<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) LARGE CAP
GROWTH FUND
ANNUAL REPORT o NOVEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 18
Notes to Financial Statements ............................................. 24
Independent Auditors' Report .............................................. 30
MFS' Year 2000 Readiness Disclosure ....................................... 32
Trustees and Officers ..................................................... 33
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that
this new communication medium is changing forever the way we work, play, and
shop. One might also argue that investing in this new technology represents
the investment opportunity of a lifetime. The question for any investor is
whether and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no
doubt that Internet-delivered information and brokerage services enable
individual investors to be well-informed and to trade at bargain prices. But
we believe the numbers and facts argue that, for most of us, mutual funds
purchased through a financial professional will continue to be one of the best
products for long-term investing in this new millennium.
According to a survey by the Investment Company Institute, a national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of
course that doesn't tell us how well they did owning those funds or stocks,
but another statistic gives us a clue. In the third quarter of 1999, during a
period of volatility in the greatest bull market in history, a quarter of the
7,500 stocks tracked by Morningstar, a popular rating service, lost more than
20% of their value. But during the same period, less than 1% of the mutual
funds tracked by Morningstar -- 6 out of 10,000 funds -- were down by a
similar amount.(2) So, with all things being equal, an investor's chance of
picking one of those losing stocks was about 25 times greater than his or her
chance of picking an equally losing fund.
The numbers also show that a majority of Americans seek professional advice
when buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through a financial professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up markets and down ones. And for many
investors, working with a financial professional may be the best way to
develop a plan. Although the Internet abounds with calculators for developing
all sorts of investment plans, none has your broker or consultant's high
level of experience and an understanding of your unique situation. And no
calculator can counsel you during a down market, when you may be tempted to
abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns
dozens or even hundreds of holdings is better positioned to survive a
disappointment in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few mutual funds, of course, are going to be up
when the overall market is down. But as the numbers above from the third
quarter of 1999 demonstrate, mutual funds may be less likely to suffer the
extreme downturns experienced by a large number of individual holdings when
the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights.
The diversification and professional management of mutual funds help make
them inherently less risky than individual stock picking, and funds are
available in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
December 15, 1999
(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore Sun's
Dollars and Sense Conference, 10/99. In the period 7/1/99 through 9/30/99,
of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more; of the
10,000 mutual funds tracked by Morningstar, six lost 20% or more. Mutual
fund results are at net asset value; if sales charges had been reflected,
results would have been lower.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of John E. Lathrop]
John E. Lathrop
For the 12 months ended November 30, 1999, Class A shares of the Fund provided
a total return of 32.12%, Class B shares 31.05%, and Class I shares 32.35%.
These returns include the reinvestment of any distributions but exclude the
effects of any sales charges.
During the same period, the average growth fund tracked by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance,
returned 27.23%. The Fund's returns also compare to a 20.90% return over the
same period for the Standard & Poor's 500 Composite Index (the S&P 500), a
popular, unmanaged index of common stock total return performance.
Q. THE FUND OUTPERFORMED BOTH THE S&P 500 AND THE LIPPER GROWTH FUND CATEGORY
AVERAGE THIS PAST YEAR. HOW DID YOU DO IT?
A. A major factor was that we uncovered great companies in two areas we're very
bullish on: telecommunications equipment and telecommunications services. In
our opinion, what's driving the equipment area is that the Internet has
become the new wide-area network for corporate as well as individual
communication, and traffic on that network is doubling every four months.
Cellular phone service has experienced a similar explosion in demand. That
is forcing the Internet service providers and the cellular providers to
upgrade their networks to handle the increased demand. This directly
benefits companies that provide telecommunications infrastructure and
equipment. Infrastructure manufacturers that have contributed to our
performance include Cisco Systems, the dominant provider of switches and
routers for the Internet; Corning, the largest supplier of the optical fiber
that is replacing copper wire in telecommunications networks worldwide; and
Nokia and Ericsson two cellular handset manufacturers.
In the telecom services area, 1999 was a year that saw phenomenal subscriber
growth in cellular phone services, and the Fund was helped by holdings in
service providers such as NEXTEL Communications, Inc. and Sprint PCS.
Q. WHAT OTHER TECHNOLOGY AREAS CONTRIBUTED TO PERFORMANCE?
A. We held several software companies that did very well for us. As
communication on the Internet has grown, we've seen strong demand for two
kinds of applications: software to handle a ballooning need for information
storage, and software to manage increasingly complex networks. This led us
to take positions in two types of software companies.
First, we invested in large, established vendors, like Oracle Corp., that
are moving their products to Web-based models. With its "8i" software,
Oracle is capturing a dominant share of database installations for companies
doing business on the Web, including retailers like Amazon.com.
Second, we invested in smaller software companies that are direct
beneficiaries of growth in the Internet. One example that performed well for
us was VERITAS Software, a leader in storage management applications. As
more companies and individuals become linked to the Internet, corporations
need to store more data, and they spend more on the products that VERITAS
provides to protect and manage that stored data. Siebel Systems, another
software holding in the Fund, provides "front office" software. A lot of
companies have already automated their back-end processes -- financial,
human resources, and so forth. Now they're looking to improve their customer
relationship management, the front-end processes. Siebel is a leader in
software that addresses this area.
