<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(r)
[graphic omitted]
MFS(R) STRATEGIC
GROWTH FUND
SEMIANNUAL REPORT o FEBRUARY 29, 2000
-----------------------------------------
MUTUAL FUND GIFT KITS (see page 31)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 25
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that
this new communication medium is changing forever the way we work, play, and
shop. One might also argue that investing in this new technology represents
the investment opportunity of a lifetime. The question for any investor is
whether and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no
doubt that Internet-delivered information and brokerage services enable
individual investors to be well informed and to trade at bargain prices. But
we believe the numbers and facts argue that, for most of us, mutual funds
purchased through an investment professional will continue to be one of the
best products for long-term investing in this new millennium.
According to a survey by the Investment Company Institute, the national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of
course that doesn't tell us how well they did owning those funds or stocks,
but another statistic gives us a clue. In the third quarter of 1999, during a
period of volatility in the greatest bull market in history, a quarter of the
7,500 stocks tracked by Morningstar, a popular rating service, lost more than
20% of their value. But during the same period, fewer than 1% of the mutual
funds tracked by Morningstar -- 6 out of 10,000 funds -- were down by a
similar amount.(2) So an investor's chance of picking one of those losing
stocks was about 25 times greater than his or her chance of picking an equally
losing fund.
The numbers also show that a majority of Americans seek professional advice
when buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through an investment professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up as well as down markets. And for many
investors, working with an investment professional may be the best way to
develop a plan. Although the Internet abounds with calculators for developing
all sorts of investment plans, none has your investment professional's high
level of experience and an understanding of your unique situation. And no
calculator can counsel you during a down market, when you may be tempted to
abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns dozens
or even hundreds of holdings is better positioned to survive a disappointment
in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost inevitable
part of investing. Few mutual funds, of course, are going to be up when the
overall market is down. But as the numbers above from the third quarter of
1999 demonstrate, mutual funds may be less likely to suffer the extreme
downturns experienced by a large number of individual holdings when the market
heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights. The
diversification and professional management of mutual funds help make them
inherently less risky than individual stock picking, and funds are available
in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
March 15, 2000
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(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore
Sun's Dollars and Sense Conference, 10/99. In the period 7/1/99 through
9/30/99, of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or
more; of the 10,000 mutual funds tracked by Morningstar, six lost 20% or
more. Mutual fund results are at net asset value; if sales charges had been
reflected, results would have been lower.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of S. Irfan Ali]
S. Irfan Ali
For the six months ended February 29, 2000, Class A shares of the Fund
provided a total return of 38.13%, Class B shares 37.67%, Class C shares
37.73%, Class I shares 38.38%, and Class J shares 37.97%. These returns, which
include the reinvestment of any distributions but exclude the effects of any
sales charges, compare to a 4.11% return for the Fund's benchmark, the
Standard & Poor's 500 Composite Index (the S&P 500), for the same period. The
S&P 500 is a popular, unmanaged index of common stock total return
performance. Over the same period, these returns also compare to a 29.33%
return for the average large-cap growth fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance.
Q. TO WHAT DO YOU ATTRIBUTE THE FUND'S RECENT STRONG PERFORMANCE, AS COMPARED
TO ITS BENCHMARK?
A. The Fund's strong performance over the past six months, relative to the S&P
500, can be largely attributed to our emphasis on select stocks in
technology and telecommunications, two sectors that greatly outpaced the
rest of the market.
As of February 29, 2000, the technology sector comprises about 49% of the
portfolio and consists primarily of holdings in software, semiconductor, and
networking companies. A standout in the software area has been Oracle, one
of the largest positions in the Fund and an example of how we use MFS
Original Research(R) to guide individual stock selection. Oracle is a
leading database software vendor. Its stock had not done particularly well
for much of 1999. But we stuck with the company and actually increased our
holdings in it because Oracle had been retooling all of its products for the
Internet and was, we perceived, very well positioned to exploit explosive
growth in business-to-business use of the Internet. As we spoke with
Oracle's current and potential customers, we came to believe that Oracle was
going to experience an acceleration in revenue as its software became a
dominant platform for electronic commerce. When its Internet-driven revenue
started to accelerate around the middle of last year, Oracle's market
positioning became apparent, and our holdings in the company became a major
contributor to the Fund's performance.
Q. COULD YOU COMMENT ON THE FUND'S TELECOMMUNICATIONS HOLDINGS?
A. Complementing the technology sector, telecommunications holdings were also
strong performers. Sprint PCS and NEXTEL, for example, were large positions
that did very well as each company benefited from a rapid increase in
wireless phone customers. Industry consolidation proved to be another
positive trend among wireless stocks as companies merged to create
continental or global coverage areas. The Fund's performance was helped by
investments in several wireless companies whose stocks appreciated
considerably as they became acquisition targets, including Mannesmann,
AirTouch, and Orange PLC.
Q. DID ANY AREAS UNDERPERFORM DURING THE PERIOD?
A. An area that was disappointing for the Fund was the health care sector.
Concern over reform of Medicare reimbursements created a challenging
environment for health care stocks. Large-cap pharmaceutical stocks, for
example, which had been very highly valued, were weak performers during the
period. Though the portfolio had correctly been underweighted in health care
stocks, the exposure we had did not help the Fund's performance.
Q. HOW IS THE FUND POSITIONED?
A. Looking to the period ahead, we have taken positions in a number of sectors
-- including technology, telecommunications, and business services -- where
we see potential for strong growth.
