<PAGE> 1
[MFS LOGO] Semiannual Report
May 31, 1997
INVESTMENT MANAGEMENT
MFS(R) Gold & Natural Resources Fund
[MAN AND WOMAN GRAPHIC]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter from the Chairman........................................................ 1
Portfolio Manager's Overview.................................................... 2
Portfolio Manager's Profile..................................................... 3
Fund Facts...................................................................... 3
Performance Summary............................................................. 3
Portfolio Concentration......................................................... 5
Portfolio of Investments........................................................ 6
Financial Statements............................................................ 8
Notes to Financial Statements................................................... 14
The MFS Family of Funds(R)...................................................... 20
Trustees and Officers........................................................... 21
</TABLE>
HIGHLIGHTS
- FOR THE SIX MONTHS ENDED MAY 31, 1997, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF -13.58%, WHILE CLASS B
SHARES RETURNED -14.06%.
- THE FUND OUTPERFORMED THE FINANCIAL TIMES GOLD MINES INDEX, WHICH
DECLINED 16.15% DURING THE PERIOD, IN PART BECAUSE OF THE FUND'S
UNDERWEIGHTINGS IN AFRICA AND AUSTRALIA AND ITS EXPOSURE TO
NONPRECIOUS METALS, MAINLY TITANIUM.
- THE PRICE OF GOLD HAS BEEN WEAK THROUGHOUT 1997, FALLING 6.8% SINCE
NOVEMBER 30, 1996, AS AN ECONOMIC ENVIRONMENT OF MODERATE INFLATION
AND HIGH REAL (INFLATION-ADJUSTED) INTEREST RATES HAS CONTINUED TO PUT
NEGATIVE PRESSURE ON GOLD PRICES.
<PAGE> 3
LETTER FROM THE CHAIRMAN
Dear Shareholders:
[PHOTO] After more than six years of expansion, the U.S.
economy is experiencing another year of growth in
1997, although a few signs point to the possibility
of a modest rise in inflation during the year. On
the positive side, the pattern of moderate growth
and inflation set over the past few years now seems
fairly well entrenched in the economy and, short of
a major international or domestic crisis, appears
to have enough momentum to remain on track for some
time. The U.S. economy exhibited a great deal of strength in the first quarter
of 1997, growing at an annualized rate of 5.8%. This pace would clearly lead to
inflationary pressures were it to continue, as could the ongoing tightness in
the labor market. Moreover, there is reason for caution as a result of the
continuing high level of consumer debt and rising personal bankruptcies. Given
these somewhat conflicting indicators, we expect real (inflation-adjusted)
growth to revolve around 2% to 2 1/2% in 1997, with the strength of the first
quarter moderating as we move through the balance of the year.
We continue to urge U.S. equity investors to remain cautious for 1997. Just as
the slowdown in corporate earnings growth and the increases in interest rates in
1996 raised some near-term concerns, further interest-rate increases and the
fear of an acceleration of inflation have added some volatility to the stock
market in 1997. However, while the U.S. equity market enjoyed several years
without a major correction, we would like to point out that such downturns are a
natural part of the investment environment and, when they end, they often result
in more attractive valuations for stocks.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
- ----------------------
A. Keith Brodkin
Chairman and President
June 12, 1997
1
<PAGE> 4
PORTFOLIO MANAGER'S OVERVIEW
Dear Shareholders:
For the six months ended May 31, 1997, Class A
[PHOTO] shares of the Fund provided a total return of
-13.58%, while Class B shares returned -14.06%.
These returns, which include the reinvestment of
distributions but exclude the effects of any sales
charges, compare to a -16.15% return for the
Financial Times Gold Mines Index (the Index), an
unmanaged index designed to reflect the performance
in international markets of shares of companies engaged primarily in gold
mining.
The Fund outperformed the Index during the past six months because of its
underweightings in Australia and Africa. Specifically, the North American
component of the Index decreased by 13.1%, the Australian component by 19.8%,
and the African component by 21.6%. The Fund's performance was also aided by its
12.6% exposure to nonprecious metals, mainly titanium.
