<PAGE>
Annual Report
[LOGO] MFS(SM) for Year Ended
INVESTMENT MANAGEMENT November 30, 1997
MFS(R) EMERGING GROWTH FUND
[Graphic Omitted]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
A Discussion with the Portfolio Manager ................................... 2
Portfolio Manager's Profile ............................................... 4
Fund Facts ................................................................ 5
Performance Summary ....................................................... 5
Portfolio Concentration ................................................... 8
Tax Form Summary .......................................................... 8
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 26
Notes to Financial Statements ............................................. 34
Independent Auditors' Report .............................................. 43
The MFS Family of Funds(R) ................................................ 44
Trustees and Officers ..................................................... 45
HIGHLIGHTS
o FOR THE 12 MONTHS ENDED NOVEMBER 30, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 18.66%, CLASS B SHARES 17.78%,
CLASS C SHARES 17.81%, AND CLASS I SHARES 20.24%. (SEE PERFORMANCE SUMMARY
FOR MORE INFORMATION.)
o ALTHOUGH 1997 WAS A DIFFICULT YEAR, WITH BOTH FASTER-GROWING AND SMALL
COMPANIES OUT OF FAVOR DUE TO THE NEGATIVE IMPACT OF THE ASIAN CRISIS, THE
FUND HAS PERFORMED RELATIVELY WELL COMPARED TO SOME OF ITS COMPETITORS.
o THE TECHNOLOGY SECTOR CONTINUES TO BENEFIT THE FUND, AS COUNTRIES AROUND THE
WORLD, INCLUDING THOSE IN ASIA, HAVE BEEN FORCED TO KEEP SPENDING ON
TECHNOLOGY IN ORDER TO LOWER COSTS AND BECOME MORE COMPETITIVE.
o MANY OF THE COMPANIES IN THE PORTFOLIO ARE INVOLVED IN THE FASTEST-GROWING,
MOST-DYNAMIC SEGMENTS OF THE ECONOMY AND, AS A RESULT, HAVE HELPED THE FUND
MAINTAIN AN AVERAGE EARNINGS GROWTH RATE OF APPROXIMATELY 25% IN SPITE OF
ITS GROWTH IN ASSETS.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
An unprecedented combination of generally positive factors has helped the U.S.
economy enjoy a sustained period of relative stability and moderate growth in
which thousands of new jobs have been created every month, inflation remains
under control, and the investment climate -- at least until now -- has been
favorable. For example, the increased use of technology and other productivity
enhancements, as well as corporate restructuring and global competition, is
improving companies' balance sheets and helping control inflation. Meanwhile,
borrowing by corporations and governments continues to decline, while consumer
confidence is increasing, although consumer debt levels are still
uncomfortably high. The rapid pace of growth seen in the first quarter slowed
to an annual rate of 3.3% in the second quarter and 3.5% in the third. We
believe economic momentum will carry well into the first quarter of 1998, as
the money supply is increasing at a rapid rate. Because economic growth
continues to be impressive, markets are likely to continue to focus on the
Federal Reserve Board's willingness to raise interest rates.
The extreme volatility seen in the U.S. equity market in October was, we
believe, the consequence of overvaluations that had been evident for some
months. As a result, the stock market has been vulnerable to some type of
correction and has been impacted in the near term by chaotic market conditions
in the Pacific Rim. In the face of all this, however, the equity market
continues to exhibit surprising strength, much of it the result of continued
gains in corporate earnings, a trend that could be an important indicator of
the market's future direction. Certainly the situation throughout Asia bears
close scrutiny because it appears to be clearly deflationary and raises the
prospect of trade wars developing throughout the area. We are not convinced
that U.S. markets have escaped totally from October's volatility. Thus, while
the near-term outlook for profits is generally favorable, we believe equity
valuations have risen to a point where a cautious investment approach seems
warranted, with a need for particular attention to be paid to the effect of
Pacific Rim volatility on the earnings of U.S. companies.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
December 15, 1997
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of John W. Ballen]
John W. Ballen
For the 12 months ended November 30, 1997, Class A shares of the Fund provided
a total return of 18.66%, Class B shares 17.78%, Class C shares 17.81%, and
Class I shares 20.24%. These returns assume the reinvestment of distributions
but exclude the effects of any sales charges and compare to a 28.60% return
for the Standard & Poor's 500 Composite Index (the S&P 500), a popular,
unmanaged index of common stock total return performance, and to a 23.48%
return for the Russell 2000 Total Return Index (the Russell 2000), an
unmanaged index comprised of 2,000 of the smallest U.S.-domiciled company
common stocks that are traded on the New York Stock Exchange, the American
Stock Exchange, and NASDAQ.
Q. WHY DO YOU THINK THE FUND UNDERPERFORMED ITS BENCHMARK INDICES OVER THE
PAST YEAR?
A. It was a very difficult beginning of the year, with both faster-growing and
small companies very much out of favor. When investors can make over 20% in
the S&P 500, they don't see a reason to worry about other companies,
despite their faster growth rates. During the summer, we had a big rally in
small companies, and the Fund was actually ahead of all the indices by
early September. But then the Asian crisis started, setting up another
difficult time for small companies, and they've really retreated recently.
The Fund has actually done pretty well relative to some of our well-known
mutual fund competitors, but we are trailing both the S&P 500 and the
Russell 2000.
Q. IN YOUR LAST REPORT, TECHNOLOGY WAS THE LARGEST SECTOR IN THE FUND. HAS
THAT CHANGED? WHY DO YOU STILL FIND THIS SECTOR ATTRACTIVE?
A. We've had some really good performance from several of these stocks,
including Computer Associates, Compuware, SAP, Cisco Systems, Microsoft,
and BMC Software. The world, including the United States, needs technology
in order to lower costs and become more competitive. Even in Asia, where
they're having difficulty, companies have to keep spending on technology or
they're going to lose their competitive edge. In fact, as more companies
put in new technology, it puts pressure on all the other players to do the
same thing. Overseas companies have been investing in technology to keep up
with U.S. companies, because if they don't they'll be out of business. The
cost savings are just too huge for companies that have been reducing their
costs through technology.
Q. HOWEVER, THE FUND'S LARGEST HOLDING IS NOT A TECHNOLOGY COMPANY; IT'S HFS.
COULD YOU TALK ABOUT THAT COMPANY?
A. HFS' stock has underperformed, even though the company has hit every
target, and it's representative of why the Fund hasn't performed better.
The company has grown its earnings over 30% during the past year, and we
think that earnings growth rate will continue. However, it's trading at a
price-to-earnings multiple that's about even with the market's, and the
multiple has contracted all year. It started the year trading at a multiple
in the high 20s; now it's down to 20. We still like the company. It has a
very consistent strategy of owning companies that are royalty-based
franchisers, and it doesn't own its assets, so both its return on equity
and earnings growth are very high. I think it's been very careful in terms
of its acquisitions.
Q. FOR THE PAST FEW YEARS, THE SMALLER-COMPANY STOCKS HAVE UNDERPERFORMED THE
LARGER COMPANIES IN THE S&P 500. DO
YOU SEE THAT CHANGING?
A. I think it will. The valuations have come down quite a bit, so I think the
small companies will come back at some point. But, first, I think
we have to get past all this concern about Asia.
Q. SPEAKING OF ASIA, HOW HAS THE TURMOIL THERE AFFECTED THE FUND?
A. Not too much. Many of our companies are domestically focused, but some of
the technology companies are starting to see an impact. Still, corporate
earnings in the United States are very strong, and earnings in Europe are
starting to accelerate. I think that will help offset a lot of the Asian
impact. I am cognizant of what's going on there, but it hasn't really
altered the focus of the Fund.
Q. HOW HAS THE FUND BEEN ABLE TO MAINTAIN ITS FOCUS ON GROWTH IN SPITE OF ITS
SIZE?
A. It's been able to do so because the fundamentals are powerful for so many
companies. Many of them are involved in the fastest-growing, most-dynamic
segments of the economy and, as a result, they've helped us maintain the
Fund's average earnings growth rate at about 25%. There's been no change in
that rate over the past four years, despite the Fund's growth in assets.
Q. COULD YOU TALK ABOUT SOME STOCKS OR SECTORS THAT DID NOT PERFORM AS WELL AS
YOU WOULD HAVE LIKED?
A. Health care has been tough. Companies like United Healthcare, Oxford Health
Plans, and PacifiCare Health Systems have come down a lot, with
improvements in their pricing structures taking longer to implement than we
thought. We initially thought it would take about a year for these
companies to get pricing more in line with costs; now it looks more like
two years. They are getting the higher prices, but this year costs went up
as well. That was unexpected. Next year I think prices will go up more than
costs, so profit margins should improve. In other sectors, U.S. Office
Products is down over 10% this year but, again, the company has beaten
every one of its estimates. Such is the case with Republic Industries and
many of the other fast-growing companies we own in the Fund.
Q. LOOKING AHEAD, WHAT KIND OF MARKET OR ECONOMIC ENVIRONMENT DO YOU SEE FOR THE
COMING YEAR, AND HOW MIGHT THIS AFFECT YOUR MANAGEMENT OF THE FUND?
A. We expect to see more downsizing and restructuring, both in the United
States and abroad, and we're trying to find companies that can capitalize
on that. Because of the Fund's bottom-up, stock-oriented approach, we don't
spend a lot of time looking at the economic environment. However, we expect
to see the overall trend of corporate earnings growth continue, though
perhaps at a slightly slower pace. Corporate earnings in general have been
growing at a 10% to 20% annual rate, and we anticipate earnings growth in
the 10% to 15% range for 1998. Again, much of this is a direct result of
restructuring and cost containment, helped by the increasing use of
technology, which is making companies more productive and competitive in
global markets. We think this pattern should continue in spite of what's
happening in the equity markets.
/s/ John W. Ballen
John W. Ballen
Portfolio Manager
PORTFOLIO MANAGER'S PROFILE
JOHN W. BALLEN BEGAN HIS CAREER AT MFS AS AN INDUSTRY SPECIALIST IN 1984
AND WAS PROMOTED TO INVESTMENT OFFICER IN 1986, VICE PRESIDENT --
INVESTMENTS IN 1987, DIRECTOR OF RESEARCH IN 1988, SENIOR VICE PRESIDENT
IN 1990, DIRECTOR OF EQUITY PORTFOLIO MANAGEMENT IN 1993, CHIEF EQUITY
OFFICER IN 1995, AND EXECUTIVE VICE PRESIDENT IN 1997. A GRADUATE OF
HARVARD COLLEGE, THE UNIVERSITY OF NEW SOUTH WALES, AND THE STANFORD
UNIVERSITY GRADUATE SCHOOL OF BUSINESS ADMINISTRATION, HE HAS MANAGED
MFS(R) EMERGING GROWTH FUND SINCE ITS INCEPTION IN 1986.
