<PAGE>
MFS CAPITAL GROWTH FUND
(A SERIES OF MFS SERIES TRUST II)
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
January 25, 1996
VIA EDGAR
- ---------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: MFS SERIES TRUST II (FILE NO. 811-4775), ON BEHALF OF
MFS CAPITAL GROWTH FUND
-----------------------------------------------------
Ladies and Gentlemen:
Pursuant to the requirements of Section 30(b) of the Investment Company
Act of 1940 and Rule 30b2-1 thereunder, we hereby file a copy of the Annual
Report to Shareholders dated November 30, 1995 of MFS Capital Growth Fund.
Very truly yours,
LORRAINE K. GRIP
Lorraine K. Grip
Senior Production Editor
LKG/kha
<PAGE>
[MFS LOGO] ANNUAL REPORT FOR
YEAR ENDED
NOVEMBER 30, 1995
MFS [Register Mark] CAPITAL GROWTH FUND
Front cover
A photo of a computer keyboard.
<PAGE>
MFS [Register Mark] CAPITAL GROWTH FUND
TRUSTEES
A. Keith Brodkin* -- Chairman and President
Richard B. Bailey* -- Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Marshall N. Cohan -- Private Investor
Lawrence H. Cohn, M.D. -- Chief of Cardiac Surgery, Brigham and Women's
Hospital; Professor of Surgery, Harvard Medical School
The Hon. Sir J. David Gibbons, KBE -- Chief Executive Officer, Edmund Gibbons
Ltd.; Chairman, Bank of N.T. Butterfield & Son Ltd.
Abby M. O'Neill -- Private Investor; Director, Rockefeller Financial Services,
Inc. (investment adviser)
Walter E. Robb, III -- President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); President, Benchmark Consulting Group, Inc.
(office services); Trustee, Landmark Funds (mutual funds)
Arnold D. Scott* -- Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames* -- President and Director, Massachusetts Financial Services
Company
J. Dale Sherratt -- President, Insight Resources, Inc. (acquisition planning
specialists)
Ward Smith -- Former Chairman (until 1994), NACCO Industries; Director,
Sundstrand Corporation
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Deloitte & Touche LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime).
INVESTOR SERVICE MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any business day from 8
a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances and exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone telephone.
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
John F. Brennan, Jr.*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
TOP-RATED SERVICE
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s
Broker/Dealer Survey, Main Office Operations Service Quality category. The firm
achieved a 3.49 overall score -- on a scale of 1 to 4 -- in the 1995 survey. A
total of 71 firms responded, offering input on the quality of service they
receive from 36 mutual fund companies nationwide. The survey contained questions
about service quality in 17 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
During the past 12 months, Class A shares of the Fund provided a total return of
+39.51%, while Class B shares had a total return of +38.16%. Both of these
returns, which include the reinvestment of distributions but exclude the effects
of any sales charges, outperformed the Standard & Poor's 500 Composite Index
(the S&P 500), a popular, unmanaged index of common stock performance, which
returned +36.93% over the same period. A discussion of the Fund's performance
during this period may be found in the Portfolio Performance and Strategy
section of this letter.
Economic Outlook
Moderate, but sustainable, growth has been the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy growing
at an annual rate of 4.2% in the third quarter, this surprisingly strong growth
was mainly driven by a pickup in consumer spending and an increase in business
and government outlays. Although impressive, this growth rate is not expected to
continue in coming months. Recent retail sales have been disappointing, in part
because of rising levels of consumer debt. An extended period of lower mortgage
rates seems to have relieved much of the pent-up demand for housing. Growth is
not expected to get much help from the manufacturing sector, either, as order
flows from manufacturers have moderated. Export activity, meanwhile, is also
expected to remain modest as continued weakness abroad has limited demand for
many U.S. goods. However, the Federal Reserve Board's consistent and, so far,
successful efforts to fight inflation seem to be giving consumers and businesses
enough longer term confidence to help maintain modest growth in real (adjusted
for inflation) gross domestic product into 1996.
Interest Rates
Given the recent signs of economic weakness, prospects for the Fed's further
decreasing short-term interest rates are good. Long-term rates, meanwhile, have
moved noticeably downward in recent months in anticipation of more modest
fourth-quarter growth with continued low inflation. While there were some
increases in commodity prices early in the year, companies found it difficult to
pass these on at the consumer level as they continue to fight for market share.
