MFS CAPITAL GROWTH FUND
(A SERIES OF MFS SERIES TRUST II)
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
July 19, 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 Seminnual
Report to Shareholders dated May 31, 1996 of MFS Capital Growth Fund.
Very truly yours,
APRIL ANDERSON
April Anderson
Senior Production Editor
<PAGE>
[MFS LOGO] SEMIANNUAL REPORT
THE FIRST NAME IN MUTUAL FUNDS MAY 31, 1996
MFS [Register Mark] CAPITAL GROWTH FUND
[Cover: A Photo of Two Men in a Window]
<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 advisers)
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
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*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
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.
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:
For the six months ended May 31, 1996, Class A shares of the Fund provided a
total return of 14.64%, while Class B shares had a total return of 14.21%. Both
of these returns, which include the reinvestment of distributions but exclude
the effects of any sales charges, outperformed the 11.78% return of the Standard
& Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock performance, over the same period. A discussion of the Fund's performance
may be found in the Portfolio Performance and Strategy section of this letter.
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.
1
<PAGE>
Letter to Shareholders - continued
Portfolio Performance and Strategy
The Fund's outperformance relative to the S&P 500 can be attributed to three
factors: exposure to domestic equities, relative sector weightings, and stock
selection. Our exposure to domestic equities during the past six months averaged
85% of total net assets, cash averaged 6.5%, and international equities
comprised the remaining 8.5%. Given the strong performance of both U.S. and
international markets over the past six months, our exposure to cash somewhat
impeded performance.
The best-performing sector of the S&P 500 during the past six months was
retailing, which advanced 21.1%. The Fund was underweighted in this sector, at
about 3% of net assets. However, one of our holdings - Office Depot - showed
significant outperformance, gaining 33%.
Industrial goods and services was the second-best-performing sector, up
17.5%, and the Fund was significantly overweighted here versus the S&P 500, with
15% of net assets in this sector. Our exposure to agriculture-equipment stocks
was particularly rewarding, with both AGCO and Case showing strong performance
during the period.
Gaming and lodging had a very strong period and, given our substantial
overweighting at 9.9% of net assets, provided strong outperformance. Two of the
Fund's largest holdings, Harrah's Entertainment and Promus Hotel Corp., gained
significantly, up 35% and 24%, respectively.
Our current outlook remains cautious. While business prospects appear good
and inflation remains low, the recent rise in long-term interest rates, coupled
with strong year-to-date stock market performance, has made it increasingly
difficult to find undervalued U.S. equities.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
[Signature of A. Keith Brodkin] [Signature of John F. Brennan, Jr.]
A. Keith Brodkin John F. Brennan, Jr.
Chairman and President Portfolio Manager
June 10, 1996
2
<PAGE>
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 1995. Mr. Brennan became Portfolio Manager of MFS
Capital Growth Fund on May 1, 1995.
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.
PERFORMANCE SUMMARY
Because mutual funds like MFS Capital Growth 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.
3
<PAGE>
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* +14.64% +33.01% +61.04%
- --------------------------------------------------------------------------------
Average Annual Total Return* -- +33.01% +19.06%
- --------------------------------------------------------------------------------
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 +26.30%
and +14.91%, respectively.
Class B Investment Results
(net asset value change including reinvested distributions)
12/29/86+-
6 Months 1 Year 5 Years 5/31/96
- --------------------------------------------------------------------------------
Cumulative Total Return++ +14.21% +31.85% +88.85% +265.88%
- --------------------------------------------------------------------------------
Average Annual Total Return++ -- +31.85% +13.56% + 14.75%
- --------------------------------------------------------------------------------
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 December 29, 1986+ to March 31, 1996, were +28.86%, +12.94% and +14.30%,
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.
+ Commencement of offering of this class of shares.
++ These results do not include any CDSC. If the charge had been included, the
results would have been lower.
* These results do not include the sales charge. If the charge had been
included, the results would have been lower.