<PAGE>
FUND FACTS
OBJECTIVE: THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE
LONG-TERM GROWTH OF CAPITAL.
COMMENCEMENT OF INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 13, 1993
CLASS B DECEMBER 29, 1986
CLASS C APRIL 1, 1996
CLASS I JANUARY 2, 1997
SIZE: $9.4 BILLION NET ASSETS AS OF NOVEMBER 30, 1997
PERFORMANCE SUMMARY
The information below and on the following page illustrates the historical
performance of MFS Emerging Growth Fund -- Class B shares in comparison to
various market indicators. Class B share performance results do not reflect
the deduction of the contingent deferred sales charge (CDSC); benchmark
comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be greater than or less than the line
shown, based on differences in charges and fees paid by shareholders investing
in different classes. It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-year period ended November 30, 1997)
MFS S&P Russell
Emerging 500 2000 Consumer
Growth Fund - Composite Total Return Price
Class B Index Index Index - U.S.
------------- --------- ------------ ------------
Period Market Market Market Market
End Value Value Value Value
- -------- ------------- --------- ------------ ------------
11/30/92 $10,000 $10,000 $10,000 $10,000
11/30/93 11,936 11,010 11,897 10,268
11/30/94 12,916 11,125 11,765 10,542
11/30/95 18,714 15,239 15,116 10,813
11/30/96 22,181 19,485 17,613 11,169
11/30/97 26,124 25,041 21,735 11,409
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended November 30, 1997)
MFS S&P Russell
Emerging 500 2000 Consumer
Growth Fund - Composite Total Return Price
Class B Index Index Index - U.S.
------------- --------- ------------ ------------
Period Market Market Market Market
End Value Value Value Value
- -------- ------------- --------- ------------ ------------
11/30/87 $10,000 $10,000 $10,000 $10,000
11/30/89 15,473 16,136 15,622 10,904
11/29/91 24,286 18,745 17,072 11,934
11/30/93 37,464 24,450 25,146 12,627
11/30/95 58,740 33,843 31,949 13,298
11/28/97 81,999 55,611 45,938 14,030
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF NOVEMBER 30, 1997
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Emerging Growth Fund (Class A)
including 5.75% sales charge (SEC results) +11.86% +24.97% +20.56% +23.10%
- ------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Fund (Class A)
at net asset value +18.66% +27.46% +21.99% +23.83%
- ------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Fund (Class B)
with CDSC (SEC results) +13.78% +25.84% +20.99% +23.42%
- ------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Fund (Class B)
at net asset value +17.78% +26.47% +21.17% +23.42%
- ------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Fund (Class C)
with CDSC (SEC results) +16.81% +26.48% +21.18% +23.42%
- ------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Fund (Class C)
at net asset value +17.81% +26.48% +21.18% +23.42%
- ------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Fund (Class I)
at net asset value +20.24% +27.34% +21.68% +23.67%
- ------------------------------------------------------------------------------------------------------------
Average mid-cap fund* +17.72% +22.54% +15.86% +17.66%
- ------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +28.60% +31.05% +20.15% +18.72%
- ------------------------------------------------------------------------------------------------------------
Russell 2000 Total Return Index+ +23.48% +22.70% +16.80% +16.47%
- ------------------------------------------------------------------------------------------------------------
Consumer Price Index+# + 2.15% + 2.67% + 2.67% + 3.44%
- ------------------------------------------------------------------------------------------------------------
* Source: Lipper Analytical Services, Inc.
+ Source: CDA/Wiesenberger.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics and measures
the cost of living (inflation).
</TABLE>
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 share SEC results include the maximum 5.75% sales charge. Class
B share SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%.
Class C shares have no initial sales charge but, along with Class
B shares, have higher annual fees and expenses than Class A shares. Class
C share purchases are subject to a 1% CDSC if redeemed within 12 months of
purchase. Class I shares have no sales charge or Rule 12b-1 fees and are only
available to certain institutional investors.
Class A and Class C share results include the performance and the operating
expenses (e.g., Rule 12b-1 fees) of the Fund's Class B shares for periods
prior to the inception of Class A and Class C shares. Because operating
expenses attributable to Class A shares are lower than those of Class B
shares, Class A share performance generally would have been higher than Class
B share performance. Operating expenses attributable to Class C shares are not
significantly different from those of Class B shares. The Class B share
performance included within the Class A share SEC performance has been
adjusted to reflect the initial sales charge generally applicable to Class A
shares rather than the CDSC generally applicable to Class B shares. The Class
C share SEC performance has been adjusted to reflect the lower CDSC generally
applicable to Class C shares rather than the CDSC generally applicable to
Class B shares.
Class I share results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
inception of Class I shares. Because operating expenses attributable to Class
B shares are greater than those of Class I shares, Class I share performance
generally would have been higher than Class B share performance. The Class B
share performance included within the Class I share performance has been
adjusted to reflect the fact that Class I shares have no CDSC.
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.
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1997
<TABLE>
TOP 10 HOLDINGS (BEGINNING WITH THE LARGEST POSITION IN THE PORTFOLIO)
<S> <C>
COMPUTER ASSOCIATES INTERNATIONAL, INC. UNITED HEALTHCARE CORP.
Computer software company Health maintenance organization
HFS, INC. COMPUWARE CORP.
Franchiser of hotels and real estate companies Computer software company
ORACLE SYSTEMS CORP. BMC SOFTWARE, INC.
Developer and manufacturer of database Computer software company
software
MICROSOFT CORP.
CISCO SYSTEMS, INC. Computer software and systems company
Computer network developer
CADENCE DESIGN SYSTEMS, INC.
TYCO INTERNATIONAL LTD. Computer software and systems company
Manufacturer of fire protection, packaging,
and electronic equipment
</TABLE>
LARGEST SECTORS
Technology 39.0%
Miscellaneous
(Conglomerates, special products/services) 15.7%
Leisure 13.9%
Other Sectors 12.0%
Health Care 10.6%
Retailing 8.8%
For a more complete breakdown, refer to the Portfolio of Investments.
TAX FORM SUMMARY
IN JANUARY 1998, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY
REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE
CALENDAR YEAR 1997.
DIVIDENDS-RECEIVED DEDUCTION
FOR THE YEAR ENDED NOVEMBER 30, 1997, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 36.99%.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
THE FUND HAS DESIGNATED $67,418,888 AS A LONG-TERM CAPITAL GAIN.
<PAGE>
PORTFOLIO OF INVESTMENTS - November 30, 1997
Stocks - 98.1%
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
U.S. Stocks - 93.8%
Advertising - 0.4%
Lamar Advertising Co., "A"* 105,000 $ 3,228,750
Leap Group, Inc.* 150,000 262,500
Outdoor Systems, Inc.* 525,638 16,229,058
Snyder Communications, Inc.* 180,000 6,108,750
Universal Outdoor Holdings, Inc.* 282,300 12,597,637
--------------
$ 38,426,695
- -------------------------------------------------------------------------------
Aerospace - 0.1%
Howmet International, Inc.* 450,500 $ 6,870,125
- -------------------------------------------------------------------------------
Airlines - 0.1%
Airnet Systems, Inc.* 200,000 $ 4,050,000
Atlas Air, Inc.* 310,000 8,176,250
--------------
$ 12,226,250
- -------------------------------------------------------------------------------
Apparel and Textiles - 0.1%
Nine West Group, Inc.* 417,316 $ 11,345,779
Polo Ralph Lauren Corp.* 78,000 2,106,000
Tefron Ltd.* 28,500 598,500
--------------
$ 14,050,279
- -------------------------------------------------------------------------------
Automotive - 0.1%
APS Holding Corp., "A"* 144,000 $ 549,000
Avis Rent A Car, Inc.* 110,400 3,705,300
Dura Automotive Systems, Inc.* 53,400 1,408,425
Group 1 Automotive, Inc.* 22,900 221,844
Hayes Wheels International, Inc.* 40,000 1,195,000
United Auto Group, Inc.* 21,400 300,937
--------------
$ 7,380,506
- -------------------------------------------------------------------------------
Biotechnology - 0.2%
IDEXX Laboratories, Inc.* 10,000 $ 159,375
Waters Corp.* 355,000 15,198,438
--------------
$ 15,357,813
- -------------------------------------------------------------------------------
Building - 0.1%
Comfort Systems USA, Inc.* 49,000 $ 833,000
Dayton Superior Corp.++* 265,000 4,505,000
Group Maintenance America Corp.* 150,000 2,100,000
--------------
$ 7,438,000
