<PAGE>
[LOGO] Semiannual Report
THE FIRST NAME IN MUTUAL FUNDS May 31, 1996
MFS(R) GOLD AND NATURAL RESOURCES FUND
[GRAPHIC OMITTED: A picture of two men in a window.]
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MFS(R) GOLD & NATURAL RESOURCES FUND
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TRUSTEES ASSISTANT SECRETARY
A. Keith Brodkin* - Chairman and President James R. Bordewick, Jr.*
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991), CUSTODIAN
Massachusetts Financial Services Company; State Street Bank and Trust Company
Director, Cambridge Bancorp;
Director, Cambridge Trust Company INVESTOR INFORMATION
Marshall N. Cohan - Private Investor For MFS stock and bond market outlooks,
Lawrence H. Cohn, M.D. - Chief of Cardiac call toll free: 1-800-637-4458 anytime from
Surgery, Brigham and Women's Hospital; a touch-tone telephone.
Professor of Surgery, Harvard Medical School
The Hon. Sir J. David Gibbons, KBE - Chief For information on MFS mutual funds,
Executive Officer, Edmund Gibbons Ltd.; call your financial adviser or, for an
Chairman, Bank of N.T. Butterfield & Son Ltd. information kit, call toll free:
Abby M. O'Neill - Private Investor; 1-800-637-2929 any business day from
Director, Rockefeller Financial Services, Inc. 9 a.m. to 5 p.m. Eastern time (or leave
(investment advisers) a message anytime).
Walter E. Robb, III - President and Treasurer,
Benchmark Advisors, Inc. (corporate financial INVESTOR SERVICE
consultants); President, Benchmark Consulting MFS Service Center, Inc.
Group, Inc. (office services); Trustee, P.O. Box 2281
Landmark Funds (mutual funds) Boston, MA 02107-9906
Arnold D. Scott* - Senior Executive Vice
President, Director and Secretary, For general information, call toll free:
Massachusetts Financial Services Company 1-800-225-2606 any business day from
Jeffrey L. Shames* - President and Director, 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
J. Dale Sherratt - President, Insight For service to speech- or hearing-impaired,
Resources, Inc. call toll free: 1-800-637-6576 any business
(acquisition planning specialists) day from 9 a.m. to 5 p.m. Eastern time.
Ward Smith - Former Chairman (until 1994), (To use this service, your phone must be equipped
NACCO Industries; Director, Sundstrand with a Telecommunications Device for the Deaf.)
Corporation
For share prices, account balances and
INVESTMENT ADVISER exchanges, call toll free: 1-800-MFS-TALK
Massachusetts Financial Services Company (1-800-637-8255) anytime from a touch-tone
500 Boylston Street telephone.
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street TOP-RATED SERVICE
Boston, MA 02116-3741 For the second year in a row,
[DALBAR MFS earned a #1 ranking in
PORTFOLIO MANAGER LOGO] DALBAR, Inc.'s Broker/Dealer
Constantinos Mokas* Survey, Main Office Operations
Service Quality category. The
TREASURER firm achieved a 3.49 overall score - on a
W. Thomas London* scale of 1 to 4 - in the 1995 survey. A total
of 71 firms responded, offering input on the
ASSISTANT TREASURER quality of service they receive from 36
James O. Yost* mutual fund companies nationwide. The survey
contained questions about service quality in
SECRETARY 17 categories, including "knowledge of phone
Stephen E. Cavan* service contracts," "accuracy of transaction
processing," and "overall ease of doing
*Affiliated with the Investment Adviser business with the firm."
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LETTER TO SHAREHOLDERS
Dear Shareholders:
For the six months ended May 31, 1996, the Fund's Class A and Class B shares
provided total returns of 25.05% and 23.99%, respectively, including the
reinvestment of distributions but excluding the effects of any sales charges.
These returns compare to a 24.2% return for the Financial Times Gold Mines
Index (the Index), an unmanaged index designed to reflect the performance in
international markets of companies engaged primarily in gold mining, and an
11.78% return for the Standard & Poor's 500 Composite Index (the S&P 500), a
popular unmanaged index of common stock performance.