Technology is still our largest industry weighting, given what we see as
continued highly favorable trends. Semiconductor companies remain supply-
constrained by strong demand from the personal computer and
telecommunications industries. Major semiconductor holdings in the portfolio
include LSI Logic, Atmel, and Teradyne. Networking companies such as Cisco
Systems are, we believe, seeing a broadening market opportunity driven by
the demands of increased data traffic and Internet usage. Software
companies, we expect, will also see growth from the Internet, augmented by
an increase in software spending post-Year 2000 (Y2K). Besides Oracle,
software holdings include Microsoft, Computer Associates, Siebel Systems,
and Rational Software.
We would also highlight business services as an area in which we are
building our industry weighting. These companies provide services to other
businesses, such as credit card processing, mutual fund processing, wire
transfers, and information technology consulting. Many of these stocks
lagged the market in 1999, primarily because of a slowing in growth in the
second half of the year stemming from customers' reluctance to make major
information technology changes ahead of the Y2K date change. We have
invested in companies such as Computer Sciences Corp. because of attractive
valuations and prospects of acceleration in business in the year 2000.
/s/ S. Irfan Ali
S. Irfan Ali
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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S. IRFAN ALI IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R). HE IS
PORTFOLIO MANAGER OF MFS(R) STRATEGIC GROWTH FUND AND THE STRATEGIC GROWTH
SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS. HE IS ALSO A MANAGER
OF MFS(R) INSTITUTIONAL LARGE CAP GROWTH FUND.
HE JOINED MFS AS A RESEARCH ANALYST IN 1993 AFTER GRADUATING FROM HARVARD
BUSINESS SCHOOL WITH AN M.B.A. DEGREE AND WAS NAMED ASSISTANT VICE PRESIDENT
IN 1996, VICE PRESIDENT IN 1997, AND PORTFOLIO MANAGER IN 1999. HE COMPLETED
HIS BACHELOR'S DEGREE AT HARVARD IN 1989 AND WORKED AS A CORPORATE FINANCE
ANALYST WITH FIRST BOSTON CORP. BEFORE GOING TO BUSINESS SCHOOL.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED BY
AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your investment professional, or by calling MFS
at 1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS CAPITAL APPRECIATION.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JANUARY 2, 1996
CLASS INCEPTION: CLASS A JANUARY 2, 1996
CLASS B APRIL 11, 1997
CLASS C APRIL 11, 1997
CLASS I JANUARY 2, 1997
CLASS J DECEMBER 31, 1999
SIZE: $2.6 BILLION NET ASSETS AS OF FEBRUARY 29, 2000
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes to
Performance Summary.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH FEBRUARY 29, 2000
CLASS A
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding
Sales Charge +38.13% +48.68% +206.67% +371.67%
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Average Annual Total Return Excluding
Sales Charge -- +48.68% + 45.29% + 45.24%
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Average Annual Total Return Including
Sales Charge -- +40.13% + 42.45% + 43.18%
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CLASS B
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding
Sales Charge +37.67% +47.73% +200.56% +362.26%
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Average Annual Total Return Excluding
Sales Charge -- +47.73% + 44.31% + 44.54%
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Average Annual Total Return Including
Sales Charge -- +43.73% + 43.86% + 44.39%
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CLASS C
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding
Sales Charge +37.73% +47.77% +201.12% +363.13%
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Average Annual Total Return Excluding
Sales Charge -- +47.77% + 44.40% + 44.60%
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Average Annual Total Return Including
Sales Charge -- +46.77% + 44.40% + 44.60%
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* For the period from the commencement of the Fund's investment operations,
January 2, 1996, through February 29, 2000.
CLASS I
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding
Sales Charge +38.38% +49.22% +209.66% +376.26%
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Average Annual Total Return Excluding
Sales Charge -- +49.22% + 45.76% + 45.58%
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CLASS J
6 Months 1 Year 3 Years Life*
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Cumulative Total Return Excluding
Sales Charge +37.97% +48.51% +206.33% +371.13%
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Average Annual Total Return Excluding
Sales Charge -- +48.51% + 45.23% + 45.20%
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Average Annual Total Return Including
Sales Charge -- +45.54% + 44.26% + 44.49%
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* For the period from the commencement of the Fund's investment operations,
January 2, 1996, through February 29, 2000.
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance
Including Sales Charge takes into account the deduction of the applicable
contingent deferred sales charge (CDSC), which declines over six years from 4%
to 0%. Class C Share Performance Including Sales Charge takes into account the
deduction of the 1% CDSC applicable to Class C shares redeemed within 12
months. Class I shares have no sales charge and are only available to certain
institutional investors. Class J shares are only available to certain Japanese
investors.
Class B, C, I, and J share performance includes the performance of the Fund's
Class A shares for periods prior to their inception (blended performance).
