[Front Cover]
[MFS INVESTMENT MANAGEMENT LOGO]
Semiannual Report
February 28, 1997
MFS(R) Strategic Growth Fund
[silhouette of two people in front of window]
<PAGE>
Table of Contents
Letter from the Chairman ......... 1
Portfolio Manager's Overview ...... 2
Portfolio Manager's Profile ...... 3
Fund Facts ........................ 4
Performance Summary ............... 4
Portfolio Concentration ............ 5
Portfolio of Investments ............ 6
Financial Statements ............... 11
Notes to Financial Statements ...... 16
Trustees and Officers ............... 21
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Highlights
[bullet] For the six months ended February 28, 1997, Class A shares of the Fund
provided a total return at net asset value of 25.45%.
[bullet] The Fund has benefited from a significant overweighting in technology
issues, as massive technology spending allowed corporations to reduce
overhead and increase profits without raising prices.
[bullet] Microsoft Corp. is the Fund's biggest position. Its growth prospects
appear greater than ever as new opportunities, including the Internet,
cable television, and relational databases, continue to open up.
[bullet] Stocks of health maintenance organizations underperformed for the Fund
due to poor pricing by the industry, a situation which appears to have
been corrected.
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<PAGE>
Letter from the Chairman
[Photo of A. Keith Brodkin]
Dear Shareholders:
After more than six years of expansion, the U.S. economy appears to be
experiencing another year of moderate growth in 1997, although a few signs point
to the possibility of a modest rise in inflation during the year. On the
positive side, the pattern of moderate growth and inflation set over the past
few years now seems fairly well entrenched in the economy and, short of a major
international or domestic crisis, appears to have enough momentum to remain on
track for some time. Also, gains in such important sectors as housing,
automobiles, industrial production, and exports indicate a fair amount of
underlying strength in the economy. However, some reason for caution can be seen
in the continuing high levels of consumer debt and rising personal bankruptcies,
as well as in the ongoing tightness in labor markets, which could add some
inflationary pressures to the economy. Given these somewhat conflicting
indicators, we expect real (inflation-adjusted) growth to revolve around 2% in
1997, which would represent a modest decline from 1996.
We continue to urge U.S. equity investors to lower their expectations for 1997
and to point out that the impressive gains of the past two years are not
sustainable. Just as the slowdown in corporate earnings growth and increases in
interest rates in 1996 raised some near-term concerns, further interest rate
increases and an acceleration of inflation could negatively affect the stock
market in 1997. To the extent that some slowdown in earnings means that the
economy is not overheating, this could be beneficial for the equity market in
the long run. Also, we believe many of the technology-driven productivity gains
that U.S. companies have made in recent years will continue to enhance corporate
America's competitiveness and profitability. Therefore, while we have some
near-term concerns, we remain reasonably positive about the long-term viability
of the equity market.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
March 14, 1997
1
<PAGE>
Portfolio Manager's Overview
[Photo of Christian Felipe]
Dear Shareholders:
For the six months ended February 28, 1997, Class A shares of the Fund provided
a total return of 25.45%. This return, which assumes the reinvestment of
distributions, compares to a 22.5% return for the Standard & Poor's 500
Composite Index (S&P 500), a popular, unmanaged index of common stock
performance. Commencing April 10, 1997, the Fund intends to broaden the public
offering of its four classes of shares. Prior to that date, the Fund only
offered Class A shares to MFS employees and to trustees who oversee the MFS
funds.
Rising stock prices throughout 1996 and early 1997 have been driven by a
favorable economic environment of low inflation, low interest rates, and modest
but steady economic growth. This led to strong corporate profitability and
rising price/earnings ratios.
Much of the Fund's favorable performance was a result of a significant
overweighting in technology issues. Massive capital spending by major
corporations on their technology infrastructure contributed to an economy that
was able to grow almost without inflation, as technology spending allowed firms
to reduce overhead and increase profits without raising prices. The employment
picture was also bolstered by the large number of start-up companies, many of
which were financed through initial public offerings, which helped pick up some
of the slack created by restructuring at some of the larger companies.
