<PAGE>
[LOGO] MFS Annual Report
INVESTMENT MANAGEMENT August 31, 1997
MFS(R) MID CAP GROWTH FUND (FORMERLY MFS(R) OTC FUND)
[Graphic Omitted]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
A Discussion with the Portfolio Manager ................................... 2
Portfolio Manager's Profile ............................................... 5
Fund Facts ................................................................ 6
Performance Summary ....................................................... 6
Tax Form Summary .......................................................... 8
Portfolio Concentration ................................................... 8
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 21
Independent Auditors' Report .............................................. 27
The MFS Family of Funds(R) ................................................ 28
Trustees and Officers ..................................................... 29
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HIGHLIGHTS
o FOR THE 12 MONTHS ENDED AUGUST 31, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 20.26%, CLASS B SHARES
19.36%, CLASS C SHARES 19.44%, AND CLASS I SHARES 20.51%. (SEE
PERFORMANCE SUMMARY FOR MORE INFORMATION.)
o THE PAST YEAR WAS MARKED BY A STRONG DIVERGENCE OF PERFORMANCE BASED ON
CAPITALIZATION, WITH MANY OF THE LARGER COMPANIES IN THE STANDARD &
POOR'S 500 COMPOSITE INDEX EASILY OUTPERFORMING THE SMALLER COMPANIES
REPRESENTED BY THE RUSSELL 2000 TOTAL RETURN INDEX.
o THE FUND'S HEAVIEST INVESTMENT IN TECHNOLOGY IS IN SOFTWARE, AN AREA IN
WHICH GOOD COMPANIES CAN CAPTURE ATTRACTIVE MARKETS AND GROW IN A
PREDICTABLE MANNER AS HARDWARE PRODUCTS BECOME MORE POWERFUL, REQUIRING
NEW SOFTWARE TO RUN THEM.
o EFFECTIVE SEPTEMBER 1, 1997, THE NAME OF THE FUND WAS CHANGED TO MFS(R)
MID CAP GROWTH FUND. WHILE THE FUND'S INVESTMENT OBJECTIVE -- LONG-TERM
GROWTH OF CAPITAL -- IS THE SAME, THE FUND WILL BE ABLE TO INVEST AT
LEAST 65% IN MEDIUM CAPITALIZATION COMPANIES, AS OPPOSED TO BEING
LIMITED TO STOCKS LISTED ON THE OVER-THE-COUNTER MARKET, OR NASDAQ.
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin[
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, 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. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still
uncomfortably high. While some lenders are beginning to tighten standards to
address this problem, consumer debt and personal bankruptcies continue to
rise. The rapid pace of growth seen in the first quarter slowed slightly in
the second quarter, to an annual rate of 3.3%. While real (inflation-adjusted)
growth could moderate further in the third quarter, we believe economic
momentum will carry well into the first quarter of 1998. The money supply is
increasing at a rapid rate, the housing and automobile markets are
strengthening, and it now appears that Christmas sales could be quite good.
Because economic growth continues to be impressive, markets are likely to
begin focusing on the Federal Reserve Board's willingness to raise interest
rates.
Although the U.S. equity market has seen increased price volatility of late,
we have been surprised by its overall strength thus far in 1997. Much of this
is the result of continuing gains in corporate earnings. Even as the current
recovery enters its seventh year, more and more U.S. companies have been
exceeding analysts' earnings estimates. In the first quarter of 1997, for
example, two-thirds of all companies met or exceeded analysts' expectations, a
trend that could be an important indicator of the U.S. equity market's future
direction. However, while the near-term outlook for profits is generally
favorable, we believe equity valuations have risen to a point where a cautious
investment approach seems warranted.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
September 15, 1997
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Mark Regan]
Mark Regan
For the 12 months ended August 31, 1997, Class A shares of the Fund provided a
total return of 20.26%, Class B shares 19.36%, Class C shares 19.44%, and
Class I shares 20.51%. These returns, which include the reinvestment of
distributions but exclude the effects of any sales charges, compare to a
29.05% return for the Russell 2000 Total Return Index (the Russell 2000), an
unmanaged index of 2,000 of the smallest U.S.-domiciled company common stocks
that are traded on the New York Stock Exchange, the American Stock Exchange,
and NASDAQ; and to a 40.78% return for the Standard & Poor's 500 Composite
Index (the S&P 500), a popular, unmanaged index of common stock total return
performance.
Q. WHAT DO YOU SEE AS SOME OF THE MAJOR REASONS FOR THE FUND'S PERFORMANCE
OVER THE PAST YEAR?
A. There was a strong divergence over the past year of performance based on
capitalization, with many of the larger companies dramatically
outperforming smaller companies. This was reflected in the S&P 500, which
easily outperformed the Russell 2000 as well as the unmanaged NASDAQ
Composite Index, which returned 14.65%.
Q. HAVE YOU MADE ANY SIGNIFICANT CHANGES IN EMPHASIS AMONG SECTORS OVER THE
PAST YEAR, AND IF SO, WHY?
A. We have reduced the weightings in health care and communications and added
to holdings in business services and retail. Health care was pared through
a reduction in health maintenance organizations (HMOs), although we expect
many of the problems HMOs face to be resolved through improved health care
information systems. Thus, the increased investment in business services
was largely an investment in a broad range of health care information
companies. Holdings in the retail sector were increased as a number of what
we regard as promising companies in the high-growth specialty retail area
were added at attractive prices.
