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[Logo]
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) MID CAP
GROWTH FUND
(Formerly MFS(R) OTC Fund)
SEMIANNUAL REPORT o FEBRUARY 28, 1998
THE ROTH IRA IS NOW AVAILABLE (see page 32)
<PAGE>
IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT(SM)
[Photo of A. Keith Brodkin]
On February 2, 1998, Keith Brodkin, a friend and leader to everyone at MFS, died
unexpectedly at age 62. His thoughtful letters to shareholders on the markets
and economy have been an integral part of MFS shareholder reports like this one
for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $70 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
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TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
A Discussion with the Portfolio Manager ................................... 4
Portfolio Manager's Profile ............................................... 8
Fund Facts ................................................................ 9
Performance Summary ....................................................... 9
Portfolio Concentration ................................................... 11
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
MFS Investment Opportunities .............................................. 30
The MFS Family of Funds(R) ................................................ 31
Roth IRA .................................................................. 32
Trustees and Officers ..................................................... 33
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HIGHLIGHTS
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o FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 13.41%, CLASS B AND CLASS C
SHARES 13.00%, AND CLASS I SHARES 13.38%. (SEE PERFORMANCE SUMMARY FOR
MORE INFORMATION.)
o THE FUND BENEFITED FROM A STRONG MARKET FOR SMALL- AND MID-SIZED COMPANY
STOCKS AND FOR GROWTH STOCKS IN GENERAL. SPECIFICALLY, THE TECHNOLOGY
STOCKS PERFORMED WELL, AS DID BUSINESS SERVICES COMPANIES.
o HOLDINGS IN HEALTH CARE INFORMATION COMPANIES BENEFITED FROM HOSPITALS'
INCREASING NEED TO MANAGE PATIENT RECORDS AND BILLING INFORMATION BETTER,
AS WELL AS TO KEEP UP WITH CURRENT MEDICAL PRACTICES.
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 IN
STOCKS OF BOTH SMALL- AND MEDIUM- CAPITALIZATION COMPANIES, AS OPPOSED TO
BEING LIMITED TO STOCKS LISTED ON THE OVER-THE-COUNTER MARKET, OR NASDAQ.
------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders:
As investment managers we take a long-term view of the world's economies, as
well as of the stock and bond markets, and try to avoid getting caught up in
short-term fluctuations. However, it is hard to ignore unexpected events such as
the Asian economic turmoil or closely watched companies that miss their
quarterly earnings estimates. Given the potential for these events and their
possible impact on major market indices, we think it's important to offer some
perspective about recent market behavior and to let you know what MFS is doing
in an effort to provide you with favorable long-term investment performance.
The most notable recent event affecting investment markets has been the Asian
turmoil, which began in the summer of 1997 as a result of slowing growth rates
in the region and excess speculation in real estate markets. Since then, most
countries in the region have begun to implement the economic and regulatory
restructuring needed to put themselves on a stronger financial foundation. While
it may be a few years before some of these countries return to solid economic
footing, and while there will probably be a relatively short-term impact on the
U.S. economy, we believe the long-term outlook for the region is quite positive.
The Asian situation has brought home the lesson that major events can quickly
impact investment markets around the world, including those of the United
States. Although U.S. equities have enjoyed a bull market lasting more than 15
years and have continued to set records in the first several weeks of 1998,
there have been brief bouts of volatility associated with the Asian turmoil, as
well as with perceived downturns for certain industries such as technology.
While we believe the long-term outlook for the equity markets is favorable,
other, unforeseen events can trigger fairly extended periods during which prices
decline or remain relatively flat. Since no one can predict market cycles, that
makes it that much more important to find companies that can keep growing in the
face of the occasional downturn and even gain market share. For us, this means
using original, bottom-up research to examine each company's earnings potential
and position as well as the overall prospects for its industry. To that end, MFS
continues to increase the research support available to portfolio managers of
MFS funds.
On the fixed-income side, MFS uses active portfolio management based on
extensive research and credit analysis to reduce the potential for price
declines and enhance the opportunity for price appreciation. For both equity and
fixed-income managers, this means visiting and meeting with thousands of
companies and issuers of credit every year, as well as attending many
presentations and closely following sources of industry research.
We believe this approach, based on thorough research, teamwork, innovative
thinking, and the free exchange of ideas, is the best way to get the most
performance for shareholders in MFS funds -- in any market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
[Graphic Omitted]
/s/Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
March 16, 1998
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JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED
MFS IN 1983. AFTER FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO
MANAGER, HE WAS NAMED CHIEF EQUITY OFFICER IN 1987 AND PRESIDENT AND A
MEMBER OF THE BOARD OF DIRECTORS IN 1993. MR. SHAMES WAS APPOINTED
CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY 1998.
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<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Mark Regan]
Mark Regan
For the six months ended February 28, 1998, Class A shares of the Fund provided
a total return of 13.41%, Class B and Class C shares 13.00%, and Class I shares
13.38%. These returns, which include the reinvestment of distributions but
exclude the effects of any sales charges, compare to a 9.64% return for the
Russell 2000 Total Return Index (the Russell 2000) for the same period. The
Russell 2000 is an unmanaged index comprised 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.