Class J blended performance has been adjusted to take into account the initial
sales charge (load) applicable to Class J shares. Class B and C blended
performance has been adjusted to take into account the CDSC applicable to
Class B and C shares rather than the load applicable to Class A shares. Class
I blended performance has been adjusted to account for the fact that Class I
shares have no sales charge. These blended performance figures have not been
adjusted to take into account differences in class-specific operating
expenses. Because operating expenses for Class B, C, and J shares are higher
than those of Class A, the blended Class B, C, and J share performance is
higher than it would have been had Class B, C, and J shares been offered the
entire period. Conversely, because operating expenses of Class I shares are
lower than those of Class A, the blended Class I share performance is lower
than it would have been had Class I shares been offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
PORTFOLIO CONCENTRATION AS OF FEBRUARY 29, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 48.8%
UTILITIES & COMMUNICATIONS 12.7%
CONGLOMERATES, SPECIAL PRODUCTS/SERVICES 9.9%
LEISURE 6.9%
RETAILING 5.2%
<TABLE>
TOP 10 STOCK HOLDINGS
<S> <C>
MICROSOFT CORP. 3.4% MOTOROLA, INC. 2.0%
Computer software and systems company Manufacturer of communications and
electronics products
ORACLE CORP. 3.0%
Database software developer and manufacturer GENERAL ELECTRIC CO. 2.0%
Diversified manufacturing and financial
CISCO SYSTEMS, INC. 2.6% services conglomerate
Computer network developer
BMC SOFTWARE, INC. 1.9%
CORNING, INC. 2.2% Computer software company
Materials and equipment supplier to
communications industries LSI LOGIC CORP. 1.8%
Manufacturer of chips for communications
COMPUTER ASSOCIATES INTERNATIONAL, INC. 2.2% products
Computer software company
SIEBEL SYSTEMS, INC. 1.8%
Developer of sales, marketing, and customer
service software
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 29, 2000
<CAPTION>
Stocks - 99.5%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 87.8%
Advertising - 0.4%
Omnicom Group, Inc. 38,600 $ 3,635,638
Young & Rubicam, Inc. 123,400 6,231,700
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$ 9,867,338
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Banks and Credit Companies - 0.2%
Providian Financial Corp. 73,700 $ 4,776,681
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Biotechnology - 1.4%
Waters Corp.* 369,300 $ 36,214,481
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Business Machines - 3.1%
Affiliated Computer Services, Inc., "A"* 667,926 $ 21,039,669
Egain Communications Corp.* 130,500 7,356,938
Seagate Technology, Inc.* 524,000 26,134,500
Sun Microsystems, Inc.* 277,344 26,417,016
--------------
$ 80,948,123
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Business Services - 7.1%
Automatic Data Processing Inc. 308,900 $ 13,456,456
Bea Systems, Inc.* 87,400 11,061,563
BISYS Group, Inc.* 507,600 26,173,125
Computer Sciences Corp.* 474,200 37,372,887
Concord EFS, Inc.* 404,100 7,905,206
DST Systems, Inc.* 212,881 11,947,946
First Data Corp. 788,150 35,466,750
Fiserv, Inc.* 894,100 24,364,225
Metamor Worldwide, Inc.* 98,700 2,023,350
Teletech Holdings, Inc.* 324,050 12,273,394
--------------
$ 182,044,902
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Cellular Telephones - 1.5%
Sprint Corp. (PCS Group)* 602,900 $ 31,200,075
U.S. Cellular Corp.* 28,000 1,874,250
VoiceStream Wireless Corp.* 30,100 4,005,181
Western Wireless Corp.* 28,300 1,372,550
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$ 38,452,056
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Computer Hardware - Systems - 0.4%
Dell Computer Corp.* 236,800 $ 9,664,400
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Computer Software - Personal Computers - 4.6%
Documentum, Inc.* 363,300 $ 27,406,444
Intuit, Inc.* 54,900 2,882,250
Microsoft Corp.* 972,700 86,935,062
--------------
$ 117,223,756
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Computer Software - Services - 1.3%
EMC Corp.* 124,500 $ 14,815,500
Portal Software, Inc.* 230,700 17,331,338
Xpedior, Inc.* 45,000 810,000
--------------
$ 32,956,838
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Computer Software - Systems - 15.1%
Ariba, Inc.* 31,500 $ 8,331,750
BMC Software, Inc.* 1,041,862 47,925,652
Cadence Design Systems, Inc.* 1,860,740 37,098,504
Computer Associates International, Inc. 887,870 57,101,139
Compuware Corp.* 1,182,852 26,170,601
I2 Technologies, Inc.* 29,600 4,839,600
Liberate Technologies* 17,700 1,803,188
Oracle Corp.* 1,046,450 77,698,912
Rational Software Corp.* 630,900 44,872,762
Siebel Systems, Inc.* 339,300 47,056,669
VERITAS Software Corp.* 180,500 35,716,437
--------------
$ 388,615,214
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Conglomerates - 1.7%
Tyco International Ltd. 1,154,804 $ 43,810,377
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Consumer Goods and Services - 0.1%
Galileo International, Inc. 230,500 $ 3,918,500
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Electrical Equipment - 2.0%
General Electric Co. 382,900 $ 50,614,594
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Electronics - 11.5%
Altera Corp.* 346,184 $ 27,608,174
Analog Devices, Inc.* 183,900 28,872,300
Applied Materials, Inc.* 85,900 15,714,331
Atmel Corp.* 887,100 43,911,450
Cypress Semiconductor Corp.* 310,200 14,152,875
Fairchild Semiconductor International Co.* 301,900 11,396,725
Intel Corp. 225,034 25,428,842
LSI Logic Corp.* 738,000 47,278,125
National Semiconductor Corp.* 427,600 32,123,450
Novellus Systems, Inc.* 196,100 11,631,181
Teradyne, Inc.* 436,700 37,992,900
--------------
$ 296,110,353
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Entertainment - 3.7%
AMFM, Inc.* 60,400 $ 3,707,050
CBS Corp.* 468,288 27,892,404
Clear Channel Communications, Inc.* 99,725 6,644,178
Comcast Corp., "A" 464,100 19,724,250
Cox Radio, Inc., "A"* 12,348 987,840
Gemstar International Group Ltd.* 23,800 1,805,825
Hearst-Argyle Television, Inc.* 43,800 911,587
Infinity Broadcasting Corp., "A"* 1,043,525 33,327,580
Spanish Broadcasting Systems, Inc.* 14,125 270,141
--------------
$ 95,270,855
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Financial Institutions - 3.4%
American Express Co. 25,432 $ 3,412,656
Associates First Capital Corp., "A" 411,752 8,183,571
Citigroup, Inc. 298,450 15,426,134
Federal Home Loan Mortgage Corp. 192,400 8,032,700
Federal National Mortgage Assn 26,362 1,397,186
Merrill Lynch & Co., Inc. 133,700 13,704,250
Morgan Stanley Dean Witter & Co. 253,074 17,825,900
State Street Corp. 270,643 19,723,109
--------------
$ 87,705,506
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Insurance - 0.8%
American International Group, Inc. 118,093 $ 10,443,850
Aon Corp. 79,600 1,666,625
Gallagher (Arthur J.) & Co. 175,000 8,946,875
Hartford Financial Services Group, Inc. 11,900 371,875
--------------
$ 21,429,225
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Internet - 0.1%
VeriSign, Inc.* 10,800 $ 2,732,400
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Medical and Health Products - 2.5%
American Home Products Corp.