Accordingly, the technology companies have exhibited the fastest growth rates
in earnings. It is also a major theme of the market that U.S. companies have
been able to extend their domestic positions to many overseas markets.
Microsoft is the Fund's biggest position. The company dominates virtually every
area of the computer software industry, yet its growth prospects today appear to
be greater than ever as new opportunities, including the Internet, cable
television, and relational databases, continue to open up. The position in
Microsoft has been held by the Fund since its inception, as have holdings in
Intel, another favorite due to its near-monopoly position in microprocessors.
In general, we look for companies with dominant worldwide franchises that, in
our opinion, will allow them to generate a return significantly ahead of their
cost of capital. This leads us to companies with tremendous free cash flows,
which we buy when we feel their valuations have reached attractive levels. One
such area is the media sector, which has performed very well for us,
particularly
2
<PAGE>
Portfolio Manager's Overview - continued
following the passage of the Telecommunications Act of 1996 and as radio and
television company stocks have responded favorably to massive industry
consolidation. Westinghouse bought Infinity Broadcasting early in the fiscal
year, and AT&T has recently decided to sell its position in LIN Broadcasting.
Unfortunately, stocks of health maintenance organizations (HMOs) underperformed
for the Fund due to poor pricing by the industry. This situation appears to have
been corrected, and we are encouraged by prospects for this group in 1997.
We anticipate no significant change in the economy; rather, we anticipate a
continuing environment of steady growth, low inflation, and stable-to-falling
interest rates. Technology, media, financial services, and health care are some
of the major sectors that we expect will benefit from this environment.
Respectfully,
/s/ Christian Felipe
Christian Felipe
Portfolio Manager
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Portfolio Manager's Profile
Christian Felipe joined MFS in 1986. A graduate of the University of California,
Los Angeles, and the University of Pennsylvania's Wharton School of Finance and
Commerce, 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 has managed MFS Strategic Growth Fund since its
inception in 1996.
- --------------------------------------------------------------------------------
3
<PAGE>
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Fund Facts
Strategy: The objective of the Fund is capital appreciation.
Commencement of
investment operations: Class A: January 2, 1996 Class B: April 10, 1997
Class I: January 2, 1997 Class C: April 10, 1997
Size: $12.8 million net assets as of February 28, 1997
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Performance Summary
Because mutual funds like MFS[R] Strategic Growth Fund are designed for
investors with long-term goals, we have provided cumulative results for Class A
shares, as well as the average annual total returns for the applicable time
periods.
Average Annual and Cumulative Total Rates of Return
Class A Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
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Cumulative Total Return +25.45% +32.59% +53.79%
- -------------------------------------------------------------------------
Average Annual Total Return -- +32.59% +44.98%
- -------------------------------------------------------------------------
SEC Results -- +26.27% +39.01%
- -------------------------------------------------------------------------
Class I Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year Life of Fund*
- -------------------------------------------------------------------------
Cumulative Total Return +25.45% +32.59% +53.79%
- -------------------------------------------------------------------------
Average Annual Total Return -- +32.59% +44.98%
- -------------------------------------------------------------------------
SEC Results -- +26.27% +39.01%
- -------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations,
January 2, 1996 through February 28, 1997. During this period the Fund was
named MFS Aggressive Growth Fund.
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.
Class A SEC results include the maximum 5.75% sales charge. Class I shares,
which became available on January 2, 1997, have no sales load or 12b-1 fees and
are only available to certain institutional investors.
Class I share results include the performance and operating expenses (e.g., Rule
12b-1) of Class A shares, for periods prior to the commencement of offering of
Class I shares. Because operating expenses attributable to Class A shares are
greater than those of Class I shares, Class I share performance would have been
higher had Class I shares been outstanding during the entire period. The Class A
share performance included in Class I share performance has been adjusted to
reflect the fact that Class I shares have no initial sales load.
