MFS GROWTH OPPORTUNITIES FUND
SEMIANNUAL REPORT - JUNE 30, 1999
DIVERSIFYING YOUR INVESTMENT PORTFOLIO (SEE PAGE 27)
TABLE OF CONTENTS
Letter from the Chairman 1
Management Review and Outlook 3
Performance Summary 7
Portfolio of Investments 10
Financial Statements 15
Notes to Financial Statements 21
MFS' Year 2000 Readiness Disclosure 26
Trustees and Officers 29
MFS R ORIGINAL RESEARCH SM
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS SINCE 1932, WHEN WE
CREATED ONE OF THE FIRST IN-HOUSE RESEARCH DEPARTMENTS IN THE MUTUAL FUND
INDUSTRY. ORIGINAL RESEARCH SM AT MFS IS MORE THAN JUST CRUNCHING NUMBERS AND
CREATING ECONOMIC MODELS: IT'S GETTING TO KNOW EACH SECURITY AND EACH COMPANY
PERSONALLY.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
LETTER FROM THE CHAIRMAN
[photo]
Jeffrey L. Shames
DEAR SHAREHOLDERS,
It has been almost two years since financial turmoil began to rock markets in
Asia, Russia, and Latin America. Even developed markets such as Europe and the
United States were not immune. In the U.S. equity market, for example,
investors focused on a narrow group of 50 of the largest-company growth stocks
because they seemed to offer less volatility in uncertain times. Fixed-income
investors also became more concerned about risk, moving money into U.S.
Treasury securities and out of corporate and municipal bonds and
mortgage-backed securities.
The narrowness of the market was just one of three broad issues that dominated
the U.S. equity market until recently. The other two were a slowdown in
corporate earnings growth and high valuations, with stocks of many companies
selling at extremely high prices relative to their earnings.
Although these have been challenging issues, we now see signs that we feel
demonstrate each one is changing for the better. Today, we believe the markets
are presenting more opportunities for investors to diversify, for our portfolio
managers to find good values, and for us to show the benefits of staying with
our long-term objectives and strategies. Investors seem to be regaining
confidence in a wider range of companies. Stocks of some small and mid-sized
companies, as well as some large industrial companies, have begun to perform
better in the past few months than they had for the previous year or so. These
companies appear to have benefited from early signs of stability in emerging
markets and a continuation of economic growth in the United States.
U.S. companies also have produced better earnings. Corporate earnings were, on
average, relatively flat in 1998. However, we expect earnings to grow 12% to
14% this year because more companies have benefited from the strong economy and
from aggressive consolidation and cost-cutting measures they have taken over
the past several years.
Based on their earnings projections, our analysts estimate that the U.S. stock
market is still about 30% overvalued. While there has been some shift to a
wider group of stocks, many investors are still focusing on the large-company
stocks. As a result, most of the overvaluation is in the 50 largest stocks in
the Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged
index of common stock total return performance. That means about 450
1
LETTER FROM THE CHAIRMAN -- CONTINUED
stocks are selling at more attractive prices, particularly given what we see as
the improved earnings outlooks for these and many small and mid-sized companies
not in the S&P 500. These companies also benefit from consolidation, cost
cutting, and global growth. Because they are smaller, they may be able to
respond to these changes more quickly, and thus they have the potential to grow
faster than the big companies.
The fixed-income markets, meanwhile, seem to be approaching the level of
relative stability they enjoyed before the Asian turmoil. Some credit for this
stability goes to the Federal Reserve Board (the Fed), which has reassured
investors that it will act to prevent rapid economic growth from causing higher
inflation and reduced purchasing power. Also, once investors saw that the
overseas turmoil had little, if any, effect on the financial strength of most
domestic bond issuers, the major non-Treasury markets - corporate, municipal,
and mortgage - began to rebound. Our portfolio managers are now finding more
opportunities to buy bonds with relatively stable prices and attractive yields.
The past two years have challenged investors. However, we believe we are well
positioned for the current environment because our analysts and portfolio
managers continue to rely on MFS R Original Research SM to help evaluate the
long-term investment potential of each holding being considered for our
portfolios. Also, we believe our discipline of staying with our clearly defined
investment strategies can help us offer investment products with the potential
to sustain returns over a variety of market cycles.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management R
July 15, 1999
2
MANAGEMENT REVIEW AND OUTLOOK
[photo]
Paul M. McMahon
For the six months ended June 30, 1999, Class A shares of the Fund provided a
total return of 8.41%, Class B shares 7.96%, and Class I shares 8.47%. These
returns, which include the reinvestment of distributions but exclude the
effects of any sales charges, compare to a return of 12.23% 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 STOCKS DID WELL AND WHY?