Q. WHAT DO YOU SEE AS SOME REASONS FOR THE FUND'S PERFORMANCE OVER THE PAST
SIX MONTHS?
A. We had a strong market for small- and mid-sized company stocks and for growth
stocks in general. Specifically, the technology stocks performed well and the
Fund was overweighted there, at about 31% of assets. These stocks were
broadly diversified, with about 18% of that 31% in software and about 10% in
networking and telecommunications-related holdings. Performance was also
helped by business services companies, which have been exceptionally strong.
Holdings here included Tyco International, which was up about 40% during the
period, along with a number of health care information companies, such as
Shared Medical, which was up about 50%. Last fall's Asian fears weakened some
companies, but we added to our positions in them because we felt the Asian
effect was being disproportionally placed on companies that were less
impacted by it. Specifically, Teradyne and Ascend Communications were two
large positions in the Fund that were seeing more effect from Asia than we
felt was justified based on the companies' actual operating results.
Q. HOW WOULD YOU DESCRIBE THE RECENT INVESTMENT ENVIRONMENT?
A. This period of low and stable interest rates made it a stock-picker's
environment, one in which we could look to the stocks we picked to deliver on
their earnings growth rates and drive performance. It was a very favorable
environment for small- and mid-sized company stocks because that category has
not had any real expansion in price-to-earnings multiples over the past three
years, while the larger-company and value-oriented stocks have had a
tremendous expansion in multiples over that same period.
Q. BEFORE SEPTEMBER 1, 1997, THE FUND WAS KNOWN AS MFS(R) OTC FUND. HOW HAS
THE STRATEGY CHANGED SINCE BECOMING MFS MID CAP GROWTH FUND?
A. Before, we had to hold positions that weren't necessarily the right ones,
simply because we had to keep to the old charter. That reduced our
flexibility to trade out of NASDAQ stocks if we felt they had become fully
valued. And with the volatility in NASDAQ, where the price of an individual
stock can fluctuate more than 50% over a year, we lost the flexibility to add
to or reduce positions based on their volatility. Now, we can look at
companies in a number of areas that we were precluded from owning previously,
and we have expanded weightings in retailing, energy, and financial services.
Specifically, Tyco International, Franklin Resources, Fred Meyer, Rite Aid,
Teradyne, and Shared Medical are six big positions in the mid-sized company
growth range that could not have been held under the old charter.
Q. IN GENERAL, HOW DO YOU SELECT STOCKS FOR THE PORTFOLIO?
A. It's a bottom-up process, by which we work with the analysts to try and find
attractive companies that fit the profile we're looking for. That includes
companies in industries that are growing in the 20% to 25% range. We also
like to wait for an industry to narrow down to two or three competitors from
10 or 15. As that transition occurs, we try and identify the winners and
purchase them. That can happen in any business.
Q. CAN YOU GIVE US AN EXAMPLE OF A COMPANY THAT ILLUSTRATES THIS PROCESS?
A. The Fund's biggest position is Gemstar, a company that provides interactive
program guides and other software products for consumer electronics, like
on-screen program guides for televisions. There were four or five companies
competing in this market when we started investing in it, but we focused on
Starsight and Gemstar, based on our view that they had the right technology
and patents to succeed in this industry. Then, as Gemstar came up with major
licensing agreements with Telecommunications, Inc., Microsoft, and Thompson
Communications, we concentrated our holdings on that company. Now, as the
competitors have been reduced from several to two, the business growth for
Gemstar has become much more visible and its growth rate has accelerated.
Q. TECHNOLOGY STOCKS MAKE UP THE LARGEST SECTOR IN THE FUND. COULD YOU TALK
ABOUT THE KINDS OF COMPANIES YOU LIKE IN THIS INDUSTRY?
A. We don't focus at all on commodity technology companies. Instead, we look for
companies that dominate attractive industry niches. We might look for a
company that has developed a type of software that is a dominant solution in
its segment. For example, Synopsys is a dominant provider of software for the
design of semiconductors and has a 40% to 50% market share. In that business,
the rapid growth in processing power and chip density has created a natural
demand for more and more services over time, in that the technology is
advancing so fast that the software to operate it has to advance just as fast
to keep up. So a software company's underlying business will always be driven
by technological advances, and if it has a 40% or 50% market share and stays
current with the changes, it can ride the growth of technology.
Q. YOUR SECOND LARGEST GROUP IS MISCELLANEOUS, SPECIFICALLY, BUSINESS
SERVICES. TELL US ABOUT THAT.
A. That's made up of two areas. The biggest is health care information, which
comprises about 7% of the portfolio. Health care is an area that's
underinvested in information technology and would be one of the greatest
beneficiaries of it. Hospitals need to manage information better. They have
to know more about their patients and the best practices. The only way to get
all that is with information technology, and we're seeing a continual rise in
the percentage of capital budgets being spent for information technology by
hospitals. We own a number of these companies, including HBO, Shared Medical,
Transitions Systems, and HCIA. The other area is represented by transaction
processing companies and Tyco International, which is a very well-run company
with a diversified base of businesses. It's a great growth company and, in
fact, it's gotten a bit too big for the portfolio, so we're reducing our
position in it somewhat.
Q. WHAT ABOUT HEALTH CARE?
A. That's dominated by two groups: medical services and medical devices. The
services include nursing homes and a number of outpatient services companies.