4
<PAGE>
Portfolio Concentration as of February 28, 1997
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.
Top 10 Equity Holdings
Microsoft Corp.
Computer software and systems company
Franklin Resources, Inc.
Mutual fund and financial services company
Sun Microsystems, Inc.
Computer systems company
Intel Corp.
Semiconductor manufacturer
Lucent Technologies, Inc.
Telecommunications and microelectronics company
LIN Television Corp.
Broadcasting and cellular communications company
Computer Associates International, Inc.
Computer software company
Oracle Systems Corp.
Developer and manufacturer of database software
BMC Software, Inc.
Computer software company
Cadence Design Systems, Inc.
Computer software and systems company
Largest Sectors
[Pie Chart]
Technology 45.4%
Leisure 15.8%
Miscellaneous 11.2%
Financial Services 10.1%
Health Care 9.8%
Retailing 7.7%
[End Pie Chart]
*For a more complete breakdown, refer to Portfolio of Investments.
5
<PAGE>
Portfolio of Investments (Unaudited) - February 28, 1997
Stocks - 94.7%
- ----------------------------------------------------------------------
Issuer Shares Value
- ----------------------------------------------------------------------
U.S. Stocks - 89.8%
Aerospace - 0.3%
Gulfstream Aerospace Corp.* 1,500 $ 32,625
- ----------------------------------------------------------------------
Apparel and Textiles - 0.4%
Nike, Inc., "B" 750 $ 53,906
- ----------------------------------------------------------------------
Banks and Credit Companies - 0.6%
Citicorp 500 $ 58,375
Norwest Corp. 500 24,875
---------
$ 83,250
- ----------------------------------------------------------------------
Building - 0.4%
Newport News Shipbuilding, Inc. 3,000 $ 46,500
- ----------------------------------------------------------------------
Business Machines - 6.0%
Affiliated Computer Services, Inc.* 1,500 $ 30,937
Seagate Technology* 2,500 118,125
Sun Microsystems, Inc.* 20,000 617,500
---------
$766,562
- ----------------------------------------------------------------------
Business Services - 2.9%
AccuStaff, Inc.* 1,000 $ 20,750
ADT Ltd.* 4,000 87,000
Computer Sciences Corp.* 500 33,750
CUC International, Inc.* 750 17,906
DST Systems, Inc.* 1,000 32,875
Ikon Office Solutions, Inc. 1,000 41,250
Interim Services, Inc.* 2,000 75,500
Loewen Group, Inc. 500 16,125
Sabre Group Holding, Inc.* 1,000 28,250
Transaction System Architects, Inc.* 500 13,000
---------
$366,406
- ----------------------------------------------------------------------
Cellular Telephones - 0.8%
AirTouch Communications, Inc.* 1,000 $ 27,250
Telephone & Data Systems, Inc. 2,000 80,000
---------
$107,250
- ----------------------------------------------------------------------
Computer Hardware - Systems - 0.3%
Quantum Corp.* 1,000 $ 39,750
- ----------------------------------------------------------------------
Computer Software - Personal Computers - 6.6%
First Data Corp. 500 $ 18,312
Microsoft Corp.* 8,500 828,750
---------
$847,062
- ----------------------------------------------------------------------
Computer Software - Systems - 15.9%
BMC Software, Inc.* 8,300 $355,344
Cadence Design Systems, Inc.* 8,700 320,812
Computer Associates International, Inc. 9,000 391,500
Compuware Corp.* 2,250 140,063
Cooper & Chyan Technology, Inc.* 3,100 95,131
Oracle Systems Corp.* 9,300 365,025
Sybase, Inc.* 9,000 147,375
6
<PAGE>
Portfolio of Investments (Unaudited) - continued
Stocks - continued
- ------------------------------------------------------------------
Issuer Shares Value
- ------------------------------------------------------------------
U.S. Stocks - continued
Computer Software - Systems - continued
Synopsys, Inc.* 850 $ 30,334
USCS International, Inc.* 3,000 62,250
Xionics Document Technologies* 7,500 127,500
-----------
$2,035,334
- ------------------------------------------------------------------
Consumer Goods and Services - 1.9%
Service Corp. International 500 $ 14,500