Economic Environment
Real (inflation-adjusted) economic growth in the first quarter of 1996 was
2.3% on an annualized basis, and it appears that second-quarter growth could
be even stronger. Thus, real growth in gross domestic product has started the
year at a rate exceeding our expectations. While we continue to believe that
growth from quarter to quarter will be uneven, it is now our expectation that
growth for all of 1996 could exceed 2 1/2%. Although individual consumers
appear to be carrying an excessive debt load, the consumer sector itself,
which represents two-thirds of the economy, continues to be impressive as the
auto and housing markets remain resilient. Consumer spending has also been
positively impacted by widespread job growth. At the same time however, the
economies of Europe and Japan continue to be in the doldrums, weakening U.S.
export markets while subduing the capital spending plans of American
corporations. Finally, due to the pickup in economic activity and increasing
job growth, it appears that inflation may accelerate slightly this year, and
the Federal Reserve Board is expected to continue its diligent anti-
inflationary stance.
Stock Market
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity market this
year. Although we believe the equity market represents fair value at current
levels, the expected slowdown in the growth of corporate earnings and the
increases in interest rates experienced so far this year raise near-term
concerns. Further increases in interest rates, and an acceleration of
inflation coupled with an additional slowdown in corporate earnings growth,
could have a negative effect on the stock market. However, to the extent that
some earnings disappointments are taken as a sign that the economy is not
overheating, this may prove beneficial for the longer-term health of the
equity market. We continue to believe that many of the technology-driven
productivity gains that U.S. companies have made in recent years will continue
to enhance corporate America's competitiveness and profitability. Therefore,
while we have some near-term concerns, we remain quite constructive on the
long-term viability of the equity market.
Portfolio Performance and Strategy
The Fund's relatively strong performance over the past six months reflects the
significant leverage of gold mining companies to movements in the price of
gold as investors move to this area. The Fund's performance comes despite a
modest 1% rise in the price of gold. Gold prices rose in January due to strong
consumer demand, less forward selling by producers, gold sales by central
banks, and heightened inflation concerns. These factors, along with gold-price
movements, have since settled down, although the demand/supply outlook,
including a marketing push in the Far East and a decline in South African gold
production, remains favorable. In our opinion, share prices of gold mining
companies are expensive on a historical basis versus the underlying commodity
and their own valuations. Therefore, the Fund has increased its weighting in
nonprecious metals to 6.1% of the portfolio, and additional modest increases
are planned.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin /s/ Constantinos Mokas
A. Keith Brodkin Constantinos Mokas
Chairman and President Portfolio Manager
June 10, 1996
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PORTFOLIO MANAGER PROFILE
A graduate of Dartmouth College and the Amos Tuck School of Business
Administration of Dartmouth College, Constantinos Mokas began his career at
MFS in 1990 as an industry specialist and was named Assistant Vice President
in 1994. He became the Portfolio Manager for MFS Gold & Natural Resources Fund
in December 1994.
OBJECTIVE AND POLICY
The Fund seeks to provide long-term capital appreciation and preservation of
capital. Dividend and interest income from portfolio securities, if any, is
incidental to the Fund's investment objective.
The Fund intends to invest in securities (including common stocks, convertible
debt securities and precious metals and natural resources indexed debt and
equity securities) of companies which are engaged in, or which receive revenue
or income from other companies engaged in: exploring for, developing,
processing, fabricating, producing, distributing, dealing in or owning gold or
other precious metals, nonprecious metals or minerals or other natural
resources; the development of technologies for the production or use of
natural resources; the furnishing of technology, equipment, supplies or
services to the natural resources industry; or gold mine or other natural
resources finance. The Fund may also invest in gold and other precious metals,
bullion and warrants to purchase such bullion.