A. We benefited from Microsoft, which held on to its position as the top
holding in the Fund for the first half of the year. After suffering through
declining stock prices in the winter, the prices of BMC Software, a computer
software company, and Oracle, a database software developer and manufacturer,
went up in the second quarter and the portfolio benefited. Tyco International,
an industrial conglomerate and our second-largest holding, continued to perform
well thanks to strong earnings growth. MCI WorldCom, a data and
telecommunications company, Cisco Systems, a computer network developer, and
Analog Devices, a digital signal processing company, were consistently strong
performers. MediaOne, a cable broadcasting company that made a valuable
contribution to the portfolio, was trimmed after the announcement of an AT&T
acquisition offer. We added Comcast, another cable broadcaster, to our holdings
because of what we believe to be strong fundamentals for the company. Because
it seemed overvalued, we reduced our holdings in the drug company Pfizer. We
bought American Home Products, which develops and sells a wide range of drugs
and agricultural products and had good earnings growth at a reasonable
price/earnings multiple.
Q. WHAT AFFECTED THE FUND'S PERFORMANCE MOST DURING THE PERIOD?
A. The Fund underperformed during the first half of the period, but it
outperformed during the second half. During the first three months, more
cyclically oriented sectors -- energy and specialty retailing, for example --
performed well, and we had relatively few such holdings. Our technology focus
was correct, but we were more concentrated in software stocks at a time when
semiconductor stocks performed strongly. But during the second three months,
software stock performance improved significantly.
3
MANAGEMENT REVIEW AND OUTLOOK -- CONTINUED
Q. WHAT STOCKS HURT PERFORMANCE DURING THE FIRST HALF OF THE YEAR?
A. Cadence Design Systems, a developer of design software and software
services, had disappointing earnings. Compuware, a software products and
professional services company, underperformed due to concerns about a potential
slowdown in sales. Rite Aid, the drug store chain, experienced management and
financing problems.
Q. WHY DID YOU HAVE SUCH A LARGE WEIGHTING IN THE LEISURE SECTOR?
A. The leisure sector is focused on two primary areas: cable operating
companies and radio companies. The cable industry is benefiting from the
introduction of digital services, which expands the breadth of its product
offerings through cable television. The industry also gets an added boost
because of its superior connection for Internet-related services. Our primary
cable holdings are Time Warner and Comcast. Radio stocks continued to have a
strong position in the Fund because the industry benefited from consolidation
and a strong economy. Consolidation has allowed such companies as Clear Channel
Communications to offer more comprehensive advertising packages that better
cover local markets with a larger number of stations and more professional
programming. This has led to stronger demand for advertising time.
Q. WHERE ARE YOU FINDING NEW GROWTH STOCKS TODAY?
A. We continue to rely on our bottom-up MFS R Original Research SM process.
Our team of analysts and portfolio managers visits and calls companies to
identify those that have the best growth prospects at today's valuation levels.
It has become more difficult to identify new ideas in today's highly valued
market. However, we believe that patience and continued hard work will enable
us to add new companies. During the period, we added to our positions in
Wendy's International and McDonald's Corp. because we felt that fundamentals
began to improve for the restaurant industry.
Q. WHAT IS YOUR OUTLOOK FOR THE SECOND HALF OF THE YEAR?
A. Looking ahead, the Federal Reserve Board's small interest rate increase
would indicate that it is satisfied with the current level of growth in the
economy. Inflation remains under control, according to recent government
inflation indices for consumer and wholesale prices. This paints a good overall
backdrop for the stock market, which is recognized by current valuation levels.
In general, we think that more moderate upside movement should be expected from
the market than we have seen in the
4
MANAGEMENT REVIEW AND OUTLOOK -- CONTINUED
past few years of very strong performance. We will strive to continue to add
those companies that best meet our objective of capital growth for the
portfolio.
Respectfully,
Paul M. McMahon
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
5
PORTFOLIO MANAGER'S PROFILE
Paul M. McMahon is Senior Vice President of MFS Investment Management R. He is
portfolio manager of MFS R Growth Opportunities Fund and the Capital
Appreciation Series offered through MFS R/Sun Life annuity products.
He joined the MFS Research Department in 1981 as a research analyst and was
named Investment Officer in 1983, Assistant Vice President in 1984, Vice
President in 1986, and Senior Vice President in 1992. Mr. McMahon is a graduate
of Holy Cross College and the Amos Tuck School of Business Administration of
Dartmouth College. He is a member of The Boston Security Analysts Society, Inc.
All equity portfolio managers began their careers at MFS Investment Management
R as research analysts. Our portfolio managers are supported by an investment
staff of over 100 professionals utilizing MFS R Original Research SM, a
company-oriented, bottom-up process of selecting securities.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
6
FUNDFACTS
Objective: Seeks growth of capital. Dividend income, if any, is
incidental.
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: $1.2 billion net assets as of June 30, 1999
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in
net asset value, including reinvestment of dividends. (See Notes to Performance
Summary for more information.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +8.41% +16.32% +86.62% +198.27% +331.65%
Average Annual Total Return -- +16.32% +23.12% +24.43% +15.75%
SEC Results -- +9.63% +20.71% +22.96% +15.06%
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +7.96% +15.41% +81.99% +185.22% +310.13%
Average Annual Total Return -- +15.41% +22.09% +23.32% +15.16%
SEC Results -- +11.41% +21.41% +23.15% +15.16%
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +8.47% +16.52% +87.31% +199.37% +333.24%
Average Annual Total Return -- +16.52% +23.27% +24.52% +15.79%
</TABLE>
7
NOTES TO PERFORMANCE SUMMARY
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") 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. 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.