Tyco International Ltd. 3,900 230,100
-----------
$ 244,600
- ------------------------------------------------------------------
Containers - 0.1%
Corning, Inc. 500 $ 18,813
- ------------------------------------------------------------------
Electrical Equipment - 0.1%
Westinghouse Electric Corp. 500 $ 8,625
- ------------------------------------------------------------------
Electronics - 1.8%
Analog Devices, Inc.* 100 $ 2,325
Atmel Corp.* 2,500 93,438
LSI Logic Corp.* 500 17,250
Sony Corp. 1,000 72,000
Xilinx, Inc.* 1,000 45,125
-----------
$ 230,138
- ------------------------------------------------------------------
Entertainment - 10.7%
Clear Channel Communications, Inc.* 4,000 $ 191,500
Cox Radio, Inc.* 4,000 76,500
Disney (Walt) Co. 250 18,563
Harrah's Entertainment, Inc.* 13,700 253,450
Jacor Communications, Inc., "A"* 3,000 88,312
LIN Television Corp.* 10,300 427,450
Midway Games, Inc.* 2,000 31,250
Mirage Resorts, Inc.* 1,500 37,312
Paxson Communications Corp.* 10,000 88,750
Univision Communications, Inc., "A"* 4,000 132,000
Viacom, Inc., "B"* 750 26,438
-----------
$1,371,525
- ------------------------------------------------------------------
Financial Institutions - 7.9%
American Express Co. 500 $ 32,687
Associates First Capital Corp. 2,000 96,500
BA Merchants Services, Inc.* 200 3,100
Federal National Mortgage Assn. 1,500 60,000
Franklin Resources, Inc. 12,500 731,250
MBNA Corp. 500 16,000
Merrill Lynch & Co., Inc. 750 72,000
-----------
$1,011,537
- ------------------------------------------------------------------
Food and Beverage Products - 1.2%
Pepsi Co, Inc. 4,500 $ 147,938
- ------------------------------------------------------------------
Insurance - 1.4%
Equitable of Iowa Cos 3,500 $ 185,938
- ------------------------------------------------------------------
Leisure - 0.1%
Vistana, Inc. 1,000 $ 14,625
- ------------------------------------------------------------------
7
<PAGE>
Portfolio of Investments (Unaudited) - continued
Stocks - continued
- --------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------
U.S. Stocks - continued
Medical and Health Products - 2.2%
Bristol-Myers Squibb Co. 500 $ 65,250
Johnson & Johnson 1,000 57,625
Pfizer, Inc. 500 45,813
Rhone-Poulenc Rorer, Inc. 500 35,500
Schering Plough Corp. 1,000 76,625
---------
$280,813
- --------------------------------------------------------------------------
Medical and Health Technology and Services - 6.6%
Cardinal Health, Inc. 2,000 $123,000
Columbia Healthcare Corp. 1,000 42,000
Genesis Health Ventures, Inc.* 1,000 34,625
Health Management Associates, Inc.* 1,000 26,500
HealthSouth Corp.* 1,000 40,250
Lincare Holdings, Inc.* 500 21,563
Medtronic Inc. 600 38,850
Oxford Health Plans, Inc.* 500 27,875
Pacificare Health Systems, Inc.* 1,500 125,625
St. Jude Medical, Inc.* 1,100 43,450
United Healthcare Corp. 4,700 234,412
Vivra, Inc.* 3,000 89,250
---------
$847,400
- --------------------------------------------------------------------------
Pollution Control - 0.6%
USA Waste Services, Inc.* 2,000 $ 72,000
- --------------------------------------------------------------------------
Printing and Publishing - 1.6%
Gannett Co., Inc. 2,000 $159,500
Tribune Co. 1,000 39,250
---------
$198,750
- --------------------------------------------------------------------------
Restaurants and Lodging - 2.9%
HFS, Inc.* 500 $ 34,250
Hilton Hotels Corp. 3,500 87,938
Marriot International, Inc. 500 26,500
MGM Grand, Inc.* 500 17,563
Outback Steakhouse, Inc.* 750 17,906
Promus Hotel Corp.* 5,300 187,487
---------
$371,644
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Special Products and Services - 0.2%
McDonalds Corp. 500 $ 21,625
- --------------------------------------------------------------------------
Stores - 7.0%
CVS Corp. 2,000 $ 92,500
General Nutrition Cos., Inc.* 2,000 36,000
Gymboree Corp.* 1,000 24,625
Home Depot, Inc. 4,500 245,250
Linens N'Things, Inc.* 1,000 21,500
