<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) MID CAP
GROWTH FUND
ANNUAL REPORT o AUGUST 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 10
Portfolio of Investments .................................................. 14
Financial Statements ...................................................... 18
Notes to Financial Statements ............................................. 25
Independent Auditors' Report ............................................. 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,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- make us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flows, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as front-line workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flows, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes each manager will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in it's
January 10, 2000 issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people tend to stick around -- the average
MFS tenure of our portfolio managers is 11 years, with over 16 years in the
investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the
company.
We also have scale. Our research analyst team is over 35 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance,
by finding opportunities before they are generally recognized by the market and
by avoiding mistakes whenever possible. Original Research does, we believe, make
a difference.
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)
September 15, 2000
A prospectus containing more complete information on any MFS product, including
all charges and expenses, can be obtained from your investment professional.
Please read it carefully before you invest or send money. 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
For the 12 months ended August 31, 2000, Class A shares of the fund provided a
total return of 94.75%, Class B shares 93.37%, Class C shares 93.37%, and Class
I shares 95.21%. These returns include the reinvestment of any distributions but
exclude the effects of any sales charges and compare to a 67.18% return over the
same period for the fund's benchmark, the Russell Midcap(R) Growth Index (the
Russell Index). The Russell mid-cap companies are the 800 smallest companies in
the Russell 1000 Index, which measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. The Russell Midcap Growth Index
is a market-capitalization-weighted total return index that measures the
performance of those Russell mid-cap companies with higher price-to-book ratios
and higher forecasted growth values. During the same period, the average mid-cap
growth fund tracked by Lipper Inc., an independent firm that reports mutual fund
performance, returned 74.15%.
Q. WHAT DROVE THE FUND'S STRONG PERFORMANCE OVER A PERIOD THAT INCLUDED
DRAMATIC MARKET VOLATILITY?
A. Over the past 12 months, probably the most important drivers of performance
have been our energy investments, in deep-water drilling and natural gas
exploration and production companies. In addition, Internet infrastructure
stocks such as Network Solutions, which was acquired by VeriSign, were
strong contributors. Performance was also helped by our reducing selected
areas of technology beginning in the fourth quarter of 1999, when we began
to feel that many technology stocks had become overvalued. The subsequent
stock market correction in March and April of this year hit that sector
particularly hard. This allowed us to rebuild our positions in several
companies that we liked at what we felt were bargain prices, which were
significantly below where we had sold them previously.
Q. HOW DID THESE ACTIONS FIT IN WITH THE FUND'S OVERALL STRATEGY?
A. We think that one of the keys to making money in stock investing is being
early -- by looking for industries that are changing and trying to identify
as early as possible who we believe the winners will be. Our positions in
several deep-water oil drilling companies have demonstrated how MFS Original
Research(R) has helped us invest early in a business undergoing dramatic
change. Deep-water drilling rigs are floating cities that are oil companies'
most cost-effective sources of new energy. A small number of companies
control the business worldwide, leasing the rigs to oil companies. Our
analysts have been following the drilling companies since plummeting oil
prices brought drilling to a screeching halt in late 1998. Our hope was to
invest early in those companies that we felt were best positioned to
capitalize on a cyclical resurgence of the business.
Over the course of 1999, we could see that worldwide recovery from the 1998
Asian crisis was beginning to increase oil demand and prices. Our analysts,
in their phone calls and visits with drilling companies, began hearing that
oil companies were expressing interest in leasing idled rigs. One of our
analysts tracks every deep-water rig in the world; we began making
significant investments in drilling companies after he confirmed in the
fourth quarter of 1999 that a large number of idled rigs were going back to
work. We invested in three of the major drilling companies -- Transocean,
Diamond Offshore Drilling, and Noble Drilling -- at a time when the market
seemed disinterested in them. As oil prices have risen this year, these
stocks have contributed strongly to portfolio returns.
Natural gas production is another area dominated by a supply/demand
imbalance. According to our research, demand for gas has been growing faster
than that for any other form of energy, in part because new electric
utilities are almost entirely gas-fired. Gas-drilling activity, however,
declined around 1998 along with oil exploration. Our industry analyst
concluded late last year that this would soon lead to rising prices. In
fact, price increases this year have exceeded our expectations, thus
benefiting gas exploration and production holdings including Newfield
Exploration and EOG Resources.
