<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[graphic omitted]
MFS(R) INTERMEDIATE
INCOME 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 .............................................. 33
MFS' Year 2000 Readiness Disclosure ....................................... 35
Trustees and Officers ..................................................... 37
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
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<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
For the 12 months ended November 30, 1999, Class A shares of the Fund provided
a total return of -0.21%, Class B shares -1.24%, and Class I shares -0.20%.
These returns assume the reinvestment of any distributions but exclude the
effects of any sales charges.
During the same period, the average short-term world multimarket income fund
tracked by Lipper Analytical Services, Inc., an independent firm that reports
mutual fund performance, returned 1.89%. The Fund's returns also compare to a
1.20% return for the Lehman Brothers Intermediate Government Bond Index (an
unmanaged index comprised of issues of the U.S. government and its agencies
with remaining maturities of less than 10 years), a 2.54% return for the
Lehman Brothers Mortgage Index (which includes maturities of both 15 and 30
years), and a -3.44% return for the J.P. Morgan Non-Dollar Government Bond
Index (an aggregate of actively traded government bonds issued by 12
countries, excluding the United States, with remaining maturities of at least
one year).
Q. THE BOND MARKETS ACROSS THE WORLD EXPERIENCED SHARP REVERSALS IN
FORTUNE DURING THE PAST YEAR. WHAT INFLUENCED THE PERFORMANCE OF VARIOUS
TYPES OF BONDS?
A. Let's begin with the U.S. Treasury market, which began to lose some of its
allure at the start of the period in response to news that the U.S. economy
was growing at a faster-than-expected rate. From December 1998 through
February 1999, Treasury securities languished as investors impatiently
waited for clues about the economy's health and the Federal Reserve Board's
(the Fed's) stance on interest rates. In February, Fed Chairman Alan
Greenspan jolted the fixed-income markets by hinting that the Fed was
unlikely to cut interest rates further, as it had done throughout the second
half of 1998. Bond prices slipped as their yields rose. In April, investors'
moods worsened when the Fed hinted that its next move was more likely to be
an interest-rate hike, rather than a rate cut. By the end of June,
investors' fears became reality. The Fed raised short-term interest rates
one-quarter of a percentage point at month's end, a move it would repeat in
August and again in November.
Q. WHAT WAS THE ENVIRONMENT FOR FOREIGN GOVERNMENT BONDS?
A. Rising U.S. interest rates, coupled with improving economies in Europe,
Asia, and emerging markets, fanned inflationary fears abroad and pressured
many high-quality foreign government bonds as well. Emerging market bonds,
on the other hand, surprised many observers by turning in very strong gains
for the year. We feel that most of the fears that had plagued emerging
market bonds in 1998 dissipated in 1999. Renewed optimism about the world's
economy, coupled with rising commodity prices, helped many emerging markets
post double-digit returns for the year.
Q. HOW DID THE NONGOVERNMENT SECTORS OF THE MARKET FARE?
A. Mortgage securities performed reasonably well. As interest rates rose, the
rate of mortgage prepayment activity slowed dramatically, which we viewed as
a positive. In addition, the fact that mortgage securities paid higher
levels of income and were generally less sensitive to interest rates than
Treasury bonds with comparable maturities also was a plus. (Principal value
and interest on Treasury securities are guaranteed by the U.S. government if
held to maturity.) Corporate bonds, on the other hand, were weak throughout
much of the period, but came on strong at the end. The corporate market
struggled with too much supply. Many corporations rushed to issue debt in
the summer and fall of 1999 in order to lock in interest rates in case they
moved higher, while others hastened issuance in order to sidestep a
potential market freeze due to year 2000 (Y2K) concerns. However, when
issuance subsided in November, corporate bonds began to perform better.
Q. THE FUND HAD A MUCH LARGER STAKE IN CORPORATE BONDS AT THE END OF THE
PERIOD THAN IT DID AT THE BEGINNING. WHAT EXPLAINS THAT SHIFT?
A. Our decision to increase our corporate bond holdings stemmed from our desire
to lock in what we felt were cheap prices and attractive yields that
resulted from oversupply. So, we all but eliminated our Treasury holdings
and added bonds issued by telecommunications and cable companies such as
Sprint, Comcast, and Cox Communications. We think these companies could
benefit from the advent of new technologies, the explosion of the Internet,
and the convergence of media and telecommunications companies. We also
initiated or added to existing positions in high-quality utility companies
such as Entergy, CMS, and Midamerican Funding, all of which offered
attractive yields.