8
PORTFOLIO CONCENTRATION AS OF JUNE 30, 1999
FIVE LARGEST STOCK SECTORS
Technology 26.9%
Leisure 15.0%
Conglomerates, Special Products/Services 11.6%
Health care 9.7%
Retailing 9.6%
TOP 10 STOCK HOLDINGS
MICROSOFT CORP. 7.2%
Computer software and systems company
TYCO INTERNATIONAL LTD. 7.1%
U.S. security systems, packaging, and electronic equipment conglomerate
CISCO SYSTEMS, INC. 3.9%
Computer network developer
CVS CORP. 3.2%
Drug store chain
ORACLE CORP. 3.1%
Database software developer and manufacturer
BMC SOFTWARE, INC. 2.8%
Computer software company
TIME WARNER, INC. 2.7%
Publishing and entertainment company
MCI WORLDCOM, INC. 2.4%
U.S. telecommunications company
UNITED HEALTHCARE CORP. 2.3%
Health maintenance organization
CENDANT CORP. 2.2%
Hotel, real estate, and consumer services company franchiser
The portfolio is actively managed, and current holdings may be different.
9
PORTFOLIO OF INVESTMENTS (UNAUDITED) -- JUNE 30, 1999
Stocks - 92.8%
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
U.S. Stocks - 89.8%
Advertising - 0.6%
Young & Rubicam, Inc. 159,000 $ 7,224,563
Aerospace - 1.3%
General Dynamics Corp. 89,800 $ 6,151,300
United Technologies Corp. 140,600 10,079,262
------------
$ 16,230,562
Airlines - 0.5%
AMR Corp.* 92,200 $ 6,292,650
Automotive - 0.1%
Federal-Mogul Corp. 33,073 $ 1,719,796
Banks and Credit Companies - 0.6%
Bank of New York Co., Inc. 208,400 $ 7,645,675
Broadcasting - 1.2%
Hispanic Broadcasting Corp.* 3,270 $ 248,111
Infinity Broadcasting Corp.* 462,300 13,753,425
Worldgate Communications, Inc.* 1,200 61,500
------------
$ 14,063,036
Business Services - 2.0%
Concord EFS, Inc.* 39,000 $ 1,650,187
DST Systems, Inc.* 158,200 9,946,825
First Data Corp. 251,700 12,317,569
Policy Management Systems Corp.* 20,900 627,000
------------
$ 24,541,581
Computer Software - Personal Computers - 6.7%
Microsoft Corp.* 902,000 $ 81,349,125
Computer Software - Services - 0.8%
EMC Corp.* 171,000 $ 9,405,000
Informatica Corp.* 1,000 35,625
------------
$ 9,440,625
Computer Software - Systems - 9.3%
Ariba, Inc.* 2,000 $ 194,500
BMC Software, Inc.* 591,900 31,962,600
Cadence Design Systems, Inc.* 994,009 12,673,615
Cambridge Technology Partners, Inc.* 129,800 2,279,612
Computer Associates International, Inc. 262,375 14,430,625
Compuware Corp.* 307,600 9,785,525
Oracle Corp.* 948,112 35,198,658
Redback Networks, Inc.* 600 75,338
Synopsys, Inc.* 124,800 6,887,400
------------
$ 113,487,873
Conglomerates - 0.5%
Sodexho Marriott Services, Inc.* 295,400 $ 5,667,988
10
PORTFOLIO OF INVESTMENTS (UNAUDITED) -- CONTINUED
Stocks - continued
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
U.S. Stocks - continued
Consumer Goods and Services - 10.8%
Clorox Co. 50,000 $ 5,340,625
Colgate-Palmolive Co. 130,400 12,877,000
Galileo International, Inc. 250,000 13,359,375
Gillette Co. 345,300 14,157,300
Newell Rubbermaid, Inc. 121,800 5,663,700
Tyco International Ltd. 838,828 79,478,953
------------
$ 130,876,953
Electrical Equipment - 1.9%
General Electric Co. 146,600 $ 16,565,800
Thomas & Betts Corp. 129,300 6,109,425
------------
$ 22,675,225
Electronics - 1.7%
Altera Corp.* 106,000 $ 3,902,125
Analog Devices, Inc.* 326,633 16,392,894
GlobeSpan, Inc.* 1,500 59,625
------------
$ 20,354,644
Entertainment - 8.2%
CBS Corp.* 270,900 $ 11,767,219
Clear Channel Communications, Inc.* 339,295 23,390,149
Comcast Corp., "A" 324,000 12,453,750
MediaOne Group, Inc.* 238,400 17,731,000
Time Warner, Inc. 407,700 29,965,950
Univision Communications, Inc., "A"* 63,300 4,177,800
------------
$ 99,485,868
Financial Institutions - 4.4%