Additionally, unit labor costs remain under control and seem to be growing at a
pace that is near or below the ongoing inflation rate. Thus, with long-term
government bonds yielding approximately 6% in an environment of 2% to 3%
inflation, real rates of return in the fixed-income markets remain relatively
attractive.
1
<PAGE>
LETTER TO SHAREHOLDERS -- continued
Stock Markets
After some volatility late in the third quarter, the stock market continued to
strengthen. Although many companies reported solid third-quarter results, there
was some weakness in the earnings of retail, financial services and even some
technology companies. However, a slowdown in earnings may be a positive
development if it is an indication that the economy is not overheating and that
inflation is under control. While we see a deceleration of corporate earnings as
the inevitable consequence of traditional business cycles, we remain encouraged
by the high absolute level of profitability among U.S. companies. Also, many
companies' increasing emphasis on cost containment and growing use of technology
have helped keep them highly competitive and reasonably profitable. Looking
ahead, we believe that a stabilizing interest rate environment, coupled with
reasonable earnings reports, could justify current market valuations.
Portfolio Performance and Strategy
The Fund's strong performance over the past year relative to the S&P 500 can be
attributed to the following factors: underweightings in the energy, basic
materials, auto and housing sectors; overweighting in the financial services
sector; and stock selection, particularly in the industrial goods and consumer
staples sectors. An underweighting in the technology sector, which was among the
market's best performing sectors, helped offset part of this positive relative
performance.
The financial services sector, which averaged 23% of the Fund's assets
during the year, performed strongly, with a return of +54.8% versus +36.93% for
the S&P 500. The strength of this sector's performance was broadly based across
both insurance companies and banks. First Interstate Bancorp and West One
Bancorp were particuarly strong performers.
The industrial goods and consumer staples sectors also outperformed the
overall market; moreover, stock selection within these sectors added
significantly to performance. For example, Lockheed Martin and McDonnell Douglas
added to performance in the industrial goods sector, while Philip Morris and
PepsiCo made strong contributions in the consumer staples sector.
The Fund's exposure to the technology sector was limited for most of the
year at 5.5% of the portfolio, versus 9.5% for the S&P 500. With the strong
performance of this sector, which gained 49.3%, this underweighting was a
significant negative for performance relative to the S&P 500.
2
<PAGE>
LETTER TO SHAREHOLDERS -- continued
Our current outlook remains optimistic. The U.S. economic backdrop is
exceedingly positive, with the prospect of monetary easing by the Fed, low
inflation, a strong relative international trade position, and sustainable
economic growth. While we believe this economic backdrop should be rewarding for
equity investors, our enthusiasm is tempered by the exceptional performance of
the equity markets in 1995.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
[Photo of A. Keith Brodkin, [Photo of John F. Brennan, Jr.
Chairman and President] Portfolio Manager]
[Signature] [Signature]
A. Keith Brodkin John F. Brennan, Jr.
Chairman and President Portfolio Manager
December 13, 1995
PORTFOLIO MANAGER PROFILE
John Brennan has been a member of the MFS investment staff since 1985. A
graduate of the University of Rhode Island and Stanford University's Graduate
School of Business Administration, he began his career at MFS as an industry
specialist and was promoted to Assistant Vice President -- Investments in 1987.
He was named Vice President -- Investments in 1988 and Senior Vice President --
Investments in February 1995. Mr. Brennan became Portfolio Manager of MFS
Capital Growth Fund on May 1, 1995.
3
<PAGE>
OBJECTIVE AND POLICIES
The Fund seeks to provide growth of capital. Dividend income, if any, is a
consideration incidental to the Fund's objective of growth of capital.
In seeking to achieve its investment objective, the Fund generally invests in
companies believed to possess above-average growth opportunities. While the
policy of the Fund is to invest primarily in common stocks, it may also seek
appreciation in fixed-income securities, convertible bonds, convertible
preferred stocks and warrants. The Fund may also invest up to 25% of its total
assets in foreign securities.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
The Fund has designated $9,937,136 as a long-term capital gain distribution for
tax purposes. This distribution was made to shareholders of record as of
December 29, 1994, payable December 30, 1994.
For the year ended November 30, 1995, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to
61.78%.
PERFORMANCE
The information on the following page illustrates the historical performance of
MFS Capital Growth Fund Class B shares in comparison to various market
indicators. Fund results in the graph do not reflect the deduction of any
contingent deferred sales charge (CDSC) since the CDSC is not applicable after a
six-year period. Benchmark comparisons are unmanaged and do not reflect any fees
or expenses. You cannot invest in an index. All results reflect the reinvestment
of all dividends and capital gains.