In medical devices, we're looking for companies that have good growth
visibility (of 25% or more) and whose devices or procedures have been
approved by the FDA. This includes heart-related devices, defibrillators, and
pacemakers, as well as treatments for heart disease, cancer, brain disorders,
or urological diseases. All of those categories tend to serve a large
population base, they have a meaningful impact on people's lives, and they
are highly valued. A $5,000 pacemaker is a good example of something that
many people need to survive.
Q. AND LEISURE?
A. Again, that's mainly Gemstar, but this sector also includes cable companies,
consumer electronics equipment, broadcasting, and some hotels. In
broadcasting, we're seeing continued consolidation, attractive fundamentals,
and strong advertising. In hotels, it's just a case of capacity, and most
companies haven't built any new hotels lately, which gives them good pricing
power.
Q. COULD YOU TALK ABOUT SOME STOCKS THAT HAVE PERFORMED BETTER THAN EXPECTED?
A. Well, again, it would have to be Gemstar. It's probably up over 55% or 60% in
the past year. It really wasn't a surprise, but it helped when Microsoft
licensed Gemstar's technology and decided to incorporate Gemstar's
entertainment guide products into Windows 98 and its other platforms,
including Windows CE and Web TV. Gemstar signed a similar, 10-year agreement
with Telecommunications, Inc. to become its exclusive program guide, by which
the company is getting $10 for every connection that goes through TCI.
Q. AND WHAT ABOUT STOCKS THAT DID NOT PERFORM SO WELL?
A. The first would be MicroProse, the old Spectrum Holobyte, which develops
entertainment software for personal computers. The industry has been
consolidating for a number of years and MicroProse is a natural consolidation
target. It had agreed to be taken over last year and the stock went up for a
time, but then the deal fell apart and the stock fell dramatically. There are
also a couple of holdovers from the OTC portfolio for which we have not been
able to find an attractive exit price.
Q. WHAT DO YOU SEE AS THE BIGGEST RISK FOR THIS FUND THIS YEAR?
A. Rising interest rates, resulting from inflation, currency problems, or some
other unforeseen event, would hurt this Fund and all other equity
investments. Smaller-company portfolios and higher-growth portfolios usually
get hit hardest on the initial correction. Another risk would be the market's
moving from a growth market, which it is now, to a value market. Industries
such as financial services, energy, and basic commodities would perform
better than growth-oriented industries, and this Fund would underperform. We
don't see inflation going up, so we don't see that as a risk. One area where
we do see some risk is Asia. While the one- world market we have now creates
tremendous opportunities, it also creates new risks, so we not only have to
be aware of what's happening to sales on the West Coast of the United States,
but also to sales in Asia, Latin America, and Europe. Asia will continue to
be an issue for the next several months, so we're carefully checking our
Asian exposure and our international exposure in general. [Graphic Omitted]
Mark Regan Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
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.
/s/ Mark Regan
Mark Regan
Portfolio Manager
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PORTFOLIO MANAGER'S PROFILE
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MARK REGAN JOINED MFS IN 1989 AS A RESEARCH ANALYST AND WAS NAMED INVESTMENT
OFFICER IN 1990, ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1991, AND VICE
PRESIDENT -- INVESTMENTS IN 1992. A GRADUATE OF CORNELL UNIVERSITY AND THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, HE HAS
MANAGED MFS MID CAP GROWTH FUND SINCE 1993.
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<PAGE>
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FUND FACTS
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NOTE: THE FUND CHANGED ITS NAME FROM MFS OTC FUND TO MFS MID CAP GROWTH
FUND EFFECTIVE SEPTEMBER 1, 1997.
OBJECTIVE: SEEKS LONG-TERM GROWTH OF CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 1, 1993
CLASS INCEPTION: CLASS A DECEMBER 1, 1993
CLASS B DECEMBER 1, 1993
CLASS C AUGUST 1, 1994
CLASS I JANUARY 2, 1997
SIZE: $136.0 MILLION NET ASSETS AS OF FEBRUARY 28, 1998
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PERFORMANCE SUMMARY
Because mutual funds like MFS Mid Cap Growth Fund are designed for investors
with long-term goals, we have provided cumulative results as well as the average
annual total returns for Class A, Class B, Class C, and Class I shares for the
applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
AS OF FEBRUARY 28, 1998
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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Cumulative Total Return +13.41% +31.08% +100.14%
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Average Annual Total Return -- +31.08% + 17.75%
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SEC Results -- +23.50% + 16.11%
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CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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Cumulative Total Return +13.00% +30.12% +92.67%
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Average Annual Total Return -- +30.12% +16.70%
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SEC Results -- +26.12% +16.42%
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*For the period from the commencement of the Fund's investment operations,
December 1, 1993, through February 28, 1998.
CLASS C INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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Cumulative Total Return +13.00% +30.13% +92.95%
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Average Annual Total Return -- +30.13% +16.74%
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SEC Results -- +29.13% +16.74%
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CLASS I INVESTMENT RESULTS
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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Cumulative Total Return +13.38% +31.33% +100.58%
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Average Annual Total Return -- +31.33% + 17.81%
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*For the period from the commencement of the Fund's investment operations,
December 1, 1993, through February 28, 1998.