Q. WHAT OPPORTUNITIES DID ASSET-BACKED SECURITIES PRESENT?
A. Like corporate bonds, asset-backed securities fared poorly due to a Y2K-
related supply glut. As supply increased, the prices of asset-backed
securities moved lower as their yields rose. In fact, the difference in
yield between a five-year "AAA"-rated security backed by a credit card and a
five-year Treasury note was as much as 80 basis points (0.80%). In our view,
the excess yield we could capture with "AAA"-rated asset-backed securities
more than compensated for the slight difference in credit quality between
them and comparable-maturity Treasury securities. Furthermore, we feel their
higher yields should provide somewhat of a cushion should rates move higher.
Q. HAVE YOU CHANGED THE FUND'S DURATION, WHICH INDICATES SENSITIVITY TO
INTEREST-RATE CHANGES?
A. For most of the period, we kept the Fund's duration neutral, a position we
take when we don't have a strong conviction about the direction of interest
rates. While we believe it's true that the economic growth rate in 1999
exceeded most observers' expectations, inflation remained in check. Because
of those contrary indicators, we maintained a neutral stance.
Q. WHAT CHANGES DID YOU MAKE TO THE FUND'S FOREIGN HOLDINGS DURING
THE PERIOD?
A. We reduced our overall stake in high-quality foreign bonds but maintained
our holdings in Germany, Australia, and Greece. We hedged the bulk of our
European holdings into U.S. dollars, which helped the Fund's performance
when the euro weakened. Beyond that, we felt that high-quality government
bonds offered little value, in large measure because they offered yields
well below U.S. Treasury yields. Among emerging markets, we concentrated our
holdings in the higher-quality tiers, with holdings in Argentinian
investment-grade government securities, among others.
Q. WHAT'S YOUR OUTLOOK FOR THE GLOBAL MARKETS?
A. We think the world is headed for a more stable interest-rate environment.
While economic growth across the globe may continue to be healthy, we don't
believe that inflation will rise. We do believe that interest rates will
remain relatively stable in the near term. Given attractive yield levels,
corporate and asset-backed securities remain among our favorite investments.
In a more stable interest-rate environment, income -- rather than price
appreciation or depreciation -- should make up a larger part of a bond's
total return than it has over the past year.
/s/ Stephen C. Bryant /s/ James J. Calmas
Stephen C. Bryant James J. Calmas
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
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STEPHEN C. BRYANT IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND PORTFOLIO MANAGER OF MFS(R) INSTITUTIONAL GLOBAL FIXED INCOME FUND,
MFS(R) INTERMEDIATE INCOME FUND, AND THE GLOBAL GOVERNMENTS SERIES
OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS. HE ALSO MANAGES MFS(R)
GOVERNMENT MARKETS INCOME TRUST AND MFS(R) INTERMEDIATE INCOME TRUST,
TWO CLOSED-END FUNDS. HE JOINED MFS IN 1987 AS ASSISTANT VICE PRESIDENT.
HE WAS NAMED VICE PRESIDENT IN 1989, PORTFOLIO MANAGER IN 1992, AND
SENIOR VICE PRESIDENT IN 1993. MR. BRYANT IS A GRADUATE OF WESLEYAN
UNIVERSITY.
JAMES J. CALMAS IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF MFS(R) INTERMEDIATE INCOME FUND, MFS(R) LIMITED
MATURITY FUND, MERIDIAN LIMITED MATURITY FUND, AND MFS(R) LIMITED
MATURITY SERIES (PART OF MFS(R) VARIABLE INSURANCE TRUST(SM)). MR.
CALMAS JOINED MFS IN 1988 AND WAS NAMED ASSISTANT VICE PRESIDENT IN
1991, VICE PRESIDENT IN 1993, AND PORTFOLIO MANAGER IN 1998. HE IS A
GRADUATE OF DARTMOUTH COLLEGE AND HOLDS AN M.B.A. DEGREE FROM THE AMOS
TUCK SCHOOL OF BUSINESS ADMINISTRATION OF DARTMOUTH COLLEGE.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY
AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, ISSUER-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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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>
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FUND FACTS
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OBJECTIVE: SEEKS PRESERVATION OF CAPITAL AND HIGH CURRENT INCOME.