PERFORMANCE SUMMARY
Because mutual funds like MFS Gold & Natural Resources Fund are designed for
investors with long-term goals, we have provided cumulative results as well as
the average annual total returns for Class A and Class B shares for the
applicable time periods.
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AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
Class A Investment Results
(net asset value change including reinvested distributions)
9/07/93(+)-
6 Months 1 Year 5/31/96
- ------------------------------------------------------------------------------
Cumulative Total Return* +25.05% +22.20% +27.07%
- ------------------------------------------------------------------------------
Average Annual Total Return* -- +22.20% + 9.17%
- ------------------------------------------------------------------------------
The average annual total returns, calculated for the period ended as of the
most recent calendar quarter as required by the Securities and Exchange
Commission (the SEC), with all distributions reinvested and reflecting the
maximum sales charge of 5.75% on the initial investment for the 1-year period
ended March 31, 1996 and for the period from September 7, 1993(+) to March 31,
1996, were +7.03% and +5.53%, respectively.
Class B Investment Results
(net asset value change including reinvested distributions)
8/01/88(+)-
6 Months 1 Year 5 Years 5/31/96
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Cumulative Total Return(++) +23.99% +20.68% +46.27% +11.38%
- ------------------------------------------------------------------------------
Average Annual Total Return(++) -- +20.68% + 7.90% + 1.39%
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The average annual total returns, calculated for the period ended as of the
most recent calendar quarter as required by the SEC, with all distributions
reinvested and reflecting the contingent deferred sales charge (CDSC) of 4%,
2% and 0% for the 1- and 5-year periods ended March 31, 1996 and for the
period from August 1, 1988(+) to March 31, 1996, were +8.24%, +6.80% and +0.90%,
respectively.
All results represent past performance and are not an indication of future
results. Investment return and principal value will fluctuate, and shares,
when redeemed, may be worth more or less than their original cost. All Fund
results reflect the applicable expense subsidy which is explained in the Notes
to Financial Statements. Had the subsidy not been in effect, the results would
have been less favorable. The subsidy may be rescinded at any time.
(+) Commencement of offering of this class of shares.
* These results do not include the sales charge. If the charge had been
included, the results would have been lower.
(++) These results do not include any CDSC. If the charge had been included, the
results would have been lower.
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PORTFOLIO OF INVESTMENTS (UNAUDITED) - May 31, 1996
Common Stocks - 88.6%
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Issuer Shares Value
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Precious Metals and Minerals - Australia - 5.9%
Newcrest Mining 150,000 $ 665,449
Nuigini Mining Ltd.+ 100,000 244,157
Placer Pacific 300,000 507,464
Poseidon Gold Ltd. 300,000 801,890
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$ 2,218,960
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Precious Metals and Minerals - Canada - 29.4%
Agnico-Eagle Mines Ltd. 70,000 $ 1,400,000
Barrick Gold Corp. 40,000 1,260,000
Euro Nevada Mining Corp. Ltd. 35,000 1,660,584
Horsham Corp.# 1,150,000 1,250,625
Kinross Gold Corp. 50,000 450,000
Placer Dome, Inc. 75,000 2,221,875
Southern Africa Minerals Corp.+ 400,000 291,971
TVX Gold, Inc.+* 275,000 2,475,000
Triton Mining Corp.# 17,500 111,770
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$11,121,825
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Precious Metals and Minerals - South Africa - 21.5%
Ashanti Goldfields Co. 32,500 $ 686,562
Driefontein Consolidated, ADR 45,000 666,563
Free State Consolidated Gold Mines Ltd., ADR 90,000 1,035,000
Hartebeestfontein Gold Mining Co. Ltd., ADR 185,000 725,200
Kloof Gold Mining Ltd., ADR 95,000 1,211,250
Rustenburg Platinum Holdings Ltd., ADR 15,483 292,245