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 C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months. Class I shares ("I") have no sales charge or Rule 12b-1 fees and are
only available to certain institutional investors.
C results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of B for periods prior to the inception of C. Operating expenses of C are
not significantly different than those of B. The B performance included in the C
SEC performance has been adjusted to reflect the CDSC generally applicable to C
rather than the CDSC generally applicable to B.
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.
PORTFOLIO CONCENTRATION AS OF FEBRUARY 28, 1998
LARGEST EQUITY SECTORS
[Graphic Omitted]
Technology 31.1%
Other Sectors 21.9%
Health Care 12.2%
Miscellaneous (Conglomerates, special products/services) 12.2%
Leisure 11.9%
Retailing 10.7%
For a more complete breakdown, refer to the Portfolio of Investments.
TOP 10 EQUITY HOLDINGS
<TABLE>
<CAPTION>
<S> <C>
GEMSTAR INTERNATIONAL GROUP LTD. 7.5% MARINER HEALTH GROUP, INC. 3.0%
Audio/video products company Nursing home and health care company
ASCEND COMMUNICATIONS, INC. 5.6% CABLE DESIGN TECHNOLOGIES CORP. 3.0%
Telecommunications systems and products Electronic data transmission cable manufacturer
company
FRANKLIN RESOURCES, INC. 2.9%
EDIFY CORP. 3.6% Mutual fund and financial services company
Internet software company
TERADYNE, INC. 2.6%
ORACLE CORP. 3.6% Electronic systems and software manufacturer
Database software developer and manufacturer
ASPECT TELECOMMUNICATIONS CORP. 2.3%
SYNOPSYS, INC. 3.3% Telecommunications equipment manufacturer
Computer software and systems company
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 28, 1998
<TABLE>
<CAPTION>
Stocks - 97.2%
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ISSUER SHARES VALUE
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U.S. Stocks - 96.8%
Advertising
<S> <C> <C>
Doubleclick, Inc. 200 $ 6,387
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Apparel and Textiles
Novel Denim Holdings Ltd.* 500 $ 12,437
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Banks and Credit Companies - 2.1%
Banc One Corp. 12,100 $ 683,650
Compass Bancshares, Inc. 30,100 1,384,600
First Security Corp. 14,800 343,175
Regions Financial Corp. 10,200 405,450
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$ 2,816,875
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Biotechnology - 0.2%
IDEXX Laboratories, Inc.* 16,700 $ 261,981
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Business Machines - 0.2%
Affiliated Computer Services, Inc., "A"* 7,400 $ 238,187
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Business Services - 5.6%
Acsys, Inc. 500 $ 6,563
Concord EFS, Inc.* 39,200 1,220,100
DST Systems, Inc.* 10,700 565,762
First Consulting Group, Inc.* 300 5,625
Fiserv, Inc.* 37,300 2,042,175
Learning Tree International, Inc.* 81,400 1,780,625
Memberworks, Inc. 3,500 105,000
Paymentech, Inc.* 67,500 1,113,750
Steelcase, Inc. 700 25,244
Technology Solutions Co.* 23,550 765,375
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$ 7,630,219
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Chemicals - 2.0%
Cambrex Corp. 22,000 $ 1,089,000
Sigma-Aldrich Corp. 41,700 1,647,150
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$ 2,736,150
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Computer Software - Personal Computers - 0.8%
Microprose, Inc.* 566,500 $ 1,115,297
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Computer Software - Systems - 17.0%
BMC Software, Inc.* 27,600 $ 2,111,400
Cadence Design Systems, Inc.* 51,240 1,790,197
Clarify, Inc.* 43,800 657,000
Compuware Corp.* 32,500 1,369,063
Comverse Technology, Inc.* 13,900 649,825
E Trade Group, Inc. 1,800 48,150
Edify Corp.* 308,200 4,738,575
Micromuse, Inc. 300 5,700
Oracle Corp.* 191,350 4,711,994
Rational Software Corp.* 9,300 125,550
Scopus Technology, Inc.* 27,000 381,375
Security Dynamics Technologies, Inc.* 16,800 598,500
Simulation Sciences, Inc.* 47,400 485,850
Synopsys, Inc.* 125,859 4,397,199
Vantive Corp.* 36,000 985,500
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$ 23,055,878
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Consumer Goods and Services - 2.1%
1 800 Contacts* 100 $ 1,425
Cd Now, Inc. 300 6,862
Tyco International Ltd. 55,320 2,807,490
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$ 2,815,777
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Electrical Equipment - 2.9%
Cable Design Technologies Corp.* 136,200 $ 3,958,312
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Electronics - 4.3%
Anadigics, Inc.* 8,400 $ 131,250
Analog Devices, Inc.* 47,400 1,528,650
Integrated Process Equipment Corp.* 17,700 327,450
Speedfam International, Inc.* 17,800 475,038
Teradyne, Inc.* 72,300 3,411,656
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$ 5,874,044
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Entertainment - 9.2%
American Radio Systems Corp., "A"* 13,600 $ 812,600
Gemstar International Group Ltd.* 323,400 9,944,551
Harrah's Entertainment, Inc.* 5,700 120,056
Hearst-Argyle Television, Inc.* 7,200 252,900
Heftel Broadcasting Corp.* 10,200 483,225
Jacor Communications, Inc.* 15,900 920,213
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$ 12,533,545
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Financial Institutions - 4.0%
Conning Corp.* 300 $ 5,625