4
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - May 31, 1996
Common Stocks - 93.6%
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Common Stocks - 85.5%
Aerospace - 8.9%
AlliedSignal, Inc. 65,000 $ 3,558,750
General Dynamics Corp. 93,200 5,743,450
Lockheed-Martin Corp. 300,000 25,162,500
McDonnell-Douglas Corp. 90,000 9,090,000
Raytheon Co. 107,500 5,724,375
Rockwell International Corp. 24,300 1,369,912
------------
$ 50,648,987
- --------------------------------------------------------------------------------
Agricultural Products - 2.6%
AGCO Corp. 269,000 $ 8,103,625
Case Corp. 135,000 6,766,875
------------
$ 14,870,500
- --------------------------------------------------------------------------------
Automotive - 1.4%
General Motors Corp. 145,000 $ 7,993,125
- --------------------------------------------------------------------------------
Banks and Credit Companies - 3.1%
Wells Fargo & Co. 73,333 $ 17,673,253
- --------------------------------------------------------------------------------
Business Services - 4.6%
ADT Ltd. 476,400 $ 9,170,700
ALCO Standard Corp. 271,200 16,950,000
------------
$ 26,120,700
- --------------------------------------------------------------------------------
Computer Software - Systems - 3.1%
Adobe Systems, Inc. 278,300 $ 10,331,888
Sybase, Inc. 308,500 7,134,062
------------
$ 17,465,950
- --------------------------------------------------------------------------------
Consumer Goods and Services - 10.1%
Colgate-Palmolive Co. 75,000 $ 5,906,250
Gillette Co. 100,600 5,947,975
Philip Morris Cos., Inc. 180,000 17,887,500
Revlon, Inc., "A" 5,000 156,875
Tyco International Ltd. 700,000 27,650,000
------------
$ 57,548,600
- --------------------------------------------------------------------------------
Defense Electronics - 0.8%
Loral Space & Communications Corp. 280,000 $ 4,480,000
- --------------------------------------------------------------------------------
Electrical Equipment - 1.0%
Honeywell, Inc. 108,500 $ 5,506,375
- --------------------------------------------------------------------------------
Electronics - 2.4%
Altera Corp. 70,400 $ 3,405,600
Analog Devices, Inc. 97,400 2,690,675
LSI Logic Corp. 246,700 7,678,538
------------
$ 13,774,813
- --------------------------------------------------------------------------------
Entertainment - 7.0%
Chancellor Broadcasting Co., "A" 6,700 $ 171,688
Harrah's Entertainment, Inc. 971,700 32,673,412
Viacom, Inc., "B" 164,300 6,962,213
------------
$ 39,807,313
- --------------------------------------------------------------------------------
5
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Common Stocks - continued
Financial Institutions - 4.6%
Associates First Capital Corp., "A" 25,700 $ 950,900
Federal Home Loan Mortgage Corp. 160,400 13,253,050
Student Loan Marketing Assn 68,400 5,087,250
Union Planters Corp. 219,200 6,713,000
------------
$ 26,004,200
- --------------------------------------------------------------------------------
Food and Beverage Products - 1.2%
General Mills, Inc. 120,800 $ 6,930,900
- --------------------------------------------------------------------------------
Forest and Paper Products - 2.4%
Fort Howard Corp. 265,700 $ 5,513,275
Kimberly-Clark Corp. 112,700 8,213,012
------------
$ 13,726,287
- --------------------------------------------------------------------------------
Insurance - 2.7%
Chartwell Reinsurance Corp. 83,500 $ 1,837,000
Penncorp Financial Group, Inc. 183,400 5,593,700
Progressive Corp. - Ohio 170,000 7,862,500
------------
$ 15,293,200
- --------------------------------------------------------------------------------
Machinery - 1.5%
Ingersoll Rand Co. 160,800 $ 6,773,700
York International Corp. 31,700 1,676,138
------------
$ 8,449,838
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.4%
Beverly Enterprises, Inc. 579,200 $ 7,095,200
Pacificare Health Systems, Inc., "B" 60,900 5,039,475
St. Jude Medical, Inc.* 182,300 6,927,400
------------
$ 19,062,075
- --------------------------------------------------------------------------------
Oils - 3.3%
Mobil Corp. 60,000 $ 6,772,500
USX-Marathon Group 270,300 5,912,813
Union Pacific Resources Group, Inc. 225,800 5,814,350
------------
$ 18,499,663
- --------------------------------------------------------------------------------
Photographic Products - 1.4%
Eastman Kodak Co. 110,000 $ 8,181,250
