<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) MID CAP
GROWTH FUND
SEMIANNUAL REPORT o FEBRUARY 29, 2000
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MUTUAL FUND GIFT KITS (see page 31)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 10
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 18
Notes to Financial Statements ............................................. 25
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(R)
MFS(R) ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (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,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no doubt
that Internet-delivered information and brokerage services enable individual
investors to be well informed and to trade at bargain prices. But we believe the
numbers and facts argue that, for most of us, mutual funds purchased through an
investment professional will continue to be one of the best products for
long-term investing in this new millennium.
According to a survey by the Investment Company Institute, the national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of course
that doesn't tell us how well they did owning those funds or stocks, but another
statistic gives us a clue. In the third quarter of 1999, during a period of
volatility in the greatest bull market in history, a quarter of the 7,500 stocks
tracked by Morningstar, a popular rating service, lost more than 20% of their
value. But during the same period, fewer than 1% of the mutual funds tracked by
Morningstar -- 6 out of 10,000 funds -- were down by a similar amount.(2) So an
investor's chance of picking one of those losing stocks was about 25 times
greater than his or her chance of picking an equally losing fund.
The numbers also show that a majority of Americans seek professional advice when
buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through an investment professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up as well as down markets. And for many
investors, working with an investment professional may be the best way to
develop a plan. Although the Internet abounds with calculators for developing
all sorts of investment plans, none has your investment professional's high
level of experience and an understanding of your unique situation. And no
calculator can counsel you during a down market, when you may be tempted to
abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns
dozens or even hundreds of holdings is better positioned to survive a
disappointment in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few mutual funds, of course, are going to be up
when the overall market is down. But as the numbers above from the third
quarter of 1999 demonstrate, mutual funds may be less likely to suffer the
extreme downturns experienced by a large number of individual holdings when
the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights.
The diversification and professional management of mutual funds help make
them inherently less risky than individual stock picking, and funds are
available in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS 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)
March 15, 2000
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(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore Sun's
Dollars and Sense Conference, 10/99. In the period 7/1/99 through 9/ 30/99,
of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more; of the
10,000 mutual funds tracked by Morningstar, six lost 20% or more. Mutual
fund results are at net asset value; if sales charges had been reflected,
results would have been lower.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Mark Regan]
Mark Regan
For the six months ended February 29, 2000, Class A shares of the Fund provided
a total return of 64.65%, Class B shares 64.12%, Class C shares 64.14%, and
Class I shares 64.83%. These returns include the reinvestment of any
distributions but exclude the effects of any sales charges and compare to a
67.32% return over the same period for the Fund's benchmark, the Russell Mid-Cap
Growth Index (the Russell Index). This index measures the performance of the 800
smallest growth companies in the Russell 1000 Index. These returns also compare
to an 85.01% return for the average mid-cap growth fund tracked by Lipper Inc.,
an independent firm that reports mutual fund performance.
Q. THE FUND PERFORMED VERY WELL ON AN ABSOLUTE BASIS OVER THE PERIOD.
HOWEVER, IT UNDERPERFORMED RELATIVE TO ITS BENCHMARK AND ITS PEERS. COULD
YOU DISCUSS THAT?
A. In considering our performance, we think it's important for investors to
understand what kind of fund we strive to be. We are a growth portfolio in
the small- to mid-cap range that tries to deliver strong performance at what
we feel is an appropriate level of risk. In our efforts to maintain an
appropriate risk level, we have made a conscious decision to reduce some
technology holdings as valuations have reached levels that we do not think
are justifiable or sustainable, based on our fundamental research. So over
the period we've reduced our positions in some very high-growth companies --
even though many stocks of this nature have continued to appreciate, somewhat
impairing our short-term relative performance. But we strongly believe in
seeking to maintain the integrity of our risk/reward profile, especially in a
market that we believe is becoming very overvalued in some areas.
In addition, investors should understand that we try to be a true mid-cap
offering, which we define as investing in companies with market
capitalizations between $500 million and $5 billion. This has meant that our
weighted-average market cap, at about $3.4 billion, is considerably smaller
than the approximately $11.7 billion average of the Russell Index. A number
of the firms in the index have market caps considerably larger than what we
would consider to be the mid-cap range.
Q. COULD YOU DESCRIBE THE INVESTMENT STRATEGY OF THE FUND?
A. As a mid-cap portfolio, the Fund looks for growing businesses that have made
the transition from small cap to mid cap. Often, that means the Fund's assets
are invested in industries in which the competitive field has narrowed to
just a few companies. Our goal is to use our research to pick the companies
that we believe will wind up dominating their fields and to invest in them
early, before the market recognizes their true worth.
"Second-chance" companies are another type of mid-cap opportunity our
research tries to uncover. These are companies whose stock prices have
stumbled but that we believe still have the potential to be leaders in their
businesses. A stumble in the mid-cap area can result from events such as a
quarterly earnings shortfall of a few cents or a change in pricing of a major
product -- events that may cause the market to temporarily lose confidence in
a company whose fundamentals we believe remain strong, and offer us a buying
opportunity.