Bausch & Lomb, Inc. 412,000 21,733,000
Bristol-Myers Squibb Co. 179,836 10,216,933
Johnson & Johnson Co. 16,000 1,148,000
Pharmacia & Upjohn, Inc. 424,000 20,193,000
--------------
$ 64,764,841
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Medical and Health Technology and Services - 0.4%
United Healthcare Corp. 151,927 $ 7,767,268
VISX, Inc.* 177,000 2,997,937
--------------
$ 10,765,205
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Oil Services - 2.3%
Baker Hughes, Inc. 594,900 $ 15,393,037
Cooper Cameron Corp.* 301,775 16,673,069
Halliburton Co. 311,700 11,903,044
Noble Drilling Corp.* 323,400 11,642,400
Schlumberger Ltd. 33,400 2,467,425
--------------
$ 58,078,975
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Oils - 0.7%
Conoco, Inc. 172,500 $ 3,396,094
Transocean Sedco Forex, Inc.* 343,766 13,557,271
--------------
$ 16,953,365
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Printing and Publishing - 0.9%
Gannett Co., Inc. 130,916 $ 8,534,087
Tribune Co. 357,600 13,924,050
--------------
$ 22,458,137
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Railroads - 0.6%
Kansas City Southern Industries, Inc. 187,800 $ 14,789,250
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Restaurants and Lodging - 0.3%
Cendant Corp.* 262,538 $ 4,676,458
Wendy's International, Inc. 190,800 3,005,100
--------------
$ 7,681,558
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Stores - 2.9%
Costco Wholesale Corp.* 82,800 $ 4,108,950
CVS Corp. 616,298 21,570,430
Lowe's Cos., Inc. 115,400 5,495,925
Office Depot, Inc.* 1,039,931 12,674,159
Tandy Corp. 362,600 13,801,463
TJX Cos., Inc. 180,550 2,877,516
Wal-Mart Stores, Inc. 300,776 14,644,031
--------------
$ 75,172,474
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Supermarkets - 1.9%
Kroger Co.* 1,481,064 $ 22,030,827
Safeway, Inc.* 669,200 25,806,025
--------------
$ 47,836,852
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Telecommunications - 15.4%
Alltel Corp. 24,900 $ 1,444,200
American Tower Corp., "A"* 379,200 18,675,600
ANTEC Corp.* 385,000 20,380,938
AT&T Corp.* 231,300 12,085,425
Cisco Systems, Inc.* 496,624 65,647,485
Corning, Inc. 305,200 57,377,600
Cox Communications, Inc.* 279,900 12,717,956
GTE Corp. 37,800 2,230,200
JDS Uniphase Corp.* 11,800 3,110,775
MCI WorldCom, Inc.* 425,593 18,992,088
Metromedia Fiber Network, Inc., "A"* 189,160 13,598,831
Motorola, Inc. 298,947 50,970,463
Network Solutions, Inc.* 38,100 12,284,869
NEXTEL Communications, Inc.* 206,550 28,245,712
Nortel Networks Corp. 182,900 20,393,350
QUALCOMM, Inc.* 86,000 12,249,625
Tellabs, Inc.* 91,700 4,401,600
UnitedGlobalCom, Inc.* 156,400 16,343,800
Vignette Corp.* 79,100 18,232,550
Winstar Communications, Inc.* 91,800 7,103,025
--------------
$ 396,486,092
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.7%
AES Corp.* 166,100 $ 13,921,256
Calpine Corp.* 47,500 4,346,250
--------------
$ 18,267,506
- --------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.8%
U.S. West, Inc. 279,500 $ 20,298,688
- --------------------------------------------------------------------------------------------------------
Total U.S. Stocks $2,255,908,542
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 11.7%
Bermuda - 1.0%
FLAG Telecom Holdings Ltd. (Telecommunications)* 192,500 $ 5,510,313
Global Crossing Ltd. (Telecommunications)* 415,700 19,382,012
--------------
$ 24,892,325
- --------------------------------------------------------------------------------------------------------
Brazil - 1.0%
Tele Sudeste Celular Participacoes S.A. (Telecommunications) 87,100 $ 4,986,475
Telecomunicacoes De Sao Paulo S.A. (Telecommunications)* 571,400 19,534,738
--------------
$ 24,521,213
- --------------------------------------------------------------------------------------------------------
Finland - 1.0%
Nokia Corp., ADR (Telecommunications) 123,800 $ 24,551,087
- --------------------------------------------------------------------------------------------------------
France - 1.1%
Vivendi (Business Services) 250,500 $ 29,463,854
- --------------------------------------------------------------------------------------------------------
Hong Kong - 0.1%
China Telecom Ltd. (Telecommunications) 334,000 $ 3,079,320
- --------------------------------------------------------------------------------------------------------
Italy - 0.6%
Telecom Italia Mobile S.p.A. (Telecommunications) 1,229,000 $ 16,766,033
- --------------------------------------------------------------------------------------------------------
Japan - 1.1%
Fast Retailing Co. (Retail) 35,200 $ 10,012,744
Nippon Telegraph & Telephone Co. (Utilities - Telephone) 823 11,386,856
NTT Mobile Communications Network, Inc. (Telecommunications) 150 6,048,607
--------------
$ 27,448,207
- --------------------------------------------------------------------------------------------------------
Netherlands - 1.5%
Asm International N.V. (Electronics)* 238,600 $ 7,784,325
KPN N.V. (Telecommunications)* 241,700 30,770,677
--------------
$ 38,555,002
- --------------------------------------------------------------------------------------------------------
Peru - 0.1%
Telefonica del Peru S.A., ADR (Telecommunications) 167,100 $ 3,279,338
- --------------------------------------------------------------------------------------------------------
Sweden - 0.7%
Ericsson LM, "B" (Telecommunications) 121,400 $ 11,644,518
Ericsson LM, ADR (Telecommunications) 61,100 5,865,600