Micro Warehouse, Inc.* 3,000 43,125
Office Depot, Inc.* 10,000 190,000
Rite-Aid Corp. 5,450 229,581
Sunglass Hut International, Inc.* 1,000 7,250
---------
$889,831
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8
<PAGE>
Portfolio of Investments (Unaudited) - continued
Stocks - continued
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Stocks - continued
Supermarkets - 0.3%
Vons Cos., Inc.* 500 $ 34,063
- -----------------------------------------------------------------------------
Telecommunications - 7.6%
ADC Telecommunications, Inc.* 1,500 $ 40,500
Ascend Communications, Inc.* 850 44,412
Cabletron Systems, Inc.* 7,500 225,000
Cellular Communications International* 3,000 84,750
Cisco Systems, Inc.* 2,000 111,250
Glenayre Technologies, Inc.* 2,500 33,125
Lucent Technologies, Inc. 8,000 431,000
------------
$ 970,037
- -----------------------------------------------------------------------------
Utilities - Telephone - 1.4%
MCI Communications Corp. 5,000 $ 178,750
- -----------------------------------------------------------------------------
Total U.S. Stocks $11,477,297
- -----------------------------------------------------------------------------
Foreign Stocks - 4.9%
Germany - 0.5%
Sap Ag ADR (Computer Software - Systems) 200 $ 30,765
Sap Aktiengesellschsft, ADR
(Computer Software - Systems)##,* 600 30,600
------------
$ 61,365
-----------------------------------------------------------------------------
Japan - 3.4%
Canon, Inc. (Special Products and Services) 4,000 $ 83,568
Canon, Inc., ADR (Special Products and Services) 1,000 104,500
Sony Corp. (Electronics) 2,500 180,526
TDK Corp. (Special Products and Services) 1,000 66,987
------------
$ 435,581
- -----------------------------------------------------------------------------
Sweden - 0.4%
Astra AB, Free Shares, "B" ADR (Pharmaceuticals) 1,000 $ 46,738
- -----------------------------------------------------------------------------
Switzerland - 0.5%
Ciba Specialty Chemicals AG (Chemicals)* 50 $ 3,165
Novartis AG (Pharmaceuticals)* 50 57,172
------------
$ 60,337
- -----------------------------------------------------------------------------
United Kingdom - 0.1%
Danka Business Systems, ADR (Business Services) 500 $ 20,937
- -----------------------------------------------------------------------------
Total Foreign Stocks $ 624,958
- -----------------------------------------------------------------------------
Total Stocks (Identified Cost, $10,735,329) $12,102,255
- -----------------------------------------------------------------------------
Convertible Preferred Stocks - 0.4%
- -----------------------------------------------------------------------------
American Radio Systems Corp., $7.00##,*
(Identified Cost, $48,600) 1,000 $ 51,000
- -----------------------------------------------------------------------------
Warrants - 4.0%
- -----------------------------------------------------------------------------
Intel Corp. (Identified Cost, $209,780)* 5,000 $ 508,672
- -----------------------------------------------------------------------------
9
<PAGE>
Portfolio of Investments (Unaudited) - continued
Short-Term Obligations - 0.8%
- ----------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
Federal Home Loan Bank, due 3/03/97 at
Amortized Cost $100 $ 99,971
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $11,093,680) $12,761,898
- ----------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.1% $ 17,495
- ----------------------------------------------------------------------------
Net Assets - 100.0% $12,779,393
- ----------------------------------------------------------------------------
*Non-income producing security
##SEC Rule 144A Restriction
See notes to financial statements
10
<PAGE>
Financial Statements
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
February 28, 1997
- -----------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $11,093,680) $12,761,898