Please note that effective September 7, 1993, Class A shares were offered.
Information on Class A share performance appears on the next page.
4
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from January 1, 1987 to November 30, 1995)
Line graph representing the growth of a $10,000 investment for the nine-year
period ended November 30, 1995. The graph is scaled from $0 to $50,000 in
$10,000 segments. The years are marked in 12-month segments from 1987 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS Capital Growth Fund (Class B), a second line of short dashes represents
the S&P 500, a third line of medium-short dashes represents the Consumer Price
Index.
MFS Capital Growth Fund (Class B) $32,338
S&P 500 $33,034
Consumer Price Index $13,897
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
Life of Class
through
1 Year 3 Years 5 Years 11/30/95
===================================================================================================================
<S> <C> <C> <C> <C>
MFS Capital Growth Fund (Class A) including
5.75% sales charge +31.51% -- -- +13.41%*
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Growth Fund (Class A) at net
asset value +39.51% -- -- +16.46%*
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Growth Fund (Class B) with CDSC+ +34.16% +11.36% +15.17% +13.93%++
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Growth Fund (Class B) without CDSC +38.16% +12.16% +15.39% +13.93%++
- -------------------------------------------------------------------------------------------------------------------
Average capital appreciation fund +30.28% +13.56% +17.38% +12.02%**
- -------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index +36.93% +15.05% +16.76% +14.34%**
- -------------------------------------------------------------------------------------------------------------------
Consumer Price Indexes + 2.61% + 2.65% + 2.80% + 3.76%**
- -------------------------------------------------------------------------------------------------------------------
<FN>
* For the period from the commencement of offering of Class A shares,
September 7, 1993 to November 30, 1995.
+ These returns reflect the applicable Class B CDSC of 4%, 3% and 2% for the
1-, 3- and 5-year periods, respectively, and 0% for the period commencing
December 29, 1986.
++ For the period from the commencement of offering of Class B shares,
December 29, 1986 to November 30, 1995.
** Benchmark comparisons begin on January 1, 1987.
[ss] The Consumer Price Index is a popular measure of change in prices.
</FN>
</TABLE>
5
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS -- continued
In the table on the preceding page, we have included the average annual total
returns of all capital appreciation funds (including the Fund) tracked by Lipper
Analytical Services, Inc. (an independent firm which rates mutual fund
performance) for the applicable time periods. Because these returns do not
reflect any applicable sales charges, we have also included the Fund's results
at net asset value (no sales charge) for comparison.
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value of an investment in a mutual
fund will vary with changes in market conditions, and shares, when redeemed, may
be worth more or less than their original cost. All Class A 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.
6
<PAGE>
PORTFOLIO OF INVESTMENTS -- November 30, 1995
Common Stocks -- 93.6%
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
[S] [C] [C]
Aerospace -- 7.1%
Allied Signal, Inc. 140,000 $ 6,615,000
Lockheed Martin Corp. 300,000 22,012,500
McDonnell Douglas Corp. 90,000 8,021,250
------------
$ 36,648,750
- --------------------------------------------------------------------------------
Agricultural Products -- 1.9%
AGCO Corp. 100,000 $ 4,312,500
Case Corp. 135,000 5,636,250
------------
$ 9,948,750
- --------------------------------------------------------------------------------
Airlines -- 0.8%
Southwest Airlines Co. 168,400 $ 4,210,000
- --------------------------------------------------------------------------------
Apparel and Textiles -- 1.1%
Nike, Inc., "B" 100,000 $ 5,800,000
- --------------------------------------------------------------------------------
Automotive -- 1.4%
General Motors Corp. 145,000 $ 7,032,500
- --------------------------------------------------------------------------------
Banks and Credit Companies -- 2.9%
First Interstate Bancorp 110,000 $ 14,740,000
- --------------------------------------------------------------------------------
Business Services -- 1.2%
ADT Ltd.* 425,000 $ 5,950,000