- -------------------------------------------------------------------------------
Business Machines - 0.6%
Affiliated Computer Services, Inc., "A"* 1,084,900 $ 25,359,537
Sun Microsystems, Inc.* 911,900 32,828,400
--------------
$ 58,187,937
- -------------------------------------------------------------------------------
Business Services - 8.8%
A Consulting Team, Inc.* 25,000 $ 256,250
AccuStaff, Inc.* 4,728,300 139,780,369
Administaff, Inc.* 31,600 703,100
AFC Cable Systems, Inc.* 81,250 2,173,438
Affiliated Managers Group, Inc.* 54,300 1,357,500
At Home Corp.* 20,900 431,063
BDM International, Inc.* 536,300 15,686,775
BISYS Group, Inc.* 422,500 13,520,000
Bridgestreet Accomodations, Inc.* 42,600 447,300
Bright Horizons, Inc.* 19,600 311,150
Caribiner International, Inc.* 56,400 2,393,475
Ceridian Corp.* 131,300 5,760,787
C.H. Robinson Worldwide, Inc.* 43,500 913,500
Claremont Technology Group, Inc.* 53,400 981,225
Computer Sciences Corp.* 267,400 21,174,737
Corestaff, Inc.* 1,189,300 31,962,437
Cornell Corrections, Inc.* 244,300 4,275,250
CorporateFamily Solutions, Inc.* 21,200 355,100
CUC International, Inc.* 7,536,112 216,663,220
Data Processing Corp.* 229,000 5,295,625
Dendrite International, Inc.* 155,400 2,952,600
Dental Care Alliance, Inc.* 60,000 675,000
Donnelley Enterprise Solutions, Inc.* 57,400 473,550
DST Systems, Inc.* 297,850 11,039,066
Employee Solutions, Inc.* 813,200 4,472,600
F.Y.I., Inc.* 333,400 7,918,250
Fine Host Corp.* 226,500 6,639,281
First Data Corp. 2,469,304 69,912,169
Fiserv, Inc.* 331,143 16,060,435
Forrester Research, Inc.* 21,000 488,250
Franklin Covey Co.* 466,900 9,892,444
Galileo International, Inc. 192,000 5,148,000
Global Directmail Corp.* 348,300 6,269,400
Hagler Bailly, Inc.* 72,000 1,453,500
Hall Kinion & Associates, Inc.* 15,600 278,850
ICT Group, Inc.* 300,000 1,275,000
Ikon Office Solutions, Inc. 2,140,000 65,136,250
Innova Corp.* 12,500 218,750
Innovative Valve Technologies* 66,500 1,130,500
Insight Enterprises, Inc.* 300,000 11,625,000
Intelliquest Information Group* 53,800 800,275
Interim Services, Inc.* 1,131,600 32,038,425
International Network Services* 86,000 1,548,000
ITT Educational Services, Inc.* 167,000 3,507,000
Labor Ready, Inc.* 75,000 1,668,750
Lamalie Associates, Inc.* 5,700 105,450
Learning Tree International, Inc.* 71,550 1,779,806
Maximus, Inc.* 31,000 747,875
May & Speh, Inc.* 80,000 1,080,000
Mecon, Inc.* 33,600 224,700
Medquist, Inc.* 168,750 4,387,500
Mettler Toledo International, Inc.* 171,000 3,056,625
MoneyGram Payment Systems, Inc.* 110,000 1,416,250
National Data Corp. 70,700 2,501,012
National Processing, Inc.* 220,900 2,291,837
NCO Group, Inc.* 37,300 1,412,738
NOVA Corp.* 22,700 607,225
Outsource International, Inc.* 151,900 2,031,663
Pegasus Systems, Inc.* 24,400 433,100
PIA Merchandising Services, Inc.* 35,500 248,500
Pierce Leahy Corp.* 53,800 1,311,375
PMT Services, Inc.* 47,500 748,125
Precision Response Corp.* 100,000 756,250
PRT Group, Inc.* 103,600 1,385,650
Radiant Systems, Inc.* 181,500 3,584,625
RCM Technologies, Inc.* 81,000 1,270,688
Registry, Inc.* 53,760 2,368,800
RemedyTemp, Inc.* 80,000 1,880,000
Romac International, Inc.* 120,200 2,343,900
Rural/Metro Corp.* 262,700 8,915,381
Sabre Group Holding, Inc., "A"* 22,300 574,225
Securacom, Inc.* 89,000 923,375
Service Experts, Inc.* 182,100 4,950,844
Sitel Corp.* 276,400 2,573,975
SPR, Inc.* 22,000 349,250
SPS Transaction Services, Inc.* 558,245 12,037,158
Staff Leasing, Inc.* 69,800 1,553,050
Superior Services, Inc.* 110,700 2,615,287
Syntel, Inc.* 85,000 961,563
Technology Solutions Co.* 66,000 2,037,750
TeleSpectrum Worldwide, Inc.* 1,123,000 4,351,625
TeleTech Holdings, Inc.* 194,500 2,066,563
Transaction System Architects, Inc., "A"* 222,800 8,640,462
U.S.A. Floral Products, Inc.* 43,000 655,750
UBICS, Inc.* 110,000 1,608,750
Vestcom International, Inc.* 72,100 1,460,025
Walsh International, Inc.* 47,500 427,500
Waterlink, Inc.* 225,000 4,218,750
Wesley Jessen VisionCare, Inc.* 125,000 3,843,750
--------------
$ 829,802,373
- -------------------------------------------------------------------------------
Chemicals
Polymer Group, Inc.* 182,700 $ 1,804,163
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 3.7%
Autodesk, Inc. 1,389,437 $ 53,406,485
Dell Computer Corp.* 110,000 9,260,625
Electronic Arts, Inc.* 168,200 5,634,700
HNC Software, Inc.* 15,600 491,400
Imnet Systems, Inc.* 30,000 493,125
InterSolv, Inc.* 135,500 2,159,531
McAfee Associates, Inc.* 26,271 1,201,898
Microprose, Inc.* 49,100 233,225
Microsoft Corp.* 1,925,000 272,387,500
Quality Systems, Inc.* 90,000 652,500
Security Dynamics Technologies, Inc.* 99,000 3,366,000
--------------
$ 349,286,989
- -------------------------------------------------------------------------------
Computer Software - Services - 0.1%
Best Software, Inc.* 44,000 $ 456,500
Box Hill Systems Corp.* 61,400 717,612
Cognicase, Inc.* 20,600 195,700
Concord Communications, Inc.* 18,000 393,750
Ingram Micro, Inc.* 162,900 4,937,906
Omega Research, Inc.* 25,200 129,150
Real Networks, Inc.* 17,500 269,063
--------------
$ 7,099,681
- -------------------------------------------------------------------------------
Computer Software - Systems - 22.8%
Adobe Systems, Inc. 757,250 $ 31,804,500
Aehr Test Systems* 57,500 524,687
Alphanet Solutions, Inc.* 175,000 2,253,125
Applix, Inc.* 48,000 267,000
Aris Corp.* 26,900 655,687
Aspen Technology, Inc.* 220,900 8,421,812
Astea International, Inc.* 22,000 50,875
Axiom, Inc.* 70,000 420,000
Baan Co.* 6,762 483,483
BMC Software, Inc.* 4,325,530 280,618,759
Cadence Design Systems, Inc.++* 10,575,070 267,020,517
Carnegie Group, Inc.* 150,000 656,250
CCC Information Services Group, Inc.* 260,000 4,940,000
Clarify, Inc.* 25,000 268,750
Compaq Computer Corp.* 442,000 27,597,375
Computer Associates International, Inc. 11,198,700 583,032,319
Compuware Corp.* 8,126,896 283,933,429
Cotelligent Group, Inc.* 284,100 5,468,925
CSG Systems International, Inc.* 15,000 555,000
Desktop Data, Inc.* 15,400 122,719
Edify Corp.* 19,900 335,813
Edwards (J.D.) & Co.* 50,000 1,712,500
Engineering Animation, Inc.* 22,000 1,017,500
Factset Research Systems, Inc.* 29,000 732,250
Great Plains Software, Inc.* 12,800 288,000
Helisys, Inc.* 50,000 37,500
HMT Technology Corp.* 50,000 656,250
Information Management Associates, Inc.* 40,000 415,000
Information Management Resources, Inc.* 160,200 4,155,187
Intelligroup, Inc.* 25,000 462,500
Isocor* 53,000 129,188
Keane, Inc.* 400,000 12,675,000
Larscom, Inc.* 150,000 1,575,000
Learning Co., Inc.* 390,000 7,068,750
LHS Group, Inc.* 10,000 430,000
Mastech Corp.* 10,000 292,500
Metromail Corp.* 40,000 715,000
Objective Systems Integrators, Inc.* 38,500 370,563
Oracle Systems Corp.* 13,404,950 446,552,397
Peritus Software Services, Inc.* 14,000 239,750
Programmers Paradise, Inc.* 70,000 700,000
PSW Technologies, Inc.* 62,500 1,062,500
Radisys Corp.* 55,000 2,461,250
Rational Software Corp.* 167,200 1,692,900
Remedy Corp.* 41,400 1,806,075
SCM Microsystems, Inc.* 54,600 1,417,894
Scopus Technology++* 1,068,400 12,820,800
Siebel Systems, Inc.* 2,627 109,349
Simulation Sciences, Inc.* 178,200 3,218,737
TSI International Software Ltd.* 43,500 440,438
Sybase, Inc.* 680,689 9,529,646
Synopsys, Inc.* 1,876,594 77,174,928
System Software Associates, Inc.++* 2,367,251 31,366,076
Techforce Corp.* 50,000 350,000
Ultradata Corp.* 40,000 140,000
USCS International, Inc.* 525,000 9,975,000
Veritas Software Co.* 13,130 574,005
Versatility, Inc.* 37,000 211,594
Whittman-Hart, Inc.* 190,000 6,222,500
Xionics Document Technologies, Inc.* 114,500 1,603,000
--------------
$2,141,832,552
- -------------------------------------------------------------------------------
Construction Services
American Residential Services, Inc.* 78,000 $ 1,062,750
Shaw Group, Inc.* 139,400 3,397,875
--------------
$ 4,460,625
- -------------------------------------------------------------------------------
Consumer Goods and Services - 4.5%
Blyth Industries, Inc.* 335,000 $ 8,605,312
Capital Senior Living Corp.* 358,000 4,631,625
Carson, Inc., "A"* 132,100 1,073,313
Childtime Learning Centers, Inc.* 25,000 350,000
Cole National Corp.* 47,100 1,624,950
Hertz Corp., "A" 39,200 1,545,950
Industrial Distribution Group, Inc.* 15,150 292,584
Ivex Packaging Corp.* 67,800 1,356,000
Mac-Gray Corp.* 37,400 551,650
Meta Group, Inc.* 12,500 249,219
N2K, Inc.* 20,300 395,850
Novel Denim Holdings Ltd.* 34,000 773,500
Pameco Corp.* 42,500 664,063
Silgan Holdings, Inc.* 85,200 2,960,700
Swisher International Group, Inc., "A"* 210,000 3,255,000
Ticketmaster Group, Inc.* 105,000 2,362,500
Tyco International Ltd. 9,794,488 384,433,654
U.S. Rentals, Inc.* 145,000 3,724,687
--------------
$ 418,850,557
- -------------------------------------------------------------------------------
Electrical Equipment - 0.3%
AVX Corp. 70,000 $ 1,885,625
Barnett, Inc.* 100,000 2,037,500
Comdial Corp.* 5,000 52,500
CP Clare Corp.* 180,000 2,407,500
JPM Co.* 160,000 3,920,000
Micrel, Inc.* 59,600 2,063,650
Westinghouse Electric Corp. 513,721 15,411,630
--------------
$ 27,778,405
- -------------------------------------------------------------------------------
Electronics - 3.3%
