<PAGE>
[Logo] M F S(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MASSACHUSETTS INVESTORS GROWTH
STOCK FUND
SEMIANNUAL REPORT o MAY 31, 1998
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Now two MFS(R) IRA choices (see page 32)
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IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS(R) INVESTMENT MANAGEMENT(SM)
- --------------------------- On February 2, 1998, Keith Brodkin, a friend
and leader to everyone at MFS, died
[Photo of A. Keith Brodkin] unexpectedly at age 62. His thoughtful
letters to shareholders on the markets and
- --------------------------- economy have been an integral part of
MFS shareholder reports like this one for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager,
managing the bond portion of MFS(R) Total Return Fund. He went on to
manage our first pure bond fund, MFS(R) Bond Fund, when it was introduced
in 1974, and he was considered a pioneer in the art of active bond
management.
Keith was named President and Chief Investment Officer of MFS in 1987 and
four years later became Chairman and Chief Executive Officer. During his
stewardship, MFS has achieved significant growth in total assets under
management, rising from some $25 billion in 1991 to the over $80 billion
today entrusted to us by three million individual and institutional
investors worldwide. Under Keith's leadership, MFS has carefully but
steadily built its domestic and international investment capabilities
through the introduction of a range of new products and a still-growing
staff that now numbers over 100 equity and fixed-income professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
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TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 16
Notes to Financial Statements ............................................. 24
Trustees and Officers ..................................................... 33
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HIGHLIGHTS
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o FOR THE SIX MONTHS ENDED MAY 31, 1998, CLASS A SHARES OF THE FUND PROVIDED
A TOTAL RETURN AT NET ASSET VALUE OF 17.51%, CLASS B SHARES 17.10%, CLASS C
SHARES 17.04%, AND CLASS I SHARES 17.66%. (SEE PERFORMANCE SUMMARY FOR MORE
INFORMATION.)
o THE FUND BENEFITED FROM EARNINGS GROWTH FOR THE MAJORITY OF THE COMPANIES
IN THE PORTFOLIO BEING IN EXCESS OF 20% IN THE FIRST QUARTER, AS THESE
COMPANIES HAVE CONTINUED TO BENEFIT FROM STRONG SALES.
o TECHNOLOGY REMAINS THE FUND'S LARGEST SECTOR WEIGHTING BECAUSE THE INDUSTRY
CONTINUES TO SHOW THE BEST GROWTH IN SALES AND PROFITS. THE SAME COMPANIES
THAT HAVE HELPED THE FUND FOR QUITE A WHILE, INCLUDING MICROSOFT, COMPUTER
ASSOCIATES, AND CISCO SYSTEMS, CONTINUE TO PERFORM WELL.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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LETTER FROM THE CHAIRMAN
- ----------------------------
[Photo of Jeffrey L. Shames]
- ----------------------------
Jeffrey L. Shames
Dear Shareholders:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly
accepted measures, equity valuations appear to have risen to a point at which
the stock market has become more vulnerable to changes in the investment
environment such as rising inflation and interest rates or a slowing economy.
As a result, while we continue to hold a favorable long-term outlook for the
equity markets, we also believe that a market correction is possible in the
near term. In such a correction, equity prices would remain relatively flat or
decline, possibly for an extended period.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive
than most fixed-income investments, while low inflation helps control
companies' costs, such as for raw materials, wages, and benefits. The near-
term outlook for a continuation of this environment appears relatively
favorable. However, this year has seen a marked slowdown in corporate
earnings. This means that as equity prices continue to rise, price-to-earnings
(P/E) ratios, or the amount an investor pays for a stock in relation to the
company's earnings per share, also go up. A year ago, the average P/E ratio
for stocks in the unmanaged Standard & Poor's 500 Composite Index stood at
approximately 21; this spring, the average P/E was 33% higher, at about 28. In
some cases, such as with some of the newer companies associated with the
Internet, P/Es have soared to levels that are unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 8% to 10% this year. However, just as no one can predict
market cycles, so too no one can predict economic cycles -- except to say that
these cycles do exist and that an economic slowdown at some point is
inevitable.
Given this reality, we believe it is prudent to remind investors of the need
to take a long-term view and to diversify their investments across a range of
asset classes, including mutual funds that focus on bonds and international
investments as well as on the U.S. stock market. The likelihood of an eventual
market correction also makes it important for us to use original, bottom-up
research to find companies that we think can keep growing or gain market share
in the face of the occasional downturn. To help achieve this, and to provide
the broadest possible coverage of industry sectors and individual companies,
MFS continues to increase its number of full-time research analysts. These
analysts thoroughly investigate each company's earnings potential and position
in its industry as well as the overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation.
Every year, both fixed-income and equity managers meet with thousands of
credit issuers and companies. They also attend many presentations, closely
follow sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to
both the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders -- regardless of changes in the
overall market environment.
We appreciate your support 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
June 12, 1998
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JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED
MFS IN 1983. AFTER FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO
MANAGER, HE WAS NAMED CHIEF EQUITY OFFICER IN 1987 AND PRESIDENT AND A
MEMBER OF THE BOARD OF DIRECTORS IN 1993. MR. SHAMES WAS APPOINTED
CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY 1998.
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<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
- ------------------------------
[Photo of Christian A. Felipe]
- ------------------------------
Christian A. Felipe
For the six months ended May 31, 1998, Class A shares of the Fund provided a
total return of 17.51%, Class B shares 17.10%, Class C shares 17.04%, and
Class I shares 17.66%. These returns, which include the reinvestment of
distributions but exclude the effects of any sales charges, compare to a
15.06% return over the same period for the Standard & Poor's 500 Composite
Index (the S&P 500), a popular, unmanaged index of common stock total return
performance.