DST Systems, Inc.* 12,400 358,050
------------
$ 6,308,050
- --------------------------------------------------------------------------------
Cellular Telephones -- 0.7%
AirTouch Communications, Inc.* 117,500 $ 3,422,188
- --------------------------------------------------------------------------------
Computer Software -- Systems -- 4.2%
Adobe Systems, Inc. 147,800 $ 9,994,975
BMC Software, Inc.* 275,000 11,618,750
------------
$ 21,613,725
- --------------------------------------------------------------------------------
Consumer Goods and Services -- 11.6%
Colgate-Palmolive Co. 75,000 $ 5,493,750
Gillette Co. 160,000 8,300,000
Philip Morris Cos., Inc. 180,000 15,795,000
RJR Nabisco Holdings Corp. 281,000 8,184,125
Tyco International Ltd. 700,000 21,962,500
------------
$ 59,735,375
- --------------------------------------------------------------------------------
Containers -- 0.6%
Corning, Inc. 100,000 $ 3,012,500
- --------------------------------------------------------------------------------
Defense Electronics -- 1.8%
Loral Corp. 280,000 $ 9,485,000
- --------------------------------------------------------------------------------
Electrical Equipment -- 1.9%
Honeywell, Inc. 200,000 $ 9,525,000
- --------------------------------------------------------------------------------
Electronics -- 2.3%
Intel Corp. 198,300 $ 12,071,513
- --------------------------------------------------------------------------------
Entertainment -- 5.2%
Disney (Walt) Co. 75,000 $ 4,509,375
Harrah's Entertainment, Inc.* 897,200 22,317,850
------------
$ 26,827,225
- --------------------------------------------------------------------------------
7
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
Common Stocks -- continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
[S] [C] [C]
Financial Institutions -- 7.4%
Federal Home Loan Mortgage Corp. 286,500 $ 22,060,500
State Street Boston Corp. 200,000 9,000,000
Student Loan Marketing Assn 100,000 7,012,500
------------
$ 38,073,000
- --------------------------------------------------------------------------------
Food and Beverage Products -- 1.7%
PepsiCo, Inc. 160,000 $ 8,840,000
- --------------------------------------------------------------------------------
Foreign Stocks -- 7.1%
Australia -- 0.7%
Sydney Harbour Casino Holdings Ltd., Pfd.
(Entertainment) 2,500,000 $ 3,360,717
- --------------------------------------------------------------------------------
Canada -- 1.8%
Potash Corp. of Saskatchewan, Inc.
(Precious Metals and Minerals) 75,200 $ 5,198,200
Rogers Communications, Inc.
(Telecommunications) 400,000 4,193,955
------------
$ 9,392,155
- --------------------------------------------------------------------------------
Italy -- 1.9%
Olivetti Group, S.P.A. (Office Equipment) 6,500,000 $ 4,311,639
Telecom Italia (Telecommunications) 4,371,000 4,267,059
Telecom Italia (Telecommunications) 849,000 1,370,726
------------
$ 9,949,424
- --------------------------------------------------------------------------------
Malaysia -- 1.0%
New Straits Times Press, BHD (Publishing) 1,572,000 $ 5,235,867
- --------------------------------------------------------------------------------
Sweden -- 0.9%
Astra AB, "B" (Pharmaceuticals) 100,000 $ 3,676,695
Hennes & Mauritz (Retail) 12,700 789,536
------------
$ 4,466,231
- --------------------------------------------------------------------------------
United Kingdom -- 0.8%
PowerGen PLC, ADR (Electricity) 1,300,000 $ 4,381,517
- --------------------------------------------------------------------------------
Total Foreign Stocks $36,785,911
- --------------------------------------------------------------------------------
Forest and Paper Products -- 3.4%
Fort Howard Corp.* 576,700 $ 11,461,913
Kimberly Clark Corp. 80,000 6,150,000
------------
$ 17,611,913
- --------------------------------------------------------------------------------
Insurance -- 7.3%
AFLAC, Inc. 120,000 $ 4,890,000
American Re Corp. 120,000 4,950,000
MBIA, Inc. 70,000 5,390,000
Progressive -- Ohio 170,000 7,565,000
Prudential Reinsurance Holdings, Inc. 433,400 9,047,225
Torchmark Corp. 140,000 5,950,000
------------
$ 37,792,225
- --------------------------------------------------------------------------------
Machinery -- 1.2%
Ingersoll Rand Co. 125,000 $ 4,796,875
York International Corp. 31,700 1,418,575
------------
$ 6,215,450
- --------------------------------------------------------------------------------
Medical and Health Products -- 1.0%
Johnson & Johnson 60,000 $ 5,197,500
- --------------------------------------------------------------------------------
8
<PAGE>
