SYSTEMS, INC.
Computer network developer
COMPUTER ASSOCIATES INTERNATIONAL,
INC. ORACLE CORP.
Computer software company Developer and manufacturer of
database software
INTEL CORP.
Semiconductor manufacturer
LARGEST SECTORS
Other Sectors 30.4%
Technology 25.1%
Leisure 14.0%
Miscellaneous 12.3%
(Conglomerates, special products/services)
Financial Services 9.4%
Retailing 8.8%
For a more complete breakdown, refer to the Portfolio of Investments.
TAX FORM SUMMARY
IN JANUARY 1998, SHAREHOLDERS WERE MAILED A TAX FORM SUMMARY REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1997.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
THE FUND HAS DESIGNATED $129,248,301 AS A LONG-TERM CAPITAL GAIN.
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED DECEMBER 31, 1997, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 100%.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - December 31, 1997
Stocks - 95.0%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 93.2%
Advertising - 0.3%
Universal Outdoor Holdings, Inc.* 54,000 $ 2,808,000
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Aerospace - 1.1%
United Technologies Corp. 151,300 $ 11,016,531
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Agricultural Products - 0.8%
Case Corp. 130,800 $ 7,905,225
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Banks and Credit Companies - 1.2%
Bank of New York, Inc. 114,600 $ 6,625,312
BankBoston Corp. 20,800 1,953,900
Fleet/Norstar Financial Group, Inc. 35,700 2,675,269
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$ 11,254,481
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Business Machines - 0.2%
Affiliated Computer Services, Inc., "A"* 82,900 $ 2,181,306
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Business Services - 9.8%
AccuStaff, Inc.* 339,300 $ 7,803,900
Cendant Corp.* 1,606,473 55,222,509
Concord EFS, Inc.* 33,400 830,825
DST Systems, Inc.* 163,000 6,958,062
First Data Corp. 347,100 10,152,675
Galileo International, Inc. 193,900 5,356,488
Global Directmail Corp.* 172,200 2,981,213
Ikon Office Solutions, Inc. 268,700 7,557,187
------------
$ 96,862,859
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Chemicals - 0.6%
Praxair, Inc. 134,300 $ 6,043,500
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Computer Software - Personal Computers - 4.8%
Compaq Computer Corp. 111,300 $ 6,281,494
Microsoft Corp.* 317,600 41,049,800
------------
$ 47,331,294
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Computer Software - Systems - 8.8%
BMC Software, Inc.* 179,500 $ 11,779,687
Cadence Design Systems, Inc.* 830,950 20,358,275
Computer Associates International, Inc. 574,175 30,359,503
Oracle Corp.* 832,975 18,585,755
Synopsys, Inc.* 142,300 5,087,225
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$ 86,170,445
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Consumer Goods and Services - 13.3%
Avis Rent A Car, Inc.* 11,900 $ 380,056
Clorox Co. 64,600 5,107,437
Colgate-Palmolive Co. 160,300 11,782,050
Dollar Thrifty Automotive Group* 55,300 1,133,650
Gillette Co. 138,100 13,870,419
Philip Morris Cos., Inc. 526,800 23,870,625
Service Corp. International 76,600 $ 2,829,413
Tyco International Ltd. 1,589,328 71,619,093
------------
$130,592,743
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Containers - 0.5%
Stone Container Corp. 457,300 $ 4,773,069
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Defense Electronics - 1.8%
Loral Space & Communications Corp.* 841,800 $ 18,046,088
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Electrical Equipment - 1.2%
General Electric Co. 163,700 $ 12,011,488
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Electronics - 6.2%
Altera Corp.* 201,200 $ 6,664,750
Analog Devices, Inc.* 390,233 10,804,576
Intel Corp. 387,800 27,242,950
Microchip Technology, Inc.* 190,400 5,712,000
Micron Technology, Inc.* 207,100 5,384,600
Xilinx, Inc.* 149,700 5,248,856
------------
$ 61,057,732
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Entertainment - 5.4%
CBS Corp.* 108,000 $ 3,179,250
Clear Channel Communications, Inc.* 210,800 16,745,425
Hearst-Argyle Television, Inc.* 56,000 1,666,000
Jacor Communications, Inc.* 168,100 8,930,312