Q. COULD YOU GIVE US AN EXAMPLE OF HOW MFS ORIGINAL RESEARCH(R) UNCOVERED AN
OPPORTUNITY FOR THE PORTFOLIO?
A. Network Solutions was one of our best-performing holdings during the period
and an example that combines elements of both a second-chance opportunity and
buying a stock before the market recognizes its worth. Network Solutions owns
the exclusive rights to the registry for the .com, .net, .edu, and .org
names, so it's virtually the worldwide building permit issuer for the
Internet. Any domestic company doing business on the Internet has to pay
Network Solutions an annual fee to register its domain, or site, names.
In the middle of 1999 there was a controversy about whether the government
might take away Network Solutions' monopoly, and the stock price dropped by
two-thirds. We did extensive research and concluded that the company had a
very strong case for retaining its existing arrangement. So we bought the
stock on the dip in price, and subsequently Network Solutions negotiated a
very favorable contract with the government; it became, in essence, a
government-sanctioned monopoly. More recently, the company agreed to be
acquired by VeriSign, a company whose technology enables secure transactions
on the Internet. Now Network Solutions, a stock that we bought last summer
when it was out of favor in the market, has appreciated dramatically in
price.
Q. WHAT ARE SOME OF THE AREAS THAT DROVE PERFORMANCE OVER THE PAST SIX MONTHS?
A. Two main areas that contributed to the Fund's performance were semiconductor
capital equipment and business services companies.
Semiconductor capital equipment is the machinery that semiconductor
manufacturers use to make, test, and package computer chips. About 18 months
ago, the semiconductor industry went through a phase of underinvestment in
manufacturing facilities, a trend which currently appears to be reversing
dramatically. We bought into semiconductor capital equipment companies such
as Teradyne and KLA-Tencor last year when many of their stock prices were
stagnating and indeed, they have since risen strongly. The business services
area encompasses many of the companies that make it possible to do business
on the Internet. Holdings in this area include Network Solutions, as
discussed earlier, as well as RSA Security, which provides software that
protects corporate data and facilitates electronic commerce.
To a lesser degree, another area that contributed to performance was data
storage, an area that we perceive as crucial to doing business on the
Internet. A current bottleneck for Internet users appears to be the need to
get data in and out more rapidly, so we are invested in companies such as
Emulex Corporation that we believe will be dominant players in meeting that
need.
Q. DID YOU HAVE ANY DISAPPOINTMENTS OVER THE PERIOD?
A. Actually, our biggest disappointment, VISX, is a company we believe may prove
to be one of our best investments going forward. VISX makes laser eye surgery
equipment. This is a royalty business; in addition to selling the equipment,
VISX was receiving a per-eye royalty for each patient, and this royalty was
part of what determined prices doctors were charging for the procedure. We
believe VISX has the most units in use, its equipment is capable of
performing the broadest range of procedures, and it seems to have the
greatest service organization. But at the former procedure price, which was
fairly high, the company could see there was a limit to the number of people
who could pay for this surgery, which is elective and not covered by
insurance.
So what VISX did during the period was drop its royalty by over 50%, which
meant the procedure price could drop dramatically. In the short term, that
devastated the company's earnings and caused the stock price to drop sharply.
But what we believe the company did was assure its future, by opening up the
market to millions of customers who could not have afforded surgery at the
old price. We believe that the steep drop in VISX's stock price makes it a
classic second-chance opportunity, because our research indicates the
company's future earnings look very strong. Our only disappointment is that
we bought the stock a bit too soon, while the price was still on the way
down. So although VISX was one of our poorer-performing holdings during the
period, we believe it could potentially be one of our best-performing stocks
over the next year.
Q. HOW HAVE YOU POSITIONED THE PORTFOLIO GOING FORWARD?
A. The four major areas in which we currently see great opportunity are
technology, business services, health care, and energy. In the technology
sector, we continue to feel that many semiconductor capital equipment and
storage firms, as mentioned earlier, remain at reasonable valuations and
offer the prospect of strong performance. We will, however, continue to avoid
those areas of technology where we feel that high valuations cannot be
justified by projected earnings.
In the business services area, in addition to the types of companies
mentioned earlier, transaction processors have become an important theme in
the Fund. These are companies, such as SunGard Data Systems, Fiserv, CSG
Systems, and NOVA Corporation, that process customer transactions for mutual
funds, banks, credit-card issuers, and the cable, telephone, and television
industry. These businesses tend to benefit strongly from new technologies
such as the Internet, which are continually driving down transaction costs.
In 1999 many of these companies were not growing their businesses as rapidly
as expected. We believe this was Year 2000 (Y2K) related; potential customers
were reluctant to change their processing systems in the last three quarters
of 1999. So although some processors and other business services in the
portfolio did well in 1999, we bought many of them at depressed prices,
seeking to position the portfolio for potential growth in 2000.