--------------
$ 17,510,118
- --------------------------------------------------------------------------------------------------------
Switzerland - 0.3%
Nestle S.A. (Food and Beverage Products) 5,022 $ 8,479,523
- --------------------------------------------------------------------------------------------------------
United Kingdom - 3.2%
BP Amoco PLC, ADR (Oils) 255,350 $ 12,001,450
Cable & Wireless Communications PLC (Telecommunications) 1,636,700 27,716,029
COLT Telecom Group PLC, ADR (Telecommunications)* 34,000 7,921,469
Shire Pharmaceuticals Group PLC (Medical and Health
Technology and Services)* 100,000 4,800,000
Vodafone AirTouch PLC (Telecommunications)* 5,118,127 28,634,494
--------------
$ 81,073,442
- --------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 299,619,462
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,928,355,071) $2,555,528,004
- --------------------------------------------------------------------------------------------------------
Convertible Preferred Stock
- --------------------------------------------------------------------------------------------------------
Insurance
Lincoln National Corp., 1.85% (Identified Cost, $537,967) 25,300 $ 354,200
- --------------------------------------------------------------------------------------------------------
Convertible Bond
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
Financial Services
Bell Atlantic Financial Services, Inc., 4.25s,
2005## (Identified Cost, $437,191) $ 394 $ 558,003
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.1%
- --------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, due 3/22/00 $ 15,000 $ 14,950,825
Federal Home Loan Mortgage Corp., due 3/01/00 13,415 13,415,000
- --------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 28,365,825
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,957,696,054) $2,584,806,032
Other Assets, Less Liabilities - (0.6%) (15,776,735)
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,569,029,297
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
FEBRUARY 29, 2000
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,957,696,054) $2,584,806,032
Investments of cash collateral for securities loaned,
at value (identified cost, $138,104,729) 138,104,729
Cash 5,414
Receivable for Fund shares sold 16,595,684
Receivable for investments sold 23,207,840
Interest and dividends receivable 443,457
Deferred organization expenses 363
Other assets 4,127
--------------
Total assets $2,763,167,646
--------------
Liabilities:
Payable for Fund shares reacquired $ 4,451,193
Payable for investments purchased 51,196,797
Collateral for securities loaned, at value 138,104,729
Payable to affiliates -
Management fee 50,921
Shareholder servicing agent fee 6,790
Distribution and service fee 49,183
Administrative fee 883
Accrued expenses and other liabilities 277,853
--------------
Total liabilities $ 194,138,349
--------------
Net assets $2,569,029,297
==============
Net assets consist of:
Paid-in capital $1,820,867,082
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 627,114,736
Accumulated undistributed net realized gain on
investments and foreign currency transactions 132,312,209
Accumulated net investment loss (11,264,730)
--------------
Total $2,569,029,297
==============
Shares of beneficial interest outstanding 70,454,713
==========
Class A shares:
Net asset value per share
(net assets of $1,043,631,594 / 28,371,361 shares of
beneficial interest outstanding) $36.78
======
Offering price per share (100 / 94.25 of net asset
value per share) $39.02
======
Class B shares:
Net asset value and offering price per share
(net assets of $1,149,123,821 / 31,734,694 shares of
beneficial interest outstanding) $36.21
======
Class C shares:
Net asset value and offering price per share
(net assets of $338,997,695 / 9,341,785 shares of
beneficial interest outstanding) $36.29
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $36,513,672 / 985,817 shares of
beneficial interest outstanding) $37.04
======
Class J shares:
Net asset value, offering price, and redemption price per share
(net assets of $762,515 / 21,056 shares of beneficial
interest outstanding) $36.21
======
Offering price per share (100 / 98 of net asset value
per share) $36.95
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 29, 2000
- --------------------------------------------------------------------------------
Net investment income (loss):
Income -
Dividends $ 2,571,898
Interest 1,475,280
Income on securities loaned 234,385
Foreign taxes withheld (27,026)
--------------
Total investment income $ 4,254,537
--------------
Expenses -
Management fee $ 6,745,894
Trustees' compensation 20,406
Shareholder servicing agent fee 899,453
Distribution and service fee (Class A) 1,177,070
Distribution and service fee (Class B) 4,259,215
Distribution and service fee (Class C) 1,225,587
Distribution and service fee (Class J) 237
Administrative fee 88,769
Custodian fee 242,355
Printing 58,184
Postage 136,022
Auditing fees 15,961
Legal fees 7,721
Amortization of organization expenses 219
Miscellaneous 662,575
--------------
Total expenses $ 15,539,668
Fees paid indirectly (39,296)
--------------
Net expenses $ 15,500,372
--------------
Net investment loss $ (11,245,835)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 164,601,744
Foreign currency transactions (273,087)
--------------
Net realized gain on investments and foreign currency