Actel Corp.* 40,000 $ 590,000
ADE Corp.* 65,300 1,469,250
Altera Corp.* 2,601,200 121,768,675
Analog Devices, Inc.* 970,000 30,433,750
Asia Electronics Holding, Inc.* 143,600 1,077,000
Atmel Corp.* 861,000 19,318,687
Blonder Tongue Laboratories, Inc.* 52,500 748,125
Burr Brown* 597,450 18,072,862
International Manufacturing Services, Inc.* 43,500 440,438
Lattice Semiconductor Corp.* 25,000 1,410,938
Linear Technology Corp. 376,900 24,262,937
LSI Logic Corp.* 810,700 18,848,775
Maxim Integrated Products, Inc.* 135,900 9,394,087
Micro Linear Corp.* 198,000 1,509,750
Novellus Systems, Inc.* 197,470 7,429,809
Oak Technology, Inc.* 400,000 3,300,000
Optek Technology, Inc.* 15,000 288,750
Peak International Ltd.* 77,100 1,705,838
Sawtek, Inc.* 15,000 436,875
Sony Corp. 10,000 835,000
Speedfam International, Inc.* 20,000 512,500
Stoneridge, Inc.* 65,100 1,094,494
Teradyne, Inc.* 219,700 7,208,906
Triumph Group, Inc.* 16,000 519,000
Ultrak, Inc.* 18,000 201,375
Xilinx, Inc.* 1,124,782 38,875,278
--------------
$ 311,753,099
- -------------------------------------------------------------------------------
Entertainment - 2.7%
American Radio Systems Corp., "A"* 397,800 $ 19,790,550
Chartwell Leisure, Inc.* 309,800 5,227,875
Clear Channel Communications, Inc.* 745,991 50,540,890
Cox Radio, Inc., "A"* 259,500 8,790,562
Gametech International, Inc.* 175,000 1,925,000
Gemstar International Group Ltd.* 50,000 1,187,500
Grand Casinos, Inc.* 95,000 1,246,875
Harrah's Entertainment, Inc.* 1,453,302 29,156,871
Hearst-Argyle Television, Inc.* 421,700 12,334,725
Jacor Communications, Inc., "A"* 542,200 23,721,250
LIN Television Corp.* 699,200 37,494,600
Macromedia, Inc.* 76,000 757,625
Metro Networks, Inc.* 7,500 229,688
Premier Parks, Inc.* 90,000 3,510,000
Silverleaf Resorts, Inc.* 54,000 1,120,500
Sinclair Broadcast Group, Inc., "A"* 38,900 1,453,887
Time Warner, Inc. 735,000 42,813,750
Travel Services International, Inc.* 10,900 234,350
Univision Communications, Inc., "A"* 40,700 2,709,094
Vistana, Inc.* 309,000 6,836,625
West Coast Entertainment Corp.* 605,000 1,020,938
--------------
$ 252,103,155
- -------------------------------------------------------------------------------
Financial Institutions - 1.6%
Advanta Corp., "B" 13,000 $ 349,375
AmeriTrade Holding Corp., "A"* 16,000 536,000
ARM Financial Group, Inc., "A" 10,000 203,125
BA Merchants Services, Inc.* 224,900 3,668,681
CIT Group, Inc.* 230,000 6,986,250
Consolidated Capital Corp.* 1,924,700 39,576,644
ContiFinancial Corp.* 35,800 941,988
Emergent Group, Inc.* 140,000 1,855,000
Firstplus Financial Group, Inc.* 370,000 14,106,250
Franchise Mortgage Acceptance Co.* 126,400 2,212,000
Franklin Resources, Inc. 573,750 51,565,781
Harrington Financial Group, Inc. 20,000 247,500
Healthcare Financial Partners, Inc.* 165,000 5,445,000
IMC Mortgage Co.* 120,000 1,605,000
Liberty Financial Cos., Inc. 114,000 6,177,375
Linc Capital, Inc.* 20,000 305,000
National Auto Credit, Inc.* 525,700 3,482,762
New Century Financial Corp.* 42,000 551,250
Paymentech, Inc.* 281,900 4,369,450
Schwab (Charles) Corp. 37,500 1,446,094
Southern Pacific Funding Corp.* 77,000 952,875
--------------
$ 146,583,400
- -------------------------------------------------------------------------------
Food and Beverage Products - 0.2%
American Italian Pasta Co.* 58,000 $ 1,370,250
Beringer Wine Estates Holdings, "B"* 39,900 1,296,750
International Home Foods, Inc.* 127,200 3,052,800
Rocky Mountain International Ltd.* 67,100 310,338
Suiza Foods Corp.* 258,700 15,053,106
--------------
$ 21,083,244
- -------------------------------------------------------------------------------
Insurance - 0.6%
CIGNA Corp. 30,000 $ 5,017,500
Compdent Corp.* 298,400 6,079,900
Conseco, Inc. 480,000 22,350,000
FPA Medical Management, Inc.* 379,075 9,784,873
Frontier Insurance Group, Inc. 105,000 2,526,563
Hartford Life, Inc., "A" 70,500 2,705,437
Inspire Insurance Solutions, Inc.* 15,000 285,000
Nationwide Financial Services, Inc., "A" 108,400 3,705,925
--------------
$ 52,455,198
- -------------------------------------------------------------------------------
Machinery
ITEQ, Inc.* 250,000 $ 2,953,125
JLK Direct Distribution, Inc., "A"* 17,000 483,438
--------------
$ 3,436,563
- -------------------------------------------------------------------------------
Medical and Health Products - 0.5%
Arterial Vascular Engineering, Inc.* 24,800 $ 1,373,300
Boston Scientific Corp.* 610,000 27,564,375
Coast Dental Services, Inc.* 50,000 1,212,500
Kendle International, Inc.* 85,000 1,306,875
Matria Healthcare, Inc.* 578,500 2,964,813
Orthofix International N.V.* 473,749 6,395,611
Renex Corp.* 262,200 1,900,950
Transition Systems, Inc.* 46,000 960,250
Uromed Corp.* 48,765 243,825
Xomed Surgical Products, Inc.* 25,000 515,625
Young Innovations, Inc.* 22,900 340,638
Zoll Medical Corp.* 90,000 618,750
--------------
$ 45,397,512
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 9.8%
Access Health, Inc.* 37,500 $ 1,115,625
Advanced Health Corp.* 17,000 232,688
American Homepatient, Inc.* 420,750 8,625,375
American Oncology Resources, Inc.* 100,000 1,362,500
Ameripath, Inc.* 36,000 603,000
Applied Analytical Industries, Inc.* 10,000 123,750
BioReliance Corp.* 24,100 445,850
BioSource International, Inc.* 134,400 806,400
Cardinal Health, Inc. 329,490 24,958,867
Carematrix Corp.* 440,000 11,715,000
Castle Dental Centers, Inc.* 20,100 221,100
Centennial Healthcare Corp.* 17,500 370,781
ClinTrials Research, Inc.* 45,000 376,875
Cohr, Inc.* 56,800 699,350
Columbia/HCA Healthcare Corp. 728,184 21,481,428
Concentra Managed Care, Inc.* 13,100 443,763
Equimed, Inc.* 33,333 599,994
Foundation Health Systems, Inc.* 1,293,609 36,301,903
Genesis Health Ventures, Inc.* 266,150 6,454,137
Guidant Corp. 620,000 39,835,000
HBO & Co. 79,200 3,554,100
HCIA, Inc.* 565,000 6,780,000
Health Management Associates, Inc., "A"* 312,750 7,662,375
HEALTHSOUTH Corp.* 2,659,587 69,814,159
HPR, Inc.* 29,000 771,219
ICU Medical, Inc.* 50,000 550,000
IDX Systems Corp.* 21,300 639,000
Integrated Health Services, Inc. 1,166,200 35,496,212
Iridex Corp.* 14,000 136,500
Kapson Senior Quarters Corp.* 150,000 2,231,250
Lincare Holdings, Inc.* 146,900 8,263,125
Mariner Health Group, Inc.++* 1,664,200 24,130,900
MedPartners, Inc.* 35,765 885,184
Medtronic, Inc. 210,000 10,027,500
Mid Atlantic Medical Services, Inc.* 2,249,888 29,951,634
Monarch Dental Corp.* 16,800 232,050
National Surgery Centers, Inc.* 42,300 1,057,500
NCS Healthcare, Inc.* 36,200 963,825
Ocular Sciences, Inc.* 66,000 1,666,500
Option Care, Inc.* 105,000 459,375
Orthalliance, Inc.* 38,500 428,313
Orthodontic Centers of America, Inc.++* 2,190,000 39,693,750
Oxford Health Plans, Inc.* 1,020,000 24,352,500
PacifiCare Health Systems, Inc., "A"* 364,900 18,792,350
PacifiCare Health Systems, Inc., "B"* 672,546 36,149,347
Parexel International Corp.* 39,000 1,345,500
Pediatrix Medical Group* 37,400 1,654,950
Pharmaceutical Product Development, Inc.* 16,200 247,050
Phymatrix Corp.* 98,200 1,411,625
Physician Reliance Network, Inc.* 510,000 5,004,375
Physician Sales and Service, Inc.* 42,000 955,500
Physician Support Systems, Inc.* 38,100 566,737
Physicians Resource Group, Inc.* 300,000 1,706,250
Physio-Control International Corp.* 142,000 2,236,500
Premier Research Worldwide Ltd.* 16,500 129,938
Priority Healthcare Corp.* 24,700 385,938
Quorum Health Group, Inc.* 75,000 1,800,000
Renal Care Group, Inc.* 43,650 1,385,887
Renal Treatment Centers, Inc.* 855,302 28,492,248
Schein (Henry), Inc.* 14,350 505,837
St. Jude Medical, Inc.* 1,122,800 33,262,950
Total Renal Care Holdings, Inc.* 600,000 15,525,000
Trigon Healthcare, Inc.* 125,000 3,203,125
United Dental Care, Inc.* 20,000 257,500
United Healthcare Corp. 6,157,554 320,577,655
United Payors & United Providers, Inc.* 170,000 3,060,000
Vencor, Inc.* 18,000 436,500
WellCare Management Group, Inc.* 77,700 218,531
Wellpoint Health Networks, Inc.* 386,500 17,779,000
--------------
$ 923,610,650
- -------------------------------------------------------------------------------
Metals and Minerals - 0.1%
NS Group, Inc.* 450,000 $ 8,437,500
- -------------------------------------------------------------------------------
Oil Services - 0.1%
Bayard Drilling Tech, Inc.* 20,000 $ 367,500
Dril-Quip, Inc.* 43,300 1,296,294
Friede Goldman International, Inc.* 61,000 1,814,750
IRI International Corp.* 100,600 1,622,175
Transcoastal Marine Services, Inc.* 70,000 1,365,000
--------------
$ 6,465,719
- -------------------------------------------------------------------------------
Oils
Santa Fe International Corp. 80,000 $ 3,355,000
- -------------------------------------------------------------------------------
Pollution Control - 2.1%
Allied Waste Industries, Inc.* 208,000 $ 4,550,000
Casella Waste Systems, Inc.* 61,200 1,239,300
Philip Services Corp.* 183,300 2,898,431
Republic Industries, Inc.+(+)* 6,505,000 169,536,563
U.S.A. Waste Services, Inc.* 599,300 19,814,356
Waste Industries, Inc.* 16,400 325,950
--------------
$ 198,364,600
- -------------------------------------------------------------------------------
Printing and Publishing - 0.3%