Q. COULD YOU ELABORATE ON HOW YOU TOOK ADVANTAGE OF MARKET VOLATILITY THIS PAST
SPRING, PARTICULARLY IN THE TECHNOLOGY AREA?
A. I think it's important for shareholders to understand that we are very
sensitive to valuation. If a stock gets too highly valued, meaning that its
price relative to earnings (P/E ratio) is higher than we feel can be
justified, we believe the portfolio is better off reducing that position --
even if we still fundamentally believe in the company. Sometimes we are able
to buy back the same stock at a lower cost after a correction; that is what
happened to several of our technology holdings over the period.
An example is Emulex, the largest position in the portfolio. The company
makes a product called a host bus adapter, which is critical for linking
electronic data storage to communications networks such as the Internet.
According to our research, the market for Emulex products has been growing
tremendously as communications networks expand and as the number of storage
devices connected to those networks increases even faster. In addition, the
company has been capturing outsourcing business from companies like Sun
Microsystems and Hewlett Packard that used to make their own adapters -- so
this was a company whose stock we felt confident about owning.
However, in the first quarter of 2000 the stock rose rapidly to a valuation
that our research could not justify, and we sold most of our position.
Subsequently, the stock lost over 75% of its value in the March/April
correction. Based on our analysts' research into what made the company grow
before and why we think it should grow again in the future, we then made a
significant investment in Emulex -- at a time when the market seemed to have
lost faith in the company. We had a faster-than-expected verification of our
research when the company reported better-than-expected earnings and the
stock doubled in price by the end of the period.
Q. HOW DID THE FUND BENEFIT FROM INVESTING IN SECURE INTERNET INFRASTRUCTURE
COMPANIES, AND HOW DO YOU VIEW THIS AREA GOING FORWARD?
A. In our view, issues such as transaction costs, security, and virus
protection are huge problems that need to be resolved before the Internet
can fulfill its promise as a medium for commerce. Secure Internet
infrastructure companies try to solve those problems and make it possible
for the Internet to function on a commercial basis. We think such companies
could achieve extraordinary earnings growth for a number of years if they
develop a product or procedure that becomes an industry standard. Over the
last six months some of these companies' stock prices have corrected to very
attractive valuations, and we have used that as an opportunity to increase
our commitment in this area.
Network Solutions, the worldwide registrar for Internet site names, was a
company that contributed significantly to returns over the period and was
then bought out by VeriSign, another top 10 holding. Going forward, we see
tremendous potential in companies such as RSA Security, which provides
encryption and authentication to ensure, for example, that people making
Internet transactions are indeed who they say they are.
Internet Security Systems, a recent addition to the portfolio, offers
protection from viruses and other intruders that travel over the Internet.
According to our research, the company has a better than 60% share of its
intended market. CheckFree Corp., another top holding, is becoming, we
believe, the dominant player in electronic payment on the Internet, with
partners including Microsoft and Bank of America. Broadly defined, we
currently have about 20% of the portfolio invested in secure Internet
infrastructure firms, which include both technology and business services
companies; we view this as perhaps our biggest area of opportunity going
forward.
/s/ Mark Regan /s/ David E. Sette-Ducati
Mark Regan David E. Sette-Ducati
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
Note to Shareholders: Effective May 1, 2000, David E. Setti-Ducati became a
portfolio manager of the fund.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
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MARK REGAN IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND A
PORTFOLIO MANAGER OF THE MID CAP GROWTH PORTFOLIOS OF OUR MUTUAL FUNDS AND
INSTITUTIONAL ACCOUNTS. HE JOINED MFS IN 1989 AS A RESEARCH ANALYST. HE WAS
NAMED VICE PRESIDENT IN 1992, PORTFOLIO MANAGER IN 1993, AND SENIOR VICE
PRESIDENT IN 1999. MARK IS A GRADUATE OF CORNELL UNIVERSITY AND THE SLOAN SCHOOL
OF MANAGEMENT OF THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY.