Health care is an additional area in which we've positioned the Fund for
2000. Stocks in this sector were generally beaten down in 1999 because
Medicare cut back reimbursements and changed the payment system. This cast a
shadow over many health care-related companies that actually had what we
consider to be good businesses. We invested in several of these beaten-down
health care companies and new, unrecognized technologies and pharmaceuticals
in the second half of 1999, including United Therapeutics and Health
Management Associates. Although we may have been a bit early, as some of
their stock prices declined further and detracted from the Fund's short-term
performance, we believe these are solid companies with good potential for
stock price appreciation in 2000.
Finally, we see opportunity in two areas of the energy sector: deep-water oil
drillers and natural gas exploration and production. Oil companies have found
that the most productive wells are located in deep water over about 5,000
feet. When the price of oil is above $18 per barrel -- and it's currently in
the mid- to high-twenties -- the leases for the rigs that drill these wells
are usually bid up in price every time they're renewed. So we think this is a
good business to be in, and we own positions in most of the dominant rig
companies such as Transocean, Noble Drilling, and Diamond Offshore.
Natural gas is a situation dominated by a supply/demand imbalance. Gas demand
is growing faster than that for oil, as more houses each year are being
hooked up to gas and electric utilities are switching to gas-powered
turbines. But gas-drilling activity has been down the past few years, so
demand is growing faster than supply, and we believe some of the gas
exploration and production companies are good investments.
/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.
It is not possible to invest directly in an index.
<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 A
PORTFOLIO MANAGER OF MFS(R) MID CAP GROWTH FUND AND 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
GLOBAL, 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 investment professional, 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: $631.6 MILLION NET ASSETS AS OF FEBRUARY 29, 2000
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in net
asset value, including reinvestment of dividends. (See Notes to Performance
Summary.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH FEBRUARY 29, 2000
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +64.65% +100.73% +171.69% +282.27% +314.89%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +100.73% + 39.54% + 30.76% + 25.59%
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Average Annual Total Return Including
Sales Charge -- + 89.19% + 36.81% + 29.22% + 24.41%
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<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +64.12% + 99.08% +165.60% +267.80% +293.34%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- + 99.08% + 38.49% + 29.75% + 24.53%
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Average Annual Total Return Including
Sales Charge -- + 95.08% + 37.96% + 29.61% + 24.53%
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<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge 64.14% + 99.25% +165.69% +268.56% +295.45%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- + 99.25% + 38.50% + 29.81% + 24.56%
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Average Annual Total Return Including
Sales Charge -- + 98.25% + 38.50% + 29.81% + 24.56%
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<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +64.83% +101.09% +173.55% +284.89% +162.29%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +101.09% + 39.86% + 30.94% + 25.73%
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* For the period from the commencement of the Fund's investment operations, December 1, 1993, through February 29, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class C and I share performance includes the performance of the Fund's Class A
shares for periods prior to their inception (blended performance). Class C
blended performance has been adjusted to take into account the CDSC applicable
to Class C shares rather than the initial sales charge (load) applicable to
Class A shares. Class I share blended performance has been adjusted to account
for the fact that Class I shares have no sales charge. These blended performance
figures have not been adjusted to take into account differences in class-
specific operating expenses. Because operating expenses of Class C shares
are higher than those of Class A, the blended Class C share performance is
higher than it would have been had Class C shares been offered for the entire
period. Conversely, because operating expenses of Class I shares are lower than
those of Class A, the blended Class I share performance is lower than it would
have been had Class I shares been offered for the entire period.