Applied Graphics Technologies, Inc.* 153,000 $ 7,114,500
CMP Media, Inc.* 31,500 594,563
Journal Register Co.* 65,000 1,100,938
Mail-Well, Inc.* 577,500 18,840,937
Petersen Cos., Inc.* 66,200 1,191,600
--------------
$ 28,842,538
- -------------------------------------------------------------------------------
Railroads - 0.1%
Wisconsin Central Transportation Corp.* 246,600 $ 7,428,825
- -------------------------------------------------------------------------------
Real Estate - 0.2%
LaSalle Partners, Inc* 23,000 $ 797,813
NHP, Inc.* 424,000 12,402,000
Security Capital Group, Inc.* 80,000 2,570,000
Trammell Crow Co.* 49,500 1,089,000
--------------
$ 16,858,813
- -------------------------------------------------------------------------------
Real Estate Investment Trusts
CCA Prison Realty Trust 60,000 $ 2,137,500
Imperial Credit Commercial Mortgage Investment 150,000 2,343,750
--------------
$ 4,481,250
- -------------------------------------------------------------------------------
Restaurants and Lodging - 10.1%
Amerihost Properties, Inc.++* 517,000 $ 3,295,875
Apple South, Inc. 370,000 6,798,750
Applebee's International, Inc.++* 3,139,500 66,321,937
Back Bay Restaurant Group, Inc.* 83,000 498,000
Bertucci's, Inc.* 160,000 1,010,000
Brinker International, Inc.* 390,000 5,752,500
Bristol Hotel Co.* 35,000 866,250
Buffets, Inc.++* 2,953,050 26,208,319
Candlewood Hotel Co., Inc.* 225,000 1,968,750
Capstar Hotel Co.* 884,000 33,094,750
Choice Hotels, Inc.* 78,600 1,370,588
Doubletree Corp.* 379,600 16,678,675
Execustay Corp.* 144,000 1,386,000
Extended Stay America##(+)* 1,000,000 11,500,000
Extended Stay America, Inc.* 302,704 3,481,096
Four Seasons Hotels, Inc. 150,000 4,818,750
Friendly Ice Cream Corp.* 353,800 5,660,800
Hammons (John Q) Hotels, Inc.++* 549,300 4,737,713
HFS, Inc.++* 8,096,890 555,649,076
IHOP, Inc.++* 520,800 17,772,300
Interstate Hotels Co.* 240,000 8,880,000
ITT Corp.* 10,000 758,750
Lone Star Steakhouse & Saloon, Inc.* 370,500 6,900,562
Marriott International, Inc. 100,000 7,243,750
MGM Grand, Inc.* 262,000 10,250,750
Mortons Restaurant Group, Inc.++* 500,000 11,250,000
Outback Steakhouse, Inc.* 120,000 3,592,500
Papa John's International, Inc.* 132,300 4,398,975
PJ America, Inc.* 69,600 957,000
Promus Hotel Corp.* 1,602,501 66,503,791
Rainforest Cafe, Inc.* 115,000 4,140,000
Schlotzskys, Inc.* 142,200 2,470,725
ShoLodge, Inc.++* 375,600 6,009,600
Showbiz Pizza Time, Inc.++* 1,017,000 21,865,500
Signature Resorts, Inc.* 135,000 3,611,250
Sonic Corp.* 460,000 12,721,875
Star Buffet, Inc.* 54,000 705,375
Sun International Hotels Ltd.* 55,000 2,086,563
Sunburst Hospitality Corp.* 26,200 262,000
Taco Cabana, Inc.++* 962,395 5,052,574
Total Entertainment Restaurant Corp.* 66,500 386,531
Trendwest Resorts, Inc.* 32,000 792,000
U.S. Franchise Systems, Inc., "A"* 37,600 303,150
Wyndham Hotel Corp.* 40,550 1,723,375
--------------
$ 951,736,725
- -------------------------------------------------------------------------------
Special Products and Services - 0.7%
Action Performance Cos., Inc.* 10,000 $ 290,000
Audio Book Club, Inc.* 17,600 121,000
Ballantyne of Omaha, Inc.* 127,000 2,333,625
Carriage Services, Inc.* 80,000 1,560,000
Central Parking Corp. 66,600 3,833,662
Childrens Discovery Centers of America, Inc.* 220,000 1,815,000
CHS Electronics, Inc.* 336,450 6,350,494
Columbus McKinnon Corp. 150,000 3,506,250
Compass Plastics & Technologies, Inc. 50,000 406,250
Edutrek International, Inc., "A"* 23,000 537,625
Equity Corp. International* 400,000 8,550,000
Flanders Corp.* 117,000 877,500
OSI Systems, Inc.* 25,500 331,500
Rayovac Corp.* 62,800 1,051,900
Rock Of Ages Corp.* 13,500 249,750
Staffmark, Inc.* 320,000 11,160,000
Stewart Enterprises, Inc. 340,000 14,768,750
Wackenhut Corp. 200,000 3,962,500
White Cap Industries Corp.* 21,100 404,856
Wilmar Industries, Inc.* 66,600 1,748,250
--------------
$ 63,858,912
- -------------------------------------------------------------------------------
Steel - 0.1%
Citation Corp.* 600,000 $ 10,312,500
- -------------------------------------------------------------------------------
Stores - 8.3%
A.C. Moore Arts & Crafts, Inc.* 23,400 $ 351,000
Alrenco, Inc.* 230,000 3,680,000
American Pad & Paper Co.* 840,000 12,180,000
Bed Bath & Beyond, Inc.* 118,000 3,938,250
Boise Cascade Office Products Corp.* 341,400 6,187,875
Borders Group, Inc.* 400,000 11,425,000
BT Office Products International, Inc.* 771,800 7,910,950
CompUSA, Inc.* 440,000 16,087,500
Consolidated Stores Corp.* 1,193,125 58,015,703
Corporate Express, Inc.* 3,025,000 47,265,625
Creative Computers, Inc.* 60,000 735,000
CVS Corp. 202,300 13,427,662
Dayton-Hudson Corp. 13,000 863,688
Friedmans, Inc.* 125,000 1,828,125
General Nutrition Cos., Inc.* 1,442,088 49,211,253
Globe Business Resources, Inc.* 25,000 515,625
Gymboree Corp.* 610,000 17,613,750
Home Depot, Inc. 606,150 33,906,516
Micro Warehouse, Inc.++* 2,878,500 41,738,250
Mothers Work, Inc.++* 211,500 1,797,750
Movie Gallery, Inc.* 368,100 1,173,319
MSC Industrial Direct, Inc.* 150,800 5,862,350
Office Depot, Inc.* 7,329,100 173,149,987
OfficeMax, Inc.* 893,000 12,557,812
PETsMART, Inc.* 182,674 1,427,141
Rental Service Corp.* 112,800 2,834,100
Renters Choice, Inc.* 321,000 7,222,500
Republic Industries, Inc.* 1,478,300 38,528,194
Rite Aid Corp. 1,117,300 73,462,475
Shoe Carnival, Inc.* 425,000 3,825,000
Sports Club, Inc.* 196,000 1,568,000
Staples, Inc.* 432,768 12,198,648
Sunglass Hut International, Inc.* 500,000 3,187,500
TJX Cos., Inc. 130,000 4,485,000
U.S. Office Products Co.* 5,404,716 107,418,730
Viking Office Products, Inc.* 10,000 231,875
--------------
$ 777,812,153
- -------------------------------------------------------------------------------
Telecommunications - 9.1%
ACC Corp.* 90,000 $ 4,207,500
APAC Teleservices, Inc.* 450,000 6,300,000
Ascend Communications, Inc.* 804,700 20,067,206
Aspect Telecommunications Corp.* 351,100 7,877,806
Boston Communications Group, Inc.* 201,757 1,891,472
Cable Design Technologies Corp.* 586,800 23,765,400
Cisco Systems, Inc.* 4,920,950 424,431,937
DSP Communications, Inc.* 230,000 3,680,000
Equalnet Holding Corp.++* 400,000 637,500
Excel Communications, Inc.* 235,000 5,522,500
Excel Switching Corp.* 21,100 509,038
Glenayre Technologies, Inc.* 1,475,000 16,040,625
Hypercom Corp.* 337,200 5,395,200
International Telecommunication Data Systems, I 15,000 391,875
ITC Deltacom, Inc.* 40,900 577,713
LCC International, Inc.* 25,000 493,750
Lightbridge, Inc.* 30,000 435,000
Lucent Technologies, Inc. 245,000 19,630,625
McLeodUSA, Inc., "A"* 81,200 3,004,400
Melita International Corp.* 25,000 231,250
Metro One Telecommunications, Inc.* 34,500 284,625
Metromedia Fiber Network, Inc., "A"* 71,700 1,209,938
Network Solutions, Inc.* 20,900 339,625
Nextlink Communications, Inc., "A"* 55,200 1,117,800
Omnipoint Corp.* 30,000 633,750
Premisys Communications, Inc.* 29,800 821,363
Qwest Communications International, Inc.* 46,400 2,534,600
RMH Teleservices, Inc.* 238,000 1,279,250
Startec Global Communications Corp.* 55,000 880,000
Sterling Commerce, Inc.* 59,826 2,078,953
Tel-Save Holdings, Inc.++* 3,624,700 78,384,137
Tel-Save Holdings, Inc.##++(+)* 2,588,700 55,980,637
Teleport Communications Group, Inc., "A"* 270,000 13,230,000
Teligent, Inc.* 10,000 256,250
Tellabs, Inc.* 90,000 4,680,000
Transaction Network Services, Inc.* 250,700 4,387,250
VDI Media* 300,000 3,412,500
West Teleservices Corp.* 60,950 708,544
Westell Technologies, Inc.* 20,000 332,500
WorldCom, Inc.* 4,327,582 138,482,624
--------------
$ 856,125,143
- -------------------------------------------------------------------------------
Transportation - 0.2%
Budget Group, Inc.* 302,700 $ 10,745,850
Carey International, Inc.* 83,000 1,141,250
Coach USA, Inc.* 156,300 4,356,863
Hub Group, Inc.* 30,000 960,000
--------------
$ 17,203,963
- -------------------------------------------------------------------------------
Utilities - Electric - 0.1%
Calenergy, Inc.* 290,000 $ 9,642,500
Kuhlman Corp. 52,300 1,846,844
Power One, Inc.* 25,700 420,837
--------------
$ 11,910,181
- -------------------------------------------------------------------------------
Utilities - Telephone - 1.7%
Brooks Fiber Properties, Inc.* 68,400 $ 3,744,900
MCI Communications Corp. 3,600,000 158,175,000
--------------
$ 161,919,900
- -------------------------------------------------------------------------------
Venture Capital
Copley Partners 1+(+)* 3,000,000 $ 563,730
Copley Partners 2+(+)* 3,000,000 1,197,540
Highland Capital Partners+(+)* 7,500,000 1,175,700
--------------
$ 2,936,970
- -------------------------------------------------------------------------------
Total U.S. Stocks $8,825,326,463
- -------------------------------------------------------------------------------
Foreign Stocks - 4.3%
Argentina
Banco Rio de La Plata S.A., ADR (Banks and
Credit Cos.)* 280,000 $ 3,517,500
- -------------------------------------------------------------------------------
Australia
Sydney Harbor Casino Holdings Ltd., Preferred
(Entertainment) 600,000 $ 612,100
- -------------------------------------------------------------------------------
Canada - 0.7%
Bell Canada International, Inc.