Associates First Capital Corp., "A" 482,200 $ 21,367,487
CIT Group, Inc., "A" 108,000 3,118,500
Financial Federal Corp. * 183,475 4,036,450
Finova Group, Inc. 259,400 13,650,925
Goldman Sachs Group, Inc.* 11,100 801,975
Merrill Lynch & Co., Inc. 54,500 4,356,594
Morgan Stanley Dean Witter & Co. 60,500 6,201,250
------------
$ 53,533,181
Food and Beverage Products - 1.1%
Keebler Foods Co.* 186,500 $ 5,664,937
Quaker Oats Co. 69,600 4,619,700
Ralston-Ralston Purina Co. 101,300 3,083,319
------------
$ 13,367,956
Insurance - 2.5%
American International Group, Inc. 125,770 $ 14,722,951
Equitable Cos., Inc. 53,100 3,557,700
11
PORTFOLIO OF INVESTMENTS (UNAUDITED) -- CONTINUED
Stocks - continued
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
U.S. Stocks - continued
Insurance - continued
Lincoln National Corp. 241,600 12,638,700
------------
$ 30,919,351
Internet
Ask Jeeves, Inc. 1,000 $ 14,000
USinternetworking, Inc.* 2,800 117,600
------------
$ 131,600
Manufacturing - 0.2%
Danaher Corp. 42,600 $ 2,476,125
Medical and Health Products - 3.8%
American Home Products Corp. 273,300 $ 15,714,750
Becton, Dickinson & Co. 156,500 4,695,000
Boston Scientific Corp.* 125,200 5,500,975
Pfizer, Inc. 106,700 11,710,325
Pharmacia & Upjohn, Inc. 103,700 5,891,456
Schering Plough Corp. 62,300 3,301,900
------------
$ 46,814,406
Medical and Health Technology and Services - 5.2%
Cardinal Health, Inc. 182,002 $ 11,670,878
Guidant Corp. 157,400 8,096,263
Health Management Associates, Inc., "A"* 693,050 7,796,813
HEALTHSOUTH Corp.* 627,400 9,371,787
United HealthCare Corp. 412,800 25,851,600
------------
$ 62,787,341
Railroads - 0.5%
Kansas City Southern Industries, Inc. 92,400 $ 5,896,275
Restaurants and Lodging - 3.4%
Cendant Corp.* 1,209,973 $ 24,804,446
McDonald's Corp. 241,500 9,976,969
Wendy's International, Inc. 215,700 6,107,006
------------
$ 40,888,421
Stores - 6.7%
CVS Corp. 710,000 $ 36,032,500
Linens 'n Things, Inc.* 22,800 997,500
Lowe's Cos., Inc. 76,600 4,342,263
Office Depot, Inc.* 595,200 13,131,600
Rite Aid Corp. 629,500 15,501,437
TJX Cos., Inc. 356,300 11,869,244
------------
$ 81,874,544
Supermarkets - 2.2%
Kroger Co.* 407,200 $ 11,376,150
12
PORTFOLIO OF INVESTMENTS (UNAUDITED) -- CONTINUED
Stocks - continued
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
U.S. Stocks - continued
Supermarkets - continued
Safeway, Inc.* 302,900 14,993,550
------------
$ 26,369,700
Telecommunications - 11.9%
Adelphia Communications Corp., "A"* 6,000 $ 381,750
American Tower Corp., "A"* 182,800 4,387,200
AT&T Corp.* 81,200 2,984,100
CenturyTel, Inc. 236,200 9,388,950
Cisco Systems, Inc.* 677,250 43,640,297
Global TeleSystems Group, Inc.* 115,300 9,339,300
Intermedia Communications, Inc.* 77,900 2,337,000
L-3 Communications Holding, Inc.* 2,000 96,625
Lucent Technologies, Inc. 157,600 10,628,150
MCI WorldCom, Inc.* 320,430 27,577,007
Motorola, Inc. 82,000 7,769,500
Nextlink Communications, Inc., "A"* 35,400 2,632,875
Pinnacle Holdings, Inc.* 31,100 761,950
Qwest Communications International, Inc.* 160,908 5,320,021
Rhythms NetConnections, Inc.* 33,200 1,938,050
Sprint Corp. (PCS Group) 161,300 9,214,262
Tellabs, Inc.* 97,400 6,580,587
------------
$ 144,977,624
Utilities - Electric - 1.1%
AES Corp.* 229,100 $ 13,316,438
Utilities - Telephone - 0.6%
Frontier Corp. 114,100 $ 6,731,900
Total U.S. Stocks $1,091,141,026
Foreign Stocks - 3.0%
Bermuda - 0.4%
Ace Ltd. (Insurance) 181,500 $ 5,127,375
Finland - 0.3%
Nokia Corp., ADR (Telecommunications) 33,300 $ 3,049,031
Germany - 0.7%
Mannesmann AG (Conglomerate) 58,200 $ 8,696,387
Italy - 0.5%
Telecom Italia Mobile S.p.A.