DAVID E. SETTE-DUCATI IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND A
PORTFOLIO MANAGER OF THE TECHNOLOGY AND MID-CAP GROWTH PORTFOLIOS OF OUR MUTUAL
FUNDS, VARIABLE ANNUITIES, AND INSTITUTIONAL ACCOUNTS. DAVID JOINED MFS IN 1995
AS A RESEARCH ANALYST. HE BECAME INVESTMENT OFFICER IN 1997, VICE PRESIDENT IN
1999, AND A PORTFOLIO MANAGER IN FEBRUARY 2000. HE EARNED A MASTER OF BUSINESS
ADMINISTRATION DEGREE FROM THE AMOS TUCK SCHOOL OF BUSINESS ADMINISTRATION OF
DARTMOUTH COLLEGE AND A BACHELOR'S DEGREE FROM WILLIAMS COLLEGE. IN BETWEEN
COLLEGE AND GRADUATE SCHOOL, HE WORKED AS A CORPORATE FINANCE ANALYST WITH
LEHMAN BROTHERS AND AS AN ASSOCIATE WITH NICOLETTI & COMPANY IN NEW YORK,
SPECIALIZING IN CORPORATE FINANCE AND MERGERS AND ACQUISITIONS STRATEGY.
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.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any 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: $1.3 BILLION NET ASSETS AS OF AUGUST 31, 2000
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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 the 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.) 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, 2000. Index information is from December 1,
1993.)
MFS Mid Cap Russell
Growth Fund Midcap
- Class A Growth Index
-------------------------------------------
12/93 $ 9,425 $10,000
8/94 10,448 10,493
8/96 13,833 14,637
8/98 14,067 17,004
8/00 46,251 42,310
TOTAL RATES OF RETURN THROUGH AUGUST 31, 2000
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years 5 Years Life*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +94.75% +178.03% +269.62% +390.73%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +94.75% + 40.62% + 29.88% + 26.58%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +83.55% + 37.87% + 28.35% + 25.48%
-------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years 5 Years Life*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +93.37% +171.74% +255.74% +363.44%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +93.37% + 39.55% + 28.89% + 25.51%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +89.37% + 39.03% + 28.75% + 25.51%
-------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
1 Year 3 Years 5 Years Life*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +93.37% +171.79% +255.77% +364.09%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +93.37% + 39.55% + 28.89% + 25.54%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +92.37% + 39.55% + 28.89% + 25.54%
-------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
1 Year 3 Years 5 Years Life*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +95.21% +179.69% +272.61% +394.70%
-------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +95.21% + 40.89% + 30.09% + 26.74%
-------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years 5 Years Life*
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average mid-cap growth fund+ +74.15% +31.50% + 24.03% + 20.69%
-------------------------------------------------------------------------------------------------------------
Russell Midcap Growth Index# +67.18% + 30.11% + 26.44% + 23.82%
-------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, December 1, 1993, through
August 31, 2000. Index information is from December 1, 1993.
(+) Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</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 include 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 in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. RECENT RETURNS WERE
PRIMARILY ACHIEVED DURING FAVORABLE MARKET CONDITIONS, WHICH MAY NOT BE
REPEATED. MORE RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 32.2%
ENERGY 20.0%
HEALTH CARE 11.7%
SPECIAL PRODUCTS AND SERVICES 11.1%
UTILITIES & COMMUNICATIONS 8.0%
TOP 10 STOCK HOLDINGS
EMULEX CORP. 5.4% UNITED THERAPEUTICS CORP. 3.6%
Provider of products that enhance Pharmaceutical company
access to electronic data and
applications VERISIGN INC. 3.2%
Provider of Internet domain name
CHECKFREE CORP. 5.0% registration and trust services,
Electronic billing and payment including authentication,
services provider validation, and payment
EOG RESOURCES 4.7% ECHOSTAR COMMUNICATIONS CORP. 3.2%
Oil and natural gas exploration and Satellite television product and
production company services provider
NEWFIELD EXPLORATION CO. 3.8% VISX INC. 3.1%
Independent oil and gas company Laser eye surgery equipment company