Cash 1,688
Receivable for Fund shares sold 400
Receivable for investments sold 188,833
Dividends and interest receivable 2,292
Deferred organization expenses 1,669
-------------
Total assets $12,956,780
-------------
Liabilities:
Payable for investments purchased $ 137,792
Payable for Fund shares reaquired 24,862
Payable to affiliates -
Management fee 267
Shareholder servicing agent fee 46
Accrued expenses and other liabilities 14,420
-------------
Total liabilities $ 177,387
-------------
Net assets $12,779,393
=============
Net assets consist of:
Paid-in capital $10,534,539
Unrealized appreciation on investments and translation of assets and liabilities
in foreign currencies 1,668,218
Accumulated undistributed net realized gain on investments and foreign
currency transactions 593,273
Accumulated net investment loss (16,637)
-------------
Total $12,779,393
=============
Shares of beneficial interest outstanding 967,012
=======
Class A shares:
Net asset value per share
(net assets of $3,545,430 [dividedby] 268,280 shares of beneficial interest
outstanding) $13.22
======
Class I shares:
Net asset value per share
(net assets of $9,233,963 [dividedby] 698,732 shares of beneficial interest
outstanding) $13.22
======
</TABLE>
See notes to financial statements
11
<PAGE>
Financial Statements - continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended February 28, 1997
- -----------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 16,058
Interest 5,621
-----------
Total investment income $ 21,679
-----------
Expenses -
Management fee $ 44,713
Shareholder servicing agent fee 2,568
Shareholder servicing agent fee (Class A) 4,701
Distribution and service fee (Class A) 22,580
Printing 1,976
Auditing fees 1,974
Custodian fee 1,635
Postage 324
Amortization of organization expenses 216
-----------
Total expenses $ 80,687
Fees paid indirectly (214)
Preliminary reduction of expenses by investment adviser, distributor
and shareholder servicing agent (28,973)
-----------
Net expenses $ 51,500
-----------
Net investment loss $ (29,821)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $1,163,361
Foreign currency transactions 57
-----------
Net realized gain on investments and foreign currency transactions $1,163,418
-----------
Change in unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies $1,381,698
-----------
Net realized and unrealized gain on investments and foreign currency $2,545,116
-----------
Increase in net assets from operations $2,515,295
==========
</TABLE>
See notes to financial statements
12
<PAGE>
Financial Statements - continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1997 Period Ended
(Unaudited) August 31, 1996*
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income (loss) $ (29,821) $ 13,240
Net realized gain on investments and foreign
currency transactions 1,163,418 1,148,632
Net unrealized gain on investments and
foreign currency translation 1,381,698 286,520
------------- ------------
Increase in net assets from operations $ 2,515,295 $ 1,448,401
------------- ------------
Distributions declared to shareholders
From net realized gain on investments (1,718,842) --
------------- ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $11,309,145 $ 9,192,172
Net asset value of shares issued to
shareholders in reinvestment of
distributions 1,718,834 --
Cost of shares reaquired (11,189,722) (495,900)
------------- ------------
Increase in net assets from Fund share
transactions $ 1,838,257 $ 8,696,272
------------- ------------
Total increase in net assets $ 2,634,710 $10,144,673
Net assets:
At beginning of period 10,144,683 10
------------- ------------
At end of period (including accumulated
undistributed net investment income (loss)
of $(16,637) and $13,184, respectively) $12,779,393 $10,144,683
============= ============
</TABLE>
*For the period from the commencement of investment operations, January 2, 1996
to August 31, 1996.