Vaal Reefs Exploration & Mining Co. Ltd., ADR 100,000 1,025,000
Western Areas Gold Mining Ltd., ADR 100,674 1,573,031
Western Deep Levels Ltd., ADR 20,000 915,000
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$ 8,129,851
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Precious Metals and Minerals - U.S. - 26.0%
Amax Gold, Inc.+ 185,000 $ 1,248,750
Battle Mountain Gold Co. 120,000 1,050,000
Freeport-McMoRan Copper & Gold, Inc. 40,000 1,300,000
Homestake Mining Co. 40,000 825,000
Newmont Mining Corp. 55,000 3,313,750
Santa Fe Pacific Gold Co. 60,000 915,000
Stillwater Mining Co.+ 40,000 1,170,000
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$ 9,822,500
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Total Precious Metals and Minerals (Identified Cost,
$26,806,550) $31,293,136
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Metals and Minerals - Australia - 1.5%
Western Mining Holding, ADS 75,000 $ 567,905
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Metals and Minerals - U.S. - 4.3%
Century Aluminum Co. 74,800 $ 1,131,350
RMI Titanium Co. 25,000 503,125
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$ 1,634,475
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Total Metals and Minerals (Identified Cost, $1,866,102) $ 2,202,380
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Total Common Stocks (Identified Cost, $28,672,652) $33,495,516
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Short-Term Obligations - 8.0%
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Principal Amount
(000 Omitted)
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Federal Home Loan Bank - U.S. - 3.2%
FHLB, 5.21s, due 6/03/96 $1,200 $ 1,199,653
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Federal Home Loan Mortgage Corp. - U.S. - 2.1%
FHLMC, 5.21s, due 6/12/96 $ 800 $ 798,726
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Federal National Mortgage Association - U.S. - 2.7%
FNMA, 5.22s, due 6/07/96 $1,020 $ 1,019,113
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Total Short-Term Obligations, at Amortized Cost $ 3,017,492
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Total Investments (Identified Cost, $31,690,144) $36,513,008
Other Assets, Less Liabilities - 3.4% 1,302,232
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Net Assets - 100.0% $37,815,240
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+ Non-income producing security.
* Restricted security.
# SEC Rule 144A restriction.
See notes to financial statements
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FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
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May 31, 1996
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Assets:
Investments, at value (identified cost, $31,690,144) $36,513,008
Cash 4,248
Receivable for Fund shares sold 1,411,638
Dividends and interest receivable 42,151
Receivable from investment adviser 12,603
Other assets 289
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Total assets $37,983,937
-----------
Liabilities:
Payable for Fund shares reacquired $ 67,803
Payable to affiliates -
Management fee 740
Shareholder servicing agent fee 200
Distribution fee 12,053
Accrued expenses and other liabilities 87,901
-----------
Total liabilities $ 168,697
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Net assets $37,815,240
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Net assets consist of:
Paid-in capital $35,864,141
Unrealized appreciation on investments 4,822,864
Accumulated net realized loss on investments and foreign
currency transactions (2,705,013)
Accumulated net investment loss (166,752)
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Total $37,815,240
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Shares of beneficial interest outstanding 5,536,694
===========
Class A shares:
Net asset value and redemption price per share
(net assets of $10,279,480 / 1,471,537 shares of beneficial
interest outstanding) $6.99
=====
Offering price per share (100/94.25) $7.42
=====
Class B shares:
Net asset value and offering price per share
(net assets of $27,535,760 / 4,065,157 shares of beneficial
interest outstanding) $6.77
=====
On sales of $100,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A
and Class B shares.