Q. WHAT ABOUT INDIVIDUAL STOCKS? ANY IMPORTANT CHANGES THERE?
A. Several of the Fund's top holdings changed over the past year. These changes
were often the result of companies in the portfolio being acquired by larger
companies, such as St. Jude Medical's buying Ventritex and Gemstar's buying
Starsight Telecast. Among gaming stocks, holdings in Showboat, Harrah's
Entertainment, and Argosy were reduced because our outlook for that industry
calls for a slowdown in the establishment of new gaming jurisdictions. Among
holdings added were Cable Design Systems, a leading company in
high-performance communications cables, and Oracle Systems, the leading
provider of client-server software.
Q. YOUR LARGEST INDUSTRY SECTOR REMAINS TECHNOLOGY. COULD YOU TALK ABOUT WHAT
YOU LIKE ABOUT THIS SECTOR AND ANY PARTICULAR TECHNOLOGY SUBSECTORS AND
STOCKS YOU LIKE?
A. We continue to find the most growth opportunities in technology. These
opportunities are driven by fundamental technological advancements and
innovations that are then integrated into the industries that make use of
them. For example, our heaviest investment in technology is in software, an
area in which a good company can capture an attractive niche and grow in a
predictable manner as computers and networks become more powerful. These
companies benefit from the need to constantly update software to
accommodate the new hardware. Companies in this sector that have performed
well over the past year include Intel, Microsoft, Oracle Systems, BMC
Software, Electronic Arts, Synopsys, and Cadence Design Systems, each of
which is a dominant player in its field.
Q. THE FUND'S NEXT LARGEST SECTOR IS HEALTH CARE. HOW HAS THIS SECTOR
PERFORMED, AND WHAT STOCKS SEEM TO BE DOING PARTICULARLY WELL THESE DAYS?
A. Our health care holdings have been changed to focus on subacute care,
medical devices, and medical services. Although HMO stocks have seen some
improved performance over the past year, our holdings in this area have
been reduced. Meanwhile, the subacute care sector has benefited from
favorable regulation and consolidation, both of which have combined to push
up the group's performance. At the same time, the medical devices and
services areas performed well as new products and services drove stock
performance.
Q. COULD YOU TALK ABOUT SOME OF THE FUND'S HOLDINGS THAT PERFORMED BETTER THAN
EXPECTED, AND WHY YOU THINK THEY DID WELL?
A. A large number of companies had a positive impact on the Fund, including
Gemstar International, Oracle Systems, Mariner Health Group, Cadence Design
Systems, and Synopsys. Gemstar benefited from a consolidation in its business
that left it with no strong competitors in the very attractive market of
electronic guides and navigators for broadcast television. Oracle, Cadence
Design, and Synopsys also performed well as their dominant software positions
provided exceptional growth. Mariner Health, a provider of long-term care and
subacute care, also did well as its operational problems were resolved and
concerns about health care regulation abated.
Q. NOW, WHAT ABOUT SOME STOCKS OR SECTORS THAT DID NOT PERFORM AS WELL AS YOU
WOULD HAVE LIKED?
A. Four companies had an adverse impact on performance: Ascend Communications,
HCIA, Inc., Uromed, and Spectrum Holobyte. A variety of issues affected
these companies, although management execution and product delays were the
primary culprits. However, we believe these companies are poised for solid
recoveries in the next 12 months.
Q. IN GENERAL, HOW WOULD YOU CHARACTERIZE THE BUSINESS AND ECONOMIC
ENVIRONMENT OF THE PAST YEAR?
A. It has been an extremely favorable environment, with the primary area of
concern being the slowing of European markets and the impact of currency
fluctuations, particularly on U.S. companies that derive a large percentage
of their revenue from overseas sales.
Q. EFFECTIVE SEPTEMBER 1, 1997, THE NAME OF THE FUND WAS CHANGED TO MFS MID
CAP GROWTH FUND. WHILE THE INVESTMENT OBJECTIVE -- LONG-TERM GROWTH OF
CAPITAL -- IS THE SAME, THE INVESTMENT POLICY AND STRATEGY ARE DIFFERENT.
COULD YOU TALK ABOUT WHY THIS CHANGE WAS MADE AND THE KIND OF INVESTMENTS
YOU EXPECT TO BE MAKING?
A. The change in the Fund's name and the modification of its investment policy
have been made for a number of reasons. First, the requirement to invest in
NASDAQ stocks has limited the majority of our investments to holdings that
trade on a specific exchange (the NASDAQ), as opposed to companies that are
small- or medium-sized or that are in growth or value industries. This change
allows us to invest in small- and medium-capitalization companies without
being limited to just one exchange. Second, many of our holdings have been
leaving the NASDAQ, forcing us to liquidate these holdings as they move to
the New York Stock Exchange. Finally, the Fund's new focus will be to invest
in mid-cap and, to a lesser extent, small-cap growth companies. We will seek
to find what we believe are attractive growth companies as they become
winners in favorable growth segments.
/s/ Mark Regan
Mark Regan
Portfolio Manager
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PORTFOLIO MANAGER'S PROFILE
MARK REGAN BEGAN HIS CAREER AT MFS IN 1989 AS A RESEARCH ANALYST. A
GRADUATE OF CORNELL UNIVERSITY AND THE SLOAN SCHOOL OF MANAGEMENT OF THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY, HE WAS PROMOTED TO INVESTMENT
OFFICER IN 1990, ASSISTANT VICE PRESIDENT - INVESTMENTS IN 1991, AND
VICE PRESIDENT - INVESTMENTS IN 1992. MR. REGAN HAS MANAGED MFS(R) MID
CAP GROWTH FUND SINCE ITS INCEPTION IN 1993.