See notes to financial statements
13
<PAGE>
Financial Statements - continued
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1997 Period Ended
(Unaudited) August 31, 1996*
- ---------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 12.26 $10.00
---------- -----------
Income from investment operations# -
Net investment income (loss)[sec] $(0.05) $ 0.02
Net realized and unrealized gain on investments
and foreign currency transactions 3.04 2.24
---------- -----------
Total from investment operations $ 2.99 $ 2.26
---------- -----------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions (2.03) --
---------- -----------
Net asset value - end of period $ 13.22 $12.26
========== ===========
Total return 25.45%++ 22.60%++
Ratios (to average net assets)/
Supplemental data[sec]:
Expenses## 1.10%+ 0.44%+
Net investment income (loss) (0.75)%+ 0.23%+
Portfolio turnover 87% 104%
Average commission rate### $0.0558 $0.0555
Net assets at end of period (000 omitted) $ 3,540 $10,145
*For the period from the commencement of investment operations,
January 2, 1996 to August 31, 1996.
+Annualized.
++Not annualized.
#Per share data is based on average shares
outstanding.
##For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years
beginning on or after September 1, 1995.
[sec]The investment advisor and distributor voluntarily waived a portion of its
management fee, distribution fee and shareholder servicing agent fee,
respectively. To the extent these fees had been incurred, the net
investment income (loss) per share and the ratios would have been:
Net investment loss $(0.08) $(0.05)
Ratios (to average net assets):
Expenses## 1.71%+ 1.84%+
Net investment loss (1.28)%+ (0.66)%+
</TABLE>
See notes to financial statements
14
<PAGE>
Financial Statements - continued
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
February 28, 1997**
(Unaudited)
- ---------------------------------------------------------------------------------------------
Class I
- ---------------------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 12.08
----------
Income from investment operations# -
Net investment income[sec] $ 0.01
Net realized and unrealized gain on investments and foreign currency
transactions 1.13
----------
Total from investment operations $ 1.14
----------
Net asset value - end of period $ 13.22
==========
Total return 9.35%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.14%+
Net investment income 0.27%+
Portfolio turnover 87%
Average commission rate### $ 0.0558
Net assets at end of period (000 omitted) $ 9,234
**For the period from the commencement of
investment operations, January 2, 1997 to February 28, 1997.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly
###Average commission rate is calculated for funds with fiscal years
beginning on or after September 1, 1995.
[sec]The investment advisor and distributor voluntarily waived a portion of its
management fee, distribution fee and shareholder servicing agent fee,
respectively. To the extent these fees had been incurred, the net
investment income per share and the ratios would have been:
Net investment income $ --
Ratios (to average net assets):
Expenses## 0.25%+
Net investment loss (0.05)%+
</TABLE>
See notes to financial statements
15
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Strategic Growth Fund (the Fund) is a diversified series of MFS Series Trust
I (the Trust). The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days of less), including listed issues
and forward contracts, 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 result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
operations of the Fund.
16
<PAGE>
Notes to Financial Statements (Unaudited) - continued
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency they will receive from or require for their normal investment
activities. They may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Fund may enter into
contracts with the intent of changing the relative exposure of the Fund's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on the
Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure 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.
17
<PAGE>
Notes to Financial Statements (Unaudited) - continued
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 accumulated net realized
gains.
Multiple Classes of Shares of Beneficial Interest -- The Fund offers Class A and
Class I shares. The two classes of shares differ in their respective
distribution and service fees. All shareholders bear the common expenses of the
Fund pro rata based on average daily net assets of each class, without
distinction between share classes. Dividends are declared separately for each
class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75% of
average daily net assets. The investment adviser did not impose a portion of its
fee, which is reflected as a preliminary reduction of expenses in the Statement
of Operations.