transactions $ 164,328,657
--------------
Change in unrealized appreciation -
Investments $ 449,656,698
Translation of assets and liabilities in foreign
currencies 3,573
--------------
Net unrealized gain on investments and foreign currency
translation $ 449,660,271
--------------
Net realized and unrealized gain on investments and
foreign currency $ 613,988,928
--------------
Increase in net assets from operations $ 602,743,093
==============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (11,245,835) $ (10,112,459)
Net realized gain on investments and foreign
currency transactions 164,328,657 79,985,240
Net unrealized gain on investments and
foreign currency translation 449,660,271 220,365,436
-------------- --------------
Increase in net assets from operations $ 602,743,093 $ 290,238,217
-------------- --------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (37,735,978) $ (7,422,891)
From net realized gain on investments and foreign
currency transactions (Class B) (46,345,703) (8,619,831)
From net realized gain on investments and foreign
currency transactions (Class C) (13,271,635) (2,303,504)
From net realized gain on investments and foreign
currency transactions (Class I) (1,678,981) (774,501)
-------------- --------------
Total distributions declared to shareholders $ (99,032,297) $ (19,120,727)
-------------- --------------
Net increase in net assets from Fund share
transactions $ 685,475,017 $ 672,666,668
-------------- --------------
Total increase in net assets $1,189,185,813 $ 943,784,158
Net assets:
At beginning of period 1,379,843,484 436,059,326
-------------- --------------
At end of period (including accumulated net
investment loss of $11,264,730 and $18,895,
respectively) $2,569,029,297 $1,379,843,484
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
SIX MONTHS ENDED ------------------------------------------ AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997 1996*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $28.18 $18.79 $16.79 $12.26 $10.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss)(S) $(0.13) $(0.18) $(0.14) $(0.11) $ 0.02
Net realized and unrealized gain on
investments and foreign currency 10.57 10.29 2.32 6.67 2.24
------ ------ ------ ------ ------
Total from investment operations $10.44 $10.11 $ 2.18 $ 6.56 $ 2.26
------ ------ ------ ------ ------
Less distributions declared to
shareholders from net realized gain
on investments and foreign currency
transactions $(1.84) $(0.72) $(0.18) $(2.03) $ --
------ ------ ------ ------ ------
Net asset value - end of period $36.78 $28.18 $18.79 $16.79 $12.26
====== ====== ====== ====== ======
Total return(+) 38.13%++ 54.40% 13.07% 59.54% 22.60%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.33%+ 1.38% 1.36% 1.29% 0.44%+
Net investment income (loss) (0.85)%+ (0.69)% (0.66)% (0.82)% 0.23%+
Portfolio turnover 48% 112% 56% 82% 104%
Net assets at end of period
(000 omitted) $1,043,631 $512,994 $168,536 $21,699 $10,145
(S) For the periods ended August 31, 1997, and 1996, subject to reimbursement by the Fund, the investment adviser voluntarily
agreed to maintain expenses of the Fund, exclusive of management and distribution fees, at not more than 0.50% of average
daily net assets. Prior to August 31, 1998, the investment adviser and the distributor voluntarily waived a portion of
their management fee and distribution fee, respectively, for certain of the periods indicated. If these fees had been
incurred by the Fund and/or if actual expenses were over this limitation, the net investment loss per share and the
ratios would have been:
Net investment loss $ -- $ -- $(0.15) $(0.15) $(0.05)
Ratios (to average net assets):
Expenses## -- -- 1.43% 1.59% 1.84%+
Net investment loss -- -- (0.72)% (1.12)% (0.66)%+
* For the period from the commencement of the Fund's investment operations, January 2, 1996, through August 31, 1996.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
SIX MONTHS ENDED ------------------------- AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $27.75 $18.59 $16.75 $12.53
------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.23) $(0.35) $(0.28) $(0.09)
Net realized and unrealized gain on
investments and foreign currency 10.42 10.18 2.30 4.31
------ ------ ------ ------
Total from investment operations $10.19 $ 9.83 $ 2.02 $ 4.22
------ ------ ------ ------
Less distributions declared to shareholders
from net realized gain on investments and
foreign currency transactions $(1.73) $(0.67) $(0.18) $ --
------ ------ ------ ------
Net asset value - end of period $36.21 $27.75 $18.59 $16.75
====== ====== ====== ======
Total return 37.67%++ 53.47% 12.12% 33.76%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.98%+ 2.03% 2.08% 2.02%+
Net investment loss (1.50)%+ (1.34)% (1.36)% (1.46)%+
Portfolio turnover 48% 112% 56% 82%
Net assets at end of period (000 omitted) $1,149,124 $656,217 $196,519 $15,735
(S) For the period ended August 31, 1997, subject to reimbursement by the Fund, the investment adviser voluntarily agreed to
maintain expenses of the Fund, exclusive of management and distribution fees, at not more than 0.50% of average daily net
assets. To the extent actual expenses were over this limitation, the net investment loss per share and the ratios would
have been:
Net investment loss $ -- $ -- $ -- $(0.12)
Ratios (to average net assets):
Expenses## -- -- -- 2.51%+
Net investment loss -- -- -- (1.95)%+