- --------------------------------------------------------------------------------
Printing and Publishing - 2.1%
Scripps (E.W.) Co., "A" 192,100 $ 8,548,450
Tribune Co. 47,930 3,552,811
------------
$ 12,101,261
- --------------------------------------------------------------------------------
Railroads - 2.3%
Burlington Northern - Santa Fe 79,300 $ 6,720,675
Wisconsin Central Transportation Corp. 59,300 6,285,800
------------
$ 13,006,475
- --------------------------------------------------------------------------------
Restaurants and Lodging - 5.1%
Felcor Suite Hotels, Inc. 299,300 $ 9,240,887
Promus Hotel Corp. 718,750 19,765,626
------------
$ 29,006,513
- --------------------------------------------------------------------------------
Special Products and Services - 1.0%
Stanley Works 95,600 $ 5,795,750
- --------------------------------------------------------------------------------
6
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Common Stocks - continued
Stores - 2.5%
Office Depot, Inc. 323,800 $ 8,297,375
Sears, Roebuck & Co. 113,400 5,769,225
------------
$ 14,066,600
- --------------------------------------------------------------------------------
Telecommunications - 3.3%
Cabletron Systems, Inc. 117,200 $ 8,526,300
Ericsson (L.M.) Telephone Co., ADR, "B" 444,800 10,258,200
------------
$ 18,784,500
- --------------------------------------------------------------------------------
Utilities - Electric - 3.5%
CMS Energy Corp. 174,400 $ 5,014,000
Cinergy Corp. 162,700 4,819,987
Illinova Corp. 177,100 4,648,875
Nipsco Industries, Inc. 25,100 934,975
Portland General Electric Corp. 164,800 4,861,600
------------
$ 20,279,437
- --------------------------------------------------------------------------------
Total U.S. Common Stocks $485,077,564
- --------------------------------------------------------------------------------
Foreign Stocks - 8.1%
Hong Kong - 0.9%
Dah Sing Financial (Finance) 1,128,000 $ 3,237,105
Giordano International Ltd. (Clothing) 1,985,000 1,783,364
------------
$ 5,020,469
- --------------------------------------------------------------------------------
Italy - 2.6%
Olivetti Group (Office Equipment) 10,926,800 $ 6,861,179
Telecom Italia (Telecommunications) 849,000 1,819,286
Telecom Italia (Telecommunications) 4,371,000 6,045,604
------------
$ 14,726,069
- --------------------------------------------------------------------------------
Malaysia - 0.5%
New Straits Times Press, BHD (Publishing) 601,000 $ 3,106,752
- --------------------------------------------------------------------------------
New Zealand - 1.0%
Lion Nathan Ltd. (Consumer Goods and Services) 2,246,100 $ 5,410,923
- --------------------------------------------------------------------------------
South Korea - 0.9%
Korea Mobile Telecom (Telecommunications) 3,610 $ 5,042,500
- --------------------------------------------------------------------------------
Spain
Cubiertas as Y Mzov (Consumer Goods and Services) 4,452 $ 274,086
- --------------------------------------------------------------------------------
Sweden - 0.8%
Astra AB, "B" (Pharmaceuticals) 100,000 $ 4,524,111
- --------------------------------------------------------------------------------
United Kingdom - 1.4%
PowerGen PLC, ADR (Electricity) 1,300,000 $ 7,561,129
PowerGen PLC, ADR (Electricity) 15,889 127,902
------------
$ 7,689,031
- --------------------------------------------------------------------------------
Total Foreign Stocks $ 45,793,941
- --------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $419,460,727) $530,871,505
- --------------------------------------------------------------------------------
7
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
Short-Term Obligations - 8.4%
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 6/03/96 - 6/05/96 $15,765 $ 15,757,542
Federal National Mortgage Assn.,
due 6/04/96 - 6/18/96 23,490 23,454,481
Tennessee Valley Authority, due 6/06/96 8,590 8,583,796
- --------------------------------------------------------------------------------
Total Short-Term Obligations,
at Amortized Cost and Value $ 47,795,819
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $467,256,546) $578,667,325
Other Assets, Less Liabilities - (2.0)% (11,582,114)
================================================================================
Net Assets - 100.0% $567,085,211
- --------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
8