All 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. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
PORTFOLIO CONCENTRATION AS OF FEBRUARY 29, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 22.7%
ENERGY 21.5%
CONGLOMERATES, SPECIAL PRODUCTS/SERVICES 17.2%
HEALTH CARE 15.6%
RETAILING 6.3%
TOP 10 STOCK HOLDINGS
NETWORK SOLUTIONS, INC. 7.4% TRANSOCEAN SEDCO FOREX, INC. 3.9%
Provider of Internet domain name Offshore drilling contractor
registration services
VISX, INC. 3.6%
CYTYC CORP. 4.6% Laser eye surgery company
Medical test company
SPORTSLINE USA, INC. 3.0%
KROGER CO. 4.2% Internet sports media company
Supermarket company
NOBLE DRILLING CORP. 3.0%
RSA SECURITY, INC. 4.0% Offshore drilling and engineering company
Provider of network and data
security software INTERMEDIA COMMUNICATIONS, INC. 2.6%
Telecommunications services provider
NEWFIELD EXPLORATION CO. 4.0%
Independent oil and gas company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 29, 2000
Stocks - 95.0%
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ISSUER SHARES VALUE
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U.S. Stocks - 94.9%
Advertising
Avenue A, Inc.* 600 $ 43,200
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Agricultural Products - 1.0%
AGCO Corp. 557,400 $ 6,131,400
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Broadcasting
Regent Communications, Inc.* 3,850 $ 45,719
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Business Machines - 1.4%
Affiliated Computer Services, Inc., "A"* 36,500 $ 1,149,750
Seagate Technology, Inc.* 149,200 7,441,350
Therma-Wave, Inc.* 1,250 50,313
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$ 8,641,413
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Business Services - 5.3%
Collectors Universe, Inc.* 72,710 $ 568,047
DST Systems, Inc.* 17,400 976,575
Fiserv, Inc.* 294,000 8,011,500
Learning Tree International, Inc.* 41,100 1,094,287
National Data Corp. 221,400 6,863,400
NOVA Corp.* 555,800 12,818,137
Radiant Systems, Inc.* 15,600 797,550
S1 Corp.* 22,544 2,268,490
Turnstone Systems, Inc.* 200 38,413
------------
$ 33,436,399
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Cellular Telephones
Alamosa PCS Holdings, Inc.* 1,390 $ 50,388
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Computer Services
Inforte Corp.* 180 $ 14,479
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Computer Software - Services - 3.8%
Lightspan Partnership, Inc.* 840 $ 9,240
RSA Security, Inc.* 362,000 24,231,375
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$ 24,240,615
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Computer Software - Systems - 7.9%
Aspen Technology, Inc.* 77,000 $ 3,445,750
Banyan Systems, Inc.* 258,100 8,581,825
Computer Network Technology Corp.* 103,500 2,593,969
CSG Systems International, Inc.* 191,700 9,848,587
eOn Communications Corp.* 1,330 30,091
Etec Systems, Inc.* 52,600 6,195,294
Harbinger Corp.* 138,000 4,424,625
MMC Networks, Inc.* 95,000 3,770,313
SunGard Data Systems, Inc.* 366,200 10,986,000
------------
49,876,454
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Consumer Goods and Services - 3.0%
LoJack Corp.* 99,600 $ 703,425
Sportsline USA, Inc.* 390,380 18,006,277
------------
$ 18,709,702
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Containers - 0.9%
Smurfit-Stone Container Corp.* 422,800 $ 5,760,650
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Electronics - 7.5%
Analog Devices, Inc.* 10,600 $ 1,664,200
Cable Design Technologies Corp.* 457,300 10,575,062
Cypress Semiconductor Corp.* 42,500 1,939,062
DuPont Photomasks, Inc.* 96,600 5,651,100
Intersil Holding Corp.* 1,180 70,063
KLA-Tencor Corp.* 73,600 5,736,200
LTX Corp.* 17,800 750,938
MKS Instruments, Inc.* 73,500 3,344,250
Novellus Systems, Inc.* 22,200 1,316,737
Quantum Effect Devices, Inc.* 650 62,644
Sawtek, Inc.* 33,000 1,584,000
SIPEX Corp.* 178,400 7,994,550
Teradyne, Inc.* 54,700 4,758,900
The InterCept Group, Inc.* 67,000 1,624,750
------------
$ 47,072,456
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Entertainment - 0.1%
Hearst-Argyle Television, Inc.* 33,500 $ 697,219
Sinclair Broadcast Group, Inc., "A"* 4,600 43,700
Spanish Broadcasting Systems, Inc.* 1,100 21,037
------------
$ 761,956
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Financial Institutions - 2.3%
Edwards (A.G.), Inc. 452,000 $ 14,322,750
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Food and Beverage Products - 2.7%
Del Monte Foods Co.* 903,900 $ 11,298,750
Keebler Foods Co.* 234,900 5,960,587
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$ 17,259,337