Finova Group, Inc. 10,800 594,000
Franklin Resources, Inc. 75,600 3,855,600
Union Planters Corp. 15,500 958,094
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$ 5,413,319
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Food and Beverage Products - 1.4%
McCormick & Co., Inc. 41,800 $ 1,199,137
Tootsie Roll Industries, Inc. 8,900 664,163
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$ 1,863,300
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Insurance - 0.4%
Conseco, Inc. 12,500 $ 586,719
ESG Re Ltd.* 800 21,200
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$ 607,919
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Medical and Health Products - 2.6%
AmeriSource Health Corp., "A"* 30,800 $ 1,801,800
Mentor Corp. 31,100 907,731
Uromed Corp.* 359,300 842,110
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$ 3,551,641
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Medical and Health Technology and Services - 13.2%
Bergen Brunswig Corp. 14,800 $ 666,000
Concentra Managed Care, Inc.* 33,055 1,134,200
Cytyc Corp.* 36,800 846,400
HBO & Co. 25,960 1,405,085
HCIA, Inc.* 107,300 1,468,669
Health Management Associates, Inc., "A"* 10,500 292,031
HEALTHSOUTH Corp.* 53,800 1,452,600
Mariner Health Group, Inc.* 262,200 3,982,162
Province Healthcare Co.* 300 6,225
Shared Medical Systems Corp. 27,400 2,094,388
St. Jude Medical, Inc.* 17,400 635,100
Total Renal Care Holdings, Inc.* 34,443 1,108,634
Transition Systems, Inc.* 106,100 2,068,950
United Healthcare Corp. 11,879 720,907
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$ 17,881,351
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Oil Services - 5.2%
Camco International, Inc. 5,700 $ 333,450
Cooper Cameron Corp.* 35,200 1,887,600
Diamond Offshore Drilling, Inc. 34,200 1,549,687
Global Industries, Inc.* 94,300 1,626,675
National Oilwell, Inc.* 10,400 291,200
Noble Drilling Corp.* 24,300 689,513
Transocean Offshore, Inc. 16,500 709,500
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$ 7,087,625
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Oils - 0.4%
Apache Corp. 15,800 $ 537,200
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Photographic Products - 0.1%
Getty Images, Inc. 3,900 $ 97,500
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Printing and Publishing - 0.9%
Scholastic Corp.* 14,700 $ 582,488
Scripps (E.W.) Howard, Inc. 11,300 599,606
------------
$ 1,182,094
- ------------------------------------------------------------------------------------------------------
Railroads - 0.2%
Wisconsin Central Transportation Corp.* 10,200 $ 276,675
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.7%
Capstar Hotel Co.* 11,200 $ 378,000
Four Seasons Hotels, Inc. 15,000 540,000
------------
$ 918,000
- ------------------------------------------------------------------------------------------------------
Special Products and Services
Visual Networks, Inc. 200 $ 4,025
- ------------------------------------------------------------------------------------------------------
Stores - 8.7%
BJ's Wholesale Club, Inc.* 61,600 $ 2,086,700
Duane Reade, Inc. 400 8,950
Gymboree Corp.* 106,100 2,851,437
Home Depot, Inc. 10,100 644,506
Office Depot, Inc.* 43,900 1,209,994
Republic Industries, Inc.* 30,300 715,838
Rite Aid Corp. 68,800 2,227,400
Viking Office Products, Inc.* 97,600 2,147,200
------------
$ 11,892,025
- ------------------------------------------------------------------------------------------------------
Supermarkets - 1.6%
Meyer (Fred), Inc.* 50,090 $ 2,225,874
- ------------------------------------------------------------------------------------------------------
Telecommunications - 10.7%
Aerial Communications, Inc.* 176,900 $ 1,503,650
Ascend Communications, Inc.* 197,800 7,405,137
Aspect Telecommunications Corp.* 114,200 3,012,025
Cisco Systems, Inc.* 6,350 418,306
Corsair Communications, Inc. 5,600 114,800
Global Telesystems Group, Inc. 800 29,300
Tellabs, Inc.* 15,900 959,963
U.S. Cellular Corp.* 36,500 1,101,844
------------
$ 14,545,025
- ------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.3%
LCI International, Inc.* 13,600 $ 448,800
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $131,587,462
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 0.4%
Canada - 0.4%
Southern Africa Minerals Corp. 803,200 $ 592,455
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $113,095,240) $132,179,917
- ------------------------------------------------------------------------------------------------------
Warrant
- ------------------------------------------------------------------------------------------------------
Perkin Elmer Corp. (Identified Cost, $0) 25 $ 125
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.2%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, due 3/02/98 $2,525 $ 2,524,621
Student Loan Marketing Assn., due 3/06/98 3,210 3,207,552
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 5,732,173
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $118,827,413) $137,912,215
Other Assets, Less Liabilities - (1.4)% (1,934,829)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $135,977,386
- ------------------------------------------------------------------------------------------------------
*Non-income producing security.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------
FEBRUARY 28, 1998
- --------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $118,827,413) $ 137,912,215