Q. COULD YOU TALK ABOUT THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. The main reason for the Fund's outperformance was that earnings growth for
the majority of the companies in the Fund was in excess of 20% in the first
quarter as these companies continued to benefit from strong sales, while
earnings growth for the S&P 500 was only up approximately 3% during the same
period.
Q. HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT OF THE PAST SEVERAL MONTHS?
A. It continues to be very good. We've had a long period of steady growth and
low inflation, which has benefited the Fund. The Asian markets have come
back, although they have been volatile.
Q. WHY HAVE THE COMPANIES IN THE FUND HAD STRONG EARNINGS WHEN SO MANY OTHERS
HAVE REPORTED DISAPPOINTING EARNINGS?
A. We emphasize companies that have strong sales growth and that don't depend on
pricing power to boost earnings, as well as companies whose growth patterns
can overcome obstacles such as the Asian turmoil. In isolated sectors such as
technology Asia has had an impact, but, in general, our stocks have seen
little effect from Asia.
Q. TECHNOLOGY CONTINUES TO BE THE FUND'S LARGEST SECTOR WEIGHTING. WHY IS IT
STILL SO ATTRACTIVE TO YOU?
A. The industry continues to show the best unit and profit growth. The same
companies that have helped the Fund for quite a while, including Microsoft,
Computer Associates, and Cisco Systems, continue to perform well. There are
still lingering concerns about Japan and the rest of Asia, so we have cut
back on some companies that we think are more exposed to the problems there,
including several of the Fund's semiconductor holdings.
Q. HAS THE GOVERNMENT'S SUIT AGAINST MICROSOFT HURT THE COMPANY?
A. The legal issue has certainly hurt the stock somewhat, and we were
disappointed that it will have to go to trial. We felt that the company made
reasonable compromises to the government, but because the government is still
allowing Microsoft to ship Windows 98, we don't think the case is going to
have a real impact on the company's earnings.
Q. NOW, WHAT ABOUT FINANCIAL SERVICES?
A. That continues to be a strong industry. We think the inflation rate, driven
by the currency crisis in Asia, is going to remain low, while interest rates
will be stable and declining, all of which helps this industry. We will
continue to own the asset gatherers such as Morgan Stanley, Dean Witter and
Franklin Resources that stand to benefit from people's saving and investing
for retirement. We've also benefited from the continuing consolidation in the
industry. For example, we owned some stock in Travelers when Travelers bought
Citicorp.
Q. RETAILING HAS MOVED UP TO BECOME THE THIRD-LARGEST SECTOR. WHAT'S GOING ON
THERE?
A. We continue to like this industry, which is benefiting from a strong consumer
sector and consolidation. With the economy strong and unemployment low,
people have more confidence and more money to spend. This has meant increased
sales for companies like Home Depot and Wal-Mart. At the same time,
consolidation, the increased use of managed care, and co-payments have helped
companies such as CVS and Rite Aid.
Q. IN YOUR LAST REPORT, YOU SAID YOU HAD REFOCUSED THE FUND'S HEALTH CARE
HOLDINGS FROM HEALTH MAINTENANCE ORGANIZATIONS TO PHARMACEUTICAL COMPANIES.
HOW IS THAT GROUP PERFORMING?
A. Very well. The pharmaceutical companies continue to introduce new products at
a great pace. For example, a lot more people are taking cholesterol- lowering
drugs, and Bristol-Myers Squibb, which makes one of the best- selling drugs
in this area, is a big position in the Fund. We did eliminate Pfizer because
of the publicity surrounding Viagra, which pushed up its stock beyond what we
felt was a reasonable valuation. But, overall, the industry continues to
outperform.
Q. HAVE THERE BEEN ANY SIGNIFICANT CHANGES IN OTHER FUND HOLDINGS?
A. We made Associates First Capital, the former financing arm of the Ford Motor
Co., a very large position. We've owned it for a long time, but we took
advantage of some weakness in the stock's price when the company was spun off
by Ford. Other than that, we really haven't seen the need to make any big
changes to the portfolio. We have modestly added to or subtracted from
several positions, but the portfolio contains just about all of the names it
did six months ago.
Q. COULD YOU TALK ABOUT ANY SPECIFIC STOCKS THAT PERFORMED BETTER THAN EXPECTED,
AND WHY YOU THINK THEY DID WELL?
A. Again, the surprisingly strong consumer sector helped companies such as Home
Depot exceed earnings estimates by a greater margin than we expected. Also,
brokerage firms, specifically the asset gatherers like Morgan Stanley, Dean
Witter, have beaten expectations because people have begun investing more for
retirement.
Q. WHAT DO YOU SEE AS THE GREATEST RISK TO THE MARKETS AND THE FUND IN COMING
MONTHS?
A. The greatest risk is that earnings, particularly in the S&P 500, continue to
decline because of a slowing economy or crises in Asia, Russia, and other
emerging markets. As earnings estimates go down, the stocks will go down. So
the risk would be an earnings recession, though not necessarily an economic
recession. This would be brought about by the fact that we're in such a
globally competitive environment that the Asian crisis results in lower
prices. We try and avoid those problems by using our bottom-up approach of
picking the best stocks, but there is a risk that even these stocks could be
hurt for a time.