PORTFOLIO OF INVESTMENTS -- continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
[S] [C] [C]
Medical and Health Technology and Services -- 3.5%
Beverly Enterprises* 320,000 $ 3,720,000
Genesis Health Ventures, Inc.* 139,300 4,544,663
Pacificare Health Systems, Inc., "B"* 112,000 9,716,000
------------
$ 17,980,663
- --------------------------------------------------------------------------------
Metals and Minerals -- 0.8%
Phelps Dodge Corp. 60,000 $ 4,072,500
- --------------------------------------------------------------------------------
Oil -- 3.5%
Amoco Corp. 100,000 $ 6,775,000
Mobil Corp. 60,000 6,262,500
Union Pacific Resources Group, Inc.* 225,800 5,249,850
------------
$ 18,287,350
- --------------------------------------------------------------------------------
Photographic Products -- 1.5%
Eastman Kodak Co. 110,000 $ 7,480,000
- --------------------------------------------------------------------------------
Railroads -- 2.9%
Canadian National Railway Co.* 11,900 $ 178,500
Illinois Central Corp. 190,000 7,695,000
Norfolk Southern Corp. 90,000 7,087,500
------------
$ 14,961,000
- --------------------------------------------------------------------------------
Restaurants and Lodging -- 3.0%
Promus Hotel Corp.* 707,150 $ 15,645,694
- --------------------------------------------------------------------------------
Special Products and Services -- 1.1%
Stanley Works 115,000 $ 5,821,875
- --------------------------------------------------------------------------------
Stores -- 1.7%
Federated Department Stores, Inc.* 300,000 $ 8,737,500
- --------------------------------------------------------------------------------
Telecommunications -- 0.8%
Cabletron Systems, Inc.* 48,600 $ 4,033,800
- --------------------------------------------------------------------------------
Utilities -- Telephone -- 1.0%
MCI Communications Corp. 200,000 $ 5,350,000
- --------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $380,037,620) $483,266,956
- --------------------------------------------------------------------------------
Short-Term Obligations -- 6.2%
================================================================================
Principal Amount
(000 Omitted)
- --------------------------------------------------------------------------------
Federal Farm Credit Bank, due 12/08/95 $ 8,460 $ 8,450,624
Federal Home Loan Mortgage Corp.,
due 12/05/95 6,350 6,345,978
Federal National Mortgage Assn.,
due 12/13/95 8,020 8,004,842
Melville Corp., due 12/01/95 4,480 4,480,000
Raytheon Co., due 12/11/95 5,000 4,992,056
------------
$ 32,273,500
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $412,311,120) $515,540,456
Other Assets, Less Liabilities -- 0.2% 1,022,703
- --------------------------------------------------------------------------------
Net Assets -- 100.0% $516,563,159
================================================================================
*Non-income producing security.
See notes to financial statements
9
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
================================================================================
November 30, 1995
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $412,311,120) $515,540,456
Cash 3,657
Receivable for investments sold 220,514
Receivable for Fund shares sold 3,706,392
Dividends and interest receivable 902,916
Other assets 13,005
------------
Total assets $520,386,940
============
Liabilities:
Payable for investments purchased $ 2,559,976
Payable for Fund shares reacquired 756,299
Payable to affiliates -
Management fee 10,541
Shareholder servicing agent fee 2,923
Distribution fee 221,828
Accrued expenses and other liabilities 272,214
------------
Total liabilities $ 3,823,781
------------
Net assets $516,563,159
------------
Net assets consist of:
Paid-in capital $338,446,198
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 103,227,947
Accumulated undistributed net realized gain on investments
and foreign currency transactions 74,588,788
Accumulated undistributed net investment income 300,226
------------
Total $516,563,159
============
Shares of beneficial interest outstanding 29,381,465
============
Class A shares:
Net asset value and redemption price per share
(net assets of $88,118,595 / 4,987,749 shares of
beneficial interest outstanding) $17.67
======
Offering price per share (100/94.25) $18.75
======
Class B shares:
Net asset value and offering price per share
(net assets of $428,444,564 / 24,393,716 shares of
beneficial interest outstanding) $17.56
======
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 and
Class B shares.