Mirage Resorts, Inc.* 464,200 10,560,550
Time Warner, Inc. 62,700 3,887,400
Univision Communications, Inc., "A"* 42,800 2,987,975
Viacom, Inc., "B"* 123,300 5,109,244
------------
$ 53,066,156
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Financial Institutions - 5.3%
Associates First Capital Corp., "A" 52,900 $ 3,762,512
CIT Group, Inc., "A"* 25,700 828,825
Federal Home Loan Mortgage Corp. 355,700 14,917,169
Financial Federal Corp.* 188,975 4,464,534
Finova Group, Inc. 224,700 11,164,781
Franklin Resources, Inc. 120,450 10,471,622
Green Tree Financial Corp. 154,800 4,053,825
Merrill Lynch & Co., Inc. 33,800 2,465,288
------------
$ 52,128,556
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Financial Services - 1.3%
SunAmerica Inc. 169,450 $ 7,243,988
Travelers Group, Inc. 104,350 5,621,856
------------
$ 12,865,844
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Insurance - 1.2%
Chubb Corp. 33,100 $ 2,503,188
Conseco, Inc. 205,800 9,351,037
------------
$ 11,854,225
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Machinery - 0.2%
Lear Corp.* 40,200 $ 1,909,500
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Medical and Health Products - 1.8%
Bristol-Myers Squibb Co. 165,900 $ 15,698,288
Omnicare, Inc. 49,000 1,519,000
------------
$ 17,217,288
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Medical and Health Technology and Services - 4.4%
Genesis Health Ventures, Inc.* 77,500 $ 2,044,062
Health Management Associates, Inc., "A"* 163,900 4,138,475
HEALTHSOUTH Corp.* 347,000 9,629,250
Lincare Holdings, Inc.* 60,200 3,431,400
Medtronic, Inc. 62,200 3,253,837
Oxford Health Plans, Inc.* 162,300 2,525,794
United Healthcare Corp. 357,300 17,753,344
------------
$ 42,776,162
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Metals and Minerals - 0.4%
Minerals Technologies, Inc. 90,000 $ 4,089,375
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Oils - 0.9%
Mobil Corp. 33,600 $ 2,425,500
USX-Marathon Group 173,700 5,862,375
------------
$ 8,287,875
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Railroad - 2.3%
Burlington Northern Santa Fe Railway Co. 100,100 $ 9,303,044
Wisconsin Central Transportation Corp.* 563,600 13,174,150
------------
$ 22,477,194
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Restaurants and Lodging - 1.8%
Promus Hotel Corp.* 415,763 $ 17,462,046
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Stores - 6.3%
Corporate Express, Inc.* 308,000 $ 3,965,500
CVS Corp. 345,700 22,146,406
Linens 'N Things, Inc.* 12,600 549,675
Micro Warehouse, Inc.* 223,000 3,108,063
Office Depot, Inc.* 578,800 13,855,025
PETsMART, Inc.* 404,100 2,929,725
Rite Aid Corp. 247,900 14,548,631
Staples, Inc.* 44,300 1,229,325
------------
$ 62,332,350
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Supermarkets - 1.8%
Meyer (Fred), Inc.* 55,500 $ 2,018,813
Safeway, Inc.* 240,800 15,230,600
$ 17,249,413
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Telecommunications - 8.0%
AT&T Corp. 151,400 $ 9,273,250
3Com Corp.* 153,900 5,376,881
Ascend Communications, Inc.* 97,000 2,376,500
Bay Networks, Inc.,* 282,300 7,216,294
Cisco Systems, Inc.* 343,650 19,158,487
Glenayre Technologies, Inc.* 300,500 2,967,437
Intermedia Communications, Inc.* 33,900 2,059,425
Metromedia Fiber Network Inc., "A"* 7,600 126,350
Nextlink Communications, Inc., "A"* 5,600 119,350
Qwest Communications International, Inc.* 5,400 321,300
Tel-Save Holdings, Inc.* 120,100 2,386,988
Tel-Save Holdings, Inc.*## 134,900 2,681,138
Teleport Communications Group, Inc., "A"* 157,400 8,637,325
Tellabs, Inc.* 42,900 2,268,338
WorldCom, Inc.* 462,130 13,979,432
------------
$ 78,948,495
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 1.5%
AES Corp.* 191,400 $ 8,924,025
CalEnergy Co., Inc.* 209,300 6,017,375
------------
$ 14,941,400
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $915,660,640
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 1.8%
Canada - 0.4%
Canadian National Railway Co. (Railroad) 95,800 $ 4,526,550
Microcell Telecommunications, "B"
(Telecommunications)* 13,700 92,475
------------
$ 4,619,025
- ------------------------------------------------------------------------------------------------------
Japan - 0.2%