Cash 8,253
Receivable for investments sold 2,924,244
Receivable for Fund shares sold 115,817
Interest and dividends receivable 11,518
Other assets 1,062
-------------
Total assets $ 140,973,109
-------------
Liabilities:
Payable for investments purchased $ 4,535,281
Payable for Fund shares reacquired 301,710
Payable to affiliates -
Management fee 5,599
Administrative fee 112
Shareholder servicing agent fee 840
Distribution and service fee 61,781
Accrued expenses and other liabilities 90,400
-------------
Total liabilities $ 4,995,723
-------------
Net assets $ 135,977,386
=============
Net assets consist of:
Paid-in capital $ 112,241,665
Unrealized appreciation on investments 19,084,802
Accumulated undistributed net realized gain on
investments and foreign currency transactions 5,679,404
Accumulated net investment loss (1,028,485)
-------------
Total $ 135,977,386
=============
Shares of beneficial interest outstanding 13,244,476
==========
Class A shares:
Net asset value per share
(net assets of $51,114,941 / 4,943,910 shares of
beneficial interest outstanding) $10.34
======
Offering price per share (100 / 94.25) $10.97
------
Class B shares:
Net asset value and offering price per share
(net assets of $76,704,973 / 7,498,058 shares of
beneficial interest outstanding) $10.23
======
Class C shares:
Net asset value and offering price per share
(net assets of $6,820,902 / 673,323 shares of
beneficial interest outstanding) $10.13
======
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets of $1,336,570 / 129,185 shares of
beneficial interest outstanding) $10.35
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares. See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 28, 1998
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 122,928
Interest 97,843
Foreign taxes withheld (63)
-----------
Total investment income $ 220,708
-----------
Expenses -
Management fee $ 462,492
Trustees' compensation 10,879
Shareholder servicing agent fee 76,510
Distribution and service fee (Class A) 54,699
Distribution and service fee (Class B) 366,587
Distribution and service fee (Class C) 29,516
Administrative fee 8,218
Registration fees 68,387
Custodian fee 23,251
Postage 19,179
Printing 16,811
Auditing fees 9,033
Legal fees 955
Miscellaneous 96,457
----------
Total expenses $ 1,242,974
Fees paid indirectly (3,216)
-----------
Net expenses $ 1,239,758
-----------
Net investment loss $(1,019,050)
-----------
Realized and unrealized gain (loss) on investments:
Net realized gain on investment transactions (identified
cost basis) $ 9,295,766
-----------
Change in unrealized appreciation on investments $ 7,485,206
-----------
Net realized and unrealized gain on investments $16,780,972
-----------
Increase in net assets from operations $15,761,922
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
<S> <C> <C>
Net investment loss $ (1,019,050) $ (1,839,697)
Net realized gain on investment transactions 9,295,766 2,976,813
Net unrealized gain on investments 7,485,206 19,823,645
------------- -------------
Increase in net assets from operations $ 15,761,922 $ 20,960,761
------------- -------------
Distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions (Class A) $ (1,274,429) $ (5,360,182)
From net realized gain on investments and foreign currency
transactions (Class B) (1,589,591) (9,603,644)
From net realized gain on investments and foreign currency
transactions (Class C) (131,362) (727,466)
From net realized gain on investments and foreign currency
transactions (Class I) (38,088) --
------------- -------------
Total distributions declared to shareholders $ (3,033,470) $ (15,691,292)
------------- -------------
Net increase in net assets from Fund share transactions $ 391,174 $ 8,587,016
------------- -------------
Total increase in net assets $ 13,119,626 $ 13,856,485
Net assets:
At beginning of period 122,857,760 109,001,275
------------- -------------
At end of period (including accumulated net investment loss
of $1,028,485 and $9,435, respectively) $ 135,977,386 $ 122,857,760
============= =============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ---------------------------------------------------------
FEBRUARY 28, 1998 1997 1996 1995 1994*
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 9.42 $ 9.06 $ 10.08 $ 8.68 $ 7.83
------- -------- --------- -------- --------
Income from investment operations# -
Net investment loss(S) $ (0.06) $ (0.09) $ (0.10) $ (0.03) $ (0.05)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.27 1.77 0.96 1.69 0.90
------- -------- --------- -------- --------
Total from investment operations $ 1.21 $ 1.68 $ 0.86 $ 1.66 $ 0.85
------- -------- --------- -------- --------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $ (0.29) $ (1.32) $ (1.88) $ (0.26) --
------- -------- --------- -------- --------
Net asset value - end of period $ 10.34 $ 9.42 $ 9.06 $ 10.08 $ 8.68
======= ======== ========= ======== ========
Total return(+) 13.41%++ 20.26% 10.55% 19.77% 10.86%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.52%+ 1.41% 1.28% 1.29% 1.50%+
Net investment loss (1.17)%+ (1.09)% (1.08)% (0.40)% (0.87)%+
Portfolio turnover 67% 170% 157% 218% 82%
Average commission rate### $0.0565 $0.0387 $ 0.0422 -- --
Net assets at end of period (000 omitted) $51,115 $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.
#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.