Q. DO YOU HAVE A FAVORITE STOCK STORY OF THIS PAST YEAR, ONE THAT REALLY
ILLUSTRATES THE FUND'S APPROACH TO INVESTING?
A. I have a lot of favorites, but National Semiconductor Corp. is one that
stands out. Here's a company the market didn't seem to like, although it was
in a hot sector -- technology. Yet the stock is up significantly since we
first bought it.
When we began looking into National Semiconductor, it owned two major
assets. One was a profitable business producing high-end communications
chips. The other was Cyrix, a microprocessor design subsidiary that was
losing money. National was planning to divest itself of Cyrix, which would
free up capital for the other side of their business. National Semiconductor
is an important supplier of the chips that go into cell phones, and our
research had projected a huge acceleration in the number of cellular phone
subscribers. So we believed the part of the business National was going to
keep would see an acceleration in demand, while they were selling their
money-losing division.
The market, however, didn't have confidence that National Semiconductor
could pull off divesting Cyrix and didn't believe National had a good set of
chips for the hot consumer electronics markets. So the stock price was
depressed.
Our semiconductor analyst and I met several times with National's management
to better assess the demand for their chips and walk through their
divestiture plans. We also prepared an earnings model, which projected the
company's stock was trading at about 13 times earnings, whereas its peers in
the business were trading at an average of 25 times earnings. All this led
us to believe the market was undervaluing National's shares.
Our in-house research and expertise gave us the confidence to invest in
National Semiconductor when few others believed in it. And what we've seen
so far is that every quarter they've met or exceeded their earnings
projections, we feel they've successfully divested themselves of Cyrix, and
the share price has risen accordingly.
Q. OUTSIDE OF TECHNOLOGY, WHAT ELSE CONTRIBUTED STRONGLY TO THE
FUND'S PERFORMANCE?
A. Leisure companies, particularly those in the television and radio
broadcasting areas, have been strong performers this year. One example of a
leisure opportunity we uncovered is CBS, a media company that includes the
TV network. CBS this year agreed to merge with Viacom, a leading producer of
programming. Many people on Wall Street were skeptical of the deal,
believing that combining media production and distribution companies did not
make sense. Having met with members of Viacom's senior management, it became
apparent to us that the merger could enhance the value of CBS. This led us
to believe the stock was selling relatively cheaply compared to competitors
like Time Warner. And, in fact, CBS's stock has gone up since we bought it.
It's a good example of the kind of companies we continue to look for, where
we see some kind of fundamental change that is not yet recognized by the
marketplace.
Q. WHAT AREAS HURT THE FUND'S PERFORMANCE THIS YEAR?
A. In general, two types of companies hurt us in 1999. In retailing, drug store
and supermarket chains performed poorly. We held a drugstore company, Rite
Aid, that developed problems with accounting irregularities and which we
sold out of the Fund. Layered on top of that was the fear that Internet drug
and food companies would hurt the traditional "brick and mortar" retailers.
Rite Aid's problems and Internet fears we feel cast a shadow that dragged
down the performance of drug and supermarket chains in general, including
our holdings in CVS, Kroger, and Safeway -- companies we still believe have
good fundamentals.
The other sector that did not help us this year was financial services.
Rising interest rates and heightened competition led to earnings uncertainty
and, therefore, lowered stock valuations in the sector. For example, our
holdings in Associates First Capital (AFS), a diversified financial services
company, were negatively impacted by the perception that Fannie Mae and
Freddie Mac were planning to compete with AFS in the sub-prime mortgage
market.
Q. WHAT IS YOUR OUTLOOK FOR 2000?
A. When we talk to companies, the general outlook seems to be that earnings
increases will continue to be relatively strong. We don't hear much talk of
price increases by manufacturers or service providers, which bodes well for
inflation staying down. So, with interest rates staying roughly where they
are and earnings increases continuing, 2000 could be a good year for the
markets.
That said, I am a bit concerned about the high valuations of technology
stocks, even relative to a year ago. The fundamentals of many of these
companies are still phenomenal, so I don't think valuations will contract
because fundamentals deteriorate. But it's becoming harder to find
undiscovered technology gems like National Semiconductor. I'd say it's
likely that six months or a year from now the Fund may hold fewer tech
stocks and have more holdings in other areas, like media.
/s/ John E. Lathrop
John E. Lathrop
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on
the cover. The manager's views are subject to change at any time based on
market and other conditions, and no forecasts can be guaranteed.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
- --------------------------------------------------------------------------------
JOHN E. LATHROP IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF MFS(R) LARGE CAP GROWTH FUND.
MR. LATHROP JOINED MFS IN 1994 FROM ANOTHER MAJOR INVESTMENT MANAGEMENT
FIRM, WHERE HE HAD WORKED AS AN EQUITY ANALYST, STATISTICAL ANALYST, AND
INSTITUTIONAL ACCOUNT CONTROLLER SINCE 1988. HE WAS NAMED ASSISTANT VICE
PRESIDENT IN 1995, VICE PRESIDENT IN 1996, AND PORTFOLIO MANAGER IN
1999. HE IS A GRADUATE OF NORTHWESTERN UNIVERSITY, WHERE HE WAS ELECTED
TO PHI BETA KAPPA WITH HONORS IN ECONOMICS, AND HE EARNED AN M.B.A.