(Telecommunications)* 106,400 $ 1,547,787
Laidlaw, Inc. (Pollution Control) 480,000 6,240,000
Legacy Hotel Real Estate Investment Trust
(Real Estate)##* 773,000 5,376,988
Loewen Group, Inc. (Business Services) 1,115,600 27,541,375
Loewen Group, Inc. (Business Services)## 857,200 21,082,145
Microcell Telecommunications, "B"
(Telecommunications)* 125,000 796,875
--------------
$ 62,585,170
- -------------------------------------------------------------------------------
Chile
Distribucion y Servicio D & S S.A., ADR
(Supermarkets)* 62,000 $ 1,081,125
- -------------------------------------------------------------------------------
France - 0.1%
Dassault Systemes S.A. (Computer
Software - Systems) 265,000 $ 7,047,514
Dassault Systemes S.A., ADR (Computer
Software - Systems) 80,000 2,080,000
--------------
$ 9,127,514
- -------------------------------------------------------------------------------
Germany - 1.9%
Sap AG, ADR (Computer Software - Systems) 174,300 $ 50,689,286
Sap AG, Preferred (Computer Software - Systems) 311,625 95,925,383
Sap Aktiengesellschaft, ADR (Computer
Software - Systems)## 312,200 31,532,200
--------------
$ 178,146,869
- -------------------------------------------------------------------------------
Ireland - 0.1%
CBT Group PLC, ADR (Publishing)* 124,000 $ 8,757,500
Warner Chilcott PLC, ADR (Medical and Health
Products)* 48,000 660,000
--------------
$ 9,417,500
- -------------------------------------------------------------------------------
Israel
NICE Systems Ltd., ADR (Telecommunications)* 60,000 $ 2,617,500
- -------------------------------------------------------------------------------
Italy - 0.3%
Gucci Group NV (Apparel and Textiles) 580,000 $ 23,598,750
- -------------------------------------------------------------------------------
Mexico
TV Azteca, S.A. de C.V., ADR (Broadcasting)* 81,900 $ 1,694,306
- -------------------------------------------------------------------------------
Netherlands - 0.1%
Benckiser NV (Consumer Goods and Services)* 137,000 $ 4,811,613
- -------------------------------------------------------------------------------
New Zealand
MAS Technology Ltd., ADR (Telecommunications)* 30,000 $ 465,000
- -------------------------------------------------------------------------------
Sweden
Munters AB (Consumer Goods and Services)* 42,200 $ 404,508
- -------------------------------------------------------------------------------
United Kingdom - 1.1%
Danka Business Systems, ADR (Business Services)2,710,300 $ 99,603,525
Dr. Solomon's Group PLC, ADR (Computer Software -
Personal Computers)* 105,000 3,648,750
Insignia Solutions PLC, ADR (Computer Software -
Personal Computers)* 457,700 1,029,825
Jarvis Hotels PLC (Restaurants and Lodging)+ 98,300 253,272
SELECT Software Tools, ADR (Computer
Software - Systems)* 31,500 220,500
--------------
$ 104,755,872
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 402,835,327
- -------------------------------------------------------------------------------
Total Stocks (Identified Cost, $6,015,051,353) $9,228,161,790
- -------------------------------------------------------------------------------
Entertainment
American Radio Systems Corp., 7s## 91,100 $ 5,363,512
- -------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Apple South, Inc.##* 100,000 $ 6,950,000
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost,
$9,555,000) $ 12,313,512
- -------------------------------------------------------------------------------
Warrants - 0.3%
- -------------------------------------------------------------------------------
Intel Corp.* (Identified Cost, $17,219,667) 520,000 $ 29,607,500
- -------------------------------------------------------------------------------
Convertible Bonds - 0.1%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------
Construction Services - 0.1%
American Residential Services, Inc.,
7.25s, 2004## $ 4,000 $ 3,400,000
- -------------------------------------------------------------------------------
Medical and Health Products
Ventritex, Inc., 5.75s, 2001 $ 1,230 $ 1,369,913
- -------------------------------------------------------------------------------
Restaurants and Lodging
ShoLodge, Inc., 7.5s, 2004 $ 2,000 $ 1,975,000
- -------------------------------------------------------------------------------
Telecommunications
Midcom Communications Inc., 8.25s, 2003## $ 4,600 $ 736,000
- -------------------------------------------------------------------------------
Total Convertible Bonds
(Identified Cost, $11,830,000) $ 7,480,913
- -------------------------------------------------------------------------------
Short-Term Obligations - 0.8%
- -------------------------------------------------------------------------------
General Electric Capital Corp., due 12/01/97 $ 57,910 $ 57,910,000
Federal Home Loan Bank, due 12/01/97 14,850 14,850,000
Federal Home Loan Mortgage Corp., due 12/11/97 5,450 5,441,719
- -------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 78,201,719
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $6,131,857,739) $9,355,765,434
Other Assets, Less Liabilities - 0.6% 54,103,391
- -------------------------------------------------------------------------------
Net Assets - 100.0% $9,409,868,825
- -------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
++ Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting shares of the issuer.
(+) Security valued by or at the direction of the Trustees.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
Assets:
Investments, at value -
Unaffiliated issuers (identified cost, $5,552,294,593) $8,079,527,223
Affiliated issuer (identified cost, $579,563,146) 1,276,238,211
--------------
Total investments, at value (identified cost,
$6,131,857,739) $9,355,765,434
Cash 42,612
Receivable for investments sold 35,194,449
Receivable for Fund shares sold 109,364,757
Interest and dividends receivable 650,629
Other assets 82,327
--------------
Total assets $9,501,100,208
--------------
Liabilities:
Payable for investments purchased $ 54,522,284
Payable for Fund shares reacquired 29,525,426
Payable to affiliates -
Management fee 712,098
Administrative fee 4,098
Shareholder servicing agent fee 132,037
Distribution and service fee 4,966,604
Accrued expenses and other liabilities 1,368,836
--------------
Total liabilities $ 91,231,383
--------------
Net assets $9,409,868,825
==============
Net assets consist of:
Paid-in capital $6,109,448,139
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 3,223,907,695
Accumulated undistributed net realized gain on
investments and foreign currency transactions 76,600,394
Accumulated net investment loss (87,403)
--------------
Total $9,409,868,825
==============
Shares of beneficial interest outstanding 253,450,559
===========
Class A shares:
Net asset value per share
(net assets of $3,875,015,463 / 103,227,914 shares of
beneficial interest outstanding) $37.54
======
Offering price per share (100/94.25) $39.83
======
Class B shares:
Net asset value and offering price per share
(net assets of $5,143,325,645 / 139,575,574 shares of
beneficial interest outstanding) $36.85
======
Class C shares:
Net asset value and offering price per share
(net assets of $344,287,246 / 9,391,454 shares of
beneficial interest outstanding) $36.66
======
Class I shares:
Net asset value, offering price and redemption price per share
(net assets of $47,240,471 / 1,255,617 shares of
beneficial interest outstanding) $37.62
======
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
<TABLE>
Statement of Operations
- -----------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1997
- -----------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Interest (including income on securities loaned of $2,756,529) $ 8,811,446
Dividends (including $219,765 received from affiliated issuers) 7,737,242
Foreign taxes withheld (298,427)
--------------
Total investment income $ 16,250,261
--------------
Expenses -
Management fee $ 54,601,569
Trustees' compensation 53,852
Shareholder servicing agent fee 9,285,858
Shareholder servicing agent fee (Class A) 222,997
Shareholder servicing agent fee (Class B) 450,561
Shareholder servicing agent fee (Class C) 15,486
Distribution and service fee (Class A) 7,774,642
Distribution and service fee (Class B) 42,917,427
Distribution and service fee (Class C) 2,228,591
Administrative fee 284,318
Custodian fee 1,540,518
Printing 367,060
Postage 1,065,002
Auditing fees 41,586
Legal fees 116,470
Miscellaneous 5,641,328
--------------
Total expenses $ 126,607,265
Fees paid indirectly (454,837)
--------------
Net expenses $ 126,152,428
--------------
Net investment loss $ (109,902,167)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions (including $1,213,203 net loss from
transactions with affiliated issuers) $ 192,002,345
Foreign currency transactions (10,312)
--------------
Net realized gain on investments and foreign currency transactions $ 191,992,033
--------------
Change in unrealized appreciation -
Investments $1,252,998,436
Translation of assets and liabilities in foreign currencies 495
--------------
Net unrealized gain on investments and foreign currency
translation $1,252,998,931
--------------
Net realized and unrealized gain on investments and foreign
currency $1,444,990,964
--------------
Increase in net assets from operations $1,335,088,797
==============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (109,902,167) $ (69,790,020)
Net realized gain on investments and foreign currency
transactions 191,992,033 116,124,161
Net unrealized gain on investments and foreign
currency translation 1,252,998,931 775,003,905
-------------- --------------
Increase in net assets from operations $1,335,088,797 $ 821,338,046
-------------- --------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (28,565,649) $ --
From net realized gain on investments and foreign
currency transactions (Class B) (21,625,602) --
From net realized gain on investments and foreign
currency transactions (Class C)
(1,402,958) --
-------------- --------------
Total distributions declared to shareholders $ (51,594,209) --
-------------- --------------
Fund share (principal) transactions -
Net increase in net assets from Fund share
transactions $1,825,218,681 $2,167,297,512
-------------- --------------
Total increase in net assets $3,108,713,269 $2,988,635,558
Net assets:
At beginning of period 6,301,155,556 3,312,519,998
-------------- --------------
At end of period (including accumulated net investment
loss of $87,403 and $75,198, respectively) $9,409,868,825 $6,301,155,556
============== ==============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1997 1996 1995 1994 1993*
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $32.01 $26.79 $18.73 $17.68 $16.43
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.34) $(0.29) $(0.23) $(0.20) $(0.03)
Net realized and unrealized gain on
investments and foreign currency
transactions 6.24 5.51 8.68 1.78 1.28
------ ------ ------ ------ ------
Total from investment operations $ 5.90 $ 5.22 $ 8.45 $ 1.58 $ 1.25
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions $(0.37) $ -- $(0.38) $(0.53) $ --
In excess of net realized gain on investments
and foreign currency transactions -- -- -- *** -- --
From paid-in capital -- -- (0.01) -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.37) $ -- $(0.39) $(0.53) $ --
------ ------ ------ ------ ------
Net asset value - end of period $37.54 $32.01 $26.79 $18.73 $17.68
====== ====== ====== ====== ======
Total return+ 18.66% 19.52% 45.98% 9.06% 38.98%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.21% 1.20% 1.28% 1.33% 1.19%+
Net investment loss (0.99)% (1.01)% (1.04)% (1.09)% (0.98)%+
Portfolio turnover 21% 22% 20% 39% 58%
Average commission rate### $0.0521 $0.0498 $ -- $ -- $ --
Net assets at end of period (000,000 omitted) $ 3,875 $ 2,524 $1,312 $ 470 $ 371
+ Annualized.