(+)Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
(S)The investment adviser did not impose a portion of its management fee for the period indicated. If the 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 assets):
Expenses -- -- -- -- 2.03%+
Net investment loss -- -- -- -- (1.40)%+
</TABLE>
See notes to financial statements
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED -------------------------------------------------------------
FEBRUARY 28, 1998 1997 1996 1995 1994**
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 9.27 $ 8.93 $ 9.94 $ 8.59 $ 7.83
------- --------- --------- -------- --------
Income from investment operations# -
Net investment loss(S) $ (0.09) $ (0.16) $ (0.17) $ (0.13) $ (0.12)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.26 1.75 0.95 1.69 0.88
------- --------- --------- -------- --------
Total from investment operations $ 1.17 $ 1.59 $ 0.78 $ 1.56 $ 0.76
------- --------- --------- -------- --------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $ (0.21) $ (1.25) $ (1.79) $ (0.21) --
------- --------- --------- -------- --------
Net asset value - end of period $ 10.23 $ 9.27 $ 8.93 $ 9.94 $ 8.59
======= ========= ========= ======== ========
Total return 13.00%++ 19.36% 9.67% 18.75% 9.71%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 2.24%+ 2.20% 2.13% 2.29% 2.57%+
Net investment loss (1.89)%+ (1.87)% (1.81)% (1.44)% (2.02)%=
Portfolio turnover 67% 170% 157% 218% 82%
Average commission rate### $0.0565 $ 0.0387 $ 0.0422 -- --
Net assets at end of period (000 omitted) $76,704 $ 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 adviser did not impose a portion of its management fee for the period indicated. If the 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 assets):
Expenses -- -- -- -- 3.10%+
Net investment loss -- -- -- -- (2.56)%+
</TABLE>
See notes to financial statements
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ---------------------------------------------------------
FEBRUARY 28, 1998 1997 1996 1995 1994***
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 9.19 $ 8.85 $ 9.91 $ 8.61 $ 7.80
-------- --------- --------- -------- --------
Income from investment operations# -
Net investment loss(S) $ (0.09) $ (0.16) $ (0.17) $ (0.14) $ (0.04)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.25 1.74 0.94 1.69 0.85
-------- --------- --------- -------- -------
Total from investment operations $ 1.16 $ 1.58 $ 0.77 $ 1.55 $ 0.81
-------- --------- --------- -------- -------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $ (0.22) $ (1.24) $ (1.83) $ (0.25) --
-------- --------- --------- -------- -------
Net asset value - end of period $ 10.13 $ 9.19 $ 8.85 $ 9.91 $ 8.61
======== ========= ========= ======== =======
Total return 13.00%++ 19.44% 9.60% 18.63% 10.38%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 2.29%+ 2.16% 2.17% 2.30% 2.50%+
Net investment loss (1.91)%+ (1.79)% (1.90)% (1.55)% (2.22)%+
Portfolio turnover 67% 170% 157% 218% 82%
Average commission rate### $ 0.0565 $ 0.0387 $ 0.0422 -- --
Net assets at end of period (000 omitted) $ 6,821 $ 5,796 $ 6,860 $ 3,209 $ 87
***For the period from the inception of Class C, August 1, 1994, 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 adviser did not impose a portion of its management fee for the period indicated. If the 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>
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 1998 AUGUST 31,
(UNAUDITED) 1997****
- --------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $ 9.44 $ 8.50
-------- --------
Income from investment operations# -
Net investment loss $ (0.04) $ (0.05)
Net realized and unrealized gain on investments and
foreign currency transactions 1.26 0.99
-------- --------
Total from investment operations $ 1.22 $ 0.94
-------- --------
Less distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions $ (0.31) --
-------- --------
Net asset value - end of period $ 10.35 $ 9.44
======== ========
Total return 13.38%++ 11.06%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.26%+ 1.03%+
Net investment loss (0.90)%+ (0.74)%+
Portfolio turnover 67% 170%
Average commission rate $ 0.0565 $0.0387
Net assets at end of period (000 omitted) $ 1,337 $ 1,384
****For the period from the inception of Class I, January 2, 1997, through August 31, 1997.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(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.
(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 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. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, forward contracts, and interest rate
swaps, 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.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend 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. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The classes of shares differ in their respective distribution
and service fees. All shareholders bear the common expenses of the Fund based on
average daily net assets of each class, without distinction between share
classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75% of
average daily net assets.