Canon, Inc. (Office Equipment) 102,000 $ 2,384,130
- ------------------------------------------------------------------------------------------------------
Singapore - 0.1%
Mandarin Oriental International Ltd. (Restaurants and
Lodgings)* 1,225,429 $ 821,038
- ------------------------------------------------------------------------------------------------------
United Kingdom - 1.1%
British Petroleum PLC, ADR (Oils) 133,357 $ 10,626,886
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 18,451,079
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $659,556,092) $934,111,719
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.4%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
Consolidated Natural Gas Co., due 1/05/98 $11,985 $ 11,976,877
Federal Home Loan Bank, due 1/28/98 7,300 7,270,435
Federal Home Loan Mortgage Corp., due 1/02/98 8,000 7,998,729
Federal National Mortgage Assn., due 1/14/98 15,719 15,686,304
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 42,932,345
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $702,488,437) $977,044,064
Other Assets, Less Liabilities - 0.6% 5,636,879
- -------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $982,680,943
- -------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------
DECEMBER 31, 1997
- --------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $702,488,437) $977,044,064
Cash 1,403,625
Receivable for Fund shares sold 460,173
Receivable for investments sold 9,607,623
Dividends receivable 711,376
Receivable for daily variation margin on futures
contracts 26,861
Other assets 7,289
------------
Total assets $989,261,011
------------
Liabilities:
Payable for Fund shares reacquired $ 1,216,036
Payable for investments purchased 4,649,649
Payable to affiliates -
Management fee 11,304
Administrative fee 403
Shareholder servicing agent fee 3,092
Distribution and service fee 497,051
Accrued expenses and other liabilities 202,533
------------
Total liabilities $ 6,580,068
------------
Net assets $982,680,943
============
Net assets consist of:
Paid-in capital $700,313,224
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 274,555,622
Accumulated undistributed net realized gain on
investments and foreign currency transactions 7,892,762
Accumulated net investment loss (80,665)
------------
Total $982,680,943
============
Shares of beneficial interest outstanding 70,644,594
==========
Class A shares:
Net asset value per share
(net assets of $953,193,840 / 68,475,064 shares of
beneficial interest outstanding) $13.92
======
Offering price per share (100 / 94.25) $14.77
======
Class B shares:
Net asset value and offering price per share
(net assets of $25,578,320 / 1,888,619 shares of
beneficial interest outstanding) $13.54
======
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets of $3,908,783 / 280,911 shares of
beneficial interest outstanding) $13.91
======
On sales of $50,000 or more, the offering price of Class A
shares is reduced. A contingent deferred sales charge may be
imposed on redemptions of Class A and Class B shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 5,023,609
Interest 766,491
Foreign taxes withheld (45,200)
------------
Total investment income $ 5,744,900
------------
Expenses -
Management fee $ 3,840,881
Trustees' compensation 54,372
Shareholder servicing agent fee 1,183,236
Distribution and service fee (Class A) 1,630,304
Distribution and service fee (Class B) 213,889
Administrative fee 108,143
Custodian fee 287,389
Postage 111,335
Printing 33,851
Auditing fees 33,267
Legal fees 7,017
Miscellaneous 313,198
------------
Total expenses $ 7,816,882
Fees paid indirectly (285,991)
------------
Net expenses $ 7,530,891
------------
Net investment loss $ (1,785,991)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $133,196,511
Futures contracts 627,335
Foreign currency transaction (20,327)
------------
Net realized gain on investments and foreign
currency transactions $133,803,519
------------
Change in unrealized appreciation (depreciation) -
Investments $ 57,486,944
Translation of assets and liabilities in foreign
currencies (5)
------------
Net unrealized gain on investments and foreign
currency translation $ 57,486,939