DEGREE FROM CORNELL UNIVERSITY'S JOHNSON GRADUATE SCHOOL OF MANAGEMENT.
MR. LATHROP IS A CHARTERED FINANCIAL ANALYST.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
- --------------------------------------------------------------------------------
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
- --------------------------------------------------------------------------------
FUND FACTS
- --------------------------------------------------------------------------------
OBJECTIVE: SEEKS TO PROVIDE GROWTH OF CAPITAL.
COMMENCEMENT OF
INVESTMENT OPERATIONS: DECEMBER 29, 1986
CLASS INCEPTION: CLASS A SEPTEMBER 7, 1993
CLASS B DECEMBER 29, 1986
CLASS I JANUARY 2, 1997
SIZE: $969.2 MILLION NET ASSETS AS OF NOVEMBER 30, 1999
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include any applicable contingent deferred sales charges and reflect
the percentage change in net asset value, including reinvestment of dividends.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses.
The performance of other share classes will be greater than or less than the
line shown. (See Notes to Performance Summary.) It is not possible to invest
directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended November 30, 1999)
MFS Large Cap Standard &
Growth Fund Poor's 500
- Class B Composite Index
- -------------------------------------------------
11/89 $10,000 $10,000
11/91 11,445 11,616
11/93 14,315 15,152
11/95 19,477 20,973
11/97 28,624 34,463
11/99 45,044 51,522
<PAGE>
PERFORMANCE SUMMARY -- continued
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH NOVEMBER 30, 1999
CLASS A
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge +32.12% + 99.13% +232.69% +374.99%
- --------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge +32.12% + 25.81% + 27.18% + 16.86%
- --------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge +24.52% + 23.35% + 25.68% + 16.17%
- --------------------------------------------------------------------------------
CLASS B
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge +31.05% + 94.60% +219.51% +350.45%
- --------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge +31.05% + 24.82% + 26.15% + 16.24%
- --------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge +27.05% + 24.20% + 25.99% + 16.24%
- --------------------------------------------------------------------------------
CLASS I
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge +32.35% +100.47% +229.15% +364.02%
- --------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge +32.35% + 26.09% + 26.90% + 16.59%
- --------------------------------------------------------------------------------
COMPARATIVE INDICES
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Average growth fund+(+) +27.23% + 20.72% + 22.97% + 15.68%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index(+)# +20.90% + 24.32% + 27.47% + 17.81%
- --------------------------------------------------------------------------------
+ Source: Lipper Analytical Services, Inc.
(+) Average annual rates of return.
# Source: Standard & Poor's Micropal, Inc.
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 5.75% sales charge. Class B Share Performance
Including Sales Charge takes into account the deduction of the applicable
contingent deferred sales charge (CDSC), which declines over six years from 4%
to 0%. Class I Shares have no sales charge and are only available to certain
institutional investors.
Class A and I share performance include the performance of the Fund's Class B
shares for periods prior to their inception (blended performance). Class A
blended performance has been adjusted to take into account the initial sales
charge applicable to Class A shares rather than the CDSC applicable to Class B
shares. Class I blended performance has been adjusted to account for the fact
that Class I shares have no sales charge. These blended performance figures
have not been adjusted to take into account differences in class-specific
operating expenses. Because operating expenses for Class A and I shares are
lower than those of Class B shares, the blended Class A and I share
performance is lower than it would have been had Class A and I shares been
offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of 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.
<PAGE>
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1999
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 38.7%
LEISURE 13.7%
FINANCIAL SERVICES 9.9%
UTILITIES & COMMUNICATIONS 8.6%
RETAILING 8.2%
<TABLE>
TOP 10 STOCK HOLDINGS
<S> <C>
MICROSOFT CORP. 4.1% SUN MICROSYSTEMS, INC. 2.2%
Computer software and systems company Computer systems company
TYCO INTERNATIONAL LTD. 2.8% GENERAL ELECTRIC CO. 2.1%
Security systems, packaging, and electronic Diversified manufacturing and financial
equipment conglomerate services conglomerate
ORACLE CORP. 2.5% BMC SOFTWARE, INC. 2.1%
Database software developer and manufacturer Semiconductor manufacturer
CISCO SYSTEMS, INC. 2.5% INTEL CORP. 1.7%
Computer network developer Semiconductor manufacturer
MCI WORLDCOM, INC. 2.3% TIME WARNER, INC. 1.6%
Telecommunications company Publishing and entertainment company
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- November 30, 1999
Stocks - 100.5%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 94.8%
Automotive - 0.5%
Harley-Davidson, Inc. 80,000 $ 4,880,000
- ------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 1.3%
Bank of New York Co., Inc. 82,700 $ 3,297,663
Chase Manhattan Corp. 59,000 4,557,750
Providian Financial Corp. 57,900 4,581,337
------------
$ 12,436,750
- ------------------------------------------------------------------------------------------------------
Biotechnology - 0.7%
Guidant Corp.* 134,100 $ 6,705,000