The price of gold has been weak throughout 1997, falling 6.8% since November
30, 1996. The larger drops in the Fund and the Index show the degree to which
changes in producers' stock prices can be magnified by changes in the price of
gold. The economic environment of moderate inflation and high real
(inflation-adjusted) interest rates has continued to put negative pressure on
gold prices. A strong U.S. dollar and significant financial market returns have
also hurt gold's relative appeal, while heavy central bank selling has been
detrimental to gold's price. The Fund remains primarily invested in
precious-metals-related securities, but will likely maintain its exposure to
other metals.
Respectfully,
/s/ Constantinos Mokas
- ----------------------
Constantinos Mokas
Portfolio Manager
2
<PAGE> 5
PORTFOLIO MANAGER'S PROFILE
CONSTANTINOS MOKAS JOINED MFS IN 1990 AS AN INDUSTRY SPECIALIST AND HAS
COVERED THE COMPUTER HARDWARE, MONEY CENTER AND REGIONAL BANK, SAVINGS
AND LOAN, AND METALS INDUSTRIES. HE WAS NAMED ASSISTANT VICE PRESIDENT
IN 1994 AND VICE PRESIDENT IN 1996. A GRADUATE OF DARTMOUTH COLLEGE AND
THE AMOS TUCK SCHOOL OF BUSINESS AT DARTMOUTH COLLEGE, HE HAS MANAGED
MFS(R) GOLD & NATURAL RESOURCES FUND SINCE DECEMBER 1994.
<TABLE>
<S> <C>
FUND FACTS
STRATEGY: THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE
LONG-TERM APPRECIATION AND PRESERVATION OF CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: CLASS A: SEPTEMBER 7, 1993
CLASS B: AUGUST 1, 1988
SIZE: $24.7 MILLION NET ASSETS AS OF MAY 31, 1997
</TABLE>
PERFORMANCE SUMMARY
Because mutual funds like MFS Gold & Natural Resources Fund are designed for
investors with long-term goals, we have provided cumulative results as well as
the average annual total returns for Class A and Class B shares for the
applicable time periods.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
AS OF MAY 31, 1997
CLASS A INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
6 Months 1 Year 5 Years Life of Fund*
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return -13.58% -27.18% +6.99% -16.27%
- --------------------------------------------------------------------------------------------
Average Annual Total Return -- -27.18% +1.36% - 1.99%
- --------------------------------------------------------------------------------------------
SEC Results -- -31.40% +0.17% - 2.64%
- --------------------------------------------------------------------------------------------
</TABLE>
CLASS B INVESTMENT RESULTS
(net asset value change including reinvested distributions)
<TABLE>
<CAPTION>
6 Months 1 Year 5 Years Life of Fund*
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return -14.06% -27.77% +2.78% -19.54%
- --------------------------------------------------------------------------------------------
Average Annual Total Return -- -27.77% +0.55% - 2.43%
- --------------------------------------------------------------------------------------------
SEC Results -- -30.66% +0.16% - 2.43%
- --------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
August 1, 1988, through May 31, 1997.
3
<PAGE> 6
PERFORMANCE SUMMARY - continued
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
Class A share SEC results include the maximum 5.75% sales charge. Class B
share SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%.
Class A share results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of the Fund's Class B shares for periods prior to the
commencement of offering of Class A shares. Because operating expenses
attributable to Class B shares are greater than those of Class A shares, Class A
share performance generally would have been higher than Class B share
performance. The Class B share performance included within the Class A share SEC
performance has been adjusted to reflect the maximum sales charge generally
applicable to Class A shares rather than the CDSC generally applicable to Class
B shares.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Current subsidies and
waivers may be discontinued at any time.
4
<PAGE> 7
PORTFOLIO CONCENTRATION AS OF MAY 31, 1997
<TABLE>
TOP 10 EQUITY HOLDINGS
<S> <C>
NEWMONT MINING CORP. FREEPORT-MCMORAN COPPER & GOLD, INC.