COMMENCEMENT OF
INVESTMENT OPERATIONS: AUGUST 1, 1988
CLASS INCEPTION: CLASS A SEPTEMBER 7, 1993
CLASS B AUGUST 1, 1988
CLASS I JANUARY 2, 1997
SIZE: $107.5 MILLION NET ASSETS AS OF NOVEMBER 30, 1999
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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)
J.P. Morgan Lehman Brothers
MFS Intermediate Non-Dollar Intermediate
Income Fund Government Government Lehman Brothers
- Class B Bond Index Bond Index Mortgage Index
- --------------------------------------------------------------------------------
11/89 $10,000 $10,000 $10,000 $10,000
11/91 11,752 12,804 12,241 12,635
11/93 13,242 15,747 14,443 14,611
11/95 14,320 20,088 16,143 16,719
11/97 15,649 20,779 18,127 19,350
11/99 16,207 22,880 19,985 21,324
<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 - 0.21% +10.49% +35.94% +72.83%
- --------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge - 0.21% + 3.38% + 6.33% + 5.62%
- --------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge - 4.95% + 1.72% + 5.30% + 5.11%
- --------------------------------------------------------------------------------
CLASS B
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge - 1.24% + 7.26% +29.16% +62.07%
- --------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge - 1.24% + 2.36% + 5.25% + 4.95%
- --------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge - 5.00% + 1.48% + 4.93% + 4.95%
- --------------------------------------------------------------------------------
CLASS I
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Cumulative Total Return Excluding Sales
Charge - 0.20% +10.05% +32.52% +66.29%
- --------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge - 0.20% + 3.24% + 5.79% + 5.22%
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COMPARATIVE INDICES
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Average short-term world multimarket
income fund+(+) + 1.89% + 3.55% + 4.15% + 4.73%
- --------------------------------------------------------------------------------
J.P. Morgan Non-Dollar Government Bond
Index#(+) - 3.44% + 0.34% + 6.39% + 8.63%
- --------------------------------------------------------------------------------
Lehman Brothers Intermediate Government
Bond Index#(+) + 1.20% + 5.42% + 7.07% + 7.17%
- --------------------------------------------------------------------------------
Lehman Brothers Mortgage Index#(+) + 2.54% + 5.96% + 8.20% + 7.87%
- --------------------------------------------------------------------------------
+ Source: Lipper Analytical Services, Inc.
(+) Average annual rates of return.
# Source: Standard & Poor's Micropal, Inc.
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% 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.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility. See the
prospectus for details.
This Fund is a nondiversified fund and has more risk than a diversified fund.
An investment in shares of the Fund should not be considered to constitute a
complete investment program.
<PAGE>
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1999
QUALITY (U.S. PORTION ONLY)
Source: Standard & Poor's and Moody's
"AAA" 34.8%
"AA" 5.3%
"A" 19.1%
"BBB" 23.9%
"BB" 1.3%
Governments 15.6%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- November 30, 1999
Bonds - 96.1%
<CAPTION>
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 76.8%
Airlines - 0.6%
Delta Airlines, Inc., 6.65s, 2004 $ 661 $ 634,401
- ------------------------------------------------------------------------------------------------------
Automotive - 2.9%
Daimlerchrysler N A Holding Corp., 6.63s, 2001 $ 1,447 $ 1,449,605
Ford Motor Credit Co., 5.75s, 2004 1,750 1,671,722
------------
$ 3,121,327
- ------------------------------------------------------------------------------------------------------
Banks and Credit Companies - 2.6%
Fleet Boston Corp., 9.9s, 2001 $ 1,127 $ 1,177,625
Great Western Financial Corp., 6.375s, 2000 1,664 1,661,404
------------
$ 2,839,029
- ------------------------------------------------------------------------------------------------------
Conglomerates - 1.1%
General Electric Capital Corp., 6.52s, 2002 $ 1,167 $ 1,158,131
- ------------------------------------------------------------------------------------------------------
Corporate Asset Backed - 25.9%
Amresco Residential Securities Mortgage Loan, 5.94s, 2015 $ 2,750 $ 2,722,500
BankBoston Home Equity Loan Trust, 5.89s, 2013 1,331 1,305,472
Carco Auto Loan Master Trust, 5.65s, 2003 2,000 1,984,062
Case Equipment Receivables Trust, 5.285s, 2002 1,232 1,225,223