Q. LOOKING AHEAD, WHAT KIND OF MARKET OR ECONOMIC ENVIRONMENT DO YOU SEE, AND
HOW MIGHT THIS AFFECT SOME OF YOUR INVESTMENTS FOR THE FUND?
A. I continue to be optimistic. Earnings drive stocks prices, and the earnings
for the companies we own continue to be favorable because they're in strong
industries, they have strong positions in those industries, and they have
strong product cycles. What would reverse that favorable earnings trend would
be a global recession that affects the earnings power of these companies. We
don't anticipate such a reversal in the foreseeable future. There are signs
of a slowdown but, because of their unique positions, the companies we own
are staying ahead of it.
/s/ Christian A. Felipe
Christian A. Felipe
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGER'S PROFILE
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CHRISTIAN A. FELIPE IS A SENIOR VICE PRESIDENT OF MFS(R) INVESTMENT
MANAGEMENT(SM) AND PORTFOLIO MANAGER OF MASSACHUSETTS INVESTORS GROWTH
STOCK FUND, MFS(R) STRATEGIC GROWTH FUND, AND THE MASSACHUSETTS
INVESTORS GROWTH STOCK SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY
PRODUCTS.
MR. FELIPE JOINED THE MFS RESEARCH DEPARTMENT IN 1986. HE WAS NAMED
INVESTMENT OFFICER IN 1987, ASSISTANT VICE PRESIDENT -- INVESTMENTS IN
1988, VICE PRESIDENT -- INVESTMENTS IN 1989, AND SENIOR VICE PRESIDENT
IN 1996.
MR. FELIPE IS A GRADUATE OF THE UNIVERSITY OF CALIFORNIA, LOS ANGELES,
AND THE UNIVERSITY OF PENNSYLVANIA WHARTON SCHOOL OF FINANCE AND
COMMERCE.
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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 other MFS
product is available from your financial adviser, 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 AND FUTURE INCOME
RATHER THAN CURRENT INCOME.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JANUARY 1, 1935
CLASS INCEPTION: CLASS A JANUARY 1, 1935
CLASS B SEPTEMBER 7, 1993
CLASS C NOVEMBER 3, 1997
CLASS I JANUARY 2, 1997
SIZE: $3.0 BILLION NET ASSETS AS OF MAY 31, 1998
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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.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH MAY 31, 1998
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +17.51% +44.11% +150.22% +183.94% +519.69%
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Average Annual Total Return -- +44.11% + 35.76% + 23.21% + 20.01%
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SEC Results -- +35.82% + 33.11% + 21.76% + 19.30%
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<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +17.10% +43.15% +144.24% +173.36% +496.34%
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Average Annual Total Return -- +43.15% + 34.67% + 22.28% + 19.55%
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SEC Results -- +39.15% + 34.11% + 22.09% + 19.55%
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<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +17.04% +43.52% +149.22% +182.68% +517.11%
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Average Annual Total Return -- +43.52% + 35.58% + 23.10% + 19.96%
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SEC Results -- +42.31% + 35.58% + 23.10% + 19.96%
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<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years/Life
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +17.66% +44.48% +151.10% +184.87% +521.76%
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Average Annual Total Return -- +44.48% + 35.92% + 23.29% + 20.05%
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</TABLE>
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
B and C results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of A for periods prior to the inception of B and C.
Because operating expenses of B and C are higher than those of A, B and C
performance generally would have been lower than A performance. The A
performance included in the B and C SEC performance has been adjusted to
reflect the CDSC generally applicable to B and C rather than the initial sales
charge generally applicable to A.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of I. Because operating expenses
of A are greater than those of I, I performance generally would have been
higher than A performance. The A performance included in the I performance has
been adjusted to reflect the fact that I have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.
All results are historical and assume the reinvestment of dividends and
capital gains.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
<PAGE>
PORTFOLIO CONCENTRATION AS OF MAY 31, 1998
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 28.0%
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FINANCIAL SERVICES 17.0%
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RETAILING 16.0%
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LEISURE 12.3%
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HEALTH CARE 7.5%
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For a more complete breakdown, refer to the Portfolio of Investments.