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<PAGE>
NOTE: THE FUND CHANGED ITS NAME FROM MFS OTC FUND TO MFS(R) MID CAP GROWTH
FUND AS OF SEPTEMBER 1, 1997.
FUND FACTS
OBJECTIVE: THE INVESTMENT OBJECTIVE OF THE FUND IS TO SEEK LONG-
TERM GROWTH OF CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: CLASS A: DECEMBER 1, 1993
CLASS B: DECEMBER 1, 1993
CLASS C: AUGUST 1, 1994
CLASS I: JANUARY 2, 1997
SIZE: $122.9 MILLION NET ASSETS AS OF AUGUST 31, 1997
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS Mid Cap
Growth 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 the 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 period from December 1, 1993, through August 31, 1997)
MFS Consumer
Mid Cap S&P 500 Russell Price
Growth Fund Composite 2000 Index
- Class A Index Index - U.S.
----------- --------- ------- ---------
12/93 9,400 10,000 10,000 10,000
8/94 10,400 10,500 10,400 10,200
8/95 12,500 12,800 12,500 10,500
8/96 13,800 15,200 13,900 10,800
8/97 16,630 21,321 17,921 11,022
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
Life of
1 Year 3 Years Fund*
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MFS Mid Cap Growth Fund (Class A) including 5.75% sales charge
<S> <C> <C> <C>
(SEC results) +13.37% +14.48% +14.52%
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MFS Mid Cap Growth Fund (Class A) at net asset value +20.26% +16.77% +16.36%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Fund (Class B) with CDSC (SEC results) +15.36% +15.09% +14.75%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Fund (Class B) at net asset value +19.36% +15.84% +15.29%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Fund (Class C) with CDSC (SEC results) +18.44% +15.80% +15.33%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Fund (Class C) at net asset value +19.44% +15.80% +15.33%
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Fund (Class I) at net asset value +20.51% +16.85% +16.42%
- ----------------------------------------------------------------------------------------------------------------------------------
Average small-company growth fund** +26.85% +22.10% +17.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Total Return Index+ +29.05% +19.96% +16.86%
- ----------------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +40.78% +26.58% +22.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Price Index++ + 2.19% + 2.55% + 2.63%
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* For the period from the commencement of the Fund's investment operations, December 1,
1993, through August 31, 1997.
** 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 SEC results include the maximum 5.75% sales charge. Class B
share SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%.
Class C shares have no initial sales charge but, along with Class B shares,
have higher annual fees and expenses than Class A shares. Class C share SEC
results reflect the 1% CDSC applicable to shares redeemed within 12 months of
purchase. Class I shares, which became available on January 2, 1997, have no
sales charge or Rule 12b-1 fees and are only available to certain
institutional investors.
Class C share results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
commencement of offering of Class C shares. Operating expenses attributable to
Class C shares are not significantly different than those of Class B shares.
The Class B share performance included within the Class C share SEC
performance has been adjusted to reflect the CDSC generally applicable to
Class C shares rather than the CDSC generally applicable to Class B shares.
Class I share results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of the Fund's Class A shares for periods prior to the
commencement of offering of Class I shares. Because operating expenses
attributable to Class A shares are greater than those of Class I shares, Class
I share performance generally would have been higher than Class A share
performance.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies
and waivers may be discontinued at any time.
- --------------------------------------------------------------------------------
TAX FORM SUMMARY
IN JANUARY 1998, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1997.
DIVIDENDS RECEIVED DEDUCTION
FOR THE YEAR ENDED AUGUST 31, 1997, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 49.27%.
- --------------------------------------------------------------------------------
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 1997
TOP 10 EQUITY HOLDINGS
GEMSTAR INTERNATIONAL GROUP LTD. EDIFY CORP.
Audio/video products company Internet software company
ASCEND COMMUNICATIONS, INC. VIKING OFFICE PRODUCTS, INC.
Developer of telecommunications Mail-order office products
systems and products retailer
CABLE DESIGN TECHNOLOGIES CORP. ST. JUDE MEDICAL, INC.
Manufacturer of data transmission Developer and manufacturer of
cables medical instruments
MARINER HEALTH GROUP, INC. SPECTRUM HOLOBYTE, INC.
Nursing home and health care Developer of entertainment and
company educational software
ORACLE SYSTEMS CORP. TYCO INTERNATIONAL LTD.
Developer and manufacturer of Manufacturer of fire protection,
database software packaging, and electronic
equipment
LARGEST SECTORS
[Graphic Omitted]
Technology 36.7%
Health Care 15.6%
Leisure 13.3%
Miscellaneous 9.5%
(conglomerates, special products/services)
Retailing 9.3%
Other Sectors 15.6%
For a more complete breakdown, refer to the Portfolio of Investments.