AMERICAN TOWER CORP. 3.6% CSG SYSTEMS INTERNATIONAL, INC. 2.9%
Operator of communications and Provider of customer service and billing
broadcast towers solutions to telecommunications companies
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 2000
Stocks - 88.4%
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ISSUER SHARES VALUE
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U.S. Stocks - 87.9%
Agricultural Products - 1.1%
AGCO Corp. 1,331,000 $ 13,975,500
------------------------------------------------------------------------------
Business Machines - 1.4%
Seagate Technology, Inc.* 305,000 $ 18,109,375
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Business Services - 5.3%
Adelphia Business Solutions* 333,300 $ 4,978,669
Collectors Universe, Inc.* 72,710 254,485
National Data Corp. 381,500 11,206,562
NOVA Corp.* 1,214,300 17,455,562
Peregrine Systems, Inc.* 277,800 8,872,238
Radiant Systems, Inc.* 200,900 3,440,413
S1 Corp.* 1,401,144 24,432,448
--------------
$ 70,640,377
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Computer Software - Services - 4.6%
Blue Martini Software, Inc.* 4,090 $ 284,255
ePresence, Inc.* 288,000 2,160,000
Internet Security Systems, Inc.* 374,390 30,325,590
RSA Security, Inc.* 480,800 28,397,250
Talarian Corp.* 2,990 54,941
--------------
$ 61,222,036
------------------------------------------------------------------------------
Computer Software - Systems - 10.2%
Avici Systems, Inc.* 3,780 $ 566,291
Cerner Corp.* 148,600 5,656,087
CheckFree Corp.* 1,138,930 59,010,811
Citrix Systems, Inc.* 579,570 12,750,540
Computer Network Technology Corp.* 103,500 2,070,000
Comverse Technology, Inc.* 52,900 4,863,494
CSG Systems International, Inc.* 762,300 34,446,431
Digex, Inc.* 80,900 6,851,219
JNI Corp.* 129,260 8,676,577
Network Engines, Inc.* 3,100 121,288
Resonate, Inc.* 1,260 55,519
SignalSoft Corp.* 3,120 154,635
SpeechWorks International, Inc.* 2,340 179,302
StorageNetworks, Inc.* 5,080 515,620
--------------
$ 135,917,814
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Consumer Goods and Services - 0.6%
Sportsline USA, Inc.* 428,220 $ 7,574,141
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Containers - 1.1%
Smurfit-Stone Container Corp.* 1,155,700 $ 15,168,563
------------------------------------------------------------------------------
Electrical Equipment - 1.8%
Capstone Turbine Corp.* 3,250 $ 300,016
QLogic Corp.* 211,826 24,042,251
--------------
$ 24,342,267
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Electronics - 4.7%
Cable Design Technologies Corp.* 628,860 $ 16,979,220
DuPont Photomasks, Inc.* 96,600 7,329,525
Marvell Technology Group Ltd.* 2,600 185,575
Microtune, Inc.* 1,600 87,200
MKS Instruments, Inc.* 52,100 1,830,012
Sawtek, Inc.* 33,000 1,664,438
SIPEX Corp.* 288,800 12,436,450
Teradyne, Inc.* 238,600 15,464,262
The InterCept Group, Inc.* 98,700 2,294,775
Veeco Instruments, Inc.* 52,400 4,696,350
--------------
$ 62,967,807
------------------------------------------------------------------------------
Energy - 0.2%
Devon Energy Corp. 33,800 $ 1,979,413
------------------------------------------------------------------------------
Food and Beverage Products - 1.3%
Del Monte Foods Co.* 1,054,300 $ 6,918,844
Keebler Foods Co. 236,900 10,852,981
--------------
$ 17,771,825
------------------------------------------------------------------------------
Internet - 4.5%
Chordiant Software, Inc.* 75,490 $ 910,598
CNET Networks, Inc.* 459,600 15,396,600
iVillage, Inc.* 378,200 2,529,212
Mainspring, Inc.* 3,780 39,218
Switchboard, Inc.* 481,610 4,364,591
VeriSign, Inc.* 188,024 37,393,273
--------------
$ 60,633,492
------------------------------------------------------------------------------
Machinery - 1.9%
Applied Science and Technology, Inc.* 64,500 $ 995,719
W.W. Grainger, Inc. 831,400 24,006,675
--------------
$ 25,002,394
------------------------------------------------------------------------------
Medical and Health Technology and Services - 6.5%
ArthroCare Corp.* 220,800 $ 9,825,600
Cytyc Corp.* 598,500 27,905,062
Illumina, Inc.* 3,280 146,780
Martek Biosciences Corp.* 294,927 6,635,858
Total Renal Care Holdings, Inc.* 700,243 4,901,701
VISX, Inc.* 1,339,100 36,908,944
--------------
$ 86,323,945
------------------------------------------------------------------------------
Oil Services - 5.4%
Diamond Offshore Drilling, Inc. 180,700 $ 8,097,619
Global Industries, Inc.* 1,337,000 16,628,937