* For the period from the inception of Class A shares, September 13, 1993, through November 30, 1993.
*** The per share distribution in excess of net realized gain on investments was $0.0049.
# Per share data for the periods subsequent to December 1, 1993, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
+ 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>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $31.48 $26.56 $18.57 $17.64 $14.93
------ ------ ------ ------ ------
Income from investment operations# -
Net investment loss $(0.59) $(0.52) $(0.41) $(0.35) $(0.33)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 6.14 5.44 8.65 1.78 3.19
------ ------ ------ ------ ------
Total from investment operations $ 5.55 $ 4.92 $ 8.24 $ 1.43 $ 2.86
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions $(0.18) $ -- $(0.24) $(0.50) $(0.15)
In excess of net realized gain on investments
and foreign currency transactions -- -- -- *** -- --
From paid-in capital -- -- (0.01) -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.18) $ -- $(0.25) $(0.50) $(0.15)
------ ------ ------ ------ ------
Net asset value - end of period $36.85 $31.48 $26.56 $18.57 $17.64
====== ====== ====== ====== ======
Total return 17.78% 18.52% 44.89% 8.21% 19.36%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.97% 2.00% 2.08% 2.14% 2.19%
Net investment loss (1.75)% (1.80)% (1.83)% (1.90)% (1.61)%
Portfolio turnover 21% 22% 20% 39% 58%
Average commission rate### $0.0521 $0.0498 -- -- --
Net assets at end of period (000,000 omitted) $ 5,144 $ 3,659 $2,001 $ 769 $ 602
*** The per share distribution in excess of net realized gain on investments was $0.0031.
# Per share data for the periods subsequent to December 1, 1993, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
### Average commission rate is calculated for fiscal years beginning on or after September 1, 1995.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.07 $ 6.89 $ 7.69 $ 5.91 $ 4.97
------ ------ ------ ------ ------
Income from investment operations -
Net investment loss $(0.07) $(0.13) $(0.14) $(0.13) $(0.11)
Net realized and unrealized gain on investments
and foreign currency transactions 3.52 5.31 (0.66) 1.91 1.05
------ ------ ------ ------ ------
Total from investment operations $ 3.45 $ 5.18 $(0.80) $ 1.78 $ 0.94
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions $(0.59) $ -- $ -- $ -- $ --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.59) $ -- $ -- $ -- $ --
------ ------ ------ ------ ------
Net asset value - end of period $14.93 $12.07 $ 6.89 $ 7.69 $ 5.91
====== ====== ====== ====== ======
Total return 29.25% 75.18% 10.40% 30.12% 18.91%
Ratios (to average net assets)/Supplemental data:
Expenses 2.33% 2.50% 2.75% 2.81% 2.30%
Net investment loss (2.00)% (1.98)% (1.86)% (1.91)% (1.65)%
Portfolio turnover 59% 112% 86% 95% 57%
Net assets at end of period (000,000 omitted) $ 357 $ 145 $ 73 $ 82 $ 61
# Per share data for the periods subsequent to December 1, 1993, are based on average shares outstanding.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- --------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1997 1996***
- --------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $31.48 $28.37
------ ------
Income from investment operations# -
Net investment loss $(0.59) $(0.38)
Net realized and unrealized gain on investments and foreign
currency transactions 6.12 3.49
------ ------
Total from investment operations $ 5.53 $ 3.11
------ ------
Less distributions declared to shareholders
From net realized gain on investments and foreign currency
transactions $(0.35) $ --
------ ------
Net asset value - end of period $36.66 $31.48
====== ======
Total return 17.81% 10.96%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.97% 1.35%+
Net investment loss (1.75)% (1.25)%+
Portfolio turnover 21% 22%
Average commission rate $0.0521 $0.0498
Net assets at end of period (000,000 omitted) $ 344 $ 119
*** For the period from the inception of Class C shares, April 1, 1996, through November 30, 1996.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to December 1, 1993, are based on average shares
outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- ------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1997****
- ------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $29.98
------
Income from investment operations# -
Net investment loss $(0.23)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 7.87
------
Total from investment operations $ 7.64
------
Net asset value - end of period $37.62
======
Total return 25.48%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.97%+
Net investment loss (0.74)%+
Portfolio turnover 21%
Average commission rate $0.0521
Net assets at end of period (000,000 omitted) $ 47
**** For the period from the inception of Class I shares, January 2, 1997,
through November 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid
indirectly.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Emerging Growth Fund (the Fund) is a diversified series of MFS Series
Trust II (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 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, forward contracts, and interest rate
swaps are valued on the basis of valuations furnished by dealers or by a pricing
service with consideration to factors such as institutional- size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon exchange or over-the-counter prices. Short- term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value. Securities for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Security Loans - The Fund may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The loans are collateralized at all times by cash or
securities with a market value at least equal to the market value of
securities loaned. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. The Fund receives a fee for
lending its securities and also continues to earn income on the securities
loaned. At November 30, 1997, the value of securities loaned was $67,723,013.
These loans are collateralized by U.S. Treasury securities in the amount of
$70,190,866.
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 is amortized or 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 date 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 average daily net assets. The fee is reduced according to an
arrangement which measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of
net investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV. Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes are classified
as distributions in excess of net investment income or accumulated net
realized gains. During the year ended November 30, 1997, $109,889,962 was
reclassified from accumulated undistributed net investment loss to accumulated
net realized gain on investments due to differences between book and tax
accounting for currency transactions and the offset of short-term capital
gains against accumulated net investment loss. This change had no effect on
the net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares. The 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 effective annual rate
of 0.71% of average daily net assets.
Administrator - Effective March 1, 1997, 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, provided that the administrative fee is not assessed
on Fund assets that exceed $3 billion:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of
$16,763 for the year ended November 30, 1997.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$1,926,366 for the year ended November 30, 1997, 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
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 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares, commissions to dealers and payments to MFD
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by the Fund. MFD retains the
service fee for accounts not attributable to a securities dealer which
amounted to $780,368 for the year ended November 30, 1997. Payment of the
0.10% per annum Class A distribution fee will commence on such date as the
Trustees of the Trust may determine. Fees incurred under the distribution plan
during the year ended November 30, 1997, were 0.25% of average daily net
assets attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be additional 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 $1,499,293
and $70,363 for Class B and Class C shares, respectively, for the year ended
November 30, 1997. Fees incurred under the distribution plan during the year
ended November 30, 1997, were 1.00% and 1.00% of average net assets
attributable to Class B and Class C shares on an annualized basis,
respectively.