See notes to financial statements
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FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
Six Months Ended May 31, 1996
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 164,525
Interest 71,022
----------
Total investment income $ 235,547
----------
Expenses -
Management fee $ 124,283
Trustees' compensation 19,441
Shareholder servicing agent fee (Class A) 5,794
Shareholder servicing agent fee (Class B) 27,958
Distribution and service fee (Class B) 127,084
Auditing fees 13,658
Custodian fee 9,240
Printing 8,818
Postage 6,831
Legal fees 239
Miscellaneous 42,090
----------
Total expenses $ 385,436
Preliminary reduction of expenses by investment adviser (12,603)
----------
Net expenses $ 372,833
----------
Net investment loss $ (137,286)
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $ 74,315
Foreign currency transactions 351
----------
Net realized gain on investments and foreign currency
transactions $ 74,666
----------
Change in unrealized appreciation -
Investments $6,545,314
Translation of assets and liabilities in foreign currencies 6
----------
Net unrealized gain on investments $6,545,320
----------
Net realized and unrealized gain on investments and
foreign currency $6,619,986
----------
Increase in net assets from operations $6,482,700
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Six Months Ended Year Ended
May 31, 1996 November 30,
(Unaudited) 1995
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment loss $ (137,286) $ (196,281)
Net realized gain (loss) on investments and
foreign currency transactions 74,666 (1,624,411)
Net unrealized gain on investments and
foreign currency translation 6,545,320 417,929
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Increase (decrease) in net assets from
operations $ 6,482,700 $(1,402,763)
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Fund share (principal) transactions -
Net proceeds from sale of shares $56,759,312 $70,516,741
Net asset value of shares issued to
shareholders in reinvestment of
distributions -- --
Cost of shares reacquired (52,962,218) (73,995,431)
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Increase (decrease) in net assets from
Fund share transactions $ 3,797,094 $(3,478,690)
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Total increase (decrease) in net assets $10,279,794 $(4,881,453)
Net assets:
At beginning of period 27,535,446 32,416,899
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At end of period (including accumulated net
investment loss of $166,752 and $29,466,
respectively) $37,815,240 $27,535,446
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See notes to financial statements
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FINANCIAL STATEMENTS - continued
Financial Highlights
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Six Months Ended Year Ended November 30,
May 31, 1996 ----------------------------
(Unaudited) 1995 1994 1993*
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Class A
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Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 5.59 $ 5.76 $ 6.54 $ 5.55
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Income from investment operations## -
Net investment income (loss)(S) $ (0.00) $ 0.01 $ 0.01 $ 0.01
Net realized and unrealized gain
(loss) on investments 1.40 (0.18) (0.73) 0.98
------- ------ ------ ------
Total from investment operations $ 1.40 $(0.17) $(0.72) $ 0.99
------- ------ ------ ------
Less distributions declared to
shareholders -
From net realized gain on
investments $ -- $ -- $(0.05) $ --
Tax return of capital -- -- (0.01) --
------- ------ ------ ------
Total distributions declared to
shareholders $ -- $ -- $(0.06) $ --
------- ------ ------ ------
Net asset value - end of period $ 6.99 $ 5.59 $ 5.76 $ 6.54
======= ====== ====== ======
Total return# 25.04%++ (2.95)% (11.14)% 17.84%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses 1.44%+ 1.43% 1.42% 1.43%+
Net investment income (loss) (0.02)%+ 0.16% 0.14% 0.61%+
Portfolio turnover 10% 33% 142% 188%
Net assets at end of period
(000 omitted) $10,279 $6,328 $3,695 $1,117
* For the period from the commencement of offering of Class A shares,
September 7, 1993 to November 30, 1993.
+ Annualized.
++ Not annualized.
# 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.
## Per share data for the periods subsequent to November 30, 1992 are based on
average shares outstanding.