Global Marine, Inc.* 348,900 11,273,831
Noble Affiliates, Inc. 57,500 2,228,125
Noble Drilling Corp.* 707,000 34,289,500
--------------
$ 72,518,012
------------------------------------------------------------------------------
Oils - 12.1%
Apache Corp. 530,500 $ 33,421,500
EOG Resources, Inc. 1,437,990 55,003,117
Houston Exploration Co.* 390,200 10,096,425
Newfield Exploration Co.* 1,038,400 44,910,800
Transocean Sedco Forex, Inc. 311,100 18,588,225
--------------
$ 162,020,067
------------------------------------------------------------------------------
Pharmaceuticals - 4.0%
IntraBiotics Pharmaceuticals, Inc.* 498,410 $ 10,466,610
United Therapeutics Corp.* 493,400 42,609,716
--------------
$ 53,076,326
------------------------------------------------------------------------------
Printing and Publishing - 1.0%
Scholastic Corp.* 173,300 $ 11,123,694
Ziff-Davis, Inc.* 97,500 1,901,250
--------------
$ 13,024,944
------------------------------------------------------------------------------
Retail - 2.0%
BJ's Wholesale Club, Inc.* 800,600 $ 27,120,325
------------------------------------------------------------------------------
Supermarkets - 2.0%
Kroger Co.* 1,186,500 $ 26,918,719
------------------------------------------------------------------------------
Telecommunications - 16.2%
Airspan Networks, Inc.* 3,320 $ 58,515
Allegiance Telecom, Inc.* 311,840 15,533,530
American Tower Corp., "A"* 1,180,580 42,869,811
Aware, Inc.* 76,300 3,419,194
Cabletron Systems, Inc.* 161,200 6,034,925
Corvis Corp.* 700 72,669
Covad Communications Group, Inc.* 70,100 1,143,506
EchoStar Communications Corp.* 764,361 37,262,599
Emulex Corp.* 613,540 64,229,969
i3 Mobile, Inc.* 101,960 924,012
Integrated Telecom Express, Inc.* 2,020 63,504
Intermedia Communications, Inc.* 647,600 13,437,700
Mpower Communications Corp.* 136,050 2,508,421
Nextlink Communications, Inc., "A"* 114,800 4,025,175
Peco II, Inc.* 1,800 70,200
Pinnacle Holdings, Inc.* 78,800 3,171,700
Powerwave Technologies, Inc.* 237,860 11,447,012
Spectrasite Holdings, Inc.* 23,300 546,094
Stratos Lightwave, Inc.* 3,060 143,820
Tekelec Co.* 59,300 2,342,350
Time Warner Telecom, Inc.* 100,900 6,552,194
Triton Network Systems, Inc.* 1,910 35,932
--------------
$ 215,892,832
------------------------------------------------------------------------------
Utilities - Telephone
ICG Communications, Inc.* 27,200 $ 162,350
------------------------------------------------------------------------------
Total U.S. Stocks $1,172,362,524
------------------------------------------------------------------------------
Foreign Stocks - 0.5%
Canada
Southern Africa Minerals Corp.
(Diversified Minerals)* 794,600 $ 107,999
------------------------------------------------------------------------------
Israel - 0.5%
Check Point Software Technologies Ltd.
(Computer Software - Services)* 47,100 $ 6,867,769
Giganet Ltd. (Telecommunications)* 2,160 63,011
--------------
$ 6,930,780
------------------------------------------------------------------------------
Total Foreign Stocks $ 7,038,779
------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,004,331,782) $1,179,401,303
------------------------------------------------------------------------------
Warrants - 0.1%
------------------------------------------------------------------------------
U.S. Stocks - 0.1%
Martek Biosciences Corp.*
(Identified Cost, $0) 23,258 $ 523,305
------------------------------------------------------------------------------
Short-Term Obligations - 11.6%
------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
------------------------------------------------------------------------------
Associates Corp. of North America,
due 9/01/00 $ 50,000 $ 50,000,000
Federal Home Loan Mortgage Corp.,
due 9/01/00 105,000 105,000,000
------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 155,000,000
------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,159,331,782) $1,334,924,608
Other Assets, Less Liabilities - (0.1)% (1,045,145)
------------------------------------------------------------------------------
Net Assets - 100.0% $1,333,879,463
------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
AUGUST 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,159,331,782) $1,334,924,608
Investment of cash collateral for securities loaned,
at identified cost and value 208,366,588
Cash 77,221
Receivable for investments sold 12,087,221
Receivable for fund shares sold 38,483,452