(Telecommunications) 993,800 $ 5,929,600
Sweden - 0.7%
Ericsson LM, ADR (Telecommunications) 265,000 $ 8,728,438
United Kingdom - 0.4%
Reuters Group PLC (Business Services) 369,600 $ 4,860,874
Total Foreign Stocks $ 36,391,705
Total Stocks (Identified Cost, $711,982,812) $1,127,532,731
13
PORTFOLIO OF INVESTMENTS (UNAUDITED) -- CONTINUED
Short-Term Obligations - 7.0%
- -------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------
Federal Agricultural Mortgage Corp.,
due 7/15/99 $ 12,800 $ 12,775,758
Federal Home Loan Mortgage Corp.,
due 7/16/99 - 7/19/99 32,200 32,130,952
Federal National Mortgage Assn.,
due 7/28/99 15,000 14,945,888
General Electric Capital Corp.,
due 7/01/99 25,090 25,090,000
Total Short-Term Obligations, at Amortized Cost $ 84,942,598
Total Investments (Identified Cost, $796,925,410) $1,212,475,329
Other Assets, Less Liabilities - 0.2% 2,940,988
Net Assets - 100.0% $1,215,416,317
* Non-income producing security.
See notes to financial statements
14
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
June 30, 1999
- -------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified cost, $796,925,410) $1,212,475,329
Cash 7,501
Receivable for Fund shares sold 466,366
Receivable for investments sold 5,512,340
Interest and dividends receivable 310,395
Other assets 12,618
Total assets $1,218,784,549
LIABILITIES:
Payable for Fund shares reacquired $ 1,644,088
Payable for investments purchased 1,006,379
Payable to affiliates -
Management fee 13,773
Shareholder servicing agent fee 3,306
Distribution and service fee 354,922
Accrued expenses and other liabilities 345,764
Total liabilities $ 3,368,232
NET ASSETS $1,215,416,317
NET ASSETS CONSIST OF:
Paid-in capital $ 730,721,681
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 415,549,188
Accumulated undistributed net realized gain on investments
and foreign currency transactions 70,270,464
Accumulated net investment loss (1,125,016)
Total $1,215,416,317
SHARES OF BENEFICIAL INTEREST OUTSTANDING 72,302,232
CLASS A SHARES:
NET ASSET VALUE PER SHARE
(net assets of $1,155,120,927 / 68,572,671 shares of
beneficial interest outstanding) $16.85
Offering price per share (100 / 94.25 of net asset value
per share) $17.88
CLASS B SHARES:
NET ASSET VALUE AND OFFERING PRICE PER SHARE
(net assets of $55,152,540 / 3,424,598 shares of
beneficial interest outstanding) $16.10
CLASS I SHARES:
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(net assets of $5,142,850 / 304,963 shares of
beneficial interest outstanding) $16.86
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
15
FINANCIAL STATEMENTS -- CONTINUED
Statement of Operations (Unaudited)
Six Months Ended June 30, 1999
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS):
Income -
Dividends $ 2,197,550
Interest (including income on securities loaned of $104,759) 1,584,580
Foreign taxes withheld (12,685)
Total investment income $ 3,769,445
Expenses -
Management fee $ 2,428,142
Trustees' compensation 37,520
Shareholder servicing agent fee 618,692
Distribution and service fee (Class A) 1,070,447
Distribution and service fee (Class B) 251,427
Administrative fee 85,178
Custodian fee 202,500
Printing 17,446
Postage 60,779
Auditing fees 16,905
Legal fees 2,306
Miscellaneous 195,223
Total expenses $ 4,986,565
Fees paid indirectly (186,294)
Net expenses $ 4,800,271
Net investment loss $(1,030,826)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) (identified cost basis) -
Investment transactions $73,310,974
Foreign currency transactions (10,223)
Net realized gain on investments and foreign currency
transactions $73,300,751
Change in unrealized appreciation (depreciation) -
Investments $22,309,296
Translation of assets and liabilities in foreign currencies (724)
Net unrealized gain on investments and foreign currency
translation $22,308,572
Net realized and unrealized gain on investments and
foreign currency $95,609,323
Increase in net assets from operations $94,578,497
See notes to financial statements
16
FINANCIAL STATEMENTS -- CONTINUED
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
(Unaudited)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment loss $ (1,030,826) $ (2,871,773)
Net realized gain on investments and
foreign currency transactions 73,300,751 163,234,852
Net unrealized gain on investments and
foreign currency translation 22,308,572 118,684,994
Increase in net assets from operations $ 94,578,497 $ 279,048,073
Distributions declared to shareholders -
From net realized gain on investments
and foreign currency transactions
(Class A) $ (28,993,921) $ (120,735,017)
From net realized gain on investments
and foreign currency transactions
(Class B) (1,407,943) (5,043,936)
From net realized gain on investment
and foreign currency transactions
(Class I) (125,514) (548,219)
Total distributions declared to
shareholders $ (30,527,378) $ (126,327,172)