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
================================================================================
May 31, 1996
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $467,256,546) $578,667,325
Cash 104,221
Receivable for Fund shares sold 359,047
Dividends receivable 552,394
Other assets 6,709
------------
Total assets $579,689,696
------------
Liabilities:
Payable for investments purchased $ 11,803,332
Payable for Fund shares reacquired 317,816
Payable to affiliates -
Management fee 11,688
Shareholder servicing agent fee 3,183
Distribution fee 253,043
Accrued expenses and other liabilities 215,422
------------
Total liabilities $ 12,604,485
------------
Net assets $567,085,211
============
Net assets consist of:
Paid-in capital $391,775,225
Unrealized appreciation on investments 111,410,779
Accumulated undistributed net realized gain on
investments and foreign currency transactions 65,484,783
Accumulated distributions in excess of
net investment income (1,585,576)
------------
Total $567,085,211
============
Shares of beneficial interest outstanding 32,866,981
============
Class A shares:
Net asset value per share
(net assets of $127,543,077 / 7,395,669 shares of
beneficial interest outstanding) $17.25
======
Offering price per share (100/94.25) $18.30
======
Class B shares:
Net asset value and offering price per share
(net assets of $439,542,134 / 25,471,312 shares of
beneficial interest outstanding) $17.26
======
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
9
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
================================================================================
Six Months Ended May 31, 1996
- --------------------------------------------------------------------------------
Net Investment Income:
Income -
Dividends $ 3,387,778
Interest 900,408
------------
Total investment income $ 4,288,186
============
Expenses -
Management fee $ 2,053,005
Trustees' compensation 17,243
Shareholder servicing agent fee (Class A) 79,456
Shareholder servicing agent fee (Class B) 485,679
Distribution and service fee (Class A) 185,061
Distribution and service fee (Class B) 2,207,632
Custodian fee 138,867
Postage 61,107
Printing 35,776
Auditing fees 14,270
Legal fees 1,815
Miscellaneous 129,627
------------
Total expenses $ 5,409,538
Fees paid indirectly (18,518)
Preliminary reduction of expenses by distributor (52,634)
------------
Net expenses $ 5,338,385
------------
Net investment loss $ (1,050,200)
============
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 65,015,641
Foreign currency transactions 714
------------
Net realized gain on investments $ 65,016,355
------------
Change in unrealized appreciation -
Investments $ 8,181,443
Translation of assets and liabilities in foreign currencies 1,389
------------
Net unrealized gain on investments $ 8,182,832
------------
Net realized and unrealized gain on
investments and foreign currency $ 73,199,187
------------
Increase in net assets from operations $ 72,148,987
============
See notes to financial statements
10
<PAGE>
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 income (loss) $ (1,050,200) $ 540,622
Net realized gain on investments and
foreign currency transactions 65,016,355 74,848,998
Net unrealized gain on investments and
foreign currency 8,182,832 70,041,904
------------- -------------
Increase in net assets from operations $ 72,148,987 $ 145,431,524
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (300,266) $ (43,087)
From net investment income (Class B) -- (1,541,960)
From net realized gain on investments and
foreign currency transactions (Class A) (13,120,410) (120,843)
From net realized gain on investments and
foreign currency transactions (Class B) (60,999,950) (17,999,182)
In excess of net investment income (Class A) (535,336) --
------------- -------------
Total distributions declared to shareholders $ (74,955,962) $ (19,705,072)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 92,802,180 $ 162,346,739
Net asset value of shares issued
to shareholders in reinvestment
of distributions 69,731,210 18,312,867
Cost of shares reacquired (109,204,363) (176,934,987)
------------- -------------
Increase in net assets from Fund
share transactions $ 53,329,027 $ 3,724,619
------------- -------------
Total increase in net assets $ 50,522,052 $ 129,451,071
Net Assets:
At beginning of period 516,563,159 387,112,088