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%
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 renumeration
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 $2,655 for the six months
ended February 28, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$11,599 for the six months ended February 28, 1998, 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 $8,883 for the six months ended
February 28, 1998. 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 February 28, 1998, were
0.25% 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 $11,179 and $94 for Class B and Class C shares, respectively,
for the six months ended February 28, 1998. Fees incurred under the distribution
plan during the year ended February 28, 1998, were 1.00% and 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 six months ended February 28, 1998, were $3,036,
$54,516, and $1,452 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
0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of the
Fund's average daily net assets at an effective annual rate of 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations aggregated $82,148,628
and $84,157,178, 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 $118,827,413
------------
Gross unrealized appreciation $ 28,519,280
Gross unrealized depreciation (9,434,478)
------------
Net unrealized appreciation $ 19,084,802
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,253,212 $ 11,984,650 3,045,715 $ 27,193,349
Shares issued to shareholders in
reinvestment of distributions 136,492 1,203,819 589,985 4,958,075
Shares transferred to Class I -- -- (265,865) (2,259,849)
Shares reacquired (874,921) (8,475,830) (2,816,583) (25,053,752)
----------- ------------ ----------- ------------
Net increase 514,783 $ 4,712,639 553,252 $ 4,837,823
=========== ============ =========== ============
<CAPTION>
Class B Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,843,447 $ 17,739,114 4,632,366 $ 40,232,895
Shares issued to shareholders in
reinvestment of distributions 160,124 1,397,894 1,017,100 8,502,410
Shares reacquired (2,477,975) (23,660,424) (5,182,228) (44,830,300)
----------- ------------ ----------- ------------
Net increase (decrease) (474,404) $ (4,523,416) 467,238 $ 3,905,005
=========== ============ =========== ============
<CAPTION>
Class C Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 236,052 $ 2,232,638 555,743 $ 4,850,217
Shares issued to shareholders in
reinvestment of distributions 13,332 115,323 81,725 674,616
Shares reacquired (206,455) (1,958,212) (782,083) (6,947,620)
----------- ------------ ----------- ------------
Net increase (decrease) 42,929 $ 389,749 (144,615) $ (1,422,787)
=========== ============ =========== ============
<CAPTION>
Class I Shares
SIX MONTHS ENDED FEBRUARY 28, 1998 PERIOD ENDED AUGUST 31, 1997*
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,152 $ 59,101 12,016 $ 95,935
Shares issued to shareholders in
reinvestment of distributions 4,318 38,087 -- --
Shares transferred from Class A -- -- 265,865 2,259,849
Shares reacquired (27,961) (284,986) (131,205) (1,088,809)
----------- ------------ ----------- ------------
Net increase (decrease) (17,491) $ (187,798) 146,676 $ 1,266,975
=========== ============ =========== ============
</TABLE>
*For the period from the inception of Class I, January 2, 1997, through August
31, 1997.
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the six
months ended February 28, 1998, was $309.
--------------------------------------------
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
TRUSTEES CUSTODIAN
State Street Bank and Trust Company
Richard B. Bailey* - Private
Investor; Former Chairman and INVESTOR INFORMATION
Director (until 1991), MFS For MFS stock and bond market
Investment Management outlooks, call toll free:
1-800-637-4458 anytime from a
Peter G. Harwood - Private Investor touch-tone telephone.
J. Atwood Ives - Chairman and Chief For information on MFS mutual funds,
Executive Officer, Eastern call your financial adviser or, for
Enterprises an information kit, call toll free:
1-800-637-2929 any business day from
Lawrence T. Perera - Partner, 9 a.m. to 5 p.m. Eastern time (or
Hemenway & Barnes leave a message anytime).
William J. Poorvu - Adjunct INVESTOR SERVICE
Professor, Harvard University MFS Service Center, Inc.
Graduate School of Business P.O. Box 2281
Administration Boston, MA 02107-9906
Charles W. Schmidt - Private For general information, call toll
Investor free: 1-800-225-2606 any business
day from 8 a.m. to 8 p.m. Eastern
Arnold D. Scott* - Senior Executive time.
Vice President, Director, and
Secretary, MFS Investment Management For service to speech- or
hearing-impaired, call toll free:
Jeffrey L. Shames* - Chairman, Chief 1-800-637-6576 any business day from
Executive Officer, and Director, MFS 9 a.m. to 5 p.m. Eastern time. (To
Investment Management use this service, your phone must be
equipped with a Telecommunications
Elaine R. Smith - Independent Device for the Deaf.) For share
Consultant prices, account balances, and
exchanges, call toll free:
David B. Stone - Chairman, North 1-800-MFS-TALK (1-800-637-8255)
American Management Corp. anytime from a touch-tone telephone.
(investment advisers)
WORLD WIDE WEB
INVESTMENT ADVISER www.mfs.com
Massachusetts Financial Services
Company 500 Boylston Street [Dalbar logo] For the fourth year
Boston, MA 02116-3741 in a row, MFS earned a #1 ranking
in the DALBAR, Inc. Broker/Dealer
DISTRIBUTOR Survey, Main Office Operations
MFS Fund Distributors, Inc. Service Quality Category. The firm
500 Boylston Street achieved a 3.42 overall score on a
Boston, MA 02116-3741 scale of 1 to 4 in the 1997
survey. A total of 111 firms
PORTFOLIO MANAGER responded, offering input on the
Mark Regan* quality of service they received
from 29 mutual fund companies
TREASURER nationwide. The survey contained
W. Thomas London* questions about service quality in
11 categories, including
ASSISTANT TREASURERS "knowledge of operations contact,"
Mark E. Bradley* "keeping you informed," and "ease of
Ellen Moynihan* doing business" with the firm.
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
<PAGE>
-------------
MFS(RM) MID CAP BULK RATE
GROWTH FUND U.S. POSTAGE
PAID
[LOGO]MFS(SM) MFS
INVESTMENT MANAGEMENT -------------
We invented the mutual fund(SM)
500 Boylston Street
Boston, MA 02116-3741
[DALBAR]
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MMC-3 4/98 27M 83/283/383/883