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 of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Trustees did not receive any payments for
their services to the Fund.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales on Class A shares of the Fund for the six
months ended February 28, 1997.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.25% per annum of the Fund's average daily net assets attributable
to Class A shares, commissions to dealers and payments to MFD
18
<PAGE>
Notes to Financial Statements (Unaudited) - continued
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by the Fund. Distribution fees
under the Class A distribution plan are currently being waived.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within 12 months following such purchase. There were
no contingent deferred sales charges imposed during the six months ended
February 28, 1997 on Class A shares of the Fund.
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
0.13%. Prior to January 1, 1997, the fee was calculated as a percentage of the
average daily net assets of Class A shares at an effective annual rate of up to
0.15%. MFSC did not impose a portion of its fee, which is reflected as a
preliminary reduction of expenses in the Statement of Operations.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, aggregated $10,189,340 and $10,165,958, 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 $11,093,680
============
Gross unrealized appreciation $ 1,921,199
Gross unrealized depreciation (252,981)
------------
Net unrealized appreciation $ 1,668,218
============
(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:
Class A Shares
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1997 (Unaudited) 1996*
----------------------------- -----------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 112,061 $ 1,508,450 868,194 $9,192,172
Shares issued to
shareholders in
reinvestment of
distributions 139,290 1,718,834 -- --
Shares transferred to Class I (706,677) (8,734,528) -- --
Shares reaquired (104,136) (1,083,592) (40,453) (495,900)
---------- ------------- --------- -----------
Net increase (559,462) $(6,590,836) 827,741 $8,696,272
========== ============= ========= ===========
</TABLE>
*For the period from the commencement of investment operations, January 2, 1996
to August 31, 1996.
19
<PAGE>
Notes to Financial Statements (Unaudited) - continued
Class I Shares
Period Ended February 28, 1997**
(Unaudited)
-----------------------------
Shares Amount
- ----------------------------------------------------
Shares sold 104,626 $1,066,167
Shares transferred
from Class A 706,677 8,734,528
Shares reaquired (112,571) (1,371,602)
---------- ------------
Net increase 698,732 $8,429,093
========== ============
**For the period from the commencement of offering of Class I shares, January 2,
1997 to February 28, 1997.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $400 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the six months ended
February 28, 1997 was $25.
----------------------------------------------------------
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.
20
<PAGE>
MFS(R) Strategic Growth Fund
Trustees
A. Keith Brodkin* - Chairman and President
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991), Massachusetts Financial Services
Company; Director, Cambridge Bancorp; Director, Cambridge Trust Company
Peter G. Harwood - Private Investor
J. Atwood Ives - Chairman and Chief Executive Officer, Eastern Enterprises
Lawrence T. Perera - Partner, Hemenway & Barnes
William J. Poorvu - Adjunct Professor, Harvard University Graduate School of
Business Administration
Charles W. Schmidt - Private Investor
Arnold D. Scott* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames* - President and Director, Massachusetts Financial Services
Company
Elaine R. Smith - Independent Consultant
David B. Stone - Chairman, North American Management Corp. (investment advisers)
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Manager
Christian Felipe*
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
State Street Bank and Trust Company
*Affiliated with the Investment Adviser
Investor Information
For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances, and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
World Wide Web
www.mfs.com
- --------------------------------------------------------------------------------
[DALBAR LOGO]
For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category. The firm
achieved a 3.48 overall score on a scale of 1 to 4 in the 1996 survey. A total
of 110 firms responded, offering input on the quality of service they received
from 29 mutual fund companies nationwide. The survey contained questions about
service quality in 15 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
- --------------------------------------------------------------------------------
21
<PAGE>
MFS(R) Strategic [DALBAR LOGO] ----------------
Growth Fund Bulk Rate
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P A I D
500 Boylston Street Permit #55638
Boston, MA 02116-3741 Boston, MA
----------------
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We invented the mutual fund(SM)
(C) 1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
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