- ------------------------------------------------------------------------------------------------------
Business Machines - 4.1%
Affiliated Computer Services, Inc., "A"* 215,300 $ 8,060,294
International Business Machines Corp. 14,800 1,525,325
Sun Microsystems, Inc.* 161,600 21,371,600
Texas Instruments, Inc. 90,500 8,693,656
------------
$ 39,650,875
- ------------------------------------------------------------------------------------------------------
Business Services - 2.3%
Ceridian Corp.* 330,700 $ 7,151,388
DST Systems, Inc.* 117,900 7,420,331
First Data Corp. 180,900 7,823,925
------------
$ 22,395,644
- ------------------------------------------------------------------------------------------------------
Cellular Telephones - 0.7%
Sprint Corp. (PCS Group)* 77,200 $ 7,083,100
TeleCorp PCS, Inc.* 1,900 68,519
Triton PCS Holdings, Inc.* 3,475 162,456
------------
$ 7,314,075
- ------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 4.1%
Microsoft Corp.* 442,200 $ 40,260,928
- ------------------------------------------------------------------------------------------------------
Computer Software - Services - 1.2%
EMC Corp.* 140,000 $ 11,698,750
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 11.0%
BMC Software, Inc.* 281,700 $ 20,511,281
Citrix Systems, Inc.* 77,900 7,390,762
Computer Associates International, Inc. 153,800 9,997,000
Compuware Corp.* 335,900 11,357,619
Comverse Technology, Inc.* 21,000 2,538,375
Crossroads Systems, Inc.* 2,100 185,194
Open TV Corp.* 1,410 108,923
Oracle Corp.* 355,200 24,087,000
Siebel Systems, Inc.* 154,600 10,841,325
SunGard Data Systems, Inc.* 160,000 3,560,000
Sycamore Networks, Inc.* 1,475 327,450
Synopsys, Inc.* 62,600 4,530,675
VERITAS Software Corp.* 120,750 11,056,172
------------
$106,491,776
- ------------------------------------------------------------------------------------------------------
Conglomerates - 3.3%
AlliedSignal, Inc. 71,700 $ 4,288,556
Tyco International Ltd. 686,800 27,514,925
------------
$ 31,803,481
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.2%
Clorox Co. 103,800 $ 4,625,588
Dial Corp. 170,000 4,770,625
Galileo International, Inc. 77,400 2,476,800
------------
$ 11,873,013
- ------------------------------------------------------------------------------------------------------
Electrical Equipment - 2.2%
General Electric Co. 161,000 $ 20,930,000
- ------------------------------------------------------------------------------------------------------
Electronics - 8.0%
Agilent Technologies, Inc.* 12,260 $ 517,219
Altera Corp.* 160,000 8,620,000
Analog Devices, Inc.* 190,000 10,913,125
Applied Materials, Inc.* 40,000 3,897,500
Atmel Corp.* 235,100 10,535,419
Intel Corp. 215,100 16,495,481
LSI Logic Corp.* 236,500 14,293,469
Novellus Systems, Inc.* 73,700 6,052,612
Teradyne, Inc.* 140,000 6,098,750
------------
$ 77,423,575
- ------------------------------------------------------------------------------------------------------
Entertainment - 10.3%
Carnival Corp. 48,100 $ 2,122,412
CBS Corp.* 237,700 12,360,400
Clear Channel Communications, Inc.* 114,370 9,192,489
Comcast Corp., "A" 275,600 12,453,675
Entercom Communications Corp.* 120,400 6,885,375
Gemstar International Group Ltd.* 50,000 5,637,500
Hearst-Argyle Television, Inc.* 81,000 1,761,750
Infinity Broadcasting Corp.* 379,400 13,824,387
MediaOne Group, Inc.* 126,100 9,993,425
Time Warner, Inc. 255,700 15,773,494
Tivo, Inc.* 75 3,272
Univision Communications, Inc., "A"* 110,000 9,625,000
------------
$ 99,633,179
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 4.7%
American Express Co. 35,800 $ 5,416,988
Associates First Capital Corp., "A" 268,400 8,924,300
Citigroup, Inc. 182,750 9,845,656
Morgan Stanley Dean Witter & Co. 88,400 10,663,250
State Street Corp. 152,600 11,206,562
------------
$ 46,056,756
- ------------------------------------------------------------------------------------------------------
Financial Services - 1.3%
AXA Financial, Inc. 248,000 $ 8,339,000
S1 Corp.* 86,400 4,168,800
------------
$ 12,507,800
- ------------------------------------------------------------------------------------------------------
Insurance - 2.6%
American International Group, Inc. 103,125 $ 10,647,656
CIGNA Corp. 104,300 8,578,675
Hartford Financial Services Group, Inc. 30,400 1,419,300
Lincoln National Corp. 109,500 4,564,781
------------
$ 25,210,412
- ------------------------------------------------------------------------------------------------------
Internet
Akamai Technologies, Inc.* 1,700 $ 402,900
Deltathree.com, Inc.* 840 24,623
------------
$ 427,523
- ------------------------------------------------------------------------------------------------------
Machinery - 1.1%
Danaher Corp. 138,900 $ 6,823,463
W.W. Grainger, Inc. 85,200 4,015,050
------------
$ 10,838,513
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - 4.6%
American Home Products Corp. 217,000 $ 11,284,000
Bausch & Lomb, Inc. 74,000 4,056,125
Bristol-Myers Squibb Co. 190,200 13,896,487
Pharmacia & Upjohn, Inc. 187,600 10,259,375
Schering Plough Corp. 105,000 5,368,125
------------
$ 44,864,112
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.9%
Cardinal Health, Inc. 46,400 $ 2,427,300
Medtronic, Inc. 255,600 9,936,450
United Healthcare Corp. 117,900 6,123,431
------------
$ 18,487,181
- ------------------------------------------------------------------------------------------------------
Oils - 0.4%
Conoco, Inc. 161,500 $ 4,229,281
- ------------------------------------------------------------------------------------------------------
Printing and Publishing - 1.3%
Scholastic Corp.* 60,000 $ 3,292,500
Tribune Co. 187,000 8,987,688
------------
$ 12,280,188
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.9%
McDonald's Corp. 111,500 $ 5,017,500
Wendy's International, Inc. 150,000 3,309,375