------------
Net realized and unrealized gain on investments
and foreign currency $191,290,458
------------
Increase in net assets from operations $189,504,467
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,785,991) $ (1,232,233)
Net realized gain on investments and foreign currency
transactions 133,803,519 89,761,702
Net unrealized gain on investments and foreign currency
translation 57,486,939 64,838,899
------------- ------------
Increase in net assets from operations $ 189,504,467 $153,368,368
------------- ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $(118,989,258) $(88,077,143)
From net realized gain on investments and foreign
currency transactions (Class B) (3,160,362) (1,583,683)
From net realized gain on investments and foreign
currency transactions (Class I) (488,974) --
------------- ------------
Total distributions declared to shareholders $(122,638,594) $(89,660,826)
------------- ------------
Net increase in net assets from Fund share
transactions $ 92,987,853 $ 30,979,068
------------- ------------
Total increase in net assets $ 159,853,726 $ 94,686,610
Net assets:
At beginning of period 822,827,217 728,140,607
------------- ------------
At end of period (including accumulated net investment loss
of $80,665 and $68,680, respectively) $ 982,680,943 $822,827,217
============= ============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.97 $11.94 $10.17 $11.56 $11.17
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.03) $(0.02) $ 0.03 $ 0.02 $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 2.96 2.62 3.46 (0.50) 1.73
------ ------ ------ ------ ------
Total from investment operations $ 2.93 $ 2.60 $ 3.49 $(0.48) $ 1.80
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.01) $(0.07)
From net realized gain on investments and
foreign currency transactions (1.98) (1.57) (1.72) (0.83) (1.32)
In excess of net investment income -- -- -- (0.02) (0.02)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.05) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.98) $(1.57) $(1.72) $(0.91) $(1.41)
------ ------ ------ ------ ------
Net asset value - end of period $13.92 $12.97 $11.94 $10.17 $11.56
====== ====== ====== ====== ======
Total return(+) 23.28% 21.87% 34.49% (4.15)% 16.19%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.84% 0.84% 0.87% 0.86% 0.84%
Net investment income (loss) (0.18)% (0.15)% 0.21% 0.21% 0.60%
Portfolio turnover 60% 65% 100% 78% 79%
Average commission rate### $ 0.0449 $ 0.0438 $ -- $ -- $ --
Net assets at end of period (000 omitted) $953,194 $807,657 $721,467 $589,260 $709,839
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
(S) The distributor did not impose a portion of its distribution fee for certain of the periods indicated. If this fee had
been paid by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ -- $ -- $ 0.02 $ 0.01 $ 0.07
Ratios (to average net assets):
Expenses## -- -- 0.97% 0.96% 0.87%
Net investment income -- -- 0.11% 0.11% 0.56%
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.75 $ 9.97 $10.93 $10.96 $10.81
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.15 $ 0.24 $ 0.30 $ 0.36 $ 0.22
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.67 1.94 (0.77) 2.74 0.76
------ ------ ------ ------ ------
Total from investment operations $ 0.82 $ 2.18 $(0.47) $ 3.10 $ 0.98
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.14) $(0.18) $(0.33) $(0.36) $(0.19)
From net realized gain on investments and
foreign currency transactions (0.26) (1.22) (0.16)(++) (2.77) (0.64)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.40) $(1.40) $(0.49) $(3.13) $(0.83)
------ ------ ------ ------ ------
Net asset value - end of period $11.17 $10.75 $ 9.97 $10.93 $10.96
====== ====== ====== ====== ======
Total return(+) (8.06)% 9.29% (4.57)% 28.23% 8.90%
Ratios (to average net assets)/Supplemental data:
Expenses 0.89% 0.88% 0.80% 0.77% 0.86%
Net investment income 1.40% 2.14% 2.91% 2.79% 1.90%
Portfolio turnover 102% 131% 89% 83% 68%
Net assets at end of period (000 omitted) $694,084 $739,791 $687,847 $805,712 $767,924
(+) Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to
October 1, 1989). If the charge had been included, the results would have been lower.