<PAGE>
PORTFOLIO OF INVESTMENTS - August 31, 1997
<TABLE>
<CAPTION>
Stocks - 97.5%
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ISSUER SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 96.7%
Apparel and Textiles -
Polo Ralph Lauren Corp.* 1,800 $ 47,250
- ---------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 2.4%
Compass Bancshares, Inc. 31,400 $ 1,118,625
First Hawaiian, Inc. 31,800 1,172,625
ONBANCorp., Inc. 12,000 624,000
------------
$ 2,915,250
- ---------------------------------------------------------------------------------------------------------
Biotechnology
Perspective Biosystems, Inc.* 45 $ 548
- ---------------------------------------------------------------------------------------------------------
Business Machines - 0.3%
Affiliated Computer Services, Inc., "A"* 11,800 $ 309,750
- ---------------------------------------------------------------------------------------------------------
Business Services - 2.9%
BDM International, Inc.* 44,100 $ 1,113,525
Carbo Ceramics, Inc. 11,200 312,200
Claremont Technology Group, Inc.* 36,200 642,550
First USA Paymentech, Inc.* 10,700 325,013
Galileo International, Inc.* 2,300 60,806
Hall Kinion & Associates, Inc.* 200 4,275
HPR, Inc.* 29,500 527,312
Lamalie Associates, Inc.* 100 1,900
Technology Solutions Co.* 24,150 561,487
TeleSpectrum Worldwide, Inc.* 18,300 83,494
------------
$ 3,632,562
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Cellular Telephones - 0.8%
Telephone & Data Systems, Inc. 23,700 $ 936,150
- ---------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 6.2%
Electronic Arts, Inc.* 46,600 $ 1,482,462
Microsoft Corp.* 16,600 2,194,312
Quantum Corp.* 15,800 553,988
Read Rite Corp.* 11,800 338,513
Spectrum Holobyte, Inc.*## 634,000 3,051,125
----------------
$ 7,620,400
- ---------------------------------------------------------------------------------------------------------
Computer Software - Systems - 13.7%
Adobe Systems, Inc. 34,900 $ 1,374,188
Aris Corp.* 400 9,800
Aspen Technology, Inc.* 10,200 348,075
BMC Software, Inc.* 30,200 1,891,275
Cadence Design Systems, Inc.* 58,920 2,802,382
Cerner Corp.* 10,300 303,850
Clarify, Inc.* 9,200 144,900
Compuware Corp.* 11,500 710,125
E Trade Group, Inc.* 1,800 57,825
Edify Corp.* 241,100 3,495,950
Great Plains Software, Inc.* 200 5,275
Netscape Communications Corp.* 349 13,894
Oracle Systems Corp.* 98,750 3,764,844
Rational Software Corp.* 22,590 372,735
RWD Technologies, Inc.* 200 3,850
Synopsys, Inc.* 44,200 1,530,425
TSI International Software Ltd.* 600 7,350
------------
$ 16,836,743
- ---------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 2.5%
800-JR. Cigar, Inc.* 300 $ 9,600
Novel Denim Holdings Ltd.* 500 10,937
Tyco International Ltd.* 38,217 2,997,646
------------
$ 3,018,183
- ---------------------------------------------------------------------------------------------------------
Electronics - 4.7%
Analog Devices, Inc.* 25,300 $ 838,062
Atmel Corp.* 18,600 657,975
Intel Corp. 15,000 1,381,875
KLA-Tencor Corp.* 9,200 652,050
Kulicke & Soffa Industries, Inc.* 10,000 459,375
Teradyne, Inc.* 33,200 1,848,825
------------
$ 5,838,162
- ---------------------------------------------------------------------------------------------------------
Entertainment - 9.6%
American Radio Systems Corp. 3,800 $ 187,150
Gemstar International Group Ltd.* 475,000 9,737,500
Jacor Communications, Inc.* 22,700 998,800
LIN Television Corp.* 18,800 891,825
Silverleaf Resorts, Inc.* 900 17,325
Travel Services International, Inc.* 200 4,875
------------
$ 11,837,475
- ---------------------------------------------------------------------------------------------------------
Financial Institutions - 1.1%
Advanta Corp., "B" 8,400 $ 266,700
AmeriTrade Holding Corp., "A"* 500 9,406
ARM Financial Group, Inc., "A" 500 9,719
Delta Financial Corp.* 600 11,813
Franklin Resources, Inc. 14,200 1,098,725
------------
$ 1,396,363
- ---------------------------------------------------------------------------------------------------------
Food and Beverage Products - 2.2%
McCormick & Co., Inc. 43,900 $ 1,037,138
Smith's Food & Drug Centers, Inc., "B"* 29,900 1,637,025
------------
$ 2,674,163
- ---------------------------------------------------------------------------------------------------------
Insurance - 1.5%
Compdent Corp.* 47,900 $ 1,161,575
Conseco, Inc.* 14,400 619,200
Hartford Life, Inc., "A" 1,000 37,313
Nationwide Financial Services, Inc., "A" 1,700 47,175
Penn America Group, Inc.* 800 14,600
------------
$ 1,879,863
- ---------------------------------------------------------------------------------------------------------
Machinery - 0.4%
Greenfield Industries, Inc.* 20,800 $ 548,600
- ---------------------------------------------------------------------------------------------------------
Medical and Health Products - 4.2%
Acuson Corp.* 18,700 $ 503,731
Mentor Corp. 19,900 611,925
Schick Technologies, Inc.* 300 7,950
Transition Systems, Inc.* 71,400 1,365,525
Uromed Corp.* 450,000 2,615,625
------------
$ 5,104,756
- ---------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 15.8%
AmeriSource Health Corp., "A"* 32,000 $ 1,602,000
Centennial Healthcare Corp.* 500 10,063
CRA Managed Care, Inc.* 17,500 971,250
Cytyc Corp.* 12,800 256,000
HBO & Co. 17,500 1,253,437
HCIA, Inc.* 107,300 1,663,150
Hologic, Inc.* 26,100 632,925
IDEXX Labs, Inc.* 44,500 837,156
IDX Systems Corp.* 14,100 477,638
Mariner Health Group, Inc.* 262,200 3,801,900
Monarch Dental Corp.* 200 3,625
Physician Sales and Service, Inc.* 23,100 392,700
Renal Treatment Centers, Inc.* 23,400 792,675
Shared Medical System* 52,000 2,548,000
St. Jude Medical, Inc.* 90,000 3,425,625
United Healthcare Corp. 15,779 767,254
------------
$ 19,435,398
- ---------------------------------------------------------------------------------------------------------
Oil Services - 3.2%
Cal Dive International, Inc.* 300 $ 10,200
Cooper Cameron Corp.* 16,600 1,076,925
Diamond Offshore Drilling, Inc. 13,000 710,125
Friede Goldman International, Inc.* 600 24,150