------------
$ 8,326,875
- ------------------------------------------------------------------------------------------------------
Retail - 0.4%
Tandy Corp. 50,000 $ 3,831,250
- ------------------------------------------------------------------------------------------------------
Special Products and Services - 0.4%
Royal Caribbean Cruises Ltd. 78,500 $ 3,875,938
- ------------------------------------------------------------------------------------------------------
Stores - 6.3%
BJ's Wholesale Club, Inc.* 200,000 $ 7,475,000
CVS Corp. 287,600 11,414,125
Dayton Hudson Corp. 130,000 9,173,125
Lowe's Cos., Inc. 165,000 8,219,062
Office Depot, Inc.* 435,000 4,839,375
TJX Cos., Inc. 240,000 6,285,000
Wal-Mart Stores, Inc. 240,000 13,830,000
------------
$ 61,235,687
- ------------------------------------------------------------------------------------------------------
Supermarkets - 1.6%
Kroger Co.* 560,000 $ 11,935,000
Safeway, Inc.* 90,800 3,348,250
------------
$ 15,283,250
- ------------------------------------------------------------------------------------------------------
Technology - 1.0%
National Semiconductor Corp.* 226,900 $ 9,643,250
- ------------------------------------------------------------------------------------------------------
Telecommunications - 14.9%
AT&T Corp.* 160,000 $ 6,690,000
BroadWing, Inc.* 62,900 1,831,962
CenturyTel, Inc. 184,400 8,482,400
Cisco Systems, Inc.* 269,800 24,062,787
Corning, Inc. 148,400 13,903,225
General Instrument Corp.* 113,200 7,414,600
Global TeleSystems Group, Inc.* 128,800 4,113,550
GTE Corp. 90,600 6,613,800
MCI WorldCom, Inc.* 273,500 22,615,031
Motorola, Inc. 132,500 15,138,125
Network Solutions, Inc.* 16,500 2,458,500
Next Level Communications, Inc.* 940 60,689
NEXTEL Communications, Inc.* 108,200 10,725,325
Nortel Networks Corp. 200,000 14,800,000
NTL, Inc.* 49,000 4,468,188
Williams Communications Group, Inc.* 20,975 625,317
------------
$144,003,499
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.5%
Williams Cos., Inc. 135,500 $ 4,573,125
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $919,171,686
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 5.7%
Canada - 0.6%
AT & T Canada, Inc. (Telecommunications)* 92,800 $ 3,526,400
Seagrams Ltd. (Conglomerate) 59,700 2,600,681
------------
$ 6,127,081
- ------------------------------------------------------------------------------------------------------
Finland - 1.5%
Nokia Corp., ADR (Telecommunications) 104,600 $ 14,454,412
- ------------------------------------------------------------------------------------------------------
Germany - 0.7%
Mannesmann AG (Conglomerate) 30,600 $ 6,362,580
- ------------------------------------------------------------------------------------------------------
Greece - 0.3%
Panafon S.A. (Telecommunications)* 223,460 $ 2,660,075
- ------------------------------------------------------------------------------------------------------
Ireland - 0.2%
Elan Corp. PLC, ADR (Health Products)* 85,300 $ 2,335,087
- ------------------------------------------------------------------------------------------------------
Israel
Radware Ltd. (Internet)* 1,150 $ 52,469
- ------------------------------------------------------------------------------------------------------
Netherlands
KPNQwest N.V. (Internet)* 5,840 $ 218,562
- ------------------------------------------------------------------------------------------------------
Sweden - 1.4%
Ericsson LM, ADR (Telecommunications) 276,800 $ 13,338,300
- ------------------------------------------------------------------------------------------------------
United Kingdom - 1.0%
BP Amoco PLC, ADR (Oils) 161,504 $ 9,841,650
NDS Group PLC, ADR (Internet)* 1,850 56,194
Thus PLC (Internet)* 23,540 147,126
------------
$ 10,044,970
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 55,593,536
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $688,377,248) $974,765,222
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.7%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., due 12/17/99 - 12/30/99,
at Amortized Cost $ 6,600 $ 6,573,693
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $694,950,941) $981,338,915
Other Assets, Less Liabilities - (1.2)% (12,103,367)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $969,235,548
- ------------------------------------------------------------------------------------------------------
* Non-income producing security
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $694,950,941) $981,338,915
Cash 212,788
Net receivable for forward foreign currency exchange
contracts subject to master netting agreements 108,583
Receivable for Fund shares sold 570,333
Interest and dividends receivable 412,518
Other assets 9,548
------------
Total assets $982,652,685
------------
Liabilities:
Payable for Fund shares reacquired $ 2,445,348
Payable for investments purchased 10,663,623
Payable to affiliates -
Management fee 61,447
Shareholder servicing agent fee 7,247
Distribution and service fee 51,412
Accrued expenses and other liabilities 188,060
------------
Total liabilities $ 13,417,137
------------
Net assets $969,235,548
============
Net assets consist of:
Paid-in capital $598,109,777
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 286,496,095
Accumulated undistributed net realized gain on
investments and foreign currency transactions 84,810,710
Accumulated net investment loss (181,034)
------------
Total $969,235,548
============
Shares of beneficial interest outstanding 47,544,919
==========
Class A shares:
Net asset value per share
(net assets of $476,401,663 / 23,401,416 shares of
beneficial interest outstanding) $20.36
======
Offering price per share (100 / 94.25 of net asset value
per share) $21.60
======
Class B shares:
Net asset value and offering price per share