See notes to financial statements
10
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
================================================================================
Year Ended November 30, 1995
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 8,938,158
Interest 890,614
------------
Total investment income $ 9,828,772
------------
Expenses -
Management fee $ 3,363,454
Trustees' compensation 42,863
Shareholder servicing agent fee (Class A) 50,845
Shareholder servicing agent fee (Class B) 912,040
Distribution and service fee (Class A) 91,991
Distribution and service fee (Class B) 4,145,636
Custodian fee 207,360
Postage 91,138
Printing 75,427
Auditing fees 39,250
Legal fees 3,915
Miscellaneous 322,900
------------
Total expenses $ 9,346,819
Fees paid indirectly (32,195)
Reduction of expenses by distributor (26,474)
------------
Net expenses $ 9,288,150
------------
Net investment income $ 540,622
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 74,843,999
Foreign currency transactions 4,999
------------
Net realized gain on investments and
foreign currency transactions $ 74,848,998
------------
Change in unrealized appreciation (depreciation) -
Investments $ 70,043,293
Translation of assets and liabilities in foreign currencies (1,389)
------------
Net unrealized gain on investments and foreign
currency translation $ 70,041,904
------------
Net realized and unrealized gain on
investments and foreign currency $144,890,902
------------
Increase in net assets from operations $145,431,524
============
See notes to financial statements
11
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
================================================================================
Year Ended November 30, 1995 1994
- --------------------------------------------------------------------------------
Increase in net assets:
From operations -
Net investment income $ 540,622 $ 1,393,864
Net realized gain on investments and
foreign currency transactions 74,848,998 17,833,858
Net unrealized gain (loss) on investments
and foreign currency translation 70,041,904 (23,927,833)
------------ ------------
Increase (decrease) in net assets
from operations $145,431,524 $ (4,700,111)
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (43,087) $ (961)
From net investment income (Class B) (1,541,960) (95,487)
From net realized gain on investments and
foreign currency transactions (Class A) (120,843) (19,561)
From net realized gain on investments and
foreign currency transactions (Class B) (17,999,182) (35,570,518)
------------ ------------
Total distributions declared to shareholders $(19,705,072) $(35,686,527)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $162,346,739 $ 66,138,962
Net asset value of shares issued to shareholders
in reinvestment of distributions 18,312,867 33,058,598
Cost of shares reacquired (176,934,987) (125,984,050)
------------ ------------
Increase (decrease) in net assets from Fund
share transactions $ 3,724,619 $(26,786,490)
------------ ------------
Total increase (decrease) in net assets $129,451,071 $(67,173,128)
Net assets:
At beginning of period 387,112,088 454,285,216
------------ ------------
At end of period (including accumulated
undistributed net investment income of
$300,226 and $1,339,652, respectively) $516,563,159 $387,112,088
============ ============
See notes to financial statements
12
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
====================================================================================================================================
Year Ended November 30, 1995 1994 1993* 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.49 $ 14.75 $ 14.58 $ 13.37 $ 14.72 $ 14.83
------- ------- ------- ------- ------- -------
Income from investment operations++ -
Net investment income [ss] $ 0.11 $ 0.21 $ 0.03 $ 0.01 $ 0.04 $ 0.03
Net realized and unrealized gain
(loss) on investments 4.91 (0.25) 0.14 4.85 (0.23) 0.50
------- ------- ------- ------- ------- -------
Total from investment
operations $ 5.02 $ (0.04) $ 0.17 $ 4.86 $ (0.19) $ 0.53
------- ------- ------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ (0.22) $ (0.06) $ -- $ (0.05) $ -- # $ (0.02)
From net realized gain on
investments (0.62) (1.16) -- (0.62) (1.16) (0.62)
------- ------- ------- ------- ------- -------
Total distributions declared to
shareholders $ (0.84) $ (1.22) $ -- $ (0.67) $ (1.16) $ (0.64)
------- ------- ------- ------- ------- -------
Net asset value -- end of period $ 17.67 $ 13.49 $ 14.75 $ 17.56 $ 13.37 $ 14.72
======= ======= ======= ======= ======= =======
Total return++ 39.51% (0.47)% 5.01%+ 38.16 (1.52%) 3.70%
Ratios (to average net assets)/Supplemental data[ss]:
Expenses## 1.27% 1.12% 0.91%+ 2.14% 2.18% 2.15%
Net investment income 0.67% 1.59% 1.67%+ 0.08% 0.32% 0.10%
Portfolio turnover 91% 50% 70% 91% 50% 70%
Net assets at end of period (000 omitted) $88,119 $ 2,608 $ 196 $428,445 $384,504 $454,089
<FN>
* For the period from the commencement of offering of Class A shares, September 7, 1993 to November 30, 1993.
## For periods ending after November 30, 1994, the Fund's expenses are calculated without reduction for fees paid indirectly.