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Internet - 0.8%
Apropos Technology, Inc.* 280 $ 13,405
Centra Software, Inc.* 380 14,013
Chordiant Software, Inc.* 32,490 1,137,150
DigitalThink, Inc.* 540 22,005
Extensity, Inc.* 500 36,250
FirePond, Inc.* 310 30,206
HealthGate Data Corp.* 1,460 15,330
L90, Inc.* 7,310 152,139
Landacorp, Inc.* 450 5,822
Lante Corp.* 770 61,407
Neoforma.com, Inc.* 1,270 75,565
net.Genesis Corp.* 140 7,954
Netzee, Inc.* 130,300 3,338,937
Niku Corp.* 930 64,170
Organic, Inc.* 220 7,508
SkillSoft Corp.* 1,210 21,553
Vicinity Corp.* 1,870 75,735
webMethods, Inc.* 320 98,580
------------
$ 5,177,729
- ---------------------------------------------------------------------------
Machinery - 0.6%
Applied Science and Technology, Inc.* 90,200 $ 3,117,538
W.W. Grainger, Inc. 15,600 667,875
------------
$ 3,785,413
- ---------------------------------------------------------------------------
Medical and Health Products - 0.5%
Bausch & Lomb, Inc. 62,900 $ 3,317,975
- ---------------------------------------------------------------------------
Medical and Health Technology
and Services - 11.7%
Aspect Medical Systems, Inc.* 820 $ 54,018
Cytyc Corp.* 598,500 27,531,000
Health Management Associates, Inc., "A"* 817,800 8,791,350
IDEXX Laboratories, Inc.* 298,100 8,812,581
Lincare Holdings, Inc.* 57,200 1,340,625
Martek Biosciences Corp.##* 159,827 1,798,054
Steris Corp.* 179,400 1,737,937
Total Renal Care Holdings, Inc.* 626,643 1,879,929
VISX, Inc.* 1,282,800 21,727,425
------------
$ 73,672,919
- ---------------------------------------------------------------------------
Oil Services - 7.5%
BJ Services Co.* 46,400 $ 2,647,700
Cooper Cameron Corp.* 121,300 6,701,825
Diamond Offshore Drilling, Inc. 202,400 6,426,200
Global Industries, Inc.* 1,234,100 12,649,525
Noble Drilling Corp.* 499,600 17,985,600
Weatherford International, Inc.* 26,900 1,210,500
------------
$ 47,621,350
- ---------------------------------------------------------------------------
Oils - 12.9%
Apache Corp. 350,700 $ 12,800,550
EOG Resources, Inc. 785,500 11,978,875
Houston Exploration Co.* 389,200 5,910,975
Newfield Exploration Co.* 767,900 23,804,900
Transocean Sedco Forex, Inc.* 592,300 23,358,831
Vastar Resources, Inc. 68,500 3,634,781
------------
$ 81,488,912
- ---------------------------------------------------------------------------
Pharmaceuticals - 2.9%
Sepracor, Inc.* 54,000 $ 5,474,250
United Therapeutics Corp.* 131,900 12,860,250
------------
$ 18,334,500
- ---------------------------------------------------------------------------
U.S. Stocks - continued
Printing and Publishing - 1.3%
Scholastic Corp.* 158,400 $ 8,207,100
- ---------------------------------------------------------------------------
Retail - 0.5%
Williams-Sonoma, Inc.* 100,700 $ 3,115,406
- ---------------------------------------------------------------------------
Special Products and Services - 0.2%
U.S. Aggregates, Inc.* 65,800 $ 982,888
- ---------------------------------------------------------------------------
Stores - 1.6%
BJ's Wholesale Club, Inc.* 296,300 $ 9,185,300
Gymboree Corp.* 137,400 644,062
------------
$ 9,829,362
- ---------------------------------------------------------------------------
Supermarkets - 3.9%
Kroger Co.* 1,672,800 $ 24,882,900
- ---------------------------------------------------------------------------
Telecommunications - 14.6%
American Tower Corp., "A"* 199,800 $ 9,840,150
Ancor Communications, Inc.* 166,550 9,972,181
Avanex Corp.* 840 175,035
Cabletron Systems, Inc.* 54,500 2,670,500
Choice One Communications, Inc.* 1,130 67,800
Eloquent, Inc.* 360 12,105
Emulex Corp.* 18,700 2,992,000
Intermedia Communications, Inc.* 246,100 15,581,207
Metromedia Fiber Network, Inc., "A"* 4,150 298,346
MGC Communications, Inc.* 8,400 579,600
Network Solutions, Inc.* 137,600 44,367,400
Pinnacle Holdings, Inc.* 32,400 1,895,400
Spectrasite Holdings, Inc.* 29,600 741,850
Telaxis Communications Corp.* 560 43,715
Time Warner Telecom, Inc.* 41,500 3,195,500
------------
$ 92,432,789
- ---------------------------------------------------------------------------
Total U.S. Stocks $599,216,161
- ---------------------------------------------------------------------------
Foreign Stocks - 0.1%
Bermuda
FLAG Telecom Holdings Ltd.
(Telecommunications)* $ 28
10 6
InterWAVE Communications
International Ltd.
(Telecommunications)* 1,420 91,413
------------
$ 91,699
- ---------------------------------------------------------------------------
Canada - 0.1%
Delano Technology Corp.
(Computer Software - Services)* 250 $ 11,953
Southern Africa Minerals Corp.