------------- -------------
At end of period (including accumulated
distributions in excess of net investment
income and accumulated undistributed net
investment income of $(1,585,576) and
$300,226, respectively) $ 567,085,211 $ 516,563,159
============= =============
See notes to financial statements
11
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
================================================================================================
Six Months
Ended
May 31, Year Ended November 30,
1996 --------------------------------
(Unaudited) 1995 1994 1993*
- ------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 17.67 $ 13.49 $ 14.75 $ 14.58
-------- -------- -------- --------
Income from investment operations# -
Net investment income $ 0.02 $ 0.11 $ 0.21 $ 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.25 4.91 (0.25) 0.14
-------- -------- -------- --------
Total from investment operations $ 2.27 $ 5.02 $ (0.04) $ 0.17
-------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.06) $ (0.22) $ (0.06) $ --
In excess of net investment income (0.10) -- -- --
From net realized gain on investments and
foreign currency transactions (2.53) (0.62) (1.16) --
-------- -------- -------- --------
Total distributions declared to shareholders $ (2.69) $ (0.84) $ (1.22 $ --
-------- -------- -------- --------
Net asset value - end of period $ 17.25 $ 17.67 $ 13.49 $ 14.75
======== ======== ======== ========
Total return+++ 14.64%++ 39.51% (0.47)% 5.01%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.31%+ 1.27% 1.12% 0.91%+
Net investment income 0.28%+ 0.67% 1.59% 1.67%+
Portfolio turnover 53% 91% 50% 70%
Average commission rate### $ 0.03 -- -- --
Net assets at end of period (000 omitted) $127,543 $88,119 $ 2,608 $ 196
<FN>
* For the period from the commencement of offering of Class A shares, September 7, 1993 to
November 30, 1993.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to November 30, 1992 is based on average shares
outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without
reduction for fees paid indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or after
September 1, 1995.
+++ Total returns for Class A shares do not include the applicable sales charge (except for
reinvested dividends prior to October 1989). If the charge had been included, the results
would have been lower.
</FN>
</TABLE>
See notes to financial statements
12
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
==========================================================================================================
Six Months
Ended
May 31, Year Ended November 30,
1996 ------------------------------------------------
(Unaudited) 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 17.56 $ 13.37 $ 14.72 $ 14.83 $ 13.27
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income (loss) $ (0.05) $ 0.01 $ 0.04 $ 0.03 $ 0.02
Net realized and unrealized gain (loss)
on investments 2.26 4.85 (0.23) 0.50 2.61
-------- -------- -------- -------- --------
Total from investment operations $ 2.21 $ 4.86 $ (0.19) $ 0.53 $ 2.63
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income* $ -- $ (0.05) $ 0.00 $ (0.02) $ --
From net realized gain on investments
and foreign currency transactions (2.51) (0.62) (1.16) (0.62) (1.07)
-------- -------- -------- -------- --------
Total distributions declared to
shareholders $ (2.51) $ (0.67) $ (1.16) $ (0.64) $ (1.07)
-------- -------- -------- -------- --------
Net asset value - end of period $ 17.26 $ 17.56 $ 13.37 $ 14.72 $ 14.83
======== ======== ======== ======== ========
Total return 14.21%++ 38.16% (1.52)% 3.70% 20.61%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.12%+ 2.14% 2.18% 2.15% 2.24%
Net investment income (loss) (0.55)%+ 0.08% 0.32% 0.10% 0.18%
Portfolio turnover 53% 91% 50% 70% 65%
Average commission rate### $ 0.03 -- -- -- --
Net assets at end of period (000 omitted) $439,542 $428,445 $384,504 $454,089 $436,561
<FN>
+ Annualized.
++ Not annualized.
* The per share distribution from net investment income on Class B shares for the year ended
November 30, 1994 was $0.00312 per share.
# Per share data for the periods subsequent to November 30, 1992 is based on average shares
outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without
reduction for fees paid indirectly.
### Average commission rate is calculated for funds with fiscal years beginning on or after
September 1, 1995.