+ Annualized.
+++ Per share data for the periods subsequent to November 30, 1992 is based on average shares outstanding.
++ 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.
# The per share distribution from net investment income on Class B shares was $0.00312 per share.
[ss] The distributor did not impose a portion of its Class A distribution fee for the periods indicated.
If this fee had been incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.10 -- -- -- -- --
Ratios (to average net assets):
Expenses## 1.35% -- -- -- -- --
Net investment income 0.59% -- -- -- -- --
</FN>
</TABLE>
See notes to financial statements
13
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights -- continued
====================================================================================================================================
Year Ended November 30, 1992 1991 1990 1989 1988 1987**
- ------------------------------------------------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59 $ 7.50
------- ------- ------- -------- -------- --------
Income from investment operations -
Net investment income $ 0.02 $ 0.10 $ 0.18 $ 0.17 $ 0.12 $ 0.04
Net realized and unrealized gain
(loss) on investments 2.61 2.15 (0.75) 2.63 1.76 0.06
------- ------- ------- -------- -------- --------
Total from investment
operations $ 2.63 $ 2.25 $ (0.57) $ 2.80 $ 1.88 $ 0.10
------- ------- ------- -------- -------- --------
Less distributions declared to
shareholders -
From net investment income $ -- $ (0.14) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
From net realized gain on
investments (1.07) (0.13) -- -- -- --
------- ------- ------- -------- -------- --------
Total distributions declared to
shareholders $ (1.07) $ (0.27) $(0.19) $ (0.13) $ (0.09) $ (0.01)
------- ------- ------- -------- -------- --------
Net asset value -- end of period $ 14.83 $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59
======= ======= ======= ======== ======== ========
Total return 20.61% 20.22% (4.80)% 30.11% 24.79% 1.41%+
Ratios (to average daily net assets)/Supplemental data:
Expenses 2.24% 2.28% 2.38% 2.46% 2.17% 2.26%+
Net investment income 0.18% 0.75% 1.56% 1.56% 1.34% 0.36%+
Portfolio turnover 65% 86% 68% 58% 93% 139%
Net assets at end of period (000 omitted) $436,561 $317,375 $226,245 $202,861 $130,961 $ 88,471
<FN>
** For the period from the commencement of investment operations, December 29, 1986 to November 30, 1987.
+ Annualized.
</FN>
</TABLE>
See notes to financial statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Capital 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
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. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency and
translated into U.S. dollars at the closing daily exchange rate. 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 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
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
relative exposure of the Fund's portfolio of securities to different currencies
to take advantage of anticipated changes. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded for financial statement purposes as unrealized
until the contract settlement date.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex- dividend date for dividends received in
cash. Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Fees Paid Indirectly -- The Fund's custodian bank calculates its fee based on
the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions -- The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return, and consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV. 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 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, 1995, $4,999 was reclassified from
accumulated net realized gain on investments to accumulated undistributed net
investment income, due to differences between book and tax accounting for
currency transactions. This change had no effect on the net assets or net asset
value per share.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
Multiple Classes of Shares of Beneficial Interest -- The Fund offers Class A and
Class B shares. The two classes of shares differ in their shareholder servicing
agent, distribution and service fees. Shareholders of each class also bear
certain expenses that pertain only to that particular class. All shareholders
bear the common expenses of the Fund pro rata, based on the average daily net
assets, 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, including distribution and shareholder service fees.
(3) Transactions with Affiliates
Investment Adviser -- The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75% of
average daily net assets.