(Diversified Minerals)* 794,600 170,138
------------
$ 182,091
- ---------------------------------------------------------------------------
Ireland
Trintech Group PLC, ADR (Computer
Software - Products)* 1,050 $ 117,600
- ---------------------------------------------------------------------------
Total Foreign Stocks $ 391,390
- ---------------------------------------------------------------------------
Total Stocks (Identified Cost, $482,670,854) $599,607,551
- ---------------------------------------------------------------------------
Short-Term Obligations - 2.6%
- ---------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ---------------------------------------------------------------------------
Student Loan Marketing Assn., due
3/01/00 at Amortized Cost $ 16,620 $ 16,620
- ---------------------------------------------------------------------------
Total Investments
(Identified Cost, $499,290,854) $ 616,227
Other Assets, Less Liabilities - 2.4% 15,324
- ---------------------------------------------------------------------------
Net Assets - 100.0% $ 631,552
- ---------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
FEBRUARY 29, 2000
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $499,290,854) $616,227,551
Investments of cash collateral for securities loaned at
value
(identified cost, $97,672,208) 97,672,208
Cash 1,405
Receivable for Fund shares sold 8,579,636
Receivable for investments sold 14,982,322
Interest and dividends receivable 47,042
Other assets 1,585
------------
Total assets $737,511,749
------------
Liabilities:
Payable for Fund shares reacquired $ 1,916,618
Payable for investments purchased 6,279,010
Collateral for securities loaned, at value 97,672,208
Payable to affiliates -
Management fee 12,228
Shareholder servicing agent fee 1,630
Distribution and service fee 10,757
Administrative fee 244
Accrued expenses and other liabilities 66,713
------------
Total liabilities $105,959,408
------------
Net assets $631,552,341
============
Net assets consist of:
Paid-in capital $449,067,535
Unrealized appreciation on investments and translation of
assets and liabilities
in foreign currencies 116,936,696
Accumulated undistributed net realized gain on
investments and foreign
currency transactions 67,528,215
Accumulated net investment loss (1,980,105)
------------
Total $631,552,341
============
Shares of beneficial interest outstanding 38,482,422
==========
Class A shares:
Net asset value per share
(net assets of $233,232,595 / 14,023,160 shares of
beneficial interest outstanding) $16.63
======
Offering price per share (100 / 94.25 of net asset value
per share) $17.64
======
Class B shares:
Net asset value and offering price per share
(net assets of $314,447,239 / 19,250,825 shares of
beneficial interest outstanding) $16.33
======
Class C shares:
Net asset value and offering price per share
(net assets of $77,561,750 / 4,829,632 shares of
beneficial interest outstanding) $16.06
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $6,310,757 / 378,805 shares of
beneficial interest outstanding) $16.66
======
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 29, 2000
- --------------------------------------------------------------------------------
Net investment loss:
Income -
Interest $ 911,420
Dividends 182,108
Income on securities loaned 106,040
------------
Total investment income $ 1,199,568
------------
Expenses -
Management fee $ 1,399,561
Trustees' compensation 12,050
Shareholder servicing agent fee 186,608
Distribution and service fee (Class A) 175,706
Distribution and service fee (Class B) 955,889
Distribution and service fee (Class C) 191,341
Administrative fee 20,071
Custodian fee 68,377
Printing 27,651
Postage 20,059
Auditing fees 16,044
Legal fees 334
Miscellaneous 95,607
------------
Total expenses $ 3,169,298
Fees paid indirectly (12,325)
------------
Net expenses $ 3,156,973
------------
Net investment loss $ (1,957,405)
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 79,247,886
Foreign currency transactions (4)
------------
Net realized gain on investments and foreign
currency transactions $ 79,247,882
------------
Change in unrealized appreciation (depreciation) -
Investments $103,863,795
Translation of assets and liabilities in foreign
currencies (1)
------------
Net unrealized gain on investments and foreign
currency translation $103,863,794
------------
Net realized and unrealized gain on investments and
foreign currency $183,111,676
------------
Increase in net assets from operations $181,154,271
============
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,957,405) $ (1,808,855)
Net realized gain on investments and foreign currency
transactions 79,247,882 36,329,324
Net unrealized gain on investments and foreign currency
translation 103,863,794 37,191,254
------------- -------------
Increase in net assets from operations $ 181,154,271 $ 71,711,723
------------- -------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (15,628,718) $ (6,881,999)
From net realized gain on investments and foreign
currency transactions (Class B) (21,101,259) (9,892,160)
From net realized gain on investments and foreign
currency transactions (Class C) (4,328,223) (1,090,227)
From net realized gain on investments and foreign
currency transactions (Class I) (291,579) (168,193)
------------- -------------
Total distributions declared to shareholders $ (41,349,779) $ (18,032,579)
------------- -------------
Net increase in net assets from Fund share transactions $ 277,217,286 $ 61,808,176
------------- -------------
Total increase in net assets $ 417,021,778 $ 115,487,320
Net assets:
At beginning of period 214,530,563 99,043,243
------------- -------------
At end of period (including accumulated net investment
loss of $1,980,105 and $22,700, respectively) $ 631,552,341 $ 214,530,563
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED -----------------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.34 $ 7.71 $ 9.42 $ 9.06 $ 10.08 $ 8.68