</FN>
</TABLE>
See notes to financial statements
13
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
==========================================================================================================
Year Ended November 30, 1991 1990 1989 1988 1987**
- ----------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.29 $ 12.05 $ 9.38 $ 7.59 $ 7.50
-------- -------- -------- -------- --------
Income from investment operations -
Net investment income $ 0.10 $ 0.18 $ 0.17 $ 0.12 $ 0.04
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 2.15 (0.75) 2.63 1.76 0.06
-------- -------- -------- -------- --------
Total from investment operations $ 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
and foreign currency transactions (0.13) -- -- -- --
-------- -------- -------- -------- --------
Total distributions declared to
shareholders $ (0.27) $ (0.19) $ (0.13) $ (0.09) $ (0.01)
-------- -------- -------- -------- --------
Net asset value - end of period $ 13.27 $ 11.29 $ 12.05 $ 9.38 $ 7.59
======== ======== ======== ======== ========
Total return 20.22% (4.80)% 30.11% 24.79% 1.41%+
Ratios (to average net assets)/Supplemental data:
Expenses 2.28% 2.38% 2.46% 2.17% 2.26%+
Net investment income 0.75% 1.56% 1.56% 1.34% 0.36%+
Portfolio turnover 86% 68% 58% 93% 139%
Net assets at end of period (000 omitted) $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 (UNAUDITED)
(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
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 the revenue 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. 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. Futures
contracts, options and options on futures contracts listed on commodities
exchanges are valued at closing settlement prices. Over-the-counter options are
valued by brokers through the use of a pricing model which takes into account
closing bond valuations, implied volatility and short-term repurchase rates.
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
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
and unrealized gains and losses on investments that results from fluctuations
in foreign currency exchange rates is not separately disclosed.
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 tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
Multiple Classes Of Shares Of Beneficial Interest - The Fund offers both Class A
and Class B shares. The two classes of shares differ in their respective
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 of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
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 effective 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 $17,243 for the period ended
May 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$10,782 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 $17,249 for the
period ended May 31, 1996. Payment of the 0.10% per annum Class A distribution
fee will commence on such date as the Trustees of the Trust may determine. Fees
incurred under the distribution plan during the period ended May 31, 1996 were
0.25% of average daily net assets attributable to Class A shares on an
annualized basis.
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 $45,368 for Class B shares for the period
ended May 31, 1996. Fees incurred under the distribution
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
plan during the period 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 period ended May 31, 1996 were $407 and $214,951 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
$274,035,752 and $299,271,737, 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 $ 467,256,546
=============
Gross unrealized appreciation $ 116,392,726
Gross unrealized depreciation (4,981,947)
-------------
Net unrealized appreciation $ 111,410,779
=============
(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
Six Months Ended Year Ended
May 31, 1996 November 30, 1995
------------------------ -------------------------
Shares Amount Shares Amount
========================================================================================
<S> <C> <C> <C> <C>
Shares sold 2,749,086 $ 45,654,851 5,253,774 $ 82,156,749
Shares issued to shareholders in
reinvestment of distributions 808,534 12,467,740 12,226 158,371
Shares reacquired (1,149,700) (18,969,932) (471,616) (7,482,670)
---------- ------------ --------- ------------
Net increase 2,407,920 $ 39,152,659 4,794,384 $ 74,832,450
========== ============ ========= ============
</TABLE>
18
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
Class B Shares
Six Months Ended Year Ended
May 31, 1996 November 30, 1995
------------------------ -------------------------
Shares Amount Shares Amount
========================================================================================
<S> <C> <C> <C> <C>
Shares sold 2,845,982 $ 47,147,329 5,400,613 $ 80,189,990
Shares issued to shareholders in
reinvestment of distributions 3,699,172 57,263,470 1,397,497 18,154,496
Shares reacquired (5,467,558) (90,234,431) (11,169,472) (169,452,317)
---------- ------------ --------- ------------
Net increase (decrease) 1,077,596 $ 14,176,368 (4,371,362) $(71,107,831)
========== ============ ========= ============
</TABLE>
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 $7,027.
------------------------------------------------------------
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.