Net increase (decrease) in net assets
from Fund share transactions $ (39,843,132) $ 55,806,486
Total increase in net assets $ 24,207,987 $ 208,527,387
NET ASSETS:
At beginning of period 1,191,208,330 982,680,943
At end of period (including accumulated
net investment loss of $1,125,016 and
$94,190, respectively) $1,215,416,317 $1,191,208,330
See notes to financial statements
17
FINANCIAL STATEMENTS -- CONTINUED
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1999 ----------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $15.95 $13.92 $12.97 $11.94 $10.17 $11.56
Income from investment operations # -
Net investment income (loss)@ $(0.01) $(0.04) $(0.03) $(0.02) $ 0.03 $ 0.02
Net realized and unrealized gain (loss)
on investments and foreign currency 1.32 3.96 2.96 2.62 3.46 (0.50)
Total from investment operations $ 1.31 $ 3.92 $ 2.93 $ 2.60 $ 3.49 $(0.48)
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $ -- $(0.01)
From net realized gain on investments
and foreign currency transactions (0.41) (1.89) (1.98) (1.57) (1.72) (0.83)
In excess of net investment income -- -- -- -- -- (0.02)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.05)
Total distributions declared to
shareholders $(0.41) $(1.89) $(1.98) $(1.57) $(1.72) $(0.91)
Net asset value - end of period $16.85 $15.95 $13.92 $12.97 $11.94 $10.17
Total return^^ 8.41%++ 29.17% 23.28% 21.87% 34.49% (4.15)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL
DATA@:
Expenses ## 0.82%+ 0.81% 0.84% 0.84% 0.87% 0.86%
Net investment income (loss) (0.14)%+ (0.25)% (0.18)% (0.15)% 0.21% 0.21%
PORTFOLIO TURNOVER 29% 79% 60% 65% 100% 78%
NET ASSETS AT END OF PERIOD (000 OMITTED) $1,155,121 $1,137,302 $953,194 $807,657 $721,467 $589,260
</TABLE>
@ 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:
<TABLE>
<CAPTION>
<S> <C> <C>
Net investment income $ 0.02 $ 0.01
Ratios (to average net assets)
Expenses## 0.97% 0.96%
Net investment income 0.11% 0.11%
</TABLE>
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
^^ Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
See notes to financial statements
18
FINANCIAL STATEMENTS -- CONTINUED
Financial Highlights - continued
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1999 ----------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $15.33 $13.54 $12.73 $11.79 $10.08 $11.53
Income from investment operations # -
Net investment loss $(0.07) $(0.16) $(0.14) $(0.14) $(0.09) $(0.08)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.25 3.83 2.89 2.57 3.42 (0.49)
Total from investment operations $ 1.18 $ 3.67 $ 2.75 $ 2.43 $ 3.33 $(0.57)
Less distributions declared to shareholders -
From net realized gain on investments
and foreign currency transactions $(0.41) $(1.88) $(1.94) $(1.49) $(1.62) $(0.83)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- -- (0.05)
Total distributions declared to
shareholders $(0.41) $(1.88) $(1.94) $(1.49) $(1.62) $(0.88)
Net asset value - end of period $16.10 $15.33 $13.54 $12.73 $11.79 $10.08
Total return 7.96%++ 28.15% 22.27% 20.72% 33.20% (4.96)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL
DATA:
Expenses ## 1.63%+ 1.63% 1.64% 1.75% 1.81% 1.81%
Net investment loss (0.95)%+ (1.05)% (0.98)% (1.06)% (0.75)% (0.70)%
PORTFOLIO TURNOVER 29% 79% 60% 65% 100% 78%
NET ASSETS AT END OF PERIOD (000 OMITTED) $55,152 $48,806 $25,578 $15,170 $6,673 $3,166
</TABLE>
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
See notes to financial statements
19
FINANCIAL STATEMENTS -- CONTINUED
Financial Highlights - continued
<TABLE>
<CAPTION>
Six Months Ended Year Ended Period Ended
June 30, 1999 December 31, December 31,
(Unaudited) 1998 1997*
- ----------------------------------------------------------------------------------------------------------------------------
Class I
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $15.95 $13.91 $12.84
Income from investment operations # -
Net investment income (loss) $ 0.00** $(0.01) $ 0.00**
Net realized and unrealized gain
on investments and foreign currency 1.32 3.96 3.07
Total from investment operations $ 1.32 $ 3.95 $ 3.07
Less distributions declared to shareholders
from net realized gain on investments
and foreign currency transactions $(0.41) $(1.91) $(2.00)
Net asset value - end of period $16.86 $15.95 $13.91
Total return 8.47%++ 29.45% 24.65%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL
DATA:
Expenses ## 0.63%+ 0.63% 0.65%+
Net investment income (loss) 0.05%+ (0.06)% 0.01%+
PORTFOLIO TURNOVER 29% 79% 60%
NET ASSETS AT END OF PERIOD (000 OMITTED) $5,143 $5,100 $3,909
</TABLE>
* For the period from the inception of Class I, January 2, 1997, through
December 31, 1997.
** Per share amount was less than $0.01.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursement agent. The Fund's expenses are calculated
without reduction for this expense offset arrangement.