Interest and dividends receivable 210,979
Other assets 1,585
--------------
Total assets $1,594,151,654
--------------
Liabilities:
Payable for investments purchased $ 37,220,757
Payable for fund shares reacquired 14,550,095
Collateral for securities loaned, at value 208,366,588
Payable to affiliates -
Management fee 26,777
Shareholder servicing agent fee 3,570
Distribution and service fee 24,526
Administrative fee 625
Accrued expenses and other liabilities 79,253
--------------
Total liabilities $ 260,272,191
--------------
Net assets $1,333,879,463
==============
Net assets consist of:
Paid-in capital $ 981,613,913
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 175,592,826
Accumulated undistributed net realized gain on
investments and foreign currency transactions 176,698,991
Accumulated net investment loss (26,267)
--------------
Total $1,333,879,463
==============
Shares of beneficial interest outstanding 68,853,457
==========
Class A shares:
Net asset value per share
(net assets of $526,747,513 / 26,781,227 shares of
beneficial interest outstanding) $19.67
======
Offering price per share (100 / 94.25 of net asset
value per share) $20.87
======
Class B shares:
Net asset value and offering price per share
(net assets of $605,584,419 / 31,470,818 shares of
beneficial interest outstanding) $19.24
======
Class C shares:
Net asset value and offering price per share
(net assets of $178,008,219 / 9,408,400 shares of
beneficial interest outstanding) $18.92
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $23,539,312 / 1,193,012
shares of beneficial interest outstanding) $19.73
======
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, 2000
-------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest $ 2,911,858
Dividends 758,868
Income on securities loaned 320,170
------------
Total investment income $ 3,990,896
------------
Expenses -
Management fee $ 4,784,189
Trustees' compensation 24,865
Shareholder servicing agent fee 637,892
Distribution and service fee (Class A) 608,076
Distribution and service fee (Class B) 3,105,456
Distribution and service fee (Class C) 774,365
Administrative fee 97,576
Custodian fee 202,817
Printing 50,177
Postage 90,800
Auditing fees 44,544
Legal fees 2,049
Miscellaneous 402,133
------------
Total expenses $ 10,824,939
Fees paid indirectly (14,656)
------------
Net expenses $ 10,810,283
------------
Net investment loss $ (6,819,387)
------------
Realized and unrealized gain (loss) on investments:
Realized gain on investment transactions
(identified cost basis) - $195,234,478
------------
Change in unrealized appreciation on investments $162,519,924
------------
Net realized and unrealized gain on investments and
foreign currency $357,754,402
------------
Increase in net assets from operations $350,935,015
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (6,819,387) $ (1,808,855)
Net realized gain on investments and foreign currency
transactions 195,234,478 36,329,324
Net unrealized gain on investments and foreign currency
translation 162,519,924 37,191,254
--------------- ---------------
Increase in net assets from operations $ 350,935,015 $ 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 $ 809,763,664 $ 61,808,176
--------------- ---------------
Total increase in net assets $ 1,119,348,900 $ 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 $26,267 and $22,700, respectively) $ 1,333,879,463 $ 214,530,563
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.10) $(0.07) $(0.11) $(0.09) $(0.10)
Net realized and unrealized gain (loss) on
investments and foreign currency 10.11 5.04 (1.31) 1.77 0.96
------ ------ ------ ------ ------
Total from investment operations $10.01 $ 4.97 $(1.42) $ 1.68 $ 0.86
------ ------ ------ ------ ------
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)
------ ------ ------ ------ ------
Net asset value - end of period $19.67 $11.34 $ 7.71 $ 9.42 $ 9.06
====== ====== ====== ====== ======
Total return(+) 94.75% 68.83% (15.44)% 20.26% 10.55%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.24% 1.32% 1.43% 1.41% 1.28%
Net investment loss (0.61)% (0.69)% (1.07)% (1.09)% (1.08)%
Portfolio turnover 132% 158% 168% 170% 157%
Net assets at end of period (000 Omitted) $526,748 $83,238 $36,413 $41,737 $35,098
# 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, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS B
-----------------------------------------------------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.22) $(0.14) $(0.18) $(0.16) $(0.17)