U.S. gold mining and refining company U.S. precious metals mining company
EURO NEVADA MINING CORP. LTD. STILLWATER MINING CO.
Canadian gold mining company U.S. precious metals mining company
CENTURY ALUMINUM CO. BARRICK GOLD CORP.
U.S. producer of sheet and plate aluminum Canadian gold mining company
PLACER DOME, INC. TITANIUM METALS CORP.
Canadian precious metals mining company Producer of titanium metal products for
aerospace and industrial use
TVX GOLD, INC.
Canadian precious metals mining company AGNICO-EAGLE MINES LTD.
Canadian gold mining company
</TABLE>
LARGEST SECTORS
[PIE CHART]
Basic Materials 94.4%
Financial Services 4.6%
Miscellaneous (Conglomerates,
special products/services) 1.0%
For a more complete breakdown, refer to the Portfolio of Investments.
5
<PAGE> 8
PORTFOLIO OF INVESTMENTS (UNAUDITED) - MAY 31, 1997
<TABLE>
Stocks - 86.8%
<CAPTION>
- --------------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Metals and Minerals - U.S. - 12.6%
Century Aluminum Co. 74,800 $ 1,337,050
Oregon Metallurgical Corp. 16,500 429,000
RMI Titanium Co.* 25,000 581,250
Titanium Metals Corp.* 25,000 759,375
- --------------------------------------------------------------------------------------
Total Metals and Minerals $ 3,106,675
- --------------------------------------------------------------------------------------
Precious Metals and Minerals - 74.2%
Australia - 4.8%
Newcrest Mining 150,000 $ 373,271
Niugini Mining Ltd. 100,000 239,715
Normandy Mining Ltd. 471,000 577,074
-----------
$ 1,190,060
- --------------------------------------------------------------------------------------
Canada - 26.8%
Agnico-Eagle Mines Ltd. 70,000 $ 743,750
Barrick Gold Corp. 35,000 883,750
Euro Nevada Mining Corp. Ltd. 65,000 1,920,776
Kinross Gold Corp.* 50,000 300,000
Placer Dome, Inc. 70,000 1,277,500
Southern Africa Minerals Corp.* 400,000 182,741
Triton Mining Corp.*## 17,500 45,685
TVX Gold, Inc.*+ 200,000 1,275,000
-----------
$ 6,629,202
- --------------------------------------------------------------------------------------
South Africa - 15.7%
Ashanti Goldfields Co.## 32,500 $ 422,500
Avgold Ltd., ADR* 16,414 221,589
Driefontien Consolidated, ADR 45,000 382,500
Free State Consolidated Gold Mines Ltd., ADR 90,000 585,000
Kloof Gold Mining Ltd., ADR 55,000 374,688
Vaal Reefs Exploration & Mining Co. Ltd., ADR 100,000 600,000
Western Areas Gold Mining Ltd., ADR 102,435 717,045
Western Deep Levels Ltd., ADR 20,000 570,000
-----------
$ 3,873,322
- --------------------------------------------------------------------------------------
U.S. - 26.9%
Amax Gold, Inc.* 80,000 $ 530,000
Battle Mountain Gold Co. 120,000 735,000
Freeport-McMoRan Copper & Gold, Inc. 40,000 1,110,000
Homestake Mining Co. 40,000 555,000
Newmont Mining Corp. 70,800 2,770,050
Stillwater Mining Co.* 40,000 930,000
-----------
$ 6,630,050
- --------------------------------------------------------------------------------------
Total Precious Metals and Minerals $18,322,634
- --------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $24,113,754) $21,429,309
- --------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
PORTFOLIO OF INVESTMENTS (UNAUDITED) - continued
<TABLE>
Convertible Bond - 4.2%
<CAPTION>
- ----------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Canada
Trizec Hahn Corp.## (Identified Cost, $1,253,500) $1,150 $ 1,033,562
- ----------------------------------------------------------------------------------------
Short-Term Obligations - 10.8%
- ----------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 06/02/97 $1,950 $ 1,949,699
Federal National Mortgage Assn., due 06/06/97 710 709,468
- ----------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 2,659,167
- ----------------------------------------------------------------------------------------
Total Investments (Identified Cost, $28,026,421) $25,122,038
Other Assets, Less Liabilities - (1.8)% (454,985)
- ----------------------------------------------------------------------------------------
Net Assets - 100.0% $24,667,053
- ----------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
+Restricted security.
##SEC Rule 144A restriction.
See notes to financial
statements
7
<PAGE> 10
FINANCIAL STATEMENTS
<TABLE>
Statement of Assets and Liabilities (Unaudited)
<CAPTION>
- -------------------------------------------------------------------------------------
May 31, 1997
- -------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $28,026,421) $25,122,038
Cash 6,062
Receivable for Fund shares sold 22,175
Dividends and interest receivable 23,958
Other assets 253
-----------
Total assets $25,174,486
-----------
Liabilities:
Payable for Fund shares reacquired $ 432,532
Payable to affiliates -
Management fee 1,018
Shareholder servicing agent fee 177
Distribution and service fee 8,411
Accrued expenses and other liabilities 65,295
-----------
Total liabilities $ 507,433
-----------
Net assets $24,667,053
-----------
Net assets consist of:
Paid-in capital $32,429,952
Unrealized depreciation on investments (2,904,383)
Accumulated net realized loss on investments and foreign currency
transactions (4,763,998)
Accumulated net investment loss (94,518)
-----------
Total $24,667,053
-----------
Shares of beneficial interest outstanding 4,986,342
---------
Class A shares:
Net asset value per share (net assets of $7,574,717 / 1,488,900
shares of beneficial interest outstanding) $5.09
-----
Offering price per share (100 / 94.25) $5.40
-----
Class B shares:
Net asset value and offering price per share
(net assets of $17,092,336 / 3,497,442 shares of beneficial interest
outstanding) $4.89
-----
</TABLE>
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
8
<PAGE> 11
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Operations (Unaudited)
<CAPTION>
- -------------------------------------------------------------------------------------
Six Months Ended May 31, 1997
- -------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 174,879
Interest 58,269
-----------
Total investment income $ 233,148
-----------
Expenses -
Management fee $ 100,986
Trustees' compensation 25,579
Shareholder servicing agent fee 14,207
Shareholder servicing agent fee (Class A) 979
Shareholder servicing agent fee (Class B) 3,846
Distribution and service fee (Class B) 95,774
Administrative fee 985
Printing 27,643
Auditing fees 15,151
Custodian fee 8,439
Postage 8,413
Miscellaneous 31,278
-----------
Total expenses $ 333,280
Preliminary reduction of expenses by investment adviser (42,892)
Fees paid indirectly (882)
-----------
Net expenses $ 289,506
-----------
Net investment loss $ (56,358)
-----------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $(1,478,189)
Foreign currency transactions (53)
-----------
Net realized loss on investments and foreign currency transactions $(1,478,242)
-----------
Change in unrealized appreciation (depreciation) -
Investments $(2,693,241)
Translation of assets and liabilities in foreign currencies 112
-----------
Net unrealized loss on investments $(2,693,129)
-----------
Net realized and unrealized loss on investments and foreign
currency $(4,171,371)
-----------
Decrease in net assets from operations $(4,227,729)
-----------
</TABLE>
See notes to financial statements
9
<PAGE> 12
FINANCIAL STATEMENTS - continued
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- ------------------------------------------------------------------------------------------
Six Months Ended
May 31, 1997 Year Ended
(Unaudited) November 30, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (56,358) $ (242,263)
Net realized loss on investments and foreign
currency transactions (1,478,242) (505,922)
Net unrealized gain (loss) on investments and
foreign currency translation (2,693,129) 1,511,202
------------ ------------
Increase (decrease) in net assets from
operations $ (4,227,729) $ 763,017
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 24,421,111 $ 85,440,451
Cost of shares reacquired (24,080,204) (85,185,039)
------------ ------------
Increase in net assets from Fund share
transactions $ 340,907 $ 255,412
------------ ------------
Total increase (decrease) in net assets $ (3,886,822) $ 1,018,429
Net assets:
At beginning of period 28,553,875 27,535,446
------------ ------------
At end of period (including accumulated net
investment loss of $94,518 and $38,160,
respectively) $ 24,667,053 $ 28,553,875
------------ ------------
</TABLE>
See notes to financial statements
10
<PAGE> 13
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------
Six Months Ended Year Ended November 30,
May 31, 1997 --------------------------------------
(Unaudited) 1996 1995 1994 1993*
- -------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $ 5.89 $ 5.59 $ 5.76 $ 6.54 $ 5.55
--------- -------- -------- --------- --------
Income from investment operations# -
Net investment income(sec.) $ 0.01 $ -- $ 0.01 $ 0.01 $ 0.01
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (0.81) 0.30 (0.18) (0.73) 0.98
--------- -------- -------- --------- --------
Total from investment
operations $ (0.80) $ 0.30 $ (0.17) $ (0.72) $ 0.99
--------- -------- -------- --------- --------
Less distributions declared to
shareholders -
From net realized gain on
investments $ -- $ -- $ -- $ (0.05) $ --
Tax return of capital -- -- -- (0.01) --
--------- -------- -------- --------- --------
Total distributions declared
to shareholders $ -- $ -- $ -- $ (0.06) $ --
--------- -------- -------- --------- --------
Net asset value - end of period $ 5.09 $ 5.89 $ 5.59 $ 5.76 $ 6.54
--------- -------- -------- --------- --------
Total return++ (13.58)%++ 5.37% (2.95)% (11.14)% 17.84%++
Ratios (to average net assets)/Supplemental
data(sec.):
Expenses## 1.43%+ 1.44% 1.43% 1.42% 1.43%+
Net investment income (loss) 0.27%+ (0.03)% 0.16% 0.14% 0.61%+
Portfolio turnover 5% 26% 33% 142% 188%
Average commission rate### $ 0.0555 $ 0.0362 $ -- $ -- $ --
Net assets at end of period (000
omitted) $ 7,575 $ 7,863 $ 6,328 $ 3,695 $ 1,117
* For the period from the commencement of offering of Class A shares, September 7,
1993, to November 30, 1993.
+ Annualized.
++ Not annualized.
++ Total returns for Class A shares do not include the applicable sales charge. If
the charge had been included, the results would have been lower.
# Per share data for the periods subsequent to November 30, 1992, 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 30, 1995.
(sec.) The adviser voluntarily agreed to maintain expenses, other than management fee,
distribution and service fee of the Fund at not more than 0.68% of the average
daily net assets for the periods indicated. The investment adviser did not impose
a portion of its management fee for certain periods. To the extent actual
expenses were over/under these limitations, or if these fees had been incurred by
the Fund, the net investment income per share and the ratios would have been:
Net investment loss $ -- $ (0.01) $ -- $ (0.02) $ --
Ratios (to average net assets):
Expenses## 1.77% 1.59% 1.63% 1.84% 1.93%+
Net investment income (loss) (0.07)% (0.18)% (0.04)% (0.27)% 0.11%+
</TABLE>
See notes to financial statements
11
<PAGE> 14
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------
Six Months Ended Year Ended November 30,
May 31, 1997 -----------------------------
(Unaudited) 1996 1995 1994
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.69 $ 5.46 $ 5.68 $ 6.53
--------- -------- -------- ---------
Income from investment operations# -
Net investment loss(sec.) $ (0.02) $ (0.06) $ (0.04) $ (0.06)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (0.78) 0.29 (0.18) (0.73)
--------- -------- -------- ---------
Total from investment operations $ (0.80) $ 0.23 $ (0.22) $ (0.79)
--------- -------- -------- ---------
Less distributions declared to
shareholders -
From net realized gain on investments $ -- $ -- $ -- $ (0.05)
Tax return of capital -- -- -- (0.01)
--------- -------- -------- ---------
Total distributions declared to
shareholders $ -- $ -- $ -- $ (0.06)
--------- -------- -------- ---------
Net asset value - end of period $ 4.89 $ 5.69 $ 5.46 $ 5.68
--------- -------- -------- ---------
Total return (14.06)%++ 4.21% (3.87)% (12.24)%
Ratios (to average net assets)/Supplemental
data(sec.):
Expenses## 2.43%+ 2.52% 2.50% 2.49%
Net investment loss (0.70)%+ (1.02)% (0.79)% (0.83)%
Portfolio turnover 5% 26% 33% 142%
Average commission rate### $ 0.0555 $ 0.0362 $ -- $ --
Net assets at end of period (000 omitted) $ 17,092 $ 20,691 $ 21,207 $ 28,722
+ 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 30, 1995.
(sec.) The adviser voluntarily agreed to maintain expenses, other than management fee,
distribution and service fee of the Fund at not more than 0.68% of the average
daily net assets for the periods indicated. The investment adviser did not impose
a portion of its management fee for certain periods. To the extent actual
expenses were over/under these limitations, or if these fees had been incurred by
the Fund, the net investment income per share and the ratios would have been:
Net investment loss $ (0.03) $ (0.07) $ (0.05) $ (0.09)
Ratios (to average net assets):
Expenses## 2.77% 2.67% 2.71% 2.91%
Net investment loss (1.04)% (1.17)% (1.00)% (1.25)%
</TABLE>
See notes to financial statements
12
<PAGE> 15
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------
Year Ended November 30, 1993 1992 1991 1990 1989 1988*
- --------------------------------------------------------------------------------------------
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 $ 4.67 $ 4.80 $ 4.68 $ 6.56 $ 5.88 $ 6.16
-------- -------- -------- --------- ------- ---------
Income from investment
operations# -
Net investment income
(loss)(sec.) $ (0.02) $ (0.14) $ (0.11) $ (0.07) $ (0.04) $ 0.03
Net realized and
unrealized gain (loss)
on investments 1.88 0.01 0.23 (1.81) 0.75 (0.31)
-------- -------- -------- --------- ------- ---------
Total from
investment
operations $ 1.86 $ (0.13) $ 0.12 $ (1.88) $ 0.71 $ (0.28)
-------- -------- -------- --------- ------- ---------
Less distributions
declared to
shareholders -
From net realized gain
on investments $ -- $ -- $ -- $ -- $ (0.03) $ --
-------- -------- -------- --------- ------- ---------
Net asset value - end of
period $ 6.53 $ 4.67 $ 4.80 $ 4.68 $ 6.56 $ 5.88
-------- -------- -------- --------- ------- ---------
Total return 39.83% (2.71)% 2.56% (28.66)% 12.06% (13.71)%+
Ratios (to average net assets)/Supplemental data(sec.):
Expenses 2.66% 4.09% 4.11% 3.88% 3.67% 3.00%+
Net investment income
(loss) (0.38)% (2.39)% (2.19)% (2.04)% (1.15)% (0.94)%+
Portfolio turnover 188% 189% 135% 114% 92% 12%
Net assets at end of
period (000 omitted) $ 24,861 $ 6,432 $ 7,056 $ 7,207 $ 4,795 $ 1,778
* For the period from the commencement of investment operations, August 1, 1988, to
November 30, 1988.
+ Annualized.
# Per share data for the periods subsequent November 30, 1992, are based on average
shares outstanding.
(sec.) The investment adviser did not impose a portion of its management fee for the
period indicated. If this fee had been incurred by the Fund, the net investment
income per share and the ratios would have been:
Net investment loss $ (0.04) $ -- $ -- $ -- $ -- $ --
Ratios (to average net assets):
Expenses 3.15% -- -- -- -- --
Net investment loss (0.87)% -- -- -- -- --
</TABLE>
See notes to financial statements
13
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Business and Organization
MFS Gold & Natural Resources Fund (the Fund) is a nondiversified series of MFS
Series Trust II (the Trust). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, are valued on the basis of valuations
furnished by dealers or by a pricing service with consideration to factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued 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 investment, 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
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
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
result 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. Dividends
received in cash are recorded on the ex-dividend date. 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 custody fee is calculated as a percentage of
the fund's average daily net assets. The fee is reduced according to an
arrangement, which measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
income or accumulated net realized gains. At November 30, 1996, the Fund, for
federal income tax purposes, had a capital loss carryforward of $3,267,652,
which may be applied against any net taxable realized gains for each succeeding
year until the earlier of its utilization or expiration on November 30, 2004
($542,579), November 30, 2003 ($1,781,104), and November 30, 2002 ($943,969).
Multiple Classes of Shares of Beneficial Interest - The Fund offers both Class A
and Class B shares. The two classes of shares differ in their respective
distribution and service fees. All shareholders bear the common expenses of the
Fund pro rata based on average daily net assets of each class, without
distinction between share classes. Dividends are declared separately for each
class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses.
(3) Transaction with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate of
0.75% of average daily net assets. The investment adviser has agreed to bear the
Fund's expenses such that other expenses, which are defined to include all Fund
expenses except for management fees, distribution and service fees and class
specific expenses, do not exceed 0.68% per annum of its average daily net
assets, which is reflected as a preliminary reduction of expenses in the
Statement of Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $5,122 for the six months
ended May 31, 1997.
Administrator - Effective March 1, 1997, the Fund has an administrative services
agreement with MFS to provide the Fund with certain financial, legal,
compliance, shareholder communications, and other administrative services. As
partial reimbursement for the cost of providing these services, the Fund
16
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
pays MFS an administrative fee up to 0.015% per annum of the Fund's average
daily net assets, provided that the administrative fee is not assessed on Fund
assets that exceed $3 billion.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$7,075 for the six months ended May 31, 1997, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A and Class B shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% per
annum of its average daily net assets attributable to Class A shares in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer and a distribution fee to MFD of up to
0.10% per annum of the Fund's average daily net assets attributable to Class A
shares. Payments of the 0.25% per annum service fee will commence under the
distribution plan when the value of the net assets of the Fund attributable to
Class A shares first equals or exceeds $40 million. Payment of the 0.10% per
annum distribution fee will commence on such date as the Trustees of the Trust
may determine.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B 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 $3,813 for Class B shares for the six
months ended May 31, 1997. Fees incurred under the distribution plan during the
six months ended May 31, 1997, were 1.00% of average daily net assets
attributable to Class B shares on an annualized basis.
Purchases over $1 million of 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 12 months following such purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B
17
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the six months ended May 31, 1997, were $53 and $25,116
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 0.13%. Prior to January 1, 1997, the fee was
calculated as a percentage of the average daily net assets of each class of
shares at an effective annual rate 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 purchased option transactions and
short-term obligations aggregated $1,253,559 and $2,444,226, 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:
<TABLE>
<S> <C>
Aggregate cost $28,026,421
===========
Gross unrealized depreciation $(5,470,973)
Gross unrealized appreciation 2,566,590
-----------
Net unrealized depreciation $(2,904,383)
===========
</TABLE>
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Class A Shares
<TABLE>
<CAPTION>
Six Months Ended May 31, 1997 Year Ended November 30, 1996
----------------------------- -----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,455,888 $ 8,138,126 6,360,113 $ 41,515,582
Shares reaquired (1,301,355) (7,224,194) (6,157,121) (39,875,887)
---------- ------------ ---------- ------------
Net increase 154,533 $ 913,932 202,992 $ 1,639,695
========== ============ ========== ============
</TABLE>
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
Class B Shares
<TABLE>
<CAPTION>
Six Months Ended May 31, 1997 Year Ended November 30, 1996
----------------------------- -----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,969,517 $ 16,282,985 7,018,689 $ 43,924,869
Shares reaquired (3,109,932) (16,856,010) (7,267,186) (45,309,152)
---------- ------------ ---------- ------------
Net increase (140,415) $ (573,025) (248,497) $ (1,384,283)
========== ============ ========== ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $400 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the six
months ended May 31, 1997, was $114.
(7) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At May 31, 1997, the
Fund owned the following restricted securities (constituting 5.2% of net assets)
which may not be publicly sold without registration under the Securities Act of
1933 (the 1933 Act). The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers, or, if not available, in
good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
Date of
Description Acquisition Shares Cost Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TVX Gold, Inc. 6/28/93 200,000 $1,475,082 $1,275,000
----------
</TABLE>
(8) Subsequent Event
On June 11, 1997, the Trustees decided to terminate the Fund effective August 1,
1997. Shares outstanding at the close of business on the termination date will
automatically be exchanged at that time for shares of the same class of MFS Cash
Reserve Fund ("Cash Reserve") at Cash Reserve's then current net asset value.
---------------------------------------------------------------------
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> 22
THE MFS FAMILY OF FUNDSREGISTRATION 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 1-800-225-2606
any business day from 8 a.m. to 8 p.m. Eastern time. This material should be
read carefully before investing or sending money.
STOCK
- --------------------------------------------------------------------------------
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS(R) Capital Growth Fund
MFS(R) Emerging Growth Fund
MFS(R) Gold & Natural Resources Fund
MFS(R) Growth Opportunities Fund
MFS(R) Managed Sectors Fund
MFS(R) OTC Fund
MFS(R) Research Fund
MFS(R) Research Growth and Income Fund
MFS(R) Strategic Growth Fund
MFS(R) Value Fund
STOCK AND BOND
- --------------------------------------------------------------------------------
MFS(R) Total Return Fund
MFS(R) Utilities Fund
BOND
- --------------------------------------------------------------------------------
MFS(R) Bond Fund
MFS(R) Government Mortgage Fund
MFS(R) Government Securities Fund
MFS(R) High Income Fund
MFS(R) Intermediate Income Fund
MFS(R) Strategic Income Fund
LIMITED MATURITY BOND
- --------------------------------------------------------------------------------
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
WORLD
- --------------------------------------------------------------------------------
MFS(R)/Foreign & Colonial Emerging Markets Equity Fund
MFS(R)/Foreign & Colonial International Growth Fund
MFS(R)/Foreign & Colonial International Growth and Income Fund
MFS(R) World Asset Allocation Fundsm
MFS(R) World Equity Fund
MFS(R) World Governments Fund
MFS(R) World Growth Fund
MFS(R) World Total Return Fund
NATIONAL TAX-FREE BOND
- --------------------------------------------------------------------------------
MFS(R) Municipal Bond Fund
MFS(R) Municipal High Income Fund
MFS(R) 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(R) Cash Reserve Fund
MFS(R) Government Money Market Fund
MFS(R) Money Market Fund
20
<PAGE> 23
MFS(R) GOLD & NATURAL RESOURCES 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
Constantinos Mokas*
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 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.
WORLD WIDE WEB
www.mfs.com
[DALMAR MFS #1 GRAPHIC]
For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category. The firm
achieved a 3.48 overall score on a scale of 1 to 4 in the 1996 survey. A total
of 110 firms responded, offering input on the quality of service they received
from 29 mutual fund companies nationwide. The survey contained questions about
service quality in 15 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
21
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C> <C>
MFS(R) GOLD & NATURAL [Dalmar MFS #1 Graphic]
RESOURCES FUND ----------------------
500 Boylston Street BULK RATE
Boston, MA 02116-3741 U.S. POSTAGE
LOGO PAID
MFS
----------------------
</TABLE>
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MGN-3 7/97 7.5M 06/206