Commonwealth Edison Transition Funding Trust, 5.29s, 2003 1,331 1,312,140
Discover Card Master Trust I, 5.85s, 2006 2,100 2,028,453
Fleet Credit Card Master Trust, 5.977s, 2007 1,375 1,375,853
Ford Credit Auto Owner Trust, 5.31s, 2001 473 472,218
Ford Credit Auto Owner Trust, 6.2s, 2002 600 599,058
GE Capital Mortgage Services, Inc., 6.035s, 2020 2,400 2,337,750
Green Tree Financial Corp., 6.91s, 2028 2,305 2,304,262
Green Tree Financial Corp., 6.39s, 2029 817 816,390
Merrill Lynch Mortgage Investors, Inc., 5.65s, 2030 1,242 1,176,371
Partners First Credit Card Master Trust, 5.528s, 2027 1,650 1,647,937
Peco Energy Transition Trust, 5.48s, 2003 1,067 1,059,717
Pemex Finance Limited, 5.72s, 2003 2,700 2,575,179
Premier Auto Trust, 5.88s, 2001 1,470 1,464,943
Providian Home Equity Loan Trust, 5.699s, 2025 511 509,942
Student Loan Trust, 5.389s, 2004 930 926,263
------------
$ 27,843,733
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 7.1%
Aristar, Inc., 7.375s, 2004*** $ 1,264 $ 1,261,725
Countrywide Home Loan, Inc., 6.85s, 2004 1,457 1,434,227
General Motors Acceptance Corp., 7s, 2002 1,898 1,905,174
Lehman Brothers Holdings, Inc., 6.375s, 2001 1,373 1,361,618
Merrill Lynch & Co., 6.06s, 2001 1,665 1,645,303
------------
$ 7,608,047
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - 2.7%
J Seagram & Sons, Inc., 5.79s, 2001 $ 1,513 $ 1,487,869
Whitman Corp., 6s, 2004 1,477 1,397,094
------------
$ 2,884,963
- ------------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.0%
Georgia-Pacific Corp., 9.95s, 2002 $ 1,000 $ 1,061,630
- ------------------------------------------------------------------------------------------------------
Government National Mortgage Association - 8.0%
GNMA, 7s, 2008 - 2012 $ 4,670 $ 4,665,547
GNMA, 8.5s, 2001 - 2009 3,061 3,163,787
GNMA, 9.25s, 2001 451 466,675
GNMA TBA, 7s, 2012 275 274,318
------------
$ 8,570,327
- ------------------------------------------------------------------------------------------------------
Insurance - 1.1%
Conseco, Inc., 6.4s, 2001 $ 1,253 $ 1,210,467
- ------------------------------------------------------------------------------------------------------
Media - 0.9%
Time Warner Pass-Through Asset Trust, 6.1s, 2001## $ 1,000 $ 982,650
- ------------------------------------------------------------------------------------------------------
Oils - 1.3%
Occidental Petroleum Corp., 10.125s, 2001 $ 1,360 $ 1,429,754
- ------------------------------------------------------------------------------------------------------
Railroads - 1.1%
Union Pacific Corp., 6.34s, 2003 $ 1,250 $ 1,210,963
- ------------------------------------------------------------------------------------------------------
Telecommunications and Cable - 6.1%
Comcast Corp., 9.125s, 2006 $ 1,591 $ 1,642,596
Cox Communications, Inc., 7s, 2001 1,107 1,106,270
Sprint Spectrum LP, 11s, 2006 2,000 2,231,160
Telecomunicaiones De Puerto Rico, 6.15s, 2002## 1,596 1,564,399
------------
$ 6,544,425
- ------------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 6.9%
Agency for Intl Development (Israel), 6.625s, 2003 $ 3,000 $ 2,990,310
Federal Home Loan Mortgage Corp., 5.83s, 2013 1,313 1,299,221
Federal National Mortgage Assn., 6.75s, 2003 1,426 1,410,458
Federal National Mortgage Assn., 6.13s, 2011 976 944,261
Federal National Mortgage Assn., 6s, 2013 804 769,350
------------
$ 7,413,600
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 4.7%
California Infrastructure, 6.17s, 2003*** $ 1,000 $ 997,180
Connecticut Light & Power Co., 7.875s, 2001 414 418,691
Entergy Mississippi, Inc., 6.2s, 2004 1,500 1,427,385
Midamerican Funding LLC, 5.85s, 2001## 1,964 1,940,646
Narragansett Electric Co., 7.83s, 2002 279 285,453
------------
$ 5,069,355
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 2.8%
CMS Panhandle Holding Co., 6.125s, 2004 $ 1,161 $ 1,101,766
Columbia Gas Systems, Inc., 6.39s, 2000 1,417 1,407,761
Duke Capital Corp., 7.25s, 2004 501 500,780
------------
$ 3,010,307
- ------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 82,593,109
- ------------------------------------------------------------------------------------------------------
Foreign Bonds - 19.3%
Argentina - 0.8%
Republic of Argentina, 0s, 2001 $ 516 $ 456,041
Republic of Argentina, 11.786s, 2005 400 364,000
------------
$ 820,041
- ------------------------------------------------------------------------------------------------------
Australia - 2.2%
Commonwealth of Australia, 7.5s, 2005 AUD 3,558 $ 2,369,244