TOP 10 STOCK HOLDINGS
ASSOCIATES FIRST CAPITAL CORP. 5.3% BMC SOFTWARE, INC. 3.4%
Consumer finance company Computer software company
MICROSOFT CORP. 5.2% SAFEWAY, INC. 3.0%
Computer software and systems company Grocery store chain
COMPUTER ASSOCIATES INTERNATIONAL, ORACLE CORP. 2.9%
INC. 4.7% Database software developer and
Computer software company manufacturer
TYCO INTERNATIONAL LTD. 4.5% CADENCE DESIGN SYSTEMS, INC. 2.6%
Fire protection, packaging, and Computer software and systems company
electronic equipment manufacturer
RITE AID CORP. 2.6%
CVS CORP. 4.2% Drug store chain
Drug store chain
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- May 31, 1998
<TABLE>
<CAPTION>
Stocks - 95.1%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 91.1%
Advertising
Young & Rubicam, Inc.* 28,000 $ 784,000
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Aerospace - 2.9%
Gulfstream Aerospace Corp.* 785,000 $ 33,362,500
United Technologies Corp. 575,000 54,050,000
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$ 87,412,500
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Banks and Credit Companies - 2.5%
Firstar Corp. 155,000 $ 5,686,563
Fleet Financial Group, Inc. 85,000 6,970,000
National City Corp. 300,000 20,325,000
Norwest Corp. 335,000 13,023,125
State Street Corp. 185,000 12,753,437
Wells Fargo & Co. 44,000 15,906,000
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$ 74,664,125
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Building - 0.1%
Sherwin Williams Co. 50,000 $ 1,662,500
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Business Machines - 1.4%
Affiliated Computer Services, Inc., "A"* 675,000 $ 22,485,937
Sun Microsystems, Inc.* 455,000 18,228,438
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$ 40,714,375
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Business Services - 1.8%
AccuStaff, Inc.* 345,000 $ 11,363,437
Ceridian Corp.* 120,000 6,480,000
Computer Sciences Corp.* 250,000 12,984,375
DST Systems, Inc.* 215,000 11,368,125
First Data Corp. 75,000 2,493,750
Fiserv, Inc.* 150,000 8,845,313
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$ 53,535,000
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Cellular Telephones - 0.3%
AirTouch Communications, Inc.* 165,000 $ 7,858,125
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Chemicals - 0.6%
Sigma-Aldrich Corp. 525,000 $ 19,162,500
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Computer Software - Personal Computers - 5.2%
Autodesk, Inc. 145,000 $ 6,162,500
Microsoft Corp.* 1,750,600 148,472,762
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$ 154,635,262
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Computer Software - Systems - 14.1%
BMC Software, Inc.* 2,100,000 $ 96,731,250
Cadence Design Systems, Inc.* 2,115,000 74,553,750
Computer Associates International, Inc. 2,550,000 133,875,000
Compuware Corp.* 705,000 32,385,937
Oracle Corp.* 3,500,000 82,687,500
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$ 420,233,437
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Consumer Goods and Services - 6.2%
Clorox Co. 150,000 $ 12,525,000
Dial Corp. 200,000 4,962,500
Kimberly-Clark Corp. 100,000 4,956,250
Ralston-Ralston Purina Co. 75,000 8,348,437
Revlon, Inc., "A"* 163,700 8,665,869
Service Corp. International 455,000 18,598,125
Tyco International Ltd. 2,295,000 127,085,625
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$ 185,141,806
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Electrical Equipment - 1.5%
General Electric Co. 535,000 $ 44,605,625
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Electronics - 0.6%
Altera Corp.* 240,000 $ 8,070,000
Analog Devices, Inc.* 100,000 2,468,750
Intel Corp. 100,000 7,143,750
Xilinx, Inc.* 25,000 950,781
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$ 18,633,281
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Entertainment - 5.9%
Capstar Broadcasting Corp., "B"* 100,000 $ 1,900,000
CBS Corp. 1,125,000 35,718,750
Chancellor Media Corp.* 100,000 4,181,250
Clear Channel Communications, Inc.* 200,000 19,175,000
Cox Radio, Inc., "A"* 195,900 8,252,288
Harrah's Entertainment, Inc.* 1,480,700 37,017,500
Hearst-Argyle Television, Inc.* 100,000 3,600,000
Jacor Communications, Inc.* 250,000 13,218,750
Mirage Resorts, Inc.* 875,000 18,210,937
Time Warner, Inc. 200,000 15,562,500
Univision Communications, Inc., "A"* 450,000 15,637,500
Young Broadcasting, Inc., "A"* 65,000 3,371,875
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$ 175,846,350
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Financial Institutions - 11.3%
American Express Co. 175,000 $ 17,959,375
Associates First Capital Corp., "A" 1,995,000 149,250,938
CIT Group, Inc., "A"* 145,000 4,567,500
Federal National Mortgage Assn 685,000 41,014,375
Federated Investors, Inc. "B"* 26,700 478,931
Franklin Resources, Inc. 1,000,000 48,875,000
Heller Financial, Inc., "A"* 43,200 1,204,200
Merrill Lynch & Co., Inc. 125,000 11,187,500
Morgan Stanley, Dean Witter, Discover & Co. 810,000 63,230,625
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$ 337,768,444
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Financial Services - 0.7%
Travelers Group, Inc. 185,000 $ 11,285,000
Washington Mutual, Inc. 155,000 10,946,875
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$ 22,231,875
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Insurance - 1.2%
Allstate Corp. 125,000 $ 11,765,625
American International Group, Inc. 50,000 6,190,625
Lincoln National Corp. 135,000 12,133,125
Torchmark Corp. 117,300 5,029,238
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$ 35,118,613
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Medical and Health Products - 4.1%
American Home Products Corp. 315,000 $ 15,218,438
Biomet, Inc. 115,000 3,320,625
Bristol-Myers Squibb Co. 471,500 50,686,250
Johnson & Johnson 50,000 3,453,125
McKesson Corp. 100,000 7,812,500
Schering Plough Corp. 500,000 41,843,750
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$ 122,334,688
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Medical and Health Technology and Services - 3.0%
Health Management Associates, Inc., "A"* 65,000 $ 1,937,813
HEALTHSOUTH Corp.* 1,455,000 41,285,625