(S) The investment adviser did not impose a portion of its management fee for
the periods indicated. If this fee had been incurred by the Fund, the net
investment income (loss) per share and ratios would have been:
Net investment loss $ -- $ -- $(0.02) $ --
Ratios (to average net assets):
Expenses 1.52%+ 1.63% 1.84% 1.93%+
Net investment income (loss) (0.10)%+ (0.04)% (0.27)% 0.11%+
See notes to financial statements
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FINANCIAL STATEMENTS - continued
Financial Highlights - continued
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Six Months Ended Year Ended November 30,
May 31, 1996 -----------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992
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Class B
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Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.46 $ 5.68 $ 6.53 $ 4.67 $ 4.80
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Income from investment operations## -
Net investment income (loss)(S) $(0.03) $(0.04) $(0.06) $(0.02) $(0.14)
Net realized and unrealized gain
(loss) on investments 1.34 (0.18) (0.73) 1.88 0.01
------ ------ ------ ------ ------
Total from investment operations $ 1.31 $(0.22) $(0.79) $ 1.86 $(0.13)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on investments $ -- $ -- $(0.05) $ -- $ --
Tax return of capital -- -- (0.01) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $ -- $ -- $(0.06) $ -- $ --
------ ------ ------ ------ ------
Net asset value - end of period $ 6.77 $ 5.46 $ 5.68 $ 6.53 $ 4.67
====== ====== ====== ====== ======
Total return 23.99%++ (3.87)% (12.24)% 39.83% (2.71)%
Ratios (to average net assets)/Supplemental data(S):
Expenses 2.50% 2.50% 2.49% 2.66% 4.09%
Net investment loss (1.07)% (0.79)% (0.83)% (0.38)% (2.39)%
Portfolio turnover 10% 33% 142% 188% 189%
Net assets at end of period (000
omitted) $27,536 $21,207 $28,722 $24,861 $6,432
<FN>
## Per share data for the periods subsequent to November 30, 1992 are based on average shares outstanding.
+ Annualized.
++ Not annualized.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been
incurred by the Fund, the net investment income (loss) per share and ratios would have been:
Net investment loss $(0.03) $(0.05) $(0.09) $(0.04) $ --
Ratios (to average net assets):
Expenses 2.59%+ 2.71% 2.91% 3.15% --
Net investment income (loss) (1.16)%+ (1.00)% (1.25)% (0.87)% --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
Year Ended November 30,
----------------------------------------
1991 1990 1989 1988*
- --------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 4.68 $ 6.56 $ 5.88 $ 6.16
------ ------ ------ ------
Income from investment operations## -
Net investment income (loss)(S) $(0.11) $(0.07) $(0.04) $ 0.03
Net realized and unrealized
gain (loss) on investments 0.23 (1.81) 0.75 (0.31)
------ ------ ------ ------
Total from investment operations $ 0.12 $(1.88) $ 0.71 $ 0.28
------ ------ ------ ------
Less distributions declared to shareholders -
From net realized gain on
investments $ -- $ -- $(0.03) $ --
------ ------ ------ ------
Total distributions declared
to shareholders $ -- $ -- $(0.03) $ --
------ ------ ------ ------
Net asset value - end of period $ 4.80 $ 4.68 $ 6.56 $ 5.88
====== ====== ====== ======
Total return 2.56% (28.66)% 12.06% (13.71)%+
Ratios (to average net assets)/Supplemental data(S):
Expenses 4.11% 3.88% 3.67% 3.00%+
Net investment income (loss) (2.19)% (2.04)% (1.15)% (0.94)%+
Portfolio turnover 135% 114% 92% 12%
Net assets at end of period
(000 omitted) $7,056 $7,207 $4,795 $1,778
* For the period from the commencement of investment operations, August 1,
1988 to November 30, 1988.
+ Annualized.
(S) The investment adviser did not impose a portion of its management fee for
the periods indicated. If this fee had been incurred by the Fund, the net
investment income (loss) per share and ratios would have been:
Net investment loss $ -- $ -- $ -- $ --
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Business and Organization
MFS Gold and Natural Resources Fund (the Fund) is a non-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.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are
not available are valued at last quoted bid prices. Debt securities (other
than short-term obligations which mature in 60 days or less), including listed
issues and forward contracts, are valued on the basis of valuations furnished
by dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which there
are no such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments and 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.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund will enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Fund may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. It may also use contracts in a manner intended to
protect foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded for financial statement purposes as unrealized until
the contract settlement date.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for both financial
statement and tax reporting purposes as required by federal income tax
regulations. Dividend income is recorded on the ex-dividend date for dividends
received in cash. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
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. Foreign taxes have been provided
for on interest and dividend income earned on foreign investments in
accordance with the applicable country's tax rates and to the extent
unrecoverable are recorded as a reduction of investment income. 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. At November 30, 1995, the Fund, for federal income tax
purposes, had a capital loss carryforward of $2,725,073, which may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on November 30, 2003 ($1,781,104) and
November 30, 2002 ($943,969).