Global Industries Ltd.* 37,900 1,380,981
Hanover Compressor Co.* 500 11,813
National Oilwell, Inc.* 5,600 344,750
Noble Drilling Corp.* 11,400 324,187
------------
$ 3,883,131
- ---------------------------------------------------------------------------------------------------------
Oils - 0.6%
Apache Corp. 16,500 $ 654,844
Santa Fe International Corp.* 1,700 76,075
------------
$ 730,919
- ---------------------------------------------------------------------------------------------------------
Pollution Control
Waste Industries, Inc., "A"* 300 $ 5,475
- ---------------------------------------------------------------------------------------------------------
Printing and Publishing -
CMP Media, Inc., "A"* 400 $ 10,700
- ---------------------------------------------------------------------------------------------------------
Railroads - 1.6%
Genesee & Wyoming, Inc., "A"* 15,000 $ 468,750
Wisconsin Central Transportation Corp.* 47,500 1,472,500
------------
$ 1,941,250
- ---------------------------------------------------------------------------------------------------------
Real Estate -
Lasalle Partners, Inc* 400 $ 11,900
- ---------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 1.4%
Applebee's International, Inc. 45,500 $ 1,160,250
Prime Hospitality Corp.* 28,600 543,400
------------
$ 1,703,650
- ---------------------------------------------------------------------------------------------------------
Special Products and Services - 1.1%
Keystone International, Inc. 35,800 $ 1,349,213
- ---------------------------------------------------------------------------------------------------------
Stores - 7.7%
AnnTaylor Stores Corp.* 71,100 $ 1,217,588
Gymboree Corp.* 119,800 2,935,100
Rite Aid Corp. 37,700 1,887,356
Viking Office Products, Inc.* 162,600 3,434,925
------------
$ 9,474,969
- ---------------------------------------------------------------------------------------------------------
Telecommunications - 12.8%
ADC Telecommunications, Inc.* 20,600 $ 764,775
Aerial Communications, Inc.* 122,500 1,064,219
Ascend Communications, Inc.* 109,400 4,642,662
Aspect Telecommunications Corp.* 88,300 1,942,600
Cable Design Technologies Corp.* 132,200 4,420,437
Cabletron Systems, Inc.* 17,400 526,350
Cisco Systems, Inc.* 7,400 557,775
Cox Communications, Inc., "A"* 5,100 138,019
Genesys Telecommunications Laboratory* 200 5,600
Qwest Communications International, Inc.* 700 28,525
Tel-Save Holdings, Inc.* 16,600 296,725
U.S. Cellular Corp.* 37,900 1,141,738
U.S. West Media Group* 9,200 184,000
------------
$ 15,713,425
- ---------------------------------------------------------------------------------------------------------
Total U.S. Stocks $118,856,248
- ---------------------------------------------------------------------------------------------------------
Foreign Stocks - 0.8%
Canada - 0.8%
Rogers Communications, Inc., "B"
(Telecommunications)* 94,800 $ 663,600
Southern Africa Minerals Corp. (Precious Metals and
Minerals)*++ 810,000 303,345
------------
$ 966,945
- ---------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 966,945
- ---------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $108,223,597) $119,823,193
- ---------------------------------------------------------------------------------------------------------
Warrants -
- ---------------------------------------------------------------------------------------------------------
Perseptive Biosystems, Inc. (Identified Cost, $0) 25 $ 0
- ---------------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.2%
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ---------------------------------------------------------------------------------------------------------
General Electric Capital Corp., due 09/02/97,
at Amortized Cost and Value $1,400 $ 1,399,781
- ---------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $109,623,378) $121,222,974
Other Assets, Less Liabilities - 1.3% 1,634,786
- ---------------------------------------------------------------------------------------------------------
Net Assets -- 100.0% $122,857,760
- ---------------------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
++Affiliated issuers are those in which the Fund's holdings of an issuer represent 5% or
more of the outstanding voting securities of the issuer.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
AUGUST 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments, at value -
Unaffiliated issuers (identified cost, $108,529,649) $120,919,629
Affiliated issuer (identified cost, $1,093,729) 303,345
------------
Total investments, at value (identified cost,
$109,623,378) $121,222,974
Cash 1,465,766
Receivable for Fund shares sold 661,407
Receivable for investments sold 296,226
Dividends receivable 11,517
Other assets 1,062
------------
Total assets $123,658,952
------------
Liabilities:
Payable for investments purchased $ 436,368
Payable for Fund shares reacquired 231,933
Payable to affiliates -
Management fee 7,293
Administrative fee 152
Shareholder servicing agent fee 1,312
Distribution and service fee 62,053
Accrued expenses and other liabilities 62,081
------------
Total liabilities $ 801,192
------------
Net assets $122,857,760
============
Net assets consist of:
Paid-in capital $111,850,491
Unrealized appreciation on investments 11,599,596
Accumulated net realized loss on investments and foreign
currency transactions (582,892)
Accumulated net investment loss (9,435)
------------
Total $122,857,760
============
Shares of beneficial interest outstanding 13,178,659
=========
Class A shares:
Net asset value per share
(net assets of $41,737,337 / 4,429,126 shares of
beneficial interest outstanding) $9.42
=====
Offering price per share (100 / 94.25) $9.99
=====
Class B shares:
Net asset value and offering price per share
(net assets of $73,940,102 / 7,972,462 shares of
beneficial interest outstanding) $9.27
=====
Class C shares:
Net asset value and offering price per share
(net assets of $5,796,283/ 630,395 shares of beneficial