(++) Includes a per share distribution from paid-in capital of $0.0006.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993**
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.73 $11.79 $10.08 $11.53 $12.52
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $
$(0.14) $(0.14) $(0.09) $(0.08) --
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.89 2.57 3.42 (0.49) 0.36
------ ------ ------ ------ ------
Total from investment operations $ 2.75 $ 2.43 $ 3.33 $(0.57) $ 0.36
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions $(1.94) $(1.49) $(1.62) $(0.83) $(1.32)
In excess of net investment income -- -- -- -- (0.03)
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.05) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.94) $(1.49) $(1.62) $(0.88) $(1.35)
------ ------ ------ ------ ------
Net asset value - end of period $13.54 $12.73 $11.79 $10.08 $11.53
====== ====== ====== ====== ======
Total return 22.27% 20.72% 33.20% (4.96)% 9.29%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.64% 1.75% 1.81% 1.81% 1.33%+
Net investment loss (0.98)% (1.06)% (0.75)% (0.70)% --
Portfolio turnover 60% 65% 100% 78% 79%
Average commission rate### $0.0449 $0.0438 $ -- $ -- $ --
Net assets at end of period (000 omitted) $25,578 $15,170 $ 6,673 $ 3,166 $ 805
+ Annualized.
** For the period from the inception of Class B, September 7, 1993, through December 31, 1993.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- ------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31, 1997***
- ------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.84
------
Income from investment operations# -
Net investment income $ 0.00+++
Net realized and unrealized gain on investments and foreign
currency transactions 3.07
------
Total from investment operations $ 3.07
------
Less distributions declared to shareholders from net realized
gain on investments and foreign currency transactions $(2.00)
------
Net asset value - end of period $13.91
======
Total return 24.65%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.65%+
Net investment income 0.01%+
Portfolio turnover 60%
Average commission rate $0.0449
Net assets at end of period (000 omitted) $ 3,909
*** For the period from the inception of Class I, January 2, 1997, through
December 31, 1997.
+ Annualized.
++ Not annualized.
+++ Per share amount was $0.00007.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid
indirectly.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Growth Opportunities Fund (the Fund) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Futures contracts, options, and options on futures
contracts listed on commodities exchanges are reported at market value using
closing settlement prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value.