* For the period from the inception of Class B, April 11, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
SIX MONTHS ENDED ------------------------- AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $27.81 $18.63 $16.77 $12.53
------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.24) $(0.35) $(0.28) $(0.09)
Net realized and unrealized gain on investments
and foreign om investment operations $10.22 $ 9.85 $ 2.03 $ 4.24
------ ------ ------ ------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $(1.74) $(0.67) $(0.17) $ --
------ ------ ------ ------
Net asset value - end of period $36.29 $27.81 $18.63 $16.77
====== ====== ====== ======
Total return 37.73%++ 53.40% 12.20% 33.92%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.98%+ 2.03% 2.08% 2.04%+
Net investment loss (1.50)%+ (1.34)% (1.37)% (1.48)%+
Portfolio turnover 48% 112% 56% 82%
Net assets at end of period (000 omitted) $338,998 $185,784 $52,668 $6,048
(S) For the period ended August 31, 1997, subject to reimbursement by the Fund, the investment adviser voluntarily agreed to
maintain expenses of the Fund, exclusive of management and distribution fees, at not more than 0.50% of average daily net
assets. To the extent actual expenses were over this limitation, the net investment loss per share and the ratios would
have been:
Net investment loss $ -- $ -- $ -- $(0.13)
Ratios (to average net assets):
Expenses## -- -- -- 2.56%+
Net investment loss -- -- -- (1.99)%+
* For the period from the inception of Class C, April 11, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD ENDED
SIX MONTHS ENDED -------------------------- AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS I
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $28.36 $18.85 $16.80 $12.08
------ ------ ------ ------
Income from investment operations# -
Net investment loss(S) $(0.08) $(0.08) $(0.08) $(0.04)
Net realized and unrealized gain on investments
and foreign currency 10.66 10.34 2.31 4.76
------ ------ ------ ------
Total from investment operations $10.58 $10.26 $ 2.23 $ 4.72
------ ------ ------ ------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $(1.90) $(0.75) $(0.18) $ --
------ ------ ------ ------
Net asset value - end of period $37.04 $28.36 $18.85 $16.80
====== ====== ====== ======
Total return 38.38%++ 55.08% 13.32% 39.24%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.98%+ 1.03% 1.08% 0.94%+
Net investment loss (0.50)%+ (0.34)% (0.37)% (0.40)%+
Portfolio turnover 48% 112% 56% 82%
Net assets at end of period (000 omitted) $36,514 $24,849 $18,335 $13,462
(S) For the period ended August 31, 1997, subject to reimbursement by the Fund, the investment adviser voluntarily agreed to
maintain the expenses of the Fund, exclusive of management fees, at not more than 0.50% of average daily net assets. To
the extent actual expenses were over this limitation, the net investment loss per share and the ratios would have been:
Net investment loss $ -- $ -- $ -- $(0.06)
Ratios (to average net assets):
Expenses## -- -- -- 1.14%+
Net investment loss -- -- -- (0.60)%+
* For the period from the inception of Class I, January 2, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
PERIOD ENDED
FEBRUARY 29, 2000*
(UNAUDITED)
- --------------------------------------------------------------------------------
CLASS J
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $34.29
------
Income from investment operations# -
Net investment loss $(0.06)
Net realized and unrealized gain on investments and foreign
currency 1.98
------
Total from investment operations $ 1.92
------
Net asset value - end of period $36.21
======
Total return(+) 5.60%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.98%+
Net investment loss (1.50)%+
Portfolio turnover 48%
Net assets at end of period (000 omitted) $762
* For the period from the inception of Class J, December 31, 1999, through
February 29, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
(+) Total returns for Class J 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.
<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. The Fund
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. 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 in good faith, at
fair value, by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
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 Fund
operations.
Deferred Trustee Compensation - Effective July 24, 1999, under a Deferred
Compensation Plan (the Plan) independent Trustees may elect to defer receipt
of all or a portion of their annual compensation. Deferred amounts are treated
as though equivalent dollar amounts had been invested in shares of the Fund or
other MFS funds selected by the Trustee. Deferred amounts represent an
unsecured obligation
of the Fund until distributed in accordance with the Plan.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the Fund to certain qualified
institutions (the "Borrowers") approved by the Fund. The loans are
collateralized at all times by cash and U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned. State Street
provides the Fund with indemnification against Borrower default. The Fund
bears the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the Fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and
is allocated between the Fund and the lending agent. The dividend and interest
income earned on the securities loaned is accounted for in the same manner as
other dividend and interest income.