interest outstanding) $9.19
=====
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $1,384,038 / 146,676 shares of
beneficial interest outstanding) $9.44
=====
On sales of $50,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Operations
- --------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1997
- --------------------------------------------------------------------------------------------
Net investment income:
Income -
<S> <C>
Interest $ 195,845
Dividends 175,657
-----------
Total investment income $ 371,502
-----------
Expenses -
Management fee $ 868,526
Trustees' compensation 18,091
Shareholder servicing agent fee 99,472
Shareholder servicing agent fee (Class A) 19,320
Shareholder servicing agent fee (Class B) 53,443
Shareholder servicing agent fee (Class C) 3,228
Distribution and service fee (Class A) 98,318
Distribution and service fee (Class B) 713,344
Distribution and service fee (Class C) 57,908
Administration fee 8,511
Printing 52,377
Auditing fee 50,652
Postage 34,033
Custodian fee 32,120
Legal fee 4,748
Miscellaneous 97,179
-----------
Total expenses $ 2,211,270
Fees paid indirectly (71)
-----------
Net expenses $ 2,211,199
-----------
Net investment loss $(1,839,697)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 2,977,138
Foreign currency transactions (325)
-----------
Net realized gain on investments and foreign currency transactions $ 2,976,813
-----------
Change in unrealized appreciation on investments $19,823,645
-----------
Net realized and unrealized gain on investments and foreign
currency $22,800,458
-----------
Increase in net assets from operations $20,960,761
===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
<S> <C> <C>
Net investment loss $ (1,839,697) $ (1,585,695)
Net realized gain on investment transactions 2,976,813 20,722,363
Net unrealized gain (loss) on investments 19,823,645 (12,184,307)
------------ ------------
Increase in net assets from operations $ 20,960,761 $ 6,952,361
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (5,360,182) $ (5,350,459)
From net realized gain on investments and foreign
currency transactions (Class B) (9,603,644) (10,344,167)
From net realized gain on investments and foreign
currency transactions (Class C) (727,466) (756,617)
------------ ------------
Total distributions declared to shareholders $(15,691,292) $(16,451,243)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 72,372,396 $ 80,419,295
Net asset value of shares issued to shareholders in
reinvestment of distributions 14,135,101 14,791,845
Cost of shares reacquired (77,920,481) (71,855,199)
------------ ------------
Increase in net assets from Fund share transactions $ 8,587,016 $ 23,355,941
------------ ------------
Total increase in net assets $ 13,856,485 $ 13,857,059
Net assets:
At beginning of period 109,001,275 95,144,216
------------ ------------
At end of period (including accumulated net investment
loss of $9,435, and $1,588,957, respectively) $122,857,760 $109,001,275
============ ============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1997 1996 1995 1994*
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 9.06 $ 10.08 $ 8.68 $ 7.83
------- ------- ------- -------
Income from investment operations# -
Net investment loss $ (0.09) $ (0.10) $ (0.03) $ (0.05)
Net realized and unrealized gain on investments and
foreign currency transactions 1.77 0.96 1.69 0.90
------- ------- ------- -------
Total from investment operations $ 1.68 $ 0.86 $ 1.66 $ 0.85
------- ------- ------- -------
Less distributions declared to shareholders -
From net realized gain on investments and foreign $
currency transactions
$ (1.32) $ (1.88) $ (0.26) --
------- ------- ------- -------
Net asset value - end of period $ 9.42 $ 9.06 $ 10.08 $ 8.68
======= ======= ======= =======
Total return(+) 20.26% 10.55% 19.77% 10.86%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.41% 1.28% 1.29% 1.50%+
Net investment loss (1.09)% (1.08)% (0.40)% (0.87)%+
Portfolio turnover 170% 157% 218% 82%
Average commission rate### $0.0387 $0.0422 $ -- $ --
Net assets at end of period (000 omitted) $41,737 $35,098 $30,194 $17,776
*For the period from the commencement of the Fund's investment operations, December 1,
1993, through August 31, 1994.
+Annualized.
++Not annualized.
(+)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.
#Per share data are based upon 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 funds with fiscal years beginning on or after
September 1, 1995.
(S)The investment advisor did not impose a portion of its management fee for the periods
indicated. If this fee had been incurred by the Fund, the net investment loss per share
and the ratios would have been:
Net investment loss $-- $-- $-- $ (0.08)
Ratios (to average net asets):
Expenses -- -- -- 2.03%+
Net investment loss -- -- -- (1.40)%+
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1997 1996 1995 1994*
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 8.93 $ 9.94 $ 8.59 $ 7.83
------- ------- ------- -------
Income from investment operations# -
Net investment loss $ (0.16) $ (0.17) $ (0.13) $ (0.12)
Net realized and unrealized gain on investments and
foreign currency transactions 1.75 0.95 1.69 0.88
------- ------- ------- -------
Total from investment operations $ 1.59 $ 0.78 $ 1.56 $ 0.76
------- ------- ------- -------
Less distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions $ (1.25) $ (1.79) $ (0.21) $ --
------- ------- ------- -------
Net asset value - end of period $ 9.27 $ 8.93 $ 9.94 $ 8.59
======= ======= ======= =======
Total return 19.36% 9.67% 18.75% 9.71%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.20% 2.13% 2.29% 2.57%+
Net investment loss (1.87)% (1.81)% (1.44)% (2.02)%+
Portfolio turnover 170% 157% 218% 82%
Average commission rate### $0.0387 $0.0422 $ -- $ --
Net assets at end of period (000 omitted) $73,940 $67,043 $61,742 $36,849
*For the period from the commencement of the Fund's investment operations, December 1,
1993, through August 31, 1994.