Net realized and unrealized gain (loss) on
investments and foreign currency 9.92 4.97 (1.28) 1.75 0.95
------ ------ ------ ------ ------
Total from investment operations $ 9.70 $ 4.83 $(1.46) $ 1.59 $ 0.78
------ ------ ------ ------ ------
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)
------ ------ ------ ------ ------
Net asset value - end of period $19.24 $11.16 $ 7.60 $ 9.27 $ 8.93
====== ====== ====== ====== ======
Total return 93.37% 67.41% (16.05)% 19.36% 9.67%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.99% 2.07% 2.18% 2.20% 2.13%
Net investment loss (1.36)% (1.44)% (1.82)% (1.87)% (1.81)%
Portfolio turnover 132% 158% 168% 170% 157%
Net assets at end of period (000 Omitted) $605,584 $111,355 $56,098 $73,940 $67,043
# 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, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
CLASS C
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.01 $ 7.53 $ 9.19 $ 8.85 $ 9.91
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.22) $(0.14) $(0.18) $(0.16) $(0.17)
Net realized and unrealized gain (loss) on
investments and foreign currency 9.77 4.91 (1.26) 1.74 0.94
------ ------ ------ ------ ------
Total from investment operations $ 9.55 $ 4.77 $(1.44) $ 1.58 $ 0.77
------ ------ ------ ------ ------
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)
------ ------ ------ ------ ------
Net asset value - end of period $18.92 $11.01 $ 7.53 $ 9.19 $ 8.85
====== ====== ====== ====== ======
Total return 93.37% 67.33% (16.00)% 19.44% 9.60%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.99% 2.07% 2.18% 2.16% 2.17%
Net investment loss (1.36)% (1.44)% (1.82)% (1.79)% (1.90)%
Portfolio turnover 132% 158% 168% 170% 157%
Net assets at end of period (000 Omitted) $178,008 $18,097 $5,607 $5,796 $6,860
# 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
----------------------------------------------- AUGUST 31,
2000 1999 1998 1997*
----------------------------------------------------------------------------------------------------------------------------
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 $(0.07) $(0.04) $(0.08) $(0.05)
Net realized and unrealized gain (loss) on
investments and foreign currency 10.12 5.04 (1.32) 0.99
------ ------ ------ ------
Total from investment operations $10.05 $ 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 $19.73 $11.37 $ 7.73 $ 9.44
====== ====== ====== ======
Total return 95.21% 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 (0.36)% (0.44)% (0.82)% (0.74)%+
Portfolio turnover 132% 158% 168% 170%
Net assets at end of period (000 Omitted) $23,539 $1,841 $925 $1,384
* For the period from the inception of Class I shares, 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
(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 in good faith, at fair value, 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
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 agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the fund and the lending agent. The dividend and
interest income earned on the securities loaned is accounted for in the same
manner as other dividend and interest income.
At August 31, 2000, the value of securities loaned was $207,836,382. These loans
were collateralized by U.S. Treasury securities of $7,245,879 and cash of
$208,366,588 which was invested in the following short-term obligation:
IDENTIFIED COST
SHARES AND VALUE
----------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 208,366,588 $208,366,588
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - The fund's custody fee is 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 total expenses on the Statement of
Operations.
Tax Matters and Distributions - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 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, 2000, $6,815,820 was reclassified from accumulated
undistributed net realized gain on investments and foreign currency transactions
to accumulated undistributed net investment income due to differences between
book and tax accounting for the offset of net investment loss against short-term
capital gains. This change had no effect on the net assets or net asset value
per share.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that 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. Included in Trustees' compensation is a net
periodic pension expense of $7,720 for the year ended August 31, 2000.