See notes to financial statements
20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(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 an open-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
INVESTMENT VALUATIONS - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted
bid prices. 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 the Trustees.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction gains
and losses. That portion of both realized and unrealized gains and losses on
investments that results from fluctuations in foreign currency exchange rates
is not separately disclosed.
SECURITY LOANS - The Fund may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by
the Fund. The loans are collateralized at all times by cash 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.
21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
At June 30, 1999, there were no securities on loan. 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 State Street in its capacity as
lending agent. 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.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
FEES PAID INDIRECTLY - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. 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 and foreign currency
transactions. Accordingly, no provision for federal income or excise tax is
provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
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 average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. Differences in per share
dividend rates are generally due to differences in separate class expenses.
Class B shares will convert to Class A shares approximately eight years after
purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
22
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
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 $500 million 0.40%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc., and MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined
benefit plan for all of its independent Trustees and Mr. Bailey. Included in
Trustees' compensation is a net periodic pension expense of $11,896 for the six
months ended June 30, 1999.
ADMINISTRATOR - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$85,107 for the six months ended June 30, 1999, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A and Class B shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum (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 and a distribution fee
to MFD of up to 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $408,136 for the six
months ended June 30, 1999. 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 six months ended June 30, 1999,
were 0.19% of average daily net assets attributable to Class A shares on an
annualized basis.
23
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B shares. MFD will pay to
securities dealers that enter into a sales agreement with MFD all or a portion
of the service fee attributable to Class B shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class B
shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $3,818 for Class B shares for the six
months ended June 30, 1999. Fees incurred under the distribution plan during
the six months ended June 30, 1999, were 1.00% of average daily net assets
attributable to Class B shares on an annualized basis.
Purchases over $1 million of Class A 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 purchase. A contingent deferred sales
charge is imposed on shareholder redemptions of Class B shares in the event of
a shareholder redemption within six years of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the six months ended June 30, 1999, were $9,031 and $118,866 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 0.10%. Prior to April 1, 1999, the fee was calculated as a percentage of the
Fund's average daily net assets at an effective annual rate of 0.1125%.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
Purchases Sales
- -------------------------------------------------------------------------------
U.S. government securities $ -- $ 26,567,058
Investments (non-U.S. government securities) $323,274,881 $400,695,524
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $796,925,410
Gross unrealized appreciation $428,204,251
Gross unrealized depreciation (12,654,332)
Net unrealized appreciation $415,549,919
24
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
(5) SHARES OF BENEFICIAL INTEREST
<TABLE>
<CAPTION>
CLASS A SHARES
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 67,430,821 $ 1,084,088,481 101,045,903 $ 1,553,750,903
Shares issued to shareholders
in reinvestment of
distributions 1,854,727 29,109,440 7,591,986 113,783,982
Shares reacquired (72,013,775) (1,156,441,516) (105,812,055) (1,631,375,079)
Net increase (decrease) (2,728,227) $ (43,243,595) 2,825,834 $ 36,159,806
CLASS B SHARES
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,625,628 $ 40,625,040 3,553,497 $ 52,527,790
Shares issued to shareholders
in reinvestment of
distributions 86,559 1,298,427 325,330 4,676,943
Shares reacquired (2,471,740) (38,277,525) (2,583,295) (38,131,305)
Net increase 240,447 $ 3,645,942 1,295,532 $ 19,073,428
CLASS I SHARES
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,650 $ 90,094 22,646 $ 333,921
Shares issued to shareholders
in reinvestment of
distributions 8,010 125,514 36,578 548,219
Shares reacquired (28,430) (461,087) (20,402) (308,888)
Net increase (decrease) (14,770) $ (245,479) 38,822 $ 573,252
</TABLE>
(6) LINE OF CREDIT
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks 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 six months ended June 30, 1999, was $4,232. The Fund had no
borrowings during the period.
25
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management R, as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our
portfolio investments, delivering high-quality service to MFS fund
shareholders, retirement plan participants and MFS' institutional clients, and
supporting the financial advisers who sell our products. With that in mind, we
created a separately funded Year 2000 Program Management Office in 1996
comprised of a specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers
and software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking steps
to ascertain the Y2K readiness of MFS' internal systems and is working with our
external systems vendors to determine whether they expect their systems to be
ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS R Original Research SM
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness. Each year, MFS' research analysts and portfolio managers conduct
more than 1,000 on-site meetings with companies whose securities are, or may
be, held in fund and client portfolios, and host an additional 1,500 meetings
at MFS' headquarters. When assessing the Y2K readiness of these companies, MFS'
research analysts and portfolio managers may rely upon discussions at these
meetings as well as SEC disclosure documents and third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on MFS, shareholders of MFS funds, participants in
retirement plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program,
please visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston Street,
Boston, MA 02116-3741.
26
DIVERSIFYING YOUR INVESTMENT PORTFOLIO
Most experts agree that it's wise to diversify your investments, no matter what
your age or financial situation. Diversification -- spreading your assets among
a variety of investment types -- can help spread your risk as well.