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations# -
Net investment loss $ (0.04) $ (0.07) $ (0.11) $ (0.09) $ (0.10) $ (0.03)
Net realized and unrealized gain
(loss) on investments and
foreign currency 7.01 5.04 (1.31) 1.77 0.96 1.69
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations $ 6.97 $ 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 $ (1.68) $ (1.34) $ (0.29) $ (1.32) $ (1.88) $ (0.26)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value - end of period $ 16.63 $ 11.34 $ 7.71 $ 9.42 $ 9.06 $ 10.08
=========== =========== =========== =========== =========== ===========
Total return(+) 64.65%++ 68.83% (15.44)% 20.26% 10.55% 19.77%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.24%+ 1.32% 1.43% 1.41% 1.28% 1.29%
Net investment loss (0.59)%+ (0.69)% (1.07)% (1.09)% (1.08)% (0.40)%
Portfolio turnover 65% 158% 168% 170% 157% 218%
Net assets at end of period
(000 Omitted) $ 233,232 $ 83,238 $ 36,413 $ 41,737 $ 35,098 $ 30,194
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
(+) 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,
SIX MONTHS ENDED ----------------------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.16 $ 7.60 $ 9.27 $ 8.93 $ 9.94 $ 8.59
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations# -
Net investment loss $ (0.09) $ (0.14) $ (0.18) $ (0.16) $ (0.17) $ (0.13)
Net realized and unrealized gain
(loss) on investments and
foreign currency 6.88 4.97 (1.28) 1.75 0.95 1.69
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations $ 6.79 $ 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 $ (1.62) $ (1.27) $ (0.21) $ (1.25) $ (1.79) $ (0.21)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value - end of period $ 16.33 $ 11.16 $ 7.60 $ 9.27 $ 8.93 $ 9.94
=========== =========== =========== =========== =========== ===========
Total return 64.12%++ 67.41% (16.05)% 19.36% 9.67% 18.75%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.99%+ 2.07% 2.18% 2.20% 2.13% 2.29%
Net investment loss (1.34)%+ (1.44)% (1.82)% (1.87)% (1.81)% (1.44)%
Portfolio turnover 65% 158% 168% 170% 157% 218%
Net assets at end of period
(000 Omitted) $ 314,447 $ 111,355 $ 56,098 $ 73,940 $ 67,043 $ 61,742
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ---------------------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 11.01 $ 7.53 $ 9.19 $ 8.85 $ 9.91 $ 8.61
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations# -
Net investment loss $ (0.09) $ (0.14) $ (0.18) $ (0.16) $ (0.17) $ (0.14)
Net realized and unrealized gain
(loss) on investments and foreign
currency 6.78 4.91 (1.26) 1.74 0.94 1.69
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations $ 6.69 $ 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 $ (1.64) $ (1.29) $ (0.22) $ (1.24) $ (1.83) $ (0.25)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value - end of period $ 16.06 $ 11.01 $ 7.53 $ 9.19 $ 8.85 $ 9.91
=========== =========== =========== =========== =========== ===========
Total return 64.14%++ 67.33% (16.00)% 19.44% 9.60% 18.63%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.99%+ 2.07% 2.18% 2.16% 2.17% 2.30%
Net investment loss (1.34)%+ (1.44)% (1.82)% (1.79)% (1.90)% (1.55)%
Portfolio turnover 65% 158% 168% 170% 157% 218%
Net assets at end of period
(000 Omitted) $ 77,562 $ 18,097 $ 5,607 $ 5,796 $ 6,860 $ 3,209
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
SIX MONTHS ENDED ------------ AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $11.37 $ 7.73 $ 9.44 $ 8.50
------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.02) $(0.04) $(0.08) $(0.05)
Net realized and unrealized gain (loss) on
investments and foreign currency 7.00 5.04 (1.32) 0.99
------ ------ ------ ------
Total from investment operations $ 6.98 $ 5.00 $(1.40) $ 0.94
------ ------ ------ ------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $(1.69) $(1.36) $(0.31) $ --
------ ------ ------ ------
Net asset value - end of period $16.66 $11.37 $ 7.73 $ 9.44
====== ====== ====== ======
Total return 64.83%++ 69.03% (15.23)% 11.06%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.99%+ 1.07% 1.18% 1.03%+
Net investment loss (0.37)%+ (0.44)% (0.82)% (0.74)%+
Portfolio turnover 65% 158% 168% 170%
Net assets at end of period (000 Omitted) $6,311 $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.
## Ratios do not reflect reductions from certain expense offset arrangements.
</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 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. The Fund can
invest in foreign securities. 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 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.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the fund to certain qualified
institutions (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.
Cash collateral is invested in short-term securities. 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 the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the Fund and the lending agents. The dividend and
interest income earned on the securities loaned is accounted for in the same
manner as other dividend and interest income.
At February 29, 2000, the value of securities loaned was $95,260,494. These
loans were collateralized by U.S. Treasury securities of $410,717 and cash of
$97,672,208 which was invested in the following short-term obligation:
IDENTIFIED COST
SHARES AND VALUE
- -----------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 97,672,208 $97,672,208
-----------
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 net 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 a distribution from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. Differences in per share
dividend rates are generally due to differences in separate class expenses.
Class B shares will convert to Class A shares approximately eight years after
purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
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 $3,935 for the six months
ended February 29, 2000.