(net assets of $492,676,725 / 24,135,815 shares of
beneficial interest outstanding) $20.41
======
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets of $157,160 / 7,688 shares of beneficial
interest outstanding) $20.44
======
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.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 3,836,854
Interest 1,247,827
Foreign taxes withheld (30,635)
------------
Total investment income $ 5,054,046
------------
Expenses -
Management fee $ 6,604,867
Trustees' compensation 43,747
Shareholder servicing agent fee 914,173
Distribution and service fee (Class A) 1,010,814
Distribution and service fee (Class B) 4,762,283
Administrative fee 113,864
Custodian fee 272,201
Printing 56,487
Postage 109,912
Auditing fees 32,923
Legal fees 9,015
Miscellaneous 388,001
------------
Total expenses $ 14,318,287
Fees paid indirectly (79,935)
------------
Net expenses $ 14,238,352
------------
Net investment loss $ (9,184,306)
------------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $113,466,564
Foreign currency transactions 214,451
------------
Net realized gain on investments and foreign
currency transactions $113,681,015
------------
Change in unrealized appreciation (depreciation) -
Investments $133,070,347
Translation of assets and liabilities in foreign
currencies (12,190)
------------
Net unrealized gain on investments and foreign
currency translation $133,058,157
------------
Net realized and unrealized gain on investments
and foreign currency $246,739,172
------------
Increase in net assets from operations $237,554,866
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment loss $ (9,184,306) $ (5,686,410)
Net realized gain on investments and
foreign currency transactions 113,681,015 76,216,071
Net unrealized gain on investments and
foreign currency translation 133,058,157 59,780,431
------------- -------------
Increase in net assets from operations $ 237,554,866 $ 130,310,092
------------- -------------
Distributions declared to shareholders -
From net realized gain on investments and
foreign currency transactions (Class A) $ (36,547,129) $ (37,987,394)
From net realized gain on investments and
foreign currency transactions (Class B) (44,583,664) (69,353,928)
From net realized gain on investments and
foreign currency transactions (Class I) (4,407) (435)
------------- -------------
Total distributions declared to
shareholders $ (81,135,200) $(107,341,757)
------------- -------------
Net increase in net assets from Fund share
transactions $ 54,028,845 $ 83,734,417
------------- -------------
Total increase in net assets $ 210,448,511 $ 106,702,752
Net assets:
At beginning of period 758,787,037 652,084,285
------------- -------------
At end of period (including accumulated
net investment loss of $181,034 and
$180,470, respectively) $ 969,235,548 $ 758,787,037
============= =============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 17.29 $ 17.36 $ 18.02 $ 17.67 $ 13.49
-------- -------- -------- -------- -------
Income from investment operations# -
Net investment income (loss) $ (0.12) $ (0.06) $ 0.03 $ 0.08 $ 0.11
Net realized and unrealized gain on investments
and foreign currency 5.12 2.94 3.41 2.96 4.91
-------- -------- -------- -------- -------
Total from investment operations $ 5.00 $ 2.88 $ 3.44 $ 3.04 $ 5.02
-------- -------- -------- -------- -------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ (0.16) $ (0.22)
From net realized gain on investments and foreign
currency transactions (1.93) (2.95) (4.10) (2.53) (0.62)
-------- -------- -------- -------- -------
Total distributions declared to shareholders $ (1.93) $ (2.95) $ (4.10) $ (2.69) $ (0.84)
-------- -------- -------- -------- -------
Net asset value - end of period $ 20.36 $ 17.29 $ 17.36 $ 18.02 $ 17.67
======== ======== ======== ======== =======
Total return(+) 32.12% 20.89% 24.67% 19.76% 39.51%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.22% 1.24% 1.29% 1.31% 1.27%
Net investment income (loss) (0.64)% (0.35)% 0.22% 0.47% 0.67%
Portfolio turnover 105% 217% 159% 112% 91%
Net assets at end of period (000 Omitted)
$476,402 $323,354 $219,755 $150,261 $88,119
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) 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.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 17.32 $ 17.34 $ 17.96 $ 17.56 $ 13.37
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income (loss) $ (0.25) $ (0.18) $ (0.08) $ (0.06) $ 0.01
Net realized and unrealized gain on investments
and foreign currency 5.13 2.98 3.40 2.97 4.85
-------- -------- -------- -------- --------
Total from investment operations $ 4.88 $ 2.80 $ 3.32 $ 2.91 $ 4.86
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $ (0.05)
From net realized gain on investments and foreign
currency transactions (1.79) (2.82) (3.94) (2.51) (0.62)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (1.79) $ (2.82) $ (3.94) $ (2.51) $ (0.67)
-------- -------- -------- -------- --------
Net asset value - end of period $ 20.41 $ 17.32 $ 17.34 $ 17.96 $ 17.56
======== ======== ======== ======== ========
Total return 31.05% 20.08% 23.66% 18.84% 38.16%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.97% 1.99% 2.05% 2.13% 2.14%
Net investment income (loss) (1.38)% (1.09)% (0.51)% (0.38)% 0.08%
Portfolio turnover 105% 217% 159% 112% 91%
Net assets at end of period (000 Omitted) $492,677 $435,394 $432,327 $430,936 $428,445
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ---------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, PERIOD ENDED
---------------------- NOVEMBER 30,
1999 1998 1997*
- ----------------------------------------------------------------------------------------------
CLASS I
- ----------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $17.36 $17.41 $13.99