Total Renal Care Holdings, Inc.* 150,000 4,603,125
United Healthcare Corp. 665,000 42,560,000
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$ 90,386,563
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Oils - 0.5%
Exxon Corp. 195,000 $ 13,747,500
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Printing and Publishing - 1.2%
Gannett Co., Inc. 455,000 $ 30,001,563
Pulitzer Publishing Co. 15,000 1,327,500
Tribune Co. 85,000 5,684,375
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$ 37,013,438
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Restaurants and Lodging - 4.5%
Cendant Corp.* 1,563,100 $ 33,899,731
Four Seasons Hotels, Inc. 50,000 1,562,500
Hilton Hotels Corp. 500,000 15,718,750
Marriott International, Inc., "A" 285,000 9,903,750
McDonalds Corp. 85,000 5,578,125
Promus Hotel Corp.* 1,597,600 69,096,200
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$ 135,759,056
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Stores - 11.3%
CVS Corp. 1,685,000 $ 118,265,937
CVS Trust Automatic Common Exchange Security* 82,800 5,847,750
General Nutrition Cos., Inc.* 305,000 9,626,563
Home Depot, Inc. 490,000 38,495,625
Liz Claiborne, Inc. 150,000 7,603,125
Office Depot, Inc.* 1,585,000 46,757,500
Rite Aid Corp. 2,050,000 73,415,625
Wal-Mart Stores, Inc. 685,000 37,803,437
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$ 337,815,562
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Supermarkets - 3.9%
Meyer (Fred), Inc.* 684,500 $ 29,433,500
Safeway, Inc.* 2,356,000 85,846,750
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$ 115,280,250
- --------------------------------------------------------------------------------------------------------
Telecommunications - 5.7%
Aspect Telecommunications Corp.* 75,000 $ 1,935,938
Cisco Systems, Inc.* 800,000 60,500,000
Global TeleSystems Group, Inc.* 13,200 505,725
Lucent Technologies, Inc. 505,000 35,823,437
MCI Communications Corp. 1,100,000 58,815,625
Sprint Corp. 50,000 3,587,500
WorldCom, Inc.* 175,000 7,962,500
--------------
$ 169,130,725
- --------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.6%
LCI International, Inc.* 448,600 $ 16,794,463
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $2,718,270,063
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 4.0%
France - 0.4%
Alcatel Alsthom (Telecommunications) 53,020 $ 11,340,229
Alcatel Alsthom, ADR (Telecommunications) 35,900 1,552,675
--------------
$ 12,892,904
- --------------------------------------------------------------------------------------------------------
Germany - 0.4%
SAP AG (Computer Software - Systems) 6,500 $ 3,357,047
SAP AG, ADR (Computer Software - Systems)## 50,000 9,225,000
--------------
$ 12,582,047
- --------------------------------------------------------------------------------------------------------
Japan - 1.2%
Canon, Inc. (Office Equipment) 252,000 $ 5,997,836
Sony Corp. (Electronics) 194,000 16,370,718
Sony Corp., ADR (Electronics) 156,000 13,074,750
--------------
$ 35,443,304
- --------------------------------------------------------------------------------------------------------
Netherlands - 0.5%
ING Groep N.V. (Financial Services)* 123,100 $ 8,448,939
ING Groep N.V., ADR (Financial Services) 71,900 4,916,162
--------------
$ 13,365,101
- --------------------------------------------------------------------------------------------------------
United Kingdom - 1.5%
British Petroleum PLC, ADR (Oils) 450,000 $ 39,881,250
Sema Group PLC (Computer Software - Systems) 125,000 4,914,430
--------------
$ 44,795,680
- --------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 119,079,036
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,150,479,058) $2,837,349,099
- --------------------------------------------------------------------------------------------------------
Bonds - 0.8%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 0.8%
U.S. Treasury Bonds, 6.125s, 2027 $ 4,800 $ 5,015,232
U.S. Treasury Bonds, 6.625s, 2027 17,500 19,293,750
- --------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $22,411,734) $ 24,308,982
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 5.4%
- --------------------------------------------------------------------------------------------------------
Anheuser Busch, Inc., due 6/01/98 $ 20,000 $ 20,000,000
Federal Home Loan Bank, due 7/08/98 21,300 21,182,223
Federal Home Loan Mortgage Corp., due 6/01/98 - 6/30/98 90,300 90,036,135
Federal National Mortgage Assn., due 6/11/98 4,400 4,393,375
General Electric Capital Corp., due 6/01/98 24,600 24,600,000
- --------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 160,211,733
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,333,102,525) $3,021,869,814
Other Assets, Less Liabilities - (1.3)% (38,038,000)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,983,831,814
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
MAY 31, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $2,333,102,525) $ 3,021,869,814
Cash 456,292
Receivable for investments sold 23,646,079
Receivable for Fund shares sold 27,076,643
Dividends and interest receivable 1,697,925
Other assets 13,137
---------------
Total assets $ 3,074,759,890
---------------
Liabilities:
Payable for investments purchased $ 33,488,943
Payable for Fund shares reacquired 55,736,390
Payable to affiliates -
Management fee 59,568
Administrative fee 3,074
Shareholder servicing agent fee 27,818
Distribution and service fee 1,408,791
Accrued expenses and other liabilities 203,492
---------------
Total liabilities $ 90,928,076
---------------
Net assets $ 2,983,831,814
===============
Net assets consist of:
Paid-in capital $ 2,061,571,927
Unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 688,763,010
Accumulated undistributed net realized gain on
investments
and foreign currency transactions 232,672,946
Accumulated undistributed net investment income 823,931
---------------
Total $ 2,983,831,814
===============
Shares of beneficial interest outstanding 207,270,449
===========
Class A shares:
Net asset value per share
(net assets of $2,487,377,542 / 171,621,328 shares of
beneficial interest outstanding) $14.49
======
Offering price per share (100 / 94.25) $15.38