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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$699,333 for the year ended August 31, 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 $29,262 for the year ended August 31, 2000. Fees incurred under the
distribution plan during the year ended August 31, 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 $17,826 and $1,450 for Class B and Class C shares, respectively, for
the year ended August 31, 2000. Fees incurred under the distribution plan during
the year ended August 31, 2000, 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, 2000,
were $9,532, $228,343, and $22,225 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%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,411,988,137 and $792,187,889, 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 $1,162,372,088
--------------
Gross unrealized appreciation $ 287,039,848
Gross unrealized depreciation (114,487,328)
--------------
Net unrealized appreciation $ 172,552,520
==============
(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, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 31,214,745 $ 513,878,484 15,169,744 $ 154,338,218
Shares issued to shareholders
in reinvestment of
distributions 1,070,480 14,495,085 742,125 6,801,941
Shares reacquired (12,841,178) (204,115,058) (13,296,350) (134,640,545)
------------- ------------- ------------- -------------
Net increase 19,444,047 $ 324,258,511 2,615,519 $ 26,499,614
============= ============= ============= =============
<CAPTION>
Class B shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 28,081,396 $ 445,749,329 9,115,055 $ 92,789,536
Shares issued to shareholders
in reinvestment of
distributions 1,434,046 19,101,586 977,828 8,839,564
Shares reacquired (8,019,511) (121,714,265) (7,497,071) (75,766,605)
------------- ------------- ------------- -------------
Net increase 21,495,931 $ 343,136,650 2,595,812 $ 25,862,495
============= ============= ============= =============
<CAPTION>
Class C shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 10,385,015 $ 165,371,072 2,120,776 $ 21,806,838
Shares issued to shareholders
in reinvestment of
distributions 295,769 3,871,617 105,330 947,304
Shares reacquired (2,916,174) (44,483,669) (1,326,970) (13,771,979)
------------- ------------- ------------- -------------
Net increase 7,764,610 $ 124,759,020 899,136 $ 8,982,163
============= ============= ============= =============
<CAPTION>
Class I shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,883,814 $ 32,321,193 59,850 $ 637,177
Shares issued to shareholders
in reinvestment of
distributions 21,502 291,569 18,401 168,185
Shares reacquired (874,304) (15,003,279) (35,959) (341,458)
------------- ------------- ------------- -------------
Net increase 1,031,012 $ 17,609,483 42,292 $ 463,904
============= ============= ============= =============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. 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,
2000, was $5,790. The fund had no borrowings during the year.
<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 of MFS Mid
Cap Growth Fund, a separate series of MFS Series Trust IV, including the
portfolio of investments, as of August 31, 2000, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. 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 auditing standards generally accepted
in the United States of America. 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
securities owned as of August 31, 2000, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Mid Cap Growth Fund as of August 31, 2000, the results of its operations, the
changes in its net assets and the financial highlights for the respective stated
periods, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 5, 2000
<PAGE>
-----------------------------------------------------------------------------
FEDERAL TAX INFORMATION
-----------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 2000.
THE FUND HAS DESIGNATED $12,159,360 AS A CAPITAL GAIN DIVIDEND FOR THE YEAR
ENDED AUGUST 31, 2000.
FOR THE YEAR ENDED AUGUST 31, 2000, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS IS 0.65%.
-----------------------------------------------------------------------------
<PAGE>
MFS( R) MID CAP GROWTH FUND
<TABLE>
<S> <C>
TRUSTEES SECRETARY
J. Atwood Ives+ - Chairman and Chief Stephen E. Cavan*
Executive Officer, Eastern Enterprises
(diversified services company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner, Hemenway
& Barnes (attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct Professor,
Harvard University Graduate School of AUDITORS
Business Administration Deloitte & Touche LLP
Charles W. Schmidt+ - Private Investor INVESTOR INFORMATION
For information on MFS mutual funds, call
Arnold D. Scott* - Senior Executive your investment professional or, for an
Vice President, Director, and Secretary, information kit, call toll free: 1-800-637-2929
MFS Investment Management any business day from 9 a.m. to 5 p.m.
Eastern time (or leave a message anytime).
Jeffrey L. Shames* - Chairman and Chief
Executive Officer, MFS Investment INVESTOR SERVICE
Management MFS Service Center, Inc.
P.O. Box 2281
Elaine R. Smith+ - Independent Consultant Boston, MA 02107-9906
David B. Stone+ - Chairman, North American For general information, call toll free:
Management Corp. (investment adviser) 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTMENT ADVISER
Massachusetts Financial Services Company For service to speech- or hearing-impaired,
500 Boylston Street call toll free: 1-800-637-6576 any business day
Boston, MA 02116-3741 from 9 a.m. to 5 p.m. Eastern time. (To use
this service, your phone must be equipped with
DISTRIBUTOR a Telecommunications Device for the Deaf.)
MFS Fund Distributors, Inc.
500 Boylston Street For share prices, account balances, exchanges,
Boston, MA 02116-3741 or stock and bond outlooks, call toll free:
1-800-MFS-TALK (1-800-637-8255)
CHAIRMAN AND PRESIDENT anytime from a touch-tone telephone.
Jeffrey L. Shames*
WORLD WIDE WEB
PORTFOLIO MANAGERS www.mfs.com
Mark Regan*
David E. Sette-Ducati*
TREASURER
James O. Yost*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
</TABLE>
+ Independent Trustee
*MFS Investment Management
<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)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MMC-2 10/00 94.6M 83/283/383/883