------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.08) $(0.02) $ 0.12
Net realized and unrealized gain
on investments and foreign currency 5.13 2.96 3.30
------ ------ ------
Total from investment operations $ 5.05 $ 2.94 $ 3.42
------ ------ ------
Less distributions declared to shareholders from
net realized gain on investments and foreign
currency transactions $(1.97) $(2.99) $ --
------ ------ ------
Net asset value - end of period $20.44 $17.36 $17.41
====== ====== ======
Total return 32.35% 21.37% 24.45%++
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.97% 0.98% 1.07%+
Net investment income (loss) (0.42)% (0.15)% 0.90%+
Portfolio turnover 105% 217% 159%
Net assets at end of period (000 Omitted) $157 $39 $3
* For the period from the inception of Class I, January 2, 1997, through November 30, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Large Cap Growth Fund (the Fund) is a diversified series of MFS Series
Trust II (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The Fund can
invest in foreign securities. 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 forward contracts are valued on the basis of valuations
furnished by dealers or by a pricing service with consideration to factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued in good faith by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Security Loans - State Street Bank and Trust Company ("State Street"), as agent,
may loan the securities of the Fund to certain brokers (the "Borrowers")
approved by the Fund. The loans are collateralized at all times by cash and U.S.
Treasury securities in an amount at least equal to the market value of the
securities loaned. State Street provides the Fund with indemnification against
Borrower default. The Fund bears the risk of loss with respect to the investment
of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the Fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the Fund and the lending agent. Income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for in
the same manner as other dividend and interest income.
At November 30, 1999, the value of securities loaned was $23,260,956. These
loans were collateralized by U.S. Treasury securities of $24,497,061 which was
invested in the following short-term obligations:
SHARES VALUE
- ------------------------------------------------------------------------------
Elan PLC 85,300 $ 2,329,756
Infinity Broadcasting Corp. 379,400 3,848,100
Sprint Corp. 77,200 7,083,100
-----------
Total investment of cash collateral for
securities loaned $23,260,956
===========
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
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 or ex-interest date in an amount equal to the value
of the security on such date.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. During
the period, the Fund's custodian fees were reduced by $79,935 under this
arrangement.
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.
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 be reported in the financial statements as distributions from paid-in
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 net realized gains. During
the year ended November 30, 1999, $9,183,742 was reclassified from accumulated
undistributed net realized gains on investments and foreign currency
transactions to accumulated net investment loss due to differences between book
and tax accounting for currency transactions and the offset of net investment
loss against short-term capital gains. This change had no effect on the net
assets or net asset value per share. At November 30, 1999, accumulated net
realized gain on investments and foreign currency transactions under book
accounting were different from tax accounting due to temporary differences in
accounting for losses on washsale transactions.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates are
generally due to differences in separate class expenses. Class B shares will
convert to Class A shares approximately eight years after purchase.
(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 the following annual rates:
First $1 billion of average net assets 0.75%
Average net assets in excess of $1 billion 0.65%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $12,307 for the year ended
November 30, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$120,370 for the year ended November 30, 1999, 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 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 paid 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. Payment of the 0.10% per annum Class A distribution fee will be
implemented on such a date as the Trustees of the Trust may determine. MFD
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $84,464 for the year ended November 30, 1999. Fees incurred
under the distribution plan during the year ended November 30, 1999, were 0.25%
of average daily net assets attributable to Class A shares on an annualized
basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 0.75% per annum, and a service fee of up to 0.25% per annum, of the
Fund's average daily net assets attributable to Class B 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 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 $59,130 for Class B shares, for the year
ended November 30, 1999. Fees incurred under the distribution plan during the
year ended November 30, 1999, were 1.00% of average daily net assets
attributable to Class B shares on an annualized basis.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the year ended November 30, 1999, were $5,723 and
$274,649 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 Fund's average daily net assets at an annual rate of 0.10%.