======
Class B shares:
Net asset value and offering price per share
(net assets of $425,546,912 / 30,583,852 shares of
beneficial interest outstanding) $13.91
======
Class C shares:
Net asset value and offering price per share
(net assets of $56,720,099 / 4,086,775 shares of
beneficial interest outstanding) $13.88
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $14,187,261 / 978,494 shares of
beneficial interest outstanding) $14.50
======
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 MAY 31, 1998
- -------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 5,714,830
Interest 5,475,555
Foreign taxes withheld (144,345)
------------
Total investment income $ 11,046,040
------------
Expenses -
Management fee $ 2,975,708
Trustees' compensation 40,483
Shareholder servicing agent fee 1,372,221
Distribution and service fee (Class A) 3,150,765
Distribution and service fee (Class B) 1,088,965
Distribution and service fee (Class C) 92,064
Administrative 142,131
Custodian fee 246,019
Postage 94,242
Printing 55,801
Legal fees 43,146
Auditing fees 17,203
Miscellaneous 547,554
------------
Total expenses $ 9,866,302
Fees paid indirectly (218,405)
------------
Net expenses $ 9,647,897
------------
Net investment income $ 1,398,143
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $234,911,386
Foreign currency transactions (30,856)
------------
Net realized gain on investments and foreign
currency transactions $234,880,530
------------
Change in unrealized appreciation -
Investments $111,056,237
Translation of assets and liabilities in foreign
currencies 5,292
------------
Net unrealized gain on investments and foreign
currency translation $111,061,529
------------
Net realized and unrealized gain on investments
and foreign currency $345,942,059
------------
Increase in net assets from operations $347,340,202
============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,398,143 $ 338,418
Net realized gain on investment and foreign currency
transactions 234,880,530 293,422,338
Net unrealized gain on investments and foreign
currency translation 111,061,529 258,770,599
-------------- --------------
Increase in net assets from operations $ 347,340,202 $ 552,531,355
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (801,128) $ --
From net investment income (Class C) (3,421) --
From net investment income (Class I) (27,146) --
From net realized gain on investments and foreign
currency transactions (Class A) (273,013,152) (309,700,403)
From net realized gain on investments and foreign
currency transactions (Class B) (16,675,701) (5,913,744)
From net realized gain on investments and foreign
currency transactions (Class C) (287,027) --
From net realized gain on investments and foreign
currency transactions (Class I) (1,756,440) --
-------------- --------------
Total distributions declared to shareholders $ (292,564,015) $ (315,614,147)
-------------- --------------
Net increase in net assets from Fund share
transactions $1,049,991,110 $ 275,910,431
-------------- --------------
Total increase in net assets $1,104,767,297 $ 512,827,639
Net assets:
At beginning of period 1,879,064,517 1,366,236,878
-------------- --------------
At end of period (including accumulated undistributed
net investment income of $823,931 and $257,483,
respectively) $2,983,831,814 $1,879,064,517
============== ==============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
SIX MONTHS ENDED --------------------------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993
(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 $14.68 $13.44 $12.51 $10.48 $12.97 $12.15
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $ 0.02 $ 0.01 $(0.01) $(0.01) $(0.01) $(0.01)
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 2.06 4.33 2.55 3.12 (0.49 )1.55
------ ------ ------ ------ ------ ------
Total from investment
operations $ 2.08 $ 4.34 $ 2.54 $ 3.11 $(0.50) $ 1.54
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.01) $ -- $ -- $ -- $ -- $ --
From net realized gain on
investments and foreign
currency transactions (2.26) (3.10) (1.61) (1.08) (1.99) (0.72)
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(2.27) $(3.10) $(1.61) $(1.08) $(1.99) $(0.72)
------ ------ ------ ------ ------ ------
Net asset value - end of period $14.49 $14.68 $13.44 $12.51 $10.48 $12.97
====== ====== ====== ====== ====== ======
Total return(+) 17.51%++ 42.91% 23.87% 32.91% (5.00)% 13.43%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.74%+ 0.71% 0.72% 0.73% 0.72% 0.71%
Net investment income (loss) 0.25%+ 0.05% (0.05)% (0.08)% (0.06)% (0.19)%
Portfolio turnover 33% 93% 107% 46% 56% 52%
Net assets at end of period
(000,000 omitted) $2,487 $1,773 $1,341 $1,180 $977 $1,132
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
(+) 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.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------------
1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $10.87 $ 8.48 $10.70 $ 8.39 $ 9.05
------ ------ ------ ------ ------
Income from investment operations -
Net investment income (loss) $(0.03) $ 0.01 $ 0.05 $ 0.09 $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 2.07 2.93 (1.02) 3.14 0.64
------ ------ ------ ------ ------
Total from investment operations $ 2.04 $ 2.94 $(0.97) $ 3.23 $ 0.76
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $(0.03) $(0.05) $(0.08) $(0.15)
From net realized gain on investments and
foreign currency transactions (0.76) (0.52) (1.20) (0.84) (1.27)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.76) $(0.55) $(1.25) $(0.92) $(1.42)
------ ------ ------ ------ ------
Net asset value - end of period $12.15 $10.87 $ 8.48 $10.70 $ 8.39
====== ====== ====== ====== ======
Total return(+) 19.35% 36.56% (10.27)% 42.14% 8.21%
Ratios (to average net assets)/
Supplemental data:
Expenses 0.67% 0.63% 0.53% 0.54% 0.58%
Net investment income (loss) (0.24)% 0.14% 0.55% 0.91% 1.27%
Portfolio turnover 16% 39% 44% 32% 75%
Net assets at end of period
(000,000 omitted) $1,070 $950 $749 $907 $735
(+) Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to
March 1, 1991). If the charge had been included, the results would have been lower.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