Administrator - The Fund has an administrative service 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
$182,424 for the six months ended February 29, 2000, 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 $10,154 for the six months ended February 29, 2000. Fees incurred
under the distribution plan during the six months ended February 29, 2000, 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 $7,424 and $721 for Class B and Class C shares, respectively, for
the six months ended February 29, 2000. Fees incurred under the distribution
plan during the six months ended February 29, 2000, were 1.00% of average daily
net assets attributable to both Class B and Class C shares on an annualized
basis.
Certain Class A and Class C are subject to a contingent deferred sales charge in
the event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the six months ended February 29, 2000, were $750,
$70,412, and $6,199 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
0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$443,178,626 and $229,070,387, respectively.
The cost and unrealized appreciation and depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $499,290,854
------------
Gross unrealized appreciation $170,024,765
Gross unrealized depreciation (53,088,068)
------------
Net unrealized appreciation $116,936,697
============
(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
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 11,304,151 $ 161,774,899 15,169,744 $ 154,338,218
Shares issued to shareholders
in reinvestment of
distributions 1,070,209 14,490,705 742,125 6,801,941
Shares reacquired (5,688,380) (78,778,019) (13,296,350) (134,640,545)
------------- ------------- ------------- -------------
Net increase 6,685,980 $ 97,487,585 2,615,519 $ 26,499,614
============= ============= ============= =============
<CAPTION>
Class B Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 12,438,123 $ 174,699,939 9,115,055 $ 92,789,536
Shares issued to shareholders
in reinvestment of
distributions 1,433,902 19,099,599 977,828 8,839,564
Shares reacquired (4,596,087) (62,852,069) (7,497,071) (75,766,605)
------------- ------------- ------------- -------------
Net increase 9,275,938 $ 130,947,469 2,595,812 $ 25,862,495
============= ============= ============= =============
<CAPTION>
Class C Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,208,810 $ 59,533,024 2,120,776 $ 21,806,838
Shares issued to shareholders
in reinvestment of
distributions 295,763 3,871,537 105,330 947,304
Shares reacquired (1,318,731) (17,798,085) (1,326,970) (13,771,979)
------------- ------------- ------------- -------------
Net increase 3,185,842 $ 45,606,476 899,136 $ 8,982,163
============= ============= ============= =============
<CAPTION>
Class I Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 223,770 $ 3,301,427 59,850 $ 637,177
Shares issued to shareholders
in reinvestment of
distributions 21,502 291,569 18,401 168,185
Shares reacquired (28,467) (417,240) (35,959) (341,458)
------------- ------------- ------------- -------------
Net increase 216,805 $ 3,175,756 42,292 $ 463,904
============= ============= ============= =============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the six months ended February 29, 2000, was $1,543. The Fund had no
borrowings during the period.
<PAGE>
MFS(R) MID CAP GROWTH FUND
TRUSTEES SECRETARY
J. Atwood Ives(+) - Chairman and Stephen E. Cavan*
Chief Executive Officer, Eastern
Enterprises (diversified services ASSISTANT SECRETARY
company) James R. Bordewick, Jr.*
Lawrence T. Perera(+) - Partner, CUSTODIAN
Hemenway & Barnes (attorneys) State Street Bank and Trust Company
William J. Poorvu(+) - Adjunct INVESTOR INFORMATION For information
Professor, Harvard University on MFS mutual funds, call your
Graduate School of Business investment professional or, for an
Administration information kit, call toll free:
1-800-637-2929 any business day from
Charles W.Schmidt(+) - Private 9 a.m. to 5 p.m. Eastern time (or
Investor leave a message anytime).
Arnold D. Scott* - Senior Executive INVESTOR SERVICE MFS Service Center,
Vice President, Director, and Inc.
Secretary, MFS Investment Management P.O. Box 2281
Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman and
Chief Executive Officer, MFS For general information, call toll
Investment Management free: 1-800-225-2606 any business
day from 8 a.m. to 8 p.m. Eastern
Elaine R. Smith(+) - Independent time.
Consultant
For service to speech- or
David B. Stone(+) - Chairman, North hearing-impaired, call toll free:
American Management Corp. 1-800-637-6576 any business day from
(investment adviser) 9 a.m. to 5 p.m. Eastern time. (To
use this service, your phone must be
INVESTMENT ADVISER equipped with a Telecommunications
Massachusetts Financial Services Company Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances,
exchanges, or stock and bond
DISTRIBUTOR outlooks, call toll free:
MFS Fund Distributors, Inc. 1-800-MFS-TALK (1-800-637-8255)
500 Boylston Street anytime from a touch-tone telephone.
Boston, MA 02116-3741
WORLD WIDE WEB
CHAIRMAN AND PRESIDENT www.mfs.com
Jeffrey L. Shames*
PORTFOLIO MANAGER
Mark Regan*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
(+)Independent Trustee
*MFS Investment Management
<PAGE>
MFS(R) MID CAP GROWTH FUND ------------
BULK RATE
[Logo] M F S(R) U.S. POSTAGE
INVESTMENT MANAGEMENT PAID
We invented the mutual fund(R) MFS
------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MMC-3 4/00 37.1M 83/283/383/883