Securities for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Futures Contracts - The fund may enter into futures contracts for the delayed
delivery of securities currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
the Fund each day, depending on the daily fluctuations in the value of the
underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the Fund. The Fund's investment in futures
contracts is designed to hedge against anticipated future changes in
securities prices. Should securities prices move unexpectedly, the Fund may
not achieve the anticipated benefits of the futures contracts and may
realize a loss.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund will enter
into contracts for hedging purposes as well as for nonhedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign-currency-denominated securities from declines in value due to
unfavorable exchange rate movements. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded as unrealized until the contract
settlement date. On contract settlement date, the gains or losses are recorded
as realized gains or losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Fund's tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on Form
1099-DIV. Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes are classified
as distributions in excess of net investment income or accumulated net
realized gains. During the year ended December 31, 1997, $1,774,006 was
reclassified to accumulated net realized gain on investments and foreign
currency transactions from accumulated net investment loss due to differences
between book and tax accounting for currency transactions and net investment
losses. This change had no effect on the net assets or the net asset value per
share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective
distribution and service fees. All shareholders bear the common expenses of
the Fund based on average daily net assets of each class, without distinction
between share classes. Dividends are declared separately for each class. No
class has preferential dividend rights; differences in per share dividend
rates are generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at the following annual
rates:
First $200 million of average net assets 0.50%
Average net assets in excess of $200 million 0.40%
Administrator - Effective March 1, 1997, the Fund has an administrative
services agreement with MFS to provide the Fund with certain financial, legal,
shareholder servicing, compliance, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an administrative fee at the following annual percentage of the Fund's
average daily net assets, provided that the administrative fee is not assessed
on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an
unfunded defined benefit plan for all its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of
$16,337 for the year ended December 31, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$556,133 for the year ended December 31, 1997, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A and Class B shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum (reduced to 0.15% per annum for assets sold prior to March 1,
1991) of the Fund's average daily net assets attributable to Class A shares
which are attributable to that securities dealer, a distribution fee to MFD of
up to 0.10% per annum of the Fund's average daily net assets attributable to
Class A shares, commissions to dealers and payments to MFD wholesalers for
sales at or above a certain dollar level, and other such distribution-related
expenses that are approved by the Fund. MFD retains the service fee for
accounts not attributable to a securities dealer which amounted to $724,212
for the year ended December 31, 1997. Payment of the 0.10% per annum Class A
distribution fee will commence on such date as the Trustees of the Fund may
determine. Fees incurred under the distribution plan during the year ended
December 31, 1997, were 0.18% of average daily net assets attributable to
Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B shares. MFD will pay to
securities dealers that enter into a sales agreement with MFD all or a portion
of the service fee attributable to Class B shares. The service fee is intended
to be additional consideration for services rendered by the dealer with respect
to Class B shares. MFD retains the service fee for accounts not attributable to
a securities dealer, which amounted to $13,277 for Class B shares for the year
ended December 31, 1997. Fees incurred under the distribution plan during the
year ended December 31, 1997, were 1.00% of average daily net assets
attributable to Class B shares on an annualized basis.
Purchases over $1 million of Class A shares and certain purchases by
retirement plans are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended December 31, 1997, were
$4,861 and $23,865 for Class A and Class B
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the Fund's average daily net assets at an effective annual
rate of 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $539,485,455 and $615,515,213,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $703,752,781
------------
Gross unrealized appreciation $308,555,228
Gross unrealized depreciation (35,263,945)
------------
Net unrealized appreciation $273,291,283
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 27,510,057 $ 407,082,844 20,081,505 $ 265,741,600
Shares issued to shareholders
in reinvestment of distributions 8,193,543 109,056,560 6,559,488 84,484,449
Shares transferred to Class I (269,714) (3,463,128) -- --
Shares reacquired (29,248,030) (433,063,756) (24,769,912) (327,523,302)
----------- ------------- ----------- -------------
Net increase 6,185,856 $ 79,612,520 1,871,081 $ 22,702,747
=========== ============= =========== =============
<CAPTION>
Class B Shares
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 1,904,196 $ 27,635,898 901,449 $ 11,977,978
Shares issued to shareholders
in reinvestment of distributions 222,809 2,885,376 113,216 1,432,152
Shares reacquired (1,430,169) (20,713,143) (388,694) (5,133,809)
----------- ------------- ----------- -------------
Net increase 696,836 $ 9,808,131 625,971 $ 8,276,321
=========== ============= =========== =============
</TABLE>
Class I Shares
PERIOD ENDED DECEMBER 31, 1997*
-----------------------------------
SHARES AMOUNT
- -------------------------------------------------------------------
Shares sold 13,562 $ 191,430
Shares transferred from Class A 269,714 3,463,128
Shares issued to shareholders
in reinvestment of distributions 36,765 488,974
Shares reacquired (39,130) (576,330)
----------- -------------
Net increase 280,911 $ 3,567,202
=========== ============
* For the period from the inception of Class I, January 2, 1997, through
December 31, 1997.