SIX MONTHS ENDED --------------------------------------------------------------------------
MAY 31, 1998 1997 1996 1995 1994 1993*
(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 $14.23 $13.12 $12.26 $10.35 $12.93 $12.91
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.03) $(0.09) $(0.11) $(0.11) $(0.09) $(0.01)
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 1.97 4.21 2.51 3.10 (0.50) 0.03
------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.94 $ 4.12 $ 2.40 $ 2.99 $(0.59) $ 0.02
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders from net
realized gain on investments
and foreign currency
transactions $(2.26) $(3.01) $(1.54) $(1.08) $(1.99) $ --
------ ------ ------ ------ ------ ------
Net asset value - end of
period $13.91 $14.23 $13.12 $12.26 $10.35 $12.93
====== ====== ====== ====== ====== ======
Total return 17.10%++ 41.77% 22.87% 32.09% (5.82)% 0.70%+
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.45%+ 1.50% 1.61% 1.63% 1.60% 1.49%+
Net investment loss (0.46)%+ (0.74)% (0.94)% (0.98)% (0.87)% (0.99)%+
Portfolio turnover 33% 93% 107% 46% 56% 52%
Net assets at end of period
(000,000 omitted) $426 $93 $25 $14 $9 $2
* For the period from the inception of Class B, September 7, 1993, through November 30, 1993.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1998 NOVEMBER 30, 1997*
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $14.23 $13.98
------ ------
Income from investment operations# -
Net investment loss $(0.03) $(0.01)
Net realized and unrealized gain on investments and foreign
currency transactions 1.97 0.26
------ ------
Total from investment operations $ 1.94 $ 0.25
------ ------
Less distributions declared to shareholders -
From net investment income $(0.03) $ --
From net realized gain on investments and foreign currency
transactions (2.26) --
------ ------
Total distributions declared to shareholders $(2.29) $ --
------ ------
Net asset value - end of period $13.88 $14.23
====== ======
Total return 17.04%++ 1.79%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.45%+ 1.54%+
Net investment loss (0.46)%+ (0.91)%+
Portfolio turnover 33% 93%
Net assets at end of period (000 omitted) $56,720 $383
* For the period from the inception of Class C, November 3, 1997, through November 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1998 NOVEMBER 30, 1997*
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
CLASS I
- --------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $14.71 $ 9.86
------ ------
Income from investment operations# -
Net investment income $ 0.04 $ 0.03
Net realized and unrealized gain on investments and foreign
currency transactions 2.04 4.82
------ ------
Total from investment operations $ 2.08 $ 4.85
------ ------
Less distributions declared to shareholders -
From net investment income $(0.03) $ --
From net realized gain on investments and foreign currency
transactions (2.26) --
------ ------
Total distributions declared to shareholders $(2.29) $ --
------ ------
Net asset value - end of period $14.50 $14.71
====== ======
Total return 17.66%++ 49.19%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.45%+ 0.49%+
Net investment income 0.54%+ 0.22%+
Portfolio turnover 33% 93%
Net assets at end of period (000 omitted) $14,187 $12,482
* For the period from the inception of Class I, January 2, 1997, through November 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
Massachusetts Investors Growth Stock Fund (the Fund) is a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, are valued on the basis
of valuations furnished by dealers or by a pricing service with consideration
to factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data, without exclusive reliance upon exchange or over-the-
counter prices. Short-term obligations, which mature in 60 days or less, are
valued at amortized cost, which approximates market value. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All 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. Some securities may be
purchased on a "when-issued" or "forward delivery" basis, which means that the
securities will be delivered to the Fund at a future date, usually beyond
customary settlement time.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required
under provisions of the Code, which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. Accordingly, the amount of net investment income and net realized
gain reported on these financial statements may differ from that reported on
the Fund's tax return and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
Capital gains taxes have been provided on unrealized and realized gains from
securities transactions in countries where such a capital gains tax is
applicable. Realized and unrealized gain is reported net of any capital gains
tax in the Statement of Operations.
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. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at the following annual
rates:
First $200 million of average net assets 0.50%
Next $300 million of average net assets 0.40%
Average net assets in excess of $500 million 0.20%
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
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
$12,812 for the six months ended May 31, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$947,777 for the six months ended May 31, 1998, as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee 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 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. At the direction
of the Trustees, effective April 1, 1998, the 0.10% per annum Class A
distribution fee is being paid by the Fund. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $1,504,348
for the six months ended May 31, 1998. Fees incurred under the distribution plan
during the six months ended May 31, 1998, were 0.29% 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 $8,341 and $261 for
Class B and Class C shares, respectively, for the six months ended May 31,
1998. Fees incurred under the distribution plan during the six months ended
May 31, 1998, were 1.00% of average daily net assets attributable to Class B
and Class C shares on an annualized basis.