19
<PAGE>
MFS INVESTMENT OPPORTUNITIES
MUTUAL FUNDS
MFS Family of Funds [Register Mark], shown on the facing page, falls into
the eight general categories below. All offer full-time professional management,
a diversified portfolio, and a wide array of shareholder services.
STOCK FUNDS seek growth of capital rather than income through investments in
stocks.
STOCK AND BOND FUNDS seek current income and growth of capital through
investments in both stocks and bonds.
BOND FUNDS seek current income through investments in debt securities.
WORLD FUNDS seek stock, balanced, and bond fund objectives through investments
in U.S. and foreign stocks and bonds.
LIMITED-MATURITY FUNDS seek current income and preservation of capital through
investments in debt securities with remaining maturities of five years or less.
NATIONAL TAX-FREE BOND FUNDS seek current income exempt from federal income tax
through investments in debt securities issued by states and municipalities.[1]
STATE TAX-FREE BOND FUNDS seek current income exempt from federal and state
income taxes through investments in debt securities issued by a single state and
its municipalities.[1]
MONEY MARKET FUNDS seek preservation of capital and current income through
investments in short-term debt securities.[2]
To determine which MFS fund may be appropriate for you, please contact your
financial adviser, who can help you relate these investment opportunities to
your financial goals. If you prefer, you may call MFS Investor Information
for literature[3] on MFS products and services: 1-800-637-2929, from 9 a.m. to
5 p.m. Eastern time any business day (leave a message anytime).
[1] A small portion of the income may be subject to federal, state and/or
alternative minimum tax.
[2] Investments in money market funds are not issued or guaranteed by the U.S.
government and there is no assurance that the fund will be able to maintain
a stable net asset value.
[3] Including a prospectus containing more complete information including
charges and expenses. Read the prospectus carefully before investing.
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[Register Mark] Capital Growth Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Emerging Growth Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Gold & Natural Resources Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Growth Opportunities Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Managed Sectors Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] OTC Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Research Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Value Fund
- --------------------------------------------------------------------------------
STOCK AND BOND
================================================================================
MFS[Register Mark] Total Return Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Utilities Fund
- --------------------------------------------------------------------------------
BOND
================================================================================
MFS[Register Mark] Bond Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Government Mortgage Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Government Securities Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] High Income Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Intermediate Income Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Strategic Income Fund
- --------------------------------------------------------------------------------
LIMITED MATURITY BOND
================================================================================
MFS[Register Mark] Government Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Limited Maturity Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Municipal Limited Maturity Fund
- --------------------------------------------------------------------------------
WORLD
- --------------------------------------------------------------------------------
MFS[Register Mark]/Foreign & Colonial Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
MFS[Register Mark]/Foreign & Colonial International Growth Fund
- --------------------------------------------------------------------------------
MFS[Register Mark]/Foreign & Colonial International Growth and Income Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] World Asset Allocation Fund [Service Mark]
- --------------------------------------------------------------------------------
MFS[Register Mark] World Equity Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] World Governments Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] World Growth Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] World Total Return Fund
- --------------------------------------------------------------------------------
NATIONAL TAX-FREE BOND
- --------------------------------------------------------------------------------
MFS[Register Mark] Municipal Bond Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Municipal High Income Fund
(closed to new investors)
- --------------------------------------------------------------------------------
MFS[Register Mark] Municipal Income Fund
- --------------------------------------------------------------------------------
STATE TAX-FREE BOND
================================================================================
Alabama, Arkansas, California, Florida, Georgia, Maryland, Massachusetts,
Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Tennessee,
Virginia, West Virginia
- --------------------------------------------------------------------------------
MONEY MARKET
================================================================================
MFS[Register Mark] Cash Reserve Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Government Money Market Fund
- --------------------------------------------------------------------------------
MFS[Register Mark] Money Market Fund
- --------------------------------------------------------------------------------
<PAGE>
MFS [Register Mark] CAPITAL [Dalbar Logo] BULK RATE
GROWTH FUND U.S. POSTAGE
PAID
500 Boylston Street PERMIT #55638
Boston, MA 02116 BOSTON, MA
[MFS Logo]
MCG-3 7/96/55M 03/203
<PAGE>