+Annualized.
++Not annualized.
#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 funds with fiscal years beginning on or after
September 1, 1995.
(S)The investment advisor did not impose a portion of its management fee for the periods
indicated. If this fee had been incurred by the Fund, the net investment loss per share
and the ratios would have been:
Net investment loss $ $ $ $ (0.15)
Ratios (to average net asets):
Expenses -- -- -- 3.10%+
Net investment loss -- -- -- (2.56)%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1997 1996 1995 1994* 1997**
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 8.85 $ 9.91 $ 8.61 $ 7.80 $ 8.50
------- ------- ------- ------- -------
Income from investment operations# -
Net investment loss $ (0.16) $ (0.17) $ (0.14) $ (0.04) $ (0.05)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.74 0.94 1.69 0.85 0.99
------- ------- ------- ------- -------
Total from investment operations $ 1.58 $ 0.77 $ 1.55 $ 0.81 $ 0.94
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions $ (1.24) $ (1.83) $ (0.25) $ -- $ --
------- ------- ------- ------- -------
Net asset value - end of period $ 9.19 $ 8.85 $ 9.91 $ 8.61 $ 9.44
======= ======= ======= ======= =======
Total return 19.44% 9.60% 18.63% 10.38%++ 11.06%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 2.16% 2.17% 2.30% 2.50%+ 1.03%+
Net investment loss (1.79)% (1.90)% (1.55)% (2.22)%+ (0.74)%+
Portfolio turnover 170% 157% 218% 82% 170%
Average commission rate### $0.0387 $0.0422 $ -- $ -- $0.0387
Net assets at end of period (000 omitted) $ 5,796 $ 6,860 $ 3,209 $ 87 $ 1,384
*For the period from the commencement of offering of Class C shares, August 1,
1994, through August 31, 1994. **For the period from the commencement of the
Fund's offering of Class I shares, January 3, 1997, through August 31, 1997.
+Annualized.
++Not annualized.
+++The Fund's expenses are calculated without reduction for fees paid
indirectly. #Per share distributions are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
(S)The investment advisor did not impose a portion of its management fee for the
periods indicated. If this fee had been incurred by the Fund, the net
investment loss per share and the ratios would have been:
Net investment loss $ -- $ -- $ -- $(0.05) $ --
Ratios (to average net assets):
Expenses -- -- -- 3.03%+ --
Net investment loss -- -- -- (2.71)%+ --
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Mid Cap Growth Fund (the Fund) is a diversified series of MFS Series Trust
IV (the Trust). The Trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. Effective September 1, 1997, the name
of the Fund was changed from MFS OTC Fund to MFS Mid Cap Growth Fund.
(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.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are
not available are valued at last quoted bid prices. Debt securities (other
than short-term obligations which mature in 60 days or less), including listed
issues, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data,
without exclusive reliance upon exchange or over-the-counter 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.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or 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 and
interest payments received in additional securities are recorded on the ex-
dividend or ex-interest date in an amount equal to the value of the security
on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's average daily net assets. This fee is reduced according to an
expense offset arrangement with State Street Bank, disbursing agent, which
provides for partial reimbursement of custody fees based on a formula
developed to measure the value of cash deposited by the Fund with the dividend
disbursing agent. 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 net 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 August 31, 1997, $1,835,920 was reclassified
from accumulated net realized loss on investments and foreign currency
transactions to accumulated net investment loss due to differences between
book and tax accounting for the offset of short-term capital gains against
accumulated net investment loss. This change had no effect on the net assets
or net asset value per share. At August 31, 1997, accumulated net realized
loss under book accounting was different from tax accounting due to temporary
differences in accounting for wash sale transactions.
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 pro rata 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 an annual rate of 0.75%
of average daily net assets.
Administrator - Effective March 1, 1997, the Fund has an administrative
services agreement with MFS to provide the Fund with certain financial, legal,
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, 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 officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $4,184
for the year ended August 31, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$23,709 for the year ended August 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, Class B, and Class C shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, 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 $18,471 for the year ended August 31, 1997. Payment of the 0.10%
per annum Class A distribution fee will be implemented on such date as the
Trustees of the Trust may determine. Fees incurred under the distribution plan
during the year ended August 31, 1997, were .26% of average daily net assets
attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be additional consideration for services rendered by the dealer with
respect to Class B and Class C shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $20,179
and $302 for Class B and Class C shares, respectively, for the year ended
August 31, 1997. Fees incurred under the distribution plan during the year
ended August 31, 1997, were 1.00% of average daily net assets attributable to
Class B, and Class C shares on an annualized basis, respectively.