Certain Class A shares 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 six months
ended May 31, 1998, were $4,274, $114,232, and $7,438 for Class A, Class B,
and Class C shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the Fund's average daily net assets at an effective annual
rate of 0.1125%. Prior to January 1, 1998, the fee was calculated as a
percentage of the average daily net assets at an effective annual rate of
0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,505,503,196 and $742,634,177, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $2,333,102,525
--------------
Gross unrealized appreciation $ 705,672,779
Gross unrealized depreciation (16,905,490)
--------------
Net unrealized appreciation $ 688,767,289
==============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED MAY 31, 1998 YEAR ENDED NOVEMBER 30, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 125,000,721 $ 1,755,463,244 75,114,877 $ 956,127,239
Shares issued to shareholders in
reinvestment of distributions 18,083,026 214,829,570 24,285,107 243,865,941
Shares transferred to Class I -- -- (729,102) (7,188,941)
Shares reacquired (92,274,265) (1,306,490,244) (77,641,256) (983,055,158)
----------- --------------- ----------- --------------
Net increase 50,809,482 $ 663,802,570 21,029,626 $ 209,749,081
=========== =============== =========== ==============
<CAPTION>
Class B Shares
SIX MONTHS ENDED MAY 31, 1998 YEAR ENDED NOVEMBER 30, 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 27,020,862 $ 371,293,082 8,666,385 $ 107,069,031
Shares issued to shareholders in
reinvestment of distributions 1,299,947 14,888,269 561,425 5,501,995
Shares reacquired (4,269,122) (57,557,418) (4,607,848) (55,387,255)
----------- --------------- ----------- --------------
Net increase 24,051,687 $ 328,623,933 4,619,962 $ 57,183,771
=========== =============== =========== ==============
<CAPTION>
Class C Shares
SIX MONTHS ENDED MAY 31, 1998 PERIOD ENDED NOVEMBER 30, 1997*
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,292,208 $ 59,318,955 26,928 $ 375,739
Shares issued to shareholders in
reinvestment of distributions 18,018 205,767 -- --
Shares reacquired (250,379) (3,395,450) -- --
----------- --------------- ----------- --------------
Net increase 4,059,847 $ 56,129,272 26,298 $ 375,739
=========== =============== =========== ==============
<CAPTION>
Class I Shares
SIX MONTHS ENDED MAY 31, 1998 PERIOD ENDED NOVEMBER 30, 1997**
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 115,446 $ 1,583,344 187,228 $ 2,297,029
Shares issued to shareholders in
reinvestment of distributions 150,140 1,783,665 -- --
Shares transferred from
Class A -- -- 729,102 7,188,941
Shares reacquired (135,564) (1,931,674) (67,858) (884,130)
----------- --------------- ----------- --------------
Net increase 130,022 $ 1,435,335 848,472 $ 8,601,840
=========== =============== =========== ==============
* For the period from the inception of Class C, November 3, 1997, through November 30, 1997.
** For the period from the inception of Class I, January 2, 1997, through November 30, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $805 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 May 31, 1998, was $234.
<PAGE>
Massachusetts Investors Growth Stock Fund
<TABLE>
<S> <C>
Trustees Secretary
Richard B. Bailey* - Private Investor; Former Stephen E. Cavan*
Chairman and Director (until 1991), MFS
Investment Management Assistant Secretary
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
Custodian
Lawrence H. Cohn, M.D. - Chief of Cardiac State Street Bank and Trust Company
Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School Investor Information
For MFS stock and bond market outlooks,
The Hon. Sir J. David Gibbons, KBE - Chief call toll free: 1-800-637-4458 anytime from
Executive Officer, Edmund Gibbons Ltd.; a touch-tone telephone.
Chairman, Colonial Insurance Company, Ltd.
For information on MFS mutual funds, call your
Abby M. O'Neill - Private Investor financial adviser or, for an information kit,
call toll free: 1-800-637-2929 any business
Walter E. Robb, III - President and Treasurer, day from 9 a.m. to 5 p.m. Eastern time (or
Benchmark Advisors, Inc. (corporate financial leave a message anytime).
consultants); President, Benchmark Consulting
Group, Inc. (office services) Investor Service
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive P.O. Box 2281
Vice President, Director, and Secretary, Boston, MA 02107-9906
MFS Investment Management
For general information, call toll free:
Jeffrey L. Shames* - Chairman, Chief 1-800-225-2606 any business day from
Executive Officer, and Director, 8 a.m. to 8 p.m. Eastern time.
MFS Investment Management
For service to speech- or hearing-impaired,
J. Dale Sherratt - President, Insight call toll free: 1-800-637-6576 any business
Resources, Inc. (acquisition planning day from 9 a.m. to 5 p.m. Eastern time. (To
specialists) Ward Smith - Former Chairman use this service, your phone must be equipped
(until 1994), NACCO Industries (holding with a Telecommunications Device for the
company) Deaf.) For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
Investment Adviser (1-800-637-8255) anytime from a touch-tone
Massachusetts Financial Services Company telephone.
500 Boylston Street
Boston, MA 02116-3741 World Wide Web
www.mfs.com
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street For the fourth year in a row,
Boston, MA 02116-3741 MFS earned a #1 ranking in the
[Dalbar Logo] DALBAR, Inc. Broker/Dealer
Portfolio Manager Survey, Main Office Operations
Christian A. Felipe* Service Quality Category. The
firm achieved a 3.42 overall score on a scale of
Treasurer 1 to 4 in the 1997 survey. A total of 111 firms
W. Thomas London* responded, offering input on the quality of
service they received from 29 mutual fund
Assistant Treasurers companies nationwide. The survey contained
Mark E. Bradley* questions about service quality in 11
Ellen Moynihan* categories, including "knowledge of operations
James O. Yost* contact," "keeping you informed," and "ease of
doing business" with the firm.
</TABLE>
*Affiliated with the Investment Adviser
<PAGE>
MASSACHUSETTS INVESTORS -----------------
GROWTH STOCK FUND Bulk Rate
U.S. Postage
Paid
[Logo] M F S(SM) MFS
INVESTMENT MANAGEMENT -----------------
We invented the mutual fund(SM)
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