The 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 of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $8,988 for the year ended
November 30, 1995. Distributor -- MFD, a wholly owned subsidiary of MFS, as
distributor, received $9,592 for the year ended November 30, 1995, 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. MFD retains the service fee for accounts
not attributable to a securities dealer, which amounted to $3,072 for the year
ended November 30, 1995. MFD is not imposing the 0.10% distribution fee for an
indefinite period. Fees incurred under the distribution plan during the year
ended November 30, 1995, were 0.19% of average daily net assets attributable to
Class A shares on an annualized basis. Payments under the distribution plan
commenced on July 14, 1995 when the net assets of the Fund attributable to Class
A shares first equaled or exceeded $40 million.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
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 $96,595 for Class B shares for the year
ended November 30, 1995. Fees incurred under the distribution plan during the
year ended November 30, 1995 were 1.00% of average daily net assets attributable
to Class B shares on an annualized basis.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 months following the share 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 year ended November 30, 1995 were $1,900 and $472,213
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 share 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
$395,341,131 and $435,271,737, 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 $ 412,311,120
=============
Gross unrealized appreciation $ 108,484,636
Gross unrealized depreciation (5,255,300)
-------------
Net unrealized appreciation $ 103,229,336
=============
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
(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 1995 1994
---------------------------- -----------------------------
Year Ended November 30, Shares Amount Shares Amount
================================================================================================
<S> <C> <C> <C> <C>
Shares sold 5,253,774 $ 82,156,749 231,629 $ 3,234,603
Shares issued to shareholders in
reinvestment of distributions 12,226 158,371 1,363 18,815
Shares reacquired (471,616) (7,482,670) (52,922) (732,165)
------------ ------------ ------------ ------------
Net increase 4,794,384 $ 74,832,450 180,070 $ 2,521,253
=========== ============ ============ ============
Class B Shares 1995 1994
---------------------------- -----------------------------
Year Ended November 30, Shares Amount Shares Amount
================================================================================================
Shares sold 5,400,613 $ 80,189,990 4,507,115 $ 62,904,359
Shares issued to shareholders in
reinvestment of distributions 1,397,497 18,154,496 2,390,715 33,039,783
Shares reacquired (11,169,472) (169,452,317) (8,988,227) (125,251,885)
------------ ------------ ------------ -------------
Net decrease (4,371,362) $(71,107,831) (2,090,397) $ 29,307,743)
=========== ============ ============ =============
</TABLE>
(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 year ended November
30, 1995 was $6,216.
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust II and Shareholders of MFS Capital Growth
Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Capital Growth Fund (one of the series
constituting MFS Series Trust II) as of November 30, 1995, the related statement
of operations for the year then ended, the statement of changes in net assets
for the years ended November 30, 1995 and 1994, and the financial highlights for
each of the years in the nine-year period ended November 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund'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, 1995 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 out opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Capital Growth
Fund at November 30, 1995, 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 6, 1996
------------------------------------------------------------
This report is prepared for the general infomation of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
20
<PAGE>
THE MFS FAMILY OF FUNDS [Register Mark]
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or leave a message
anytime). This material should be read carefully before investing or sending
money.
STOCK
================================================================================
Massachusetts Investors Trust
- --------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Capital Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Emerging Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Gold & Natural Resources Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Growth Opportunities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Managed Sectors Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] OTC Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Research Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Value Fund
- --------------------------------------------------------------------------------
STOCK AND BOND
================================================================================
MFS [Registration Mark] Total Return Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Utilities Fund
- --------------------------------------------------------------------------------
BOND
================================================================================
MFS [Registration Mark] Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Mortgage Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Securities Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] High Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Intermediate Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Strategic Income Fund
- --------------------------------------------------------------------------------
LIMITED MATURITY BOND
================================================================================
MFS [Registration Mark] Government Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Limited Maturity Fund
- --------------------------------------------------------------------------------
WORLD
================================================================================
MFS [Registration Mark]/Foreign & Colonial Emerging Market Equity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark]/Foreign & Colonial International Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark]/Foreign & Colonial International Growth and Income Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Asset Allocation Fund[SM]
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Equity Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Governments Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Growth Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] World Total Return Fund
- --------------------------------------------------------------------------------
NATIONAL TAX-FREE BOND
================================================================================
MFS [Registration Mark] Municipal Bond Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal High Income Fund
(closed to new investors)
- --------------------------------------------------------------------------------
MFS [Registration Mark] Municipal Income Fund
- --------------------------------------------------------------------------------
STATE TAX-FREE BOND
================================================================================
Alabama, Arkansas, California, Florida, Georgia, Louisiana, Maryland,
Massachusetts, Mississippi, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Texas, Virginia, Washington, West Virginia
- --------------------------------------------------------------------------------
MONEY MARKET
================================================================================
MFS [Registration Mark] Cash Reserve Fund
- --------------------------------------------------------------------------------
MFS [Registration Mark] Government Money Market Fund
- --------------------------------------------------------------------------------
MFS [Registration] Mark Money Market Fund
- --------------------------------------------------------------------------------
<PAGE>
MFS [Registration Mark] CAPITAL [DALBAR LOGO] BULK RATE
GROWTH FUND U.S. POSTAGE
P A I D
500 Boylston Street PERMIT #55638
Boston, MA 02116 BOSTON, MA
[MFS LOGO]
MCG-2 1/96/50M 3/203
<PAGE>