Prior to April 1, 1999, the fee was calculated as a percentage of the Fund's
average daily net assets at an annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$900,756,775 and $902,034,265, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $701,028,550
------------
Gross unrealized appreciation $298,922,593
Gross unrealized depreciation (18,612,228)
------------
Net unrealized appreciation $280,310,365
============
(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. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 50,730,843 $ 925,922,183 14,417,676 $ 234,120,550
Shares issued to shareholders
in reinvestment of
distributions 2,139,714 33,944,218 2,499,612 34,544,727
Shares reacquired (48,167,927) (880,138,211) (10,879,547) (178,012,460)
------------- ------------- ------------- -------------
Net increase 4,702,630 $ 79,728,190 6,037,741 $ 90,652,817
============= ============= ============= =============
<CAPTION>
Class B Shares
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,069,524 $ 165,735,120 4,216,923 $ 68,886,908
Shares issued to shareholders
in reinvestment of
distributions 2,635,382 42,192,558 4,732,456 65,923,866
Shares reacquired (12,712,811) (233,725,735) (8,733,786) (141,767,243)
------------- ------------- ------------- -------------
Net increase (decrease) (1,007,905) $ (25,798,057) 215,593 $ (6,956,469)
============= ============= ============= =============
<CAPTION>
Class I Shares
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,800 $ 143,422 3,950 $ 65,998
Shares issued to shareholders
in reinvestment of
distributions 277 4,407 32 434
Shares reacquired (2,626) (49,117) (1,890) (28,363)
------------- ------------- ------------- -------------
Net increase 5,451 $ 98,712 2,092 $ 38,069
============= ============= ============= =============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended November 30, 1999, was $6,618. The Fund had no
significant borrowings during the year.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange contracts. The notional or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
At November 30, 1999, forward foreign currency purchases and sales under master
netting agreements amounted to a net receivable of $108,583 with CS First Boston
Corp.
At November 30, 1999, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of the MFS Series Trust II and the Shareholders of
MFS Large Cap Growth Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Large Cap Growth Fund (a series of MFS Series Trust II), including the portfolio
of investments, as of November 30, 1999, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Large Cap Growth Fund as of November 30, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 6, 2000
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 1999.
THE FUND HAS DESIGNATED $65,870,232 AS A CAPITAL GAIN DIVIDEND FOR THE YEAR
ENDED NOVEMBER 30, 1999.
FOR THE YEAR ENDED NOVEMBER 30, 1999, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS IS 22.13%.
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and
on behalf of the MFS funds, is committed to the effective
use of technology in managing our portfolio investments,
delivering high-quality service to MFS fund shareholders, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
<TABLE>
MFS(R) LARGE CAP GROWTH FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Richard B. Bailey+ - Private Investor; Mark E. Bradley*
Former Chairman and Director (until 1991), Ellen Moynihan*
MFS Investment Management(R) James O. Yost*
Marshall N. Cohan+ - Private Investor SECRETARY
Stephen E. Cavan*
Lawrence H. Cohn, M.D.+ - Chief of Cardiac
Surgery, Brigham and Women's Hospital; ASSISTANT SECRETARY
Professor of Surgery, Harvard Medical School James R. Bordewick, Jr.*
The Hon. Sir J. David Gibbons, KBE+ - Chief CUSTODIAN
Executive Officer, Edmund Gibbons Ltd.; State Street Bank and Trust Company
Chairman, Colonial Insurance Company, Ltd.
AUDITORS
Abby M. O'Neill+ - Private Investor Deloitte & Touche LLP
Walter E. Robb, II+ - President and Treasurer, INVESTOR INFORMATION
Benchmark Advisors, Inc. (corporate financial For information on MFS mutual funds, call your
consultants); President, Benchmark Consulting financial consultant or, for an information
Group, Inc. (office services) kit, call toll free: 1-800-637-2929 any
business day from 9 a.m. to 5 p.m. Eastern time
Arnold D. Scott* - Senior Executive Vice (or leave a message anytime).
President, Director, and Secretary, MFS
Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Jeffrey L. Shames* - Chairman and Chief P.O. Box 2281
Executive Officer, MFS Investment Management Boston, MA 02107-9906
J. Dale Sherratt+ - President, Insight For general information, call toll free:
Resources, Inc. (acquisition planning 1-800-225-2606 any business day from
specialists) 8 a.m. to 8 p.m. Eastern time.
Ward Smith+ - Former Chairman (until 1994), For service to speech- or hearing-impaired,
NACCO Industries (holding company) call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use
INVESTMENT ADVISER this service, your phone must be equipped with
Massachusetts Financial Services Company a Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges,
or stock and bond outlooks, call toll free:
DISTRIBUTOR 1-800-MFS-TALK (1-800-637-8255) anytime from a
MFS Fund Distributors, Inc. touch-tone telephone.
500 Boylston Street
Boston, MA 02116-3741 WORLD WIDE WEB
www.mfs.com
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGER
John E. Lathrop*
TREASURER
W. Thomas London*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) LARGE CAP GROWTH FUND ------------
BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MLC-2 1/00 74M 03/203/803