- ------------------------------------------------------------------------------------------------------
Canada - 1.0%
Metronet Communications Corp., 12s, 2007
(Telecommunications) $ 898 $ 1,043,925
- ------------------------------------------------------------------------------------------------------
Chile - 0.4%
Enersis S. A., 6.6s, 2026 (Utilities - Electric) $ 433 $ 407,423
- ------------------------------------------------------------------------------------------------------
Denmark - 0.3%
Kingdom of Denmark, 7s, 2007 DKK 2,447 $ 364,662
- ------------------------------------------------------------------------------------------------------
France - 0.4%
Republic of France, 4s, 2009 EUR 435 $ 397,026
- ------------------------------------------------------------------------------------------------------
Germany - 4.5%
Bayerische Landesbank Girozent, 5.625s, 2001 (Banks
and Credit Cos.)*** $ 465 $ 459,625
Federal Republic of Germany, 4.5s, 2009 EUR 2,318 2,224,234
KFW International Finance, Inc., 9.4s, 2004 (Agency) $ 592 648,814
Landesbank Baden Wurttemberg, 7.875s, 2004 (Banks and
Credit Cos.) 1,500 1,552,050
------------
$ 4,884,723
- ------------------------------------------------------------------------------------------------------
Greece - 2.0%
Hellenic Republic, 8.01s, 2003 GRD 300,000 974,351
Hellenic Republic, 8.7s, 2005 72,000 240,118
Hellenic Republic, 6s, 2006 250,000 741,317
Hellenic Republic, 5.75s, 2008 EUR 151 152,650
------------
$ 2,108,436
- ------------------------------------------------------------------------------------------------------
Iceland - 0.6%
Republic of Iceland, 6.125s, 2004 $ 635 $ 611,499
- ------------------------------------------------------------------------------------------------------
Israel - 0.9%
Israel Electric Corp., 8.25s, 2009 (Utilities - Electric)## $ 1,000 $ 992,880
- ------------------------------------------------------------------------------------------------------
Mexico - 0.1%
Petroleos Mexicanos, 9.5s, 2027 (Oils) $ 110 $ 103,950
- ------------------------------------------------------------------------------------------------------
New Zealand - 0.5%
Government of New Zealand, 8s, 2006 NZD 1,100 $ 590,501
- ------------------------------------------------------------------------------------------------------
Norway - 1.3%
Union Bank Norway, 7.35s, 2049 (Banks and Credit Cos.)## $ 1,500 $ 1,452,195
- ------------------------------------------------------------------------------------------------------
Panama - 0.2%
Republic of Panama, 4.25s, 2014 $ 230 $ 170,200
- ------------------------------------------------------------------------------------------------------
Peru - 0.2%
Republic of Peru, 4.5s, 2017 $ 420 $ 275,646
- ------------------------------------------------------------------------------------------------------
Philippines - 0.3%
Republic of Philippines, 9.875s, 2019 $ 290 $ 295,075
- ------------------------------------------------------------------------------------------------------
South Korea - 0.5%
Export-Import Bank Korea, 7.1s, 2007 (Banks and Credit Cos.) $ 530 $ 520,778
- ------------------------------------------------------------------------------------------------------
Spain - 2.3%
Kingdom of Spain, 9.125s, 2000 $ 2,400 $ 2,442,456
- ------------------------------------------------------------------------------------------------------
Sweden - 0.8%
AB Spintab, 6.8s, 2049 (Banks & Credit Cos.)## $ 950 $ 915,496
- ------------------------------------------------------------------------------------------------------
United Kingdom
United Kingdom Treasury, 6.75s, 2004 GBP 2 $ 3,288
- ------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 20,769,444
- ------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $105,873,211) $103,362,553
- ------------------------------------------------------------------------------------------------------
Repurchase Agreement - 3.9%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
Goldman Sachs, dated 11/30/99, due 12/01/99, total to
be received $4,191,652 (secured by various U.S.
Treasury and Federal Agency obligations in a
jointly traded account),
at Cost $ 4,191 $ 4,191,000
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $110,064,211) $107,553,553
Other Assets, Less Liabilities - 0.0% (5,885)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $107,547,668
- ------------------------------------------------------------------------------------------------------
*** Securities held as futures collateral.
## SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown