<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) MID CAP
GROWTH FUND
ANNUAL REPORT o AUGUST 31, 1999
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 16
Notes to Financial Statements ............................................. 23
Independent Auditors' Report .............................................. 29
MFS' Year 2000 Readiness Disclosure ....................................... 31
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
The current investment and economic environment bears little resemblance to
last year's. One year ago, global economies were floundering, and the crisis
in Asia threatened an already weak U.S. economy. Corporate earnings were flat,
and economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low. Many
corporations are focused on improving their profitability, and investors have
been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999 will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis has
passed. In fact, Japan's economic woes seem to have reached bottom. Although the
process is in its infancy, some Japanese corporations not only are talking about
restructuring and cost cutting, they also are beginning to take action, looking
within to become more competitive and improve returns on equity. While still
lagging the United States, Europe is beginning to restructure and consolidate.
These signs of international growth have contributed to concerns that the U.S.
economy now may be too strong. In June, and again in August, the Fed raised
rates by one-quarter of a percentage point to help ward off the specter of
inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current
market many investors are taking on additional risk - whether through day
trading or investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago.
We believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top
25 stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged
index of common stock total return performance, are still the most overvalued.
Such extreme overvaluation makes the stock market sensitive to interest-rate
news and any negative earnings surprises. The Year 2000 (Y2K) computer problem
is another factor causing investor concern. While we believe corporate America
is well prepared to address any Y2K situations that may arise at year-end, no
one can predict investor behavior. In our opinion, it is investor behavior
that has the greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is through our
continuing commitment to MFS Original Research(R) and our fundamental investment
tenet of long-term investing. Whether markets are up or down, MFS analysts focus
on analyzing industries and visiting companies to determine the long-term
winners and the prices that will make them attractive opportunities. Because all
companies will not benefit equally from the improving international environment,
bottom-up research remains critical to identifying those that we believe are
successfully restructuring, consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at
attractive prices. For this reason, we are continuing to expand our domestic
and international capabilities to ensure that MFS has primary, in-house
research on companies worldwide. We believe that we have built the right
investment team, backed by MFS Original Research, to take advantage of those
opportunities for our shareholders.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
September 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Mark Regan]
Mark Regan
For the 12 months ended August 31, 1999, the Fund's Class A, B, C, and I
shares provided total returns of 68.83%, 67.41%, 67.33%, and 69.03%,
respectively. These returns, which include the reinvestment of any
distributions but exclude the effects of any sales charges, compare to a
48.84% return for the Russell Midcap Growth Index (the Russell Index) for the
same period. This index measures the performance of the smallest growth
companies in the Russell 1000 Index. The average mid cap growth fund tracked
by Lipper Analytical Services, Inc., an independent firm that reports mutual
fund performance, returned 42.72% for the period.
Q. MID-CAP STOCKS REBOUNDED NICELY THIS PAST YEAR. WHAT HAPPENED?
A. The mid-cap sector took a severe beating when the market fell during the
summer of 1998. So we started the period at really depressed levels. Then
last fall the Federal Reserve Board lowered short-term interest rates, and
investors began moving back into stocks. For the first time in a couple of
years, they recognized how attractive mid-cap stocks were compared to
large-cap names. Mid caps made a strong comeback in the last quarter of
1998, then took a breather in the first quarter of 1999 as unsettling
economic data sent investors back to the safety of blue-chip names. In
April, the prospect of rising interest rates caused many investors to look
beyond high-priced, large-cap names; therefore, mid-cap stocks began
another strong run. This continued through most of the spring and summer
despite continued volatility in the market.
Q. HOW DID THE FUND COME OUT SO FAR AHEAD OF THE RUSSELL INDEX?
A. The Fund focuses on companies with market capitalizations between $250
million and roughly $5 billion. Within this range, we try to find companies
with above-average growth potential. Often these are corporations that have
successful products and services but limited competition. When mid-cap
stocks bounced back this past year, the Fund benefited from strong
individual stock selection, as well as from stocks that appreciated as a
result of their companies being acquired by larger ones.
Q. LET'S START WITH THE BUY-OUTS. WHY WERE THERE SO MANY THIS PAST YEAR?
A. We typically have between seven and 11 buy-outs in the Fund each year,
usually resulting in a higher stock price. Large companies often grow their
businesses by acquiring smaller companies with faster earnings growth and
lower stock prices than their own. What made the difference this past year
was that two of our largest investments, Concentra Managed Health Care and
Ascend Communications, a company that builds the switches and on-ramps to
the Internet, were bought out. We also had smaller stakes in a number of
companies, including Giant Foods and Smith Food and Drug, which were
acquired by larger companies.
Q. WHEN YOU THINK ABOUT INDIVIDUAL STOCKS THAT TURNED IN EXCEPTIONALLY STRONG
PERFORMANCE, WHICH NAMES COME TO MIND?
A. Gemstar International and Cytyc. Gemstar has a patented process for putting
software guides in the front end of televisions. These guides help
consumers access all sorts of programming information. Within three to five
years, we expect every new television to have one of these guides.
Similarly, cable boxes, VCRs, and satellite boxes will all have them. This
is the kind of situation we like: tremendous growth potential with
virtually no competition. Cytyc has developed an alternative pap smear
process that promises more accurate and faster results -- and that we
believe may become the industry standard.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. Most of our disappointments came in health care, where stocks have been
hurt by changes in Medicare reimbursement policies. We actually used the
downturn as a buying opportunity and built up our stake. For example, we
added Health Management Associates, which operates hospitals in rural
areas. This is a company with good businesses that we believe should have
been somewhat insulated from Medicare issues, but whose price declined
along with the rest of the sector. We're still hopeful that our health care
stocks will be among the first to recover.
Q. WHAT RECENT CHANGES HELPED PERFORMANCE?
A. We built an above-average stake in oil and gas stocks, focusing on deep-
water drillers like Cooper Cameron, Diamond Offshore Drilling, and Noble
Drilling. As oil prices rose, these companies did exceptionally well. The
Fund also benefited from timely pruning of retail and financial services
holdings. In the retail area, we took some profits in BJ's Wholesale Club
after its stock price had climbed considerably. We also sold our investment
in Rite Aid, a drug store that had accounting problems, and Gymboree, a
children's clothes retailer that we later bought back. And then we had a few
buy-outs in the retail sector that further lowered our stake. In financial
services, we sold bank and insurance stocks, expecting that they would get
hurt by rising interest rates. We did keep A.G. Edwards, a brokerage firm
with strong potential that has yet to live up to our expectations. Finally,
as the Y2K deadline approached, we reduced our technology weighting.
Q. WHERE ELSE ARE YOU FINDING INVESTMENT OPPORTUNITIES FOR THE FUTURE?
A. We recently bought Del Monte Foods, a canned fruits and vegetables company
that just went public, dominates its market, and has a valuation (stock
price compared to other measures like earnings) below that of its
established competitors. We're also focusing on three specific investment
themes. The biggest one is what we call Internet plumbing companies -- or
the businesses that will make the Internet work. We own stock in companies
such as Edify that simplify doing business on the Internet. We also like
processing companies such as Affiliated Computer, BISYS Group, and CSG
Systems that have steady businesses with recurring revenues. Finally, we
believe there's a giant shift occurring in the way software is written for
U.S. corporations. We expect browser-based technology to replace the
current client-server model. So we're looking for companies that can help
us capitalize on this trend.
Q. WHERE DO YOU EXPECT MID-CAP STOCKS TO GO FROM HERE?
A. We're optimistic that they'll continue to do well, although we expect
volatility along the way. Mid-cap stocks are still much less expensive than
large-cap stocks and we believe they have better prospects for earnings
growth. In addition, mid-cap stocks stand to benefit if the market continues
to broaden. Finally, economic conditions seem ripe for the stock market to
continue its upward course. As long as U.S. economic growth remains healthy,
inflation stays in check, and global economies are on the rise, we believe
mid-cap stocks may continue to reward long-term investors.
/s/ Mark Regan
Mark Regan
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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MARK REGAN IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
THE PORTFOLIO MANAGER OF MFS(R) MID CAP GROWTH FUND AND A PORTFOLIO
MANAGER OF MFS(R) INSTITUTIONAL MID CAP GROWTH FUND.
HE JOINED MFS IN 1989 AS A RESEARCH ANALYST. HE WAS NAMED INVESTMENT
OFFICER IN 1990, ASSISTANT VICE PRESIDENT IN 1991, VICE PRESIDENT IN
1992, PORTFOLIO MANAGER IN 1993, AND SENIOR VICE PRESIDENT IN 1999. MR.
REGAN IS A GRADUATE OF CORNELL UNIVERSITY AND THE SLOAN SCHOOL OF
MANAGEMENT OF THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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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: $214.5 MILLION NET ASSETS AS OF AUGUST 31, 1999
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. 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. (See Notes to Performance Summary for more information.)
It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations,
December 1, 1993, through August 31, 1999. Index information is from December
1, 1993.)
MFS Mid Russell
Cap Growth Midcap
Fund - Class A Growth Index
--------------------------------------------------
December, 1993 $ 9,425 $10,000
August, 1994 10,448 10,493
August, 1995 12,513 13,090
August, 1996 13,833 14,637
August, 1997 16,635 19,209
August, 1998 14,066 17,004
August, 1999 23,749 25,308
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH AUGUST 31, 1999
CLASS A
1 Year 3 Years 5 Years Life*
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Cumulative Total Return +68.83% +71.68% +127.30% +151.98%
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Average Annual Total Return +68.83% +19.74% + 17.85% + 17.44%
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SEC Results +59.12% +17.40% + 16.46% + 16.24%
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CLASS B
1 Year 3 Years 5 Years Life*
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Cumulative Total Return +67.41% +67.75% +118.46% +139.67%
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Average Annual Total Return +67.41% +18.82% + 16.92% + 16.42%
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SEC Results +63.41% +18.11% + 16.70% + 16.34%
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CLASS C
1 Year 3 Years 5 Years Life*
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Cumulative Total Return +67.33% +67.87% +118.26% +138.77%
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Average Annual Total Return +67.33% +18.85% + 16.89% + 16.45%
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SEC Results +66.33% +18.85% + 16.89% + 16.45%
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CLASS I
1 Year 3 Years 5 Years Life*
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Cumulative Total Return +69.03% +73.28% +129.41% +154.32%
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Average Annual Total Return +69.03% +19.97% + 17.98% + 17.56%
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COMPARATIVE INDICES
1 Year 3 Years 5 Years Life*
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Average mid cap growth fund** +42.72% +15.91% + 16.47% + 14.95%
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Russell Midcap Growth Index+ +48.84% +20.02% + 19.25% + 17.53%
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* For the period from the commencement of the Fund's investment operations,
December 1, 1993, through August 31, 1999. Index information is from
December 1, 1993.
** Source: Lipper Analytical Services, Inc.
+ Source: Standard & Poor's Micropal, Inc.
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class 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.
<PAGE>
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 1999
FIVE LARGEST STOCK SECTORS
CONGLOMERATES, SPECIAL PRODUCTS/SERVICES 24.7%
HEALTH CARE 18.9%
TECHNOLOGY 16.4%
LEISURE 10.3%
ENERGY 10.0%
TOP 10 STOCK HOLDINGS
GEMSTAR INTERNATIONAL GROUP LTD. 8.4% NEWFIELD EXPLORATION CO. 3.2%
Audio/video products company Independent oil and gas company
NETWORK SOLUTIONS, INC. 7.5% SPORTSLINE USA, INC. 2.9%
Internet services company Internet sports media company
CYTYC CORP. 4.6% NOVA CORP. 2.7%
Medical supply designer and producer Credit card transactions processor
DEL MONTE FOODS CO. 3.7% CABLE DESIGN TECHNOLOGIES CORP. 2.6%
Food manufacturer and distributor Data transmission cables manufacturer
HEALTH MANAGEMENT ASSOCIATES, SECURITY DYNAMICS TECHNOLOGIES,
INC. 3.4% INC. 2.4%
Hospital operator Hardware and software developer
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 1999
Stocks - 94.3%
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ISSUER SHARES VALUE
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U.S. Stocks - 94.1%
Agricultural Products - 0.7%
AGCO Corp. 145,000 $ 1,495,313
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Business Machines - 1.9%
Affiliated Computer Services, Inc., "A"* 34,400 $ 1,470,600
Kulicke & Soffa Industries, Inc.* 2,500 51,406
Seagate Technology, Inc.* 80,600 2,674,913
------------
$ 4,196,919
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Business Services - 8.8%
BISYS Group, Inc.* 13,600 $ 646,000
DST Systems, Inc.* 17,400 1,157,100
Fiserv, Inc.* 67,500 2,079,844
IMRglobal Corp.* 61,200 1,044,225
Learning Tree International, Inc.* 100,800 1,285,200
NOVA Corp.* 210,800 5,480,800
Policy Management Systems Corp.* 76,900 2,350,256
Quintiles Transnational Corp.* 66,700 2,388,694
Technology Solutions Co.* 209,825 2,517,900
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$ 18,950,019
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Computer Software - Personal Computers - 0.5%
Intuit, Inc.* 12,200 $ 1,092,663
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Computer Software - Systems - 11.6%
Active Software, Inc.* 1,375 $ 23,891
Agile Software Corp.* 150 7,462
Aspen Technology, Inc.* 98,000 839,125
Cadence Design Systems, Inc.* 127,540 1,737,732
Checkfree Holdings Corp.* 123,400 3,609,450
Citrix Systems, Inc.* 44,200 2,519,400
CSG Systems International, Inc.* 31,600 712,975
Edify Corp.* 333,111 3,789,138
Etec Systems, Inc.* 26,200 1,152,800
Harbinger Corp.* 140,500 1,686,000
Interliant, Inc.* 21,500 272,781
Quest Software, Inc.* 400 16,750
Security Dynamics Technologies, Inc.* 206,000 4,866,750
Silverstream Software, Inc.* 750 22,594
SunGard Data Systems, Inc.* 144,300 3,607,500
------------
$ 24,864,348
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Consumer Goods and Services - 3.2%
LoJack Corp.* 99,600 $ 902,625
Sportsline USA, Inc.* 247,180 5,963,217
------------
$ 6,865,842
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Electronics - 8.1%
Analog Devices, Inc.* 41,200 $ 2,121,800
Cable Design Technologies Corp.* 246,500 5,191,906
KLA-Tencor Corp.* 7,800 489,938
LTX Corp.* 17,800 231,400
MKS Instruments, Inc.* 64,400 1,183,350
Novellus Systems, Inc.* 59,800 3,225,462
Sawtek, Inc.* 14,400 476,100
SIPEX Corp.* 174,900 3,093,544
Teradyne, Inc.* 21,200 1,442,925
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$ 17,456,425
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Entertainment - 8.3%
Gemstar International Group Ltd.* 245,980 $ 16,972,620
Hearst-Argyle Television, Inc.* 33,500 847,969
Sinclair Broadcast Group, Inc., "A"* 4,600 74,750
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$ 17,895,339
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Financial Institutions - 2.4%
Edwards (A.G.), Inc. 183,000 $ 4,597,875
Knight/Trimark Group, Inc. "A"* 14,700 481,425
------------
$ 5,079,300
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Food and Beverage Products - 5.4%
Del Monte Foods Co.* 493,000 $ 7,456,625
Keebler Foods Co.* 88,700 2,644,369
Suiza Foods Corp.* 44,200 1,408,875
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$ 11,509,869
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Internet - 0.7%
MapQuest.Com, Inc.* 100 $ 1,206
Online Resources & Communications Corp.* 13,600 243,100
Security First Technologies Corp.* 15,200 562,400
VeriSign, Inc.* 6,900 747,356
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$ 1,554,062
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Machinery - 0.8%
Applied Science and Technology, Inc.* 86,700 $ 1,668,975
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Medical and Health Products - 0.2%
Lasersight, Inc.* 35,400 $ 438,075
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Medical and Health Technology and Services - 14 7%
Cytyc Corp.* 273,500 $ 9,230,625
Health Management Associates, Inc., "A"* 852,400 6,819,200
IDEXX Laboratories, Inc.* 259,100 4,404,700
Lincare Holdings, Inc.* 57,200 1,508,650
Martek Biosciences Corp.* 159,827 1,368,519
Steris Corp.* 235,300 2,955,956
Total Renal Care Holdings, Inc.* 563,243 4,541,147
Ventana Medical Systems, Inc.* 45,050 720,800
------------
$ 31,549,597
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Oil Services - 3.9%
Cooper Cameron Corp.* 65,500 $ 2,726,437
Diamond Offshore Drilling, Inc. 23,700 906,525
Global Industries, Inc.* 184,500 2,064,094
Noble Drilling Corp.* 109,700 2,701,363
------------
$ 8,398,419
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Oils - 5.5%
Apache Corp. 20,200 $ 919,100
Houston Exploration Co.* 53,200 1,130,500
Newfield Exploration Co.* 214,200 6,506,325
Transocean Offshore, Inc. 52,900 1,798,600
Vastar Resources, Inc. 21,300 1,419,112
------------
$ 11,773,637
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Pharmaceuticals - 2.5%
Cytoclonal Pharmaceutics, Inc.* 17,800 $ 120,150
Sepracor, Inc.* 40,700 3,047,412
United Therapeutics Corp.* 78,200 2,130,950
------------
$ 5,298,512
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Printing and Publishing - 1.4%
Meredith Corp. 15,500 $ 537,656
Scholastic Corp.* 60,300 2,389,388
------------
$ 2,927,044
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Retail - 0.5%
The Great Atlantic & Pacific Tea Company, Inc. 28,000 $ 983,500
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Special Products and Services - 0.6%
U.S. Aggregates, Inc.* 86,600 $ 1,293,588
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Stores - 1.8%
BJ's Wholesale Club, Inc.* 31,400 $ 887,050
CompUSA, Inc.* 259,600 1,573,825
Gymboree Corp.* 137,400 712,762
Office Depot, Inc.* 43,400 452,988
Petco Animal Supplies, Inc.* 27,200 340,000
------------
$ 3,966,625
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Telecommunications - 10.6%
Aerial Communications, Inc.* 210,200 $ 3,310,650
Intermedia Communications, Inc.* 165,500 4,303,000
Network Solutions, Inc.* 262,100 15,103,512
------------
$ 22,717,162
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Total U.S. Stocks $201,975,233
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Foreign Stocks - 0.2%
Canada - 0.2%
Southern Africa Minerals Corp. (Diversified
Minerals)* 794,600 $ 393,077
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Ireland
eircom PLC, ADR (Telecommunications)* 800 $ 3,643
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Total Foreign Stocks $ 396,720
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Total Stocks (Identified Cost, $189,299,051) $202,371,953
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Short-Term Obligations - 3.5%
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PRINCIPAL AMOUNT
(000 OMITTED)
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Student Loan Marketing Assn., due 9/01/99,
at Amortized Cost $ 7,595 $ 7,595,000
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Other Short-Term Obligations - 26.9%
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SHARES
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Navigator Securities Lending Prime Portfolio
(Identified Cost, $57,567,227) 57,567,227 $ 57,567,227
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Total Investments (Identified Cost, $254,461,278) $267,534,180
Other Assets, Less Liabilities - (24.7)% (53,003,617)
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Net Assets - 100.0% $214,530,563
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* Non-income producing security.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
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AUGUST 31, 1999
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Assets:
Investments, at value (identified cost, $254,461,278) $267,534,180
Cash 6,250
Receivable for Fund shares sold 6,731,147
Receivable for investments sold 312,037
Interest and dividends receivable 14,821
Other assets 2,154
------------
Total assets $274,600,589
------------
Liabilities:
Payable for Fund shares reacquired $ 69,780
Payable for investments purchased 2,212,618
Collateral for securities loaned, at value 57,567,227
Payable to affiliates -
Management fee 12,875
Shareholder servicing agent fee 1,717
Distribution and service fee 114,948
Administrative fee 257
Accrued expenses and other liabilities 90,604
------------
Total liabilities $ 60,070,026
------------
Net assets $214,530,563
============
Net assets consist of:
Paid-in capital $171,850,249
Unrealized appreciation on investments 13,072,902
Accumulated undistributed net realized gain on
investments and foreign currency transactions 29,630,112
Accumulated net investment loss (22,700)
------------
Total $214,530,563
============
Shares of beneficial interest outstanding 19,117,857
==========
Class A shares:
Net asset value per share
(net assets of $83,237,568 / 7,337,180 shares of
beneficial interest outstanding) $11.34
======
Offering price per share (100 / 94.25 of net asset value
per share) $12.03
======
Class B shares:
Net asset value and offering price per share
(net assets of $111,354,519 / 9,974,887 shares of
beneficial interest outstanding) $11.16
======
Class C shares:
Net asset value and offering price per share
(net assets of $18,097,018 / 1,643,790 shares of
beneficial interest outstanding) $11.01
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $1,841,458 / 162,000 shares of
beneficial interest outstanding) $11.37
======
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
- -------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999
- -------------------------------------------------------------------------------
Net investment loss:
Income -
Interest $ 700,014
Dividends 196,035
Income on securities loaned 98,356
------------
Total investment income $ 994,405
------------
Expenses -
Management fee $ 1,185,344
Trustees' compensation 23,214
Shareholder servicing agent fee 168,148
Distribution and service fee (Class A) 150,407
Distribution and service fee (Class B) 858,477
Distribution and service fee (Class C) 108,238
Administrative fee 20,200
Custodian fee 54,113
Printing 49,386
Postage 29,629
Auditing fees 17,103
Legal fees 4,808
Miscellaneous 140,623
------------
Total expenses $ 2,809,690
Fees paid indirectly (6,430)
------------
Net expenses $ 2,803,260
------------
Net investment loss $ (1,808,855)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 36,329,375
Foreign currency transactions (51)
------------
Net realized gain on investments and foreign
currency transactions $ 36,329,324
------------
Change in unrealized appreciation on investments $ 37,191,254
------------
Net realized and unrealized gain on investments
and foreign currency $ 73,520,578
------------
Increase in net assets from operations $ 71,711,723
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,808,855) $ (2,000,225)
Net realized gain on investments and foreign currency
transactions 36,329,324 18,745,576
Net unrealized gain (loss) on investments and foreign
currency translation 37,191,254 (35,717,948)
------------ ------------
Increase (decrease) in net assets from operations $ 71,711,723 $(18,972,597)
------------ ------------
Distributions declared to shareholders -
From net realized gain on investments and foreign currency
transactions (Class A) $ (6,881,999) $ (1,274,408)
From net realized gain on investments and foreign currency
transactions (Class B) (9,892,160) (1,589,641)
From net realized gain on investments and foreign currency
transactions (Class C) (1,090,227) (131,365)
From net realized gain on investments and foreign currency
transactions (Class I) (168,193) (38,088)
------------ ------------
Total distributions declared to shareholders $(18,032,579) $ (3,033,502)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions $ 61,808,176 $ (1,808,418)
------------ ------------
Total increase (decrease) in net assets $115,487,320 $(23,814,517)
Net assets:
At beginning of period 99,043,243 122,857,760
------------ ------------
At end of period (including accumulated net investment
loss of $22,700 and $14,911, respectively) $214,530,563 $ 99,043,243
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.71 $ 9.42 $ 9.06 $10.08 $ 8.68
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.07) $(0.11) $(0.09) $(0.10) $(0.03)
Net realized and unrealized gain (loss) on
investments and foreign currency 5.04 (1.31) 1.77 0.96 1.69
------ ------ ------ ------ ------
Total from investment operations $ 4.97 $(1.42) $ 1.68 $ 0.86 $ 1.66
------ ------ ------ ------ ------
Less distributions declared to shareholders
from net realized gain on investments and
foreign currency transactions $(1.34) $(0.29) $(1.32) $(1.88) $(0.26)
------ ------ ------ ------ ------
Net asset value - end of period $11.34 $ 7.71 $ 9.42 $ 9.06 $10.08
====== ====== ====== ====== ======
Total return(+) 68.83% (15.44)% 20.26% 10.55% 19.77%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.32% 1.43% 1.41% 1.28% 1.29%
Net investment loss (0.69)% (1.07)% (1.09)% (1.08)% (0.40)%
Portfolio turnover 158% 168% 170% 157% 218%
Net assets at end of period (000 omitted) $83,238 $36,413 $41,737 $35,098 $30,194
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.60 $ 9.27 $ 8.93 $ 9.94 $ 8.59
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.14) $(0.18) $(0.16) $(0.17) $(0.13)
Net realized and unrealized gain (loss) on
investments and foreign currency 4.97 (1.28) 1.75 0.95 1.69
------ ------ ------ ------ ------
Total from investment operations $ 4.83 $(1.46) $ 1.59 $ 0.78 $ 1.56
------ ------ ------ ------ ------
Less distributions declared to shareholders
from net realized gain on investments and
foreign currency transactions $(1.27) $(0.21) $(1.25) $(1.79) $(0.21)
------ ------ ------ ------ ------
Net asset value - end of period $11.16 $ 7.60 $ 9.27 $ 8.93 $ 9.94
====== ====== ====== ====== ======
Total return 67.41% (16.05)% 19.36% 9.67% 18.75%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.07% 2.18% 2.20% 2.13% 2.29%
Net investment loss (1.44)% (1.82)% (1.87)% (1.81)% (1.44)%
Portfolio turnover 158% 168% 170% 157% 218%
Net assets at end of period (000 omitted) $111,355 $56,098 $73,940 $67,043 $61,742
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.53 $ 9.19 $ 8.85 $ 9.91 $ 8.61
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.14) $(0.18) $(0.16) $(0.17) $(0.14)
Net realized and unrealized gain (loss) on
investments and foreign currency 4.91 (1.26) 1.74 0.94 1.69
------ ------ ------ ------ ------
Total from investment operations $ 4.77 $(1.44) $ 1.58 $ 0.77 $ 1.55
------ ------ ------ ------ ------
Less distributions declared to shareholders
from net realized gain on investments and
foreign currency transactions $(1.29) $(0.22) $(1.24) $(1.83) $(0.25)
------ ------ ------ ------ ------
Net asset value - end of period $11.01 $ 7.53 $ 9.19 $ 8.85 $ 9.91
====== ====== ====== ====== ======
Total return 67.33% (16.00)% 19.44% 9.60% 18.63%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.07% 2.18% 2.16% 2.17% 2.30%
Net investment loss (1.44)% (1.82)% (1.79)% (1.90)% (1.55)%
Portfolio turnover 158% 168% 170% 157% 218%
Net assets at end of period (000 omitted) $18,097 $5,607 $5,796 $6,860 $3,209
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
--------------------------------- AUGUST 31,
1999 1998 1997*
- --------------------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.73 $ 9.44 $ 8.50
------ ------ ------
Income from investment operations# -
Net investment loss $(0.04) $(0.08) $(0.05)
Net realized and unrealized gain (loss) on investments
and foreign currency 5.04 (1.32) 0.99
------ ------ ------
Total from investment operations $ 5.00 $(1.40) $ 0.94
------ ------ ------
Less distributions declared to shareholders from net $
realized gain on investments and foreign currency
transactions $(1.36) $(0.31) --
------ ------ ------
Net asset value - end of period $11.37 $ 7.73 $ 9.44
====== ====== ======
Total return 69.03% (15.23)% 11.06%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.07% 1.18% 1.03%+
Net investment loss (0.44)% (0.82)% (0.74)%+
Portfolio turnover 158% 168% 170%
Net assets at end of period (000 omitted) $1,841 $925 $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 has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated without reduction for
this expense offset arrangement.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Mid Cap Growth Fund (the Fund) is a non-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.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Security Loans - State Street Bank and Trust Company ("State Street"), as
agent, may loan the securities of the Fund to certain brokers (the
"Borrowers") approved by the Fund. The loans are collateralized at all times
by cash and U.S. Treasury securities in an amount at least equal to the market
value of the securities loaned. State Street provides the Fund with
indemnification against Borrower default. The Fund bears the risk of loss with
respect to the investment of cash collateral.
At August 31, 1999, the value of securities loaned was $55,230,036. These
loans were collateralized by cash of $57,567,227 and U.S. Treasury securities
of $192,850. Cash collateral is invested in short-term securities, which are
included in the Portfolio of Investments. A portion of the income generated
upon investment of the collateral is remitted to the Borrowers, and the
remainder is allocated between the Fund and State Street in its capacity as
lending agent. On loans collateralized by U.S. Treasury securities, a fee is
received from the Borrower, and is allocated between the Fund and State
Street. Income from securities lending is disclosed on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
During the year ended August 31, 1999, $1,801,066 was reclassified from
accumulated undistributed net realized gain on investments and foreign
currency transactions to accumulated net investment loss due to differences
between book and tax accounting for net investment losses. This change had no
effect on the net assets or net asset value per share. At August 31, 1999,
accumulated undistributed net realized gain on investments and foreign
currency transactions under book accounting were different from tax accounting
due to temporary differences in accounting for losses on wash sale
transactions.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
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 the Fund's average daily net assets.
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 $7,788
for the year ended August 31, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$62,134 for the year ended August 31, 1999, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, 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
paid 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 and a
distribution fee to MFD of up to 0.10% per annum of the Fund's average daily
net assets attributable to Class A shares. Payment of the 0.10% per annum
Class A distribution fee will be implemented on such date as the Trustees of
the Fund may determine. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $14,456 for the year
ended August 31, 1999. Fees incurred under the distribution plan during the
year ended August 31, 1999, 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 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 $10,462 and $270 for
Class B and Class C shares, respectively, for the year ended August 31, 1999.
Fees incurred under the distribution plan during the year ended August 31,
1999, were 1.00% and 1.00% of average daily net assets attributable to Class B
and Class C shares, respectively, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended August 31,
1999, were $847, $119,773, and $6,491 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 annual rate of 0.10%.
Prior to April 1, 1999, the fee was calculated as a percentage of the Fund's
average daily net assets at an annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$272,126,075 and $241,590,010, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $256,940,597
------------
Gross unrealized appreciation $ 30,950,690
Gross unrealized depreciation (20,357,107)
------------
Net unrealized appreciation $ 10,593,583
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were
as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 15,169,744 $ 154,338,218 3,064,610 $ 31,014,067
Shares issued to shareholders in
reinvestment of distributions 742,125 6,801,941 136,735 1,206,006
Shares reacquired (13,296,350) (134,640,545) (2,908,810) (29,471,262)
----------- ------------- ----------- ------------
Net increase 2,615,519 $ 26,499,614 292,535 $ 2,748,811
=========== ============= =========== ============
<CAPTION>
Class B Shares
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,115,055 $ 92,789,536 3,317,869 $ 33,017,562
Shares issued to shareholders in
reinvestment of distributions 977,828 8,839,564 160,209 1,398,805
Shares reacquired (7,497,071) (75,766,605) (4,071,465) (39,885,321)
----------- ------------- ----------- ------------
Net increase (decrease) 2,595,812 $ 25,862,495 (593,387) $ (5,468,954)
=========== ============= =========== ============
<CAPTION>
Class C Shares
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,120,776 $ 21,806,838 529,840 $ 5,257,980
Shares issued to shareholders in
reinvestment of distributions 105,330 947,304 13,332 115,323
Shares reacquired (1,326,970) (13,771,979) (428,913) (4,191,955)
----------- ------------- ----------- ------------
Net increase 899,136 $ 8,982,163 114,259 $ 1,181,348
=========== ============= =========== ============
<CAPTION>
Class I Shares
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 59,850 $ 637,177 18,237 $ 183,027
Shares issued to shareholders in
reinvestment of distributions 18,401 168,185 4,318 38,087
Shares reacquired (35,959) (341,458) (49,523) (490,737)
----------- ------------- ----------- ------------
Net increase (decrease) 42,292 $ 463,904 (26,968) $ (269,623)
=========== ============= =========== ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended August 31, 1999, was $1,227.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust IV and the 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, 1999,
the related statement of operations for the year then ended, the statement of
changes in net assets for the years ended August 31, 1999 and 1998, and the
financial highlights for each of the years in the five-year period ended August
31, 1999. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at August 31, 1999 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, 1999, 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 7, 1999
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1999.
THE FUND HAS DESIGNATED $5,528,238 AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED AUGUST 31, 1999.
- --------------------------------------------------------------------------------
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers
and software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking
steps to ascertain the Y2K readiness of MFS' internal systems and is working
with our external systems vendors to determine whether they expect their
systems to be ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness. Each year, MFS' research analysts and portfolio managers conduct
more than 1,000 on-site meetings with companies whose securities are, or may be,
held in fund and client portfolios, and host an additional 1,500 meetings at
MFS' headquarters. When assessing the Y2K readiness of these companies, MFS'
research analysts and portfolio managers may rely upon discussions at these
meetings as well as SEC disclosure documents and third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on MFS, shareholders of MFS funds, participants in
retirement plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program,
please visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston
Street, Boston, MA 02116-3741.
<PAGE>
MFS(R) MID CAP GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
J. Atwood Ives - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified CUSTODIAN
services company) State Street Bank and Trust Company
Lawrence T. Perera - Partner, Hemenway AUDITORS
& Barnes (attorneys) Deloitte & Touche LLP
William J. Poorvu - Adjunct Professor, Harvard INVESTOR INFORMATION
University Graduate School of Business For MFS stock and bond market outlooks, call toll
Administration free: 1-800-637-4458 anytime from a touch-tone
telephone.
Charles W. Schmidt - Private Investor
For information on MFS mutual funds, call your
Arnold D. Scott* - Senior Executive financial consultant or, for an informa- tion kit,
Vice President, Director, and Secretary, call toll free: 1-800-637-2929 any business day
MFS Investment Management from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Jeffrey L. Shames* - Chairman, Chief
Executive Officer, and Director, INVESTOR SERVICE
MFS Investment Management MFS Service Center, Inc.
P.O. Box 2281
Elaine R. Smith - Independent Consultant Boston, MA 02107-9906
David B. Stone - Chairman and Director, For general information, call toll free:
North American Management Corp. 1-800-225-2606 any business day from 8 a.m. to
(investment advisers) 8 p.m. Eastern time.
INVESTMENT ADVISER For service to speech- or hearing-impaired, call
Massachusetts Financial Services Company toll free: 1-800-637-6576 any business day from 9
500 Boylston Street a.m. to 5 p.m. Eastern time. (To use this service,
Boston, MA 02116-3741 your phone must be equipped with a
Telecommunications Device for the Deaf.)
DISTRIBUTOR
MFS Fund Distributors, Inc. For share prices, account balances, and exchanges,
500 Boylston Street call toll free: 1-800-MFS-TALK (1-800-637-8255)
Boston, MA 02116-3741 anytime from a touch-tone telephone.
CHAIRMAN AND PRESIDENT WORLD WIDE WEB
Jeffrey L. Shames* www.mfs.com
PORTFOLIO MANAGER
Mark Regan*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
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<PAGE>
MFS(R) MID CAP GROWTH FUND ------------
BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MMC-2 10/99 25.5M 83/283/383/883