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Fund shares. Interest is charged to each fund, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on
the average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated
to the Fund for the year ended December 31, 1997, was $6,061.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of MFS Growth Opportunities Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Growth Opportunities Fund as of
December 31, 1997, the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended December 31,
1997 and 1996, and the financial highlights for each of the years in the ten-
year period ended December 31, 1997. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at December 31, 1997, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Growth
Opportunities Fund at December 31, 1997, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 6, 1998
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) GROWTH OPPORTUNITIES FUND
TRUSTEES CUSTODIAN
Richard B. Bailey* - Private Investor; State Street Bank and Trust Company
Former Chairman and Director (until
1991), Massachusetts Financial AUDITORS
Services Company Deloitte & Touche LLP
Peter G. Harwood - Private Investor INVESTOR INFORMATION
J. Atwood Ives - Chairman and Chief For MFS stock and bond market
Executive Officer, Eastern outlooks, call toll free:
Enterprises 1-800-637-4458 anytime from a
touch-tone telephone.
Lawrence T. Perera - Partner,
Hemenway & Barnes For information on MFS mutual funds,
call your financial adviser or, for
William J. Poorvu - Adjunct an information kit, call toll free:
Professor, Harvard University 1-800-637-2929 any business day from
Graduate School of Business 9 a.m. to 5 p.m. Eastern time (or
Administration leave a message anytime).
Charles W. Schmidt - Private Investor INVESTOR SERVICE
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive P.O. Box 2281
Vice President, Director and Boston, MA 02107-9906
Secretary, Massachusetts Financial
Services Company For general information, call toll free:
1-800-225-2606 any business day from
Jeffrey L. Shames* - Chairman, 8 a.m. to 8 p.m. Eastern time.
President, and Director,
Massachusetts Financial Services For service to speech- or
Company hearing-impaired, call toll free:
1-800-637-6576 any business day from
Elaine R. Smith - Independent 9 a.m. to 5 p.m. Eastern time. (To
Consultant use this service, your phone must be
equipped with a Telecommunications
David B. Stone - Chairman, North Device for the Deaf.)
American Management Corp. (investment
advisers) For share prices, account balances,
and exchanges, call toll free:
INVESTMENT ADVISER 1-800-MFS-TALK (1-800-637-8255)
Massachusetts Financial Services anytime from a touch-tone telephone.
Company
500 Boylston Street WORLD WIDE WEB
Boston, MA 02116-3741
www.mfs.com
DISTRIBUTOR [DALBAR For the fourth year in a row,
MFS Fund Distributors, Inc. LOGO] MFS earned a #1 ranking in the
500 Boylston Street DALBAR, Inc. Broker/Dealer Survey,
Boston, MA 02116-3741 Main Office Operations Service Quality
Category. The firm achieved a 3.42
PORTFOLIO MANAGER overall score on a scale of 1 to 4 in
Paul M. McMahon* the 1997 survey. A total of 111 firms
responded, offering input on the
TREASURER quality of service they received from
W. Thomas London* 29 mutual fund companies nationwide.
The survey contained questions about
ASSISTANT TREASURERS service quality in 11 categories,
Mark E. Bradley* including "knowledge of operations
Ellen Moynihan* contact," "keeping you informed,"
James O. Yost* "ease of doing business" with the firm.
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
<PAGE>
MFS(R) GROWTH OPPORTUNITIES FUND ----------------
Bulk Rate
500 Boylston Street U.S. Postage
Boston, MA 02116-3741 Paid
MFS
----------------
[LOGO] MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[DALBAR
LOGO]
TOP-RATED SERVICE
(C)1998 MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116-3741
MGO-2 2/98 67M 16/216/816