Multiple Classes of Shares of Beneficial Interest - The Fund offers both Class
A and Class B shares. The two classes of shares differ in their respective
shareholder servicing agent, 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 0.75% of average daily net assets. The investment adviser did not impose a
portion of its fee, which is reflected as a preliminary reduction of expenses
in the Statement of Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Fund has an
unfunded defined benefit plan for all its independent Trustees and Mr. Bailey.
Included in Trustees" compensation is a net periodic pension expense of $4,843
for the six months ended May 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$6,715 for the six months ended May 31, 1996, as its portion of the sales
charge on sales of Class A shares of the Fund. The Trustees have adopted
separate distribution plans for Class A and Class B shares pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
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. Payments of the 0.25% per annum service
fee will commence under the distribution plan when the value of the net assets
of the Fund attributable to Class A shares first equals or exceeds $40 million.
Payment of the 0.10% per annum distribution fee will commence on such date as
the Trustees of the Trust may determine.
The Class B 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 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 shares. The
service fee is intended to be additional consideration for services rendered
by the dealer with respect to Class B shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $4,983 for
Class B shares for the six months ended May 31, 1996. Fees incurred under the
distribution plan during the six months ended May 31, 1996 were 1.00% of
average daily net assets attributable to Class B shares on an annualized
basis.
Purchases over $1 million into Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the
event of a shareholder redemption within twelve 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. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended May 31,
1996 were $0 and $41,394 for Class A and Class B 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 of each class of shares at an
effective annual rate of up to 0.15% and up to 0.22% attributable to Class A
and Class B shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$3,980,451 and $2,983,725, 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 $31,690,144
===========
Gross unrealized appreciation $ 6,455,268
Gross unrealized depreciation (1,632,404)
-----------
Net unrealized appreciation $ 4,822,864
===========
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
Class A Shares
Six Months Ended Year Ended
May 31, 1996 November 30, 1995
---------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,390,337 $ 29,318,447 5,439,951 $ 31,316,326
Shares reacquired (4,050,179) (26,720,688) (4,950,704) (28,287,454)
--------- ------------- --------- -------------
Net increase 340,158 $ 2,597,759 489,247 $ 3,028,872
========= ============= ========= =============
Class B Shares
Six Months Ended Year Ended
May 31, 1996 November 30, 1995
---------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,245,576 $ 27,440,865 7,007,971 $ 39,200,415
Shares reacquired (4,066,773) (26,241,530) (8,180,833) (45,707,977)
--------- ------------- --------- -------------
Net increase
(decrease) 178,803 $ 1,199,335 (1,172,862) $ (6,507,562)
========= ============= ========= =============
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the six months ended May
31, 1996 was $160.
(7) 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 May 31, 1996,
the Fund owned the following restricted securities (constituting 10.15% of net
assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). 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. Certain of
these securities may be offered and sold to "qualified institutional buyers"
under Rule 144A of the 1933 Act.
Date of
Description Acquisition Shares Cost Value
- -------------------------------------------------------------------------------
Horsham Corp. 5/16/96 1,150,000 $1,253,500 $1,250,625
TVX Gold, Inc. 6/28/93 275,000 2,013,820 2,475,000
Triton Mining Corp. 2/9/96 - 2/21/96 17,500 124,032 111,770
----------
$3,837,395
==========
--------------------------------------------
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) GOLD & -------------
NATURAL [DALBAR BULK RATE
RESOURCES LOGO] U.S. POSTAGE
FUND TOP-RATED SERVICE P A I D
PERMIT #55638
500 Boylston Street BOSTON, MA
Boston, MA 02116 -------------
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THE FIRST NAME IN MUTUAL FUNDS
MGN-3 7/96 11M 6/206/