At February 29, 2000, the value of securities loaned was $134,688,727. These
loans were collateralized by U.S. Treasury securities of $105,827 and cash of
$138,104,729 which was invested in the following short-term obligations:
IDENTIFIED COST
SHARES AND VALUE
- --------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 138,104,729 $138,104,729
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. Distributions to shareholders are
recorded on the ex-dividend date. The Fund distinguishes between distributions
on a tax basis and a financial reporting basis and requires that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as distributions from paid-in capital. Differences in the
recognition or classification of income between the financial statements and
tax earnings and profits, which result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net
investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of the Fund's average daily net assets.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $6,406
for the six months ended February 29, 2000.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$519,774 for the six months ended February 29, 2000, as its portion of the
sales charge on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.10% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $45,035
for the six months ended February 29, 2000. Fees incurred under the
distribution plan during the six months ended February 29, 2000, were 0.35% 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 $3,514 and $2,389 for
Class B and Class C shares, respectively, for the six months ended February
29, 2000. Fees incurred under the distribution plan during the six months
ended February 29, 2000, were 1.00% of average daily net assets attributable
to Class B and Class C shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of up to 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 J shares. Class J shares
are available for distribution through Monex, Inc. ("Monex") and Citicorp
Securities (Japan) Ltd. ("Citicorp") and their network of financial
intermediaries. Monex also serves as the Fund's Agent Securities Company in
Japan, and in that capacity represents the Fund before Japanese regulatory
authorities. MFD will pay to Monex and Citicorp all of the service fee
attributable to Class J shares. Out of the distribution fee, MFD will pay to
Monex and Citicorp 0.575% per annum of average daily net assets attributable to
Class J shares and will retain the remaining 0.125%. A portion of the
distribution fee equal to 0.05% per annum of the Fund's average daily net assets
attributable to Class J shares is paid to Monex to cover its services as the
Fund's Agent Securities Company. Fees incurred under the distribution plan
during the period ended February 29, 2000, were 1.00% of average net assets
attributable to Class J shares, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended February
29, 2000, were $16,839, $526,366, and $43,153 for Class A, Class B, and Class
C shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the Fund's average daily net assets at an annual rate of
0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,552,379,768 and $952,033,570, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $1,957,696,054
--------------
Gross unrealized appreciation $ 735,998,715
Gross unrealized depreciation (108,888,737)
--------------
Net unrealized appreciation $ 627,109,978
==============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 12,426,545 $ 414,212,592 15,943,773 $ 411,479,246
Shares issued to shareholders
in reinvestment of
distributions 1,097,019 34,767,502 283,116 6,745,030
Shares reacquired (3,359,300) (108,293,275) (6,990,984) (175,904,817)
---------- ------------- ---------- -------------
Net increase 10,164,264 $ 340,686,819 9,235,905 $ 242,319,459
========== ============= ========== =============
<CAPTION>
Class B Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,957,314 $ 284,470,690 16,880,873 $ 431,590,084
Shares issued to shareholders
in reinvestment of distributions 1,318,828 41,210,532 324,370 7,646,316
Shares reacquired (2,185,063) (69,903,103) (4,132,169) (105,206,007)
---------- ------------- ---------- -------------
Net increase 8,091,079 $ 255,778,119 13,073,074 $ 334,030,393
========== ============= ========== =============
<CAPTION>
Class C Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,125,063 $ 99,807,068 5,551,263 $ 141,563,695
Shares issued to shareholders
in reinvestment of distributions 362,531 11,364,353 79,491 1,876,845
Shares reacquired (825,914) (26,470,371) (1,778,448) (44,256,563)
---------- ------------- ---------- -------------
Net increase 2,661,680 $ 84,701,050 3,852,306 $ 99,183,977
========== ============= ========== =============
<CAPTION>
Class I Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 157,634 $ 5,137,577 310,485 $ 7,959,479
Shares issued to shareholders
in reinvestment of distributions 52,333 1,668,371 32,260 771,016
Shares reacquired (100,440) (3,242,585) (439,164) (11,597,656)
---------- ------------- ---------- -------------
Net increase (decrease) 109,527 $ 3,563,363 (96,419) $ (2,867,161)
========== ============= ========== =============
<CAPTION>
Class J Shares
PERIOD ENDED FEBRUARY 29, 2000*
-------------------------------
SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Shares sold 21,126 $ 748,165
Shares reacquired (70) (2,499)
---------- -------------
Net increase 21,056 $ 745,666
========== =============
* For the period from the inception of Class J, December 31, 1999, through February 29, 2000.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the six months ended February 29, 2000, was $7,226. The Fund had no
significant borrowings during the period.
<PAGE>
<TABLE>
MFS(R) STRATEGIC GROWTH FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Richard B. Bailey+ - Private Investor; Former Mark E. Bradley*
Chairman and Director (until 1991), MFS Investment Ellen Moynihan*
Management(R) James O. Yost*
Marshall N. Cohan+ - Private Investor SECRETARY
Stephen E. Cavan*
Lawrence H. Cohn, M.D.+ - Chief of Cardiac
Surgery, Brigham and Women's Hospital; Professor ASSISTANT SECRETARY
of Surgery, Harvard Medical School James R. Bordewick, Jr.*
The Hon. Sir J. David Gibbons, KBE+ - Chief CUSTODIAN
Executive Officer, Edmund Gibbons Ltd.; Chairman, State Street Bank and Trust Company
Colonial Insurance Company, Ltd.
INVESTOR INFORMATION
Abby M. O'Neill+ - Private Investor For information on MFS mutual funds, call your
investment professional or, for an information
Walter E. Robb, III+ - President and Treasurer, kit, call toll free: 1-800-637-2929 any business
Benchmark Advisors, Inc. (corporate financial day from 9 a.m. to 5 p.m. Eastern time (or leave a
consultants); President, Benchmark Consulting message anytime).
Group, Inc. (office services)
INVESTOR SERVICE
Arnold D. Scott* - Senior Executive MFS Service Center, Inc.
Vice President, Director, and Secretary, P.O. Box 2281
MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman and Chief For general information, call toll free:
Executive Officer, MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt+ - President, Insight Resources,
Inc. (acquisition planning specialists) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9
Ward Smith+ - Former Chairman (until 1994), NACCO a.m. to 5 p.m. Eastern time. (To use this service,
Industries (holding company) your phone must be equipped with a
Telecommunications Device for the Deaf.)
INVESTMENT ADVISER
Massachusetts Financial Services Company For share prices, account balances, exchanges, or
500 Boylston Street stock and bond outlooks, call toll free:
Boston, MA 02116-3741 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
DISTRIBUTOR
MFS Fund Distributors, Inc. WORLD WIDE WEB
500 Boylston Street www.mfs.com
Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGER
S. Irfan Ali*
TREASURER
W. Thomas London*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) STRATEGIC GROWTH FUND ------------
BULK RATE
[Logo] M F S(R) U.S. POSTAGE
INVESTMENT MANAGEMENT PAID
We invented the mutual fund(R) MFS
------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MSG-3 4/00 155M 90/290/390/890