Purchases over $1 million of Class A shares and certain purchases by
retirement plans are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following such 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. A contingent deferred sales charge is imposed on shareholder
redemptions of Class C shares in the event of a shareholder redemption within
12 months of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended November 30,
1997, were $161,446, $6,529,149, and $153,833 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 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 each class of shares at an effective annual rate of up to
0.15%, up to 0.22% and up to 0.15% attributable to Class A, Class B, and Class C
shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations aggregated
$3,247,795,952 and $1,598,904,626, 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 $6,133,081,916
--------------
Gross unrealized appreciation $3,593,023,725
Gross unrealized depreciation (370,340,207)
--------------
Net unrealized appreciation $3,222,683,518
--------------
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED NOVEMBER 30, 1997 YEAR ENDED NOVEMBER 30, 1996
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 186,156,395 $6,322,350,066 125,633,192 $3,667,675,756
Shares from merger of USA
Growth Fund 5,056,383 166,860,649 -- --
Shares issued to shareholders in
reinvestment of distributions 879,714 26,601,710 -- --
Transfer to Class I (888,406) (26,634,425) -- --
Shares reacquired (166,809,329) (5,698,965,342) (95,760,044) (2,803,650,694)
------------ -------------- ----------- --------------
Net increase 24,394,757 $ 790,212,658 29,873,148 $ 864,025,062
============ ============== =========== ==============
<CAPTION>
Class B Shares
YEAR ENDED NOVEMBER 30, 1997 YEAR ENDED NOVEMBER 30, 1996
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 75,823,687 $2,516,584,452 86,922,156 $2,514,573,078
Shares issued to shareholders in
reinvestment of distributions 567,281 16,942,530 -- --
Shares reacquired (53,046,942) (1,739,291,055) (46,040,180) (1,324,527,599)
------------ -------------- ----------- --------------
Net increase 23,344,026 $ 794,235,927 40,881,976 $1,190,045,479
============ ============== =========== ==============
<CAPTION>
Class C Shares
YEAR ENDED NOVEMBER 30, 1997 YEAR ENDED NOVEMBER 30, 1996
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,194,500 $ 307,318,296 4,515,421 $ 135,088,436
Shares issued to shareholders in
reinvestment of distributions 22,963 684,782 -- --
Shares reacquired (3,605,048) (120,103,252) (736,382) (21,861,465)
------------ -------------- ----------- --------------
Net increase 5,612,415 $ 187,899,826 3,779,039 $ 113,226,971
============ ============== =========== ==============
<CAPTION>
Class I Shares
PERIOD ENDED NOVEMBER 30, 1997*
--------------------------------
SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Shares sold 530,365 $16,396,903
Transfer from Class A 888,406 26,634,425
Shares reacquired (163,154) (5,454,303)
------------ --------------
Net increase 1,255,617 $37,577,025
============ ==============
* For the period from the inception of Class I shares, January 2, 1997, through November 30, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 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
year ended November 30, 1997, was $63,817.
(7) Transactions in Securities of Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the year ended November
30, 1997, is set forth on the following pages.
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
BEGINNING ------------------------------- --------------------------------
AFFILIATE SHARES SHARES COST SHARES COST
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amerihost Properties, Inc. 522,000 -- $ -- (5,000) $ (35,625)
Applebees International, Inc. 3,126,500 55,000 1,264,810 (42,000) (1,012,732)
Buffets, Inc. 2,953,050 -- -- -- --
Cadence Design Systems, Inc. 4,267,525 6,391,945 39,022,234 (84,400) (3,055,588)
Dayton Superior Corp. 265,000 -- -- -- --
Equalnet Holding Corp. 520,400 -- -- (120,400) (1,572,126)
HFS, Inc. 6,441,610 1,655,280 91,746,040 -- --
IHOP Corp. 612,200 -- -- (91,400) (2,263,315)
Hammons (John Q.) Hotels, Inc. 549,300 -- -- -- --
Mariner Health Group, Inc. 1,048,900 625,300 8,791,324 (10,000) (228,771)
Micro Warehouse, Inc. 2,565,200 313,300 4,247,357 -- --
Mortons Restaurant Group, Inc. 553,200 -- -- (53,200) (814,425)
Mothers Work, Inc. 211,500 -- -- -- --
Orthodontics Centers of
America, Inc. 1,990,000 200,000 2,425,000 -- --
Scopus Technology -- 1,068,400 15,849,379 -- --
ShoLodge, Inc. 375,600 -- -- -- --
Showbiz Pizza Time, Inc. 1,030,000 100,000 1,650,000 (113,000) (1,966,125)
System Software Associates,
Inc. 2,519,350 -- -- (152,099) (3,627,331)
Taco Cabana, Inc. 962,395 -- -- -- --
Tel-Save Holdings, Inc. 1,827,350 4,406,050 42,713,550 (20,000) (195,212)
------------ ------------
$207,709,694 $(14,771,250)
============ ============
</TABLE>
<TABLE>
<CAPTION>
ENDING REALIZED DIVIDEND ENDING
AFFILIATE SHARES GAIN (LOSS) INCOME VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amerihost Properties, Inc. 517,000 $ (3,751) $ -- $ 3,295,875
Applebees International, Inc. 3,139,500 -- 219,765 66,321,937
Buffets, Inc. 2,953,050 -- -- 26,208,319
Cadence Design Systems, Inc. 10,575,070 1,280,914 -- 267,020,517
Dayton Superior Corp. 265,000 -- -- 4,505,000
Equalnet Holding Corp. 400,000 (1,337,016) -- 637,500
HFS, Inc. 8,096,890 -- -- 555,649,076
IHOP Corp. 520,800 224,032 -- 17,772,300
Hammons (John Q.) Hotels, Inc. 549,300 -- -- 4,737,713
Mariner Health Group, Inc. 1,664,200 (73,776) -- 24,130,900
Micro Warehouse, Inc. 2,878,500 -- -- 41,738,250
Mortons Restaurant Group, Inc. 500,000 347,902 -- 11,250,000
Mothers Work, Inc. 211,500 -- -- 1,797,750
Orthodontics Centers of
America, Inc. 2,190,000 -- -- 39,693,750
Scopus Technology 1,068,400 -- -- 12,820,800
ShoLodge, Inc. 375,600 -- -- 6,009,600
Showbiz Pizza Time, Inc. 1,017,000 141,811 -- 21,865,500
System Software Associates, Inc. 2,367,251 (2,051,842) -- 31,366,076
Taco Cabana, Inc. 962,395 -- -- 5,052,574
Tel-Save Holdings, Inc. 6,213,400 258,523 -- 134,364,774
----------- -------- ------------------
$(1,213,203) $219,765 $1,276,238,211
=========== ======== ==============
</TABLE>
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At November 30,
1997, the Fund owned the following restricted securities (constituting 1.84%
of net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF SHARES
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jarvis Hotels PLC 6/21/96 98,300 $ 264,282 $ 253,272
Copley Partners 1 12/06/86 3,000,000 1,787,509 563,730
Copley Partners 2 12/02/86 - 8/09-91 3,000,000 2,054,422 1,197,540
Highland Capital Partners 6/28/88 - 6/28/93 7,500,000 5,482,059 1,175,700
Republic Industries, Inc. 5/15/96 6,505,000 227,897,500 169,536,563
------------
$172,726,805
============
</TABLE>
(9) Acquisition
At the close of business on June 2, 1997, the Fund acquired all of the assets
and liabilities of the New USA Growth Fund, a series of New USA Mutual Funds,
Inc. The acquisition was accomplished by a tax free exchange of 5,056,383
Class A shares of the Fund (valued at $166,860,649) for 13,631,450 shares of
the New USA Growth Fund's net assets on that date ($166,860,649), including
$15,293,245 of unrealized appreciation, which were combined with those of the
Fund. The aggregate net assets for Class A shares after the acquisition were
$2,359,349,019.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust II and Shareholders of MFS Emerging Growth
Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Emerging Growth Fund (one of
the Series constituting MFS Series Trust II) as of November 30, 1997, the
related statement of operations for the year then ended, the statement of
changes in net assets for the years ended November 30, 1997 and 1996, and the
financial highlights for each of the years in the ten-year period ended
November 30, 1997. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
November 30, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Emerging Growth
Fund at November 30, 1997, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 9, 1998
--------------------------------------------
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.
<PAGE>
MFS(R) Emerging Growth Fund
TRUSTEES SECRETARY
A. Keith Brodkin* - Chairman and Stephen E. Cavan*
President; Chairman and Director,
Massachusetts Financial Services ASSISTANT SECRETARY
Company James R. Bordewick, Jr.*
Richard B. Bailey* - Private CUSTODIAN
Investor; Former Chairman and State Street Bank and Trust Company
Director (until 1991), Massachusetts
Financial Services Company AUDITORS
Deloitte & Touche LLP
Marshall N. Cohan - Private Investor
INVESTOR INFORMATION
Lawrence H. Cohn, M.D. - Chief of For MFS stock and bond market outlooks,
Cardiac Surgery, Brigham and Women's call toll free: 1-800-637-4458 anytime
Hospital; Professor of Surgery, from a touch-tone telephone.
Harvard Medical School
For information on MFS mutual funds,
The Hon. Sir J. David Gibbons, KBE - call your financial adviser or, for an
Chief Executive Officer, Edmund information kit, call toll free:
Gibbons Ltd. 1-800-637-2929 any business day from 9
a.m. to 5 p.m. Eastern time (or leave a
Abby M. O'Neill - Private Investor message anytime).
Walter E. Robb, III - President and INVESTOR SERVICE
Treasurer, Benchmark Advisors, Inc. MFS Service Center, Inc.
(corporate financial consultants); P.O. Box 2281
President, Benchmark Consulting Boston, MA 02107-9906
Group, Inc. (office services)
For general information, call toll free:
Arnold D. Scott* - Senior Executive 1-800-225-2606 any business day from
Vice President, Director and 8 a.m. to 8 p.m. Eastern time.
Secretary, Massachusetts Financial
Services Company For service to speech- or
hearing-impaired, call toll free:
Jeffrey L. Shames* - President and 1-800-637-6576 any business day from 9
Director, Massachusetts Financial a.m. to 5 p.m. Eastern time. (To use
Services Company this service, your phone must be
equipped with a Telecommunications
J. Dale Sherratt - President, Insight Device for the Deaf.)
Resources, Inc. (acquisition planning
specialists) For share prices, account balances, and
exchanges, call toll free:
Ward Smith - Former Chairman (until 1-800-MFS-TALK (1-800-637-8255) anytime
1994), NACCO Industries (holding from a touch-tone telephone.
company)
WORLD WIDE WEB
INVESTMENT ADVISER www.mfs.com
Massachusetts Financial Services
Company [Dalbar Logo] For the fourth year
500 Boylston Street in a row, MFS earned
Boston, MA 02116-3741 a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office
DISTRIBUTOR Operations Service Quality Category.
MFS Fund Distributors, Inc. The firm achieved a 3.42 overall score
500 Boylston Street on a scale of 1 to 4 in the 1997
Boston, MA 02116-3741 survey. A total of 111 firms responded,
offering input on the quality of
PORTFOLIO MANAGER service they received from 29 mutual
John W. Ballen* fund companies nationwide. The survey
contained questions about service
TREASURER quality in 11 categories, including
W. Thomas London* "knowledge of operations contact,"
"keeping you informed," and "ease of
ASSISTANT TREASURERS doing business" with the firm.
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
<PAGE>
MFS(R) Emerging Growth Fund ----------------
Bulk Rate
500 Boylston Street U.S. Postage
Boston, MA 02116-3741 Paid
MFS
----------------
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