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. A contingent deferred sales charge is imposed on shareholder
redemptions of Class C shares in the event of a shareholder redemption within
twelve months of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended August 31,
1997, were $304, $140,576, and $3,156 for Class A, Class B, and Class C
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the fund's average daily net assets at an effective annual
rate of 0.13%. Prior to January 1, 1997, the fee was calculated as a
percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22%, and up to 0.15%
attributable to Class A, Class B, and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations aggregated
$191,450,780 and $203,178,277, 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 $110,655,476
============
Gross unrealized appreciation $ 18,497,710
Gross unrealized depreciation 7,930,212
------------
Net unrealized appreciation $ 10,567,498
============
(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:
Class A Shares
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1997 YEAR ENDED AUGUST 31, 1996
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,045,715 $ 27,193,349 2,953,255 $ 28,054,414
Shares issued to shareholders in
reinvestment of distributions 589,985 4,958,075 609,434 4,991,266
Shares transferred to Class I (265,865) (2,259,849)
Shares reacquired (2,816,583) (25,053,752) (2,683,072) (24,825,437)
---------- ------------ ---------- -------------
Net increase 553,252 $ 4,837,823 879,617 $ 8,220,243
========== ============ ========== =============
Class B Shares
YEAR ENDED AUGUST 31, 1997 YEAR ENDED AUGUST 31, 1996
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
Shares sold 4,632,366 $ 40,232,895 3,674,349 $ 33,978,577
Shares issued to shareholders in
reinvestment of distributions 1,017,100 8,502,410 1,119,205 9,076,592
Shares reacquired (5,182,228) (44,830,300) (3,501,980) (31,963,123)
---------- ------------ ---------- -------------
Net increase 467,237 $ 3,905,005 1,291,574 $ 11,092,046
========== ============ ========== =============
Class C Shares
YEAR ENDED AUGUST 31, 1997 YEAR ENDED AUGUST 31, 1996
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
Shares sold 555,743 $ 4,850,217 2,005,344 $ 18,386,304
Shares issued to shareholders in
reinvestment of distributions 81,725 674,616 89,936 723,987
Shares reacquired (782,083) (6,947,620) (1,644,089) (15,066,639)
---------- ------------ ---------- -------------
Net increase (decrease) (144,615) $ (1,422,787) 451,191 $ 4,043,652
========== ============ ========== =============
Class I Shares
YEAR ENDED AUGUST 31, 1997
--------------------------------
SHARES AMOUNT
- -------------------------------------------------------------------
Shares sold 12,016 $ 95,935
Shares transferred from Class A 265,865 2,259,849
Shares reacquired (131,205) (1,088,809)
---------- ------------
Net increase 146,676 $ 1,266,975
========== ============
</TABLE>
(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 August 31, 1997, was $1,130.
(7) Transactions in Securities of Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of affiliated issues at
August 31, 1997, is set forth below.
ENDING PURCHASE MARKET
AFFILIATE SHARE AMOUNT COST VALUE
- --------------------------------------------------------------------------------
Southern African
Minerals Corp. 810,000 $1,093,729 $303,345
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IV Shareholders of MFS Mid Cap Growth
Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Mid Cap Growth Fund as of
August 31, 1997, the related statement of operations for the year then ended,
the statement of changes in net assets for the years ended August 31, 1997 and
1996, and the financial highlights for the year ended August 31, 1997 and for
each of the years in the four-year period ended August 31, 1997. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 August 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 Mid Cap Growth
Fund at August 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
October 3, 1997
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) MID CAP GROWTH FUND
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<S> <C>
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President State Street Bank and Trust Company
Richard B. Bailey* - Private Investor; AUDITORS
Former Chairman and Director (until 1991), Deloitte & Touche LLP
Massachusetts Financial Services Company;
Director, Cambridge Bancorp; Director, Cambridge INVESTOR INFORMATION
Trust Company For MFS stock and bond market outlooks, call toll
free: 1-800-637-4458 anytime from a touch-tone
Peter G. Harwood - Private Investor telephone.
J. Atwood Ives - Chairman and Chief Executive For information on MFS mutual funds, call your
Officer, Eastern Enterprises financial adviser or, for an information kit, call
toll free: 1-800-637-2929 any business day from
Lawrence T. Perera - Partner, Hemenway & Barnes 9 a.m. to 5 p.m. Eastern time (or leave a message
anytime).
William J. Poorvu - Adjunct Professor, Harvard
University Graduate School of Business INVESTOR SERVICE
Administration MFS Service Center, Inc.
P.O. Box 2281
Charles W. Schmidt - Private Investor Boston, MA 02107-9906
Arnold D. Scott* - Senior Executive Vice For general information, call toll free:
President, Director and Secretary, Massachusetts 1-800-225-2606 any business day from
Financial Services Company 8 a.m. to 8 p.m. Eastern time.
Jeffrey L. Shames* - President and Director, For service to speech- or hearing-impaired, call
Massachusetts Financial Services Company toll free: 1-800-637-6576 any business day from
9 a.m. to 5 p.m. Eastern time. (To use this service,
Elaine R. Smith - Independent Consultant your phone must be equipped with a
Telecommunications Device for the Deaf.)
David B. Stone - Chairman, North American
Management Corp. (investment advisers) For share prices, account balances, and exchanges,
call toll free: 1-800-MFS-TALK (1-800-637-8255)
INVESTMENT ADVISER anytime from a touch-tone telephone.
Massachusetts Financial Services 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
Mark Regan* 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
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<PAGE>
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MFS(R) MID CAP BULK RATE
GROWTH FUND U.S. POSTAGE
PAID
MFS
-------------
500 Boylston Street
Boston, MA 02116-3741
[LOGO] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[DALBAR
LOGO]
TOP-RATED SERVICE
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MMC-2 10/97 24M 83/283/383/883