No one type of investment performs well all the time. In fact, each type of
investment tends to follow its own cycle, so that when the price of one is
rising, the price of another may be declining. By including a range of
investments in your portfolio, the overall volatility -- or change in value --
of that portfolio should be less than if you put everything in one type of
investment.
MFS offers a wide variety of investments to suit a wide range of needs. For
more information, talk to your financial adviser or request our MFS R UPDATE.
For details about a specific MFS fund, ask for a prospectus including charges
and expenses. Read the prospectus carefully before you invest or send money.
For more information, call MFS at 1-800-225-2606 any business day from 8 a.m.
to 8 p.m. Eastern time or visit our Web site at www.mfs.com.
27
MFS FAMILY OF FUNDS R
MFS offers a range of mutual funds to meet investors' varying financial needs
and goals. The funds are placed below in descending order of the level of risk
and reward each one offers in relation to the others in that asset class1. The
objective of the fund you choose should correspond to your financial needs and
goals.
HIGHER RISK/HIGHER REWARD POTENTIAL
BOND FUNDS
MFS R GLOBAL GOVERNMENTS FUND
MFS R HIGH YIELD OPPORTUNITIES FUND
MFS R HIGH INCOME FUND
MFS R MUNICIPAL HIGH INCOME FUND
MFS R STRATEGIC INCOME FUND
MFS R MUNICIPAL STATE FUNDS
AL, AR, CA, FL, GA, MD, MA, MS,
NY, NC, PA, SC, TN, VA, WV
MFS R MUNICIPAL INCOME FUND
MFS R BOND FUND
MFS R MUNICIPAL BOND FUND
MFS R GOVERNMENT SECURITIES FUND
MFS R GOVERNMENT MORTGAGE FUND
MFS R INTERMEDIATE INCOME FUND
MFS R MUNICIPAL LIMITED
MATURITY FUND
MFS R LIMITED MATURITY FUND
MFS R GOVERNMENT LIMITED
MATURITY FUND
STOCK FUNDS
MFS R/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
MFS R MANAGED SECTORS FUND
MFS R NEW DISCOVERY FUND
MFS R EMERGING GROWTH FUND
MFS R MID CAP GROWTH FUND
MFS R INTERNATIONAL GROWTH FUND
MFS R RESEARCH INTERNATIONAL FUND
MFS R GLOBAL GROWTH FUND
MFS R STRATEGIC GROWTH FUND
MFS R RESEARCH FUND
MFS R INTERNATIONAL GROWTH
AND INCOME FUND
MFS R GLOBAL EQUITY FUND
MFS R CAPITAL OPPORTUNITIES FUND
MASSACHUSETTS INVESTORS GROWTH
STOCK FUND
MFS R GROWTH OPPORTUNITIES FUND
MFS R LARGE CAP GROWTH FUND
MFS R UNION STANDARD R EQUITY FUND
MFS R RESEARCH GROWTH
AND INCOME FUND
MASSACHUSETTS INVESTORS TRUST
MFS R EQUITY INCOME FUND
MFS R UTILITIES FUND
MFS R GLOBAL TOTAL RETURN FUND
MFS R TOTAL RETURN FUND
MFS R GLOBAL ASSET
ALLOCATION FUND
LOWER RISK/LOWER REWARD POTENTIAL
1 For information on the specific risks, charges, and expenses associated with
any MFS fund, refer to the prospectus. Read it carefully before investing or
sending money.
28
MFS R GROWTH OPPORTUNITIES FUND
TRUSTEES
RICHARD B. BAILEY* - Private Investor; Former Chairman and Director (until
1991), MFS Investment Management
J. ATWOOD IVES - Chairman and Chief Executive Officer, Eastern Enterprises
(diversified services company)
LAWRENCE T. PERERA - Partner, Hemenway & Barnes (attorneys)
WILLIAM J. POORVU - Adjunct Professor, Harvard University Graduate School of
Business Administration
CHARLES W.SCHMIDT - Private Investor
ARNOLD D. SCOTT* - Senior Executive Vice President, Director, and Secretary,
MFS Investment Management
JEFFREY L. SHAMES* - Chairman, Chief Executive Officer, and Director, MFS
Investment Management
ELAINE R. SMITH - Independent Consultant
DAVID B. STONE - Chairman and Director, North American Management Corp.
(investment advisers)
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
JEFFREY L. SHAMES*
PORTFOLIO MANAGER
PAUL M. MCMAHON*
TREASURER
W. THOMAS LONDON*
ASSISTANT TREASURERS
MARK E. BRADLEY*
ELLEN MOYNIHAN*
JAMES O. YOST*
SECRETARY
STEPHEN E. CAVAN*
ASSISTANT SECRETARY
JAMES R. BORDEWICK, JR.*
CUSTODIAN
State Street Bank and Trust Company
INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
INVESTOR SERVICE
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any business day from 8
a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances, and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
WORLD WIDE WEB
www.mfs.com
*Affiliated with the Investment Adviser
29
MFS R Growth Opportunities Fund
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFSFund Distributors, Inc., 500 Boylston Street, Boston,MA 02116-3741
MGO-3 8/99 52M 16/216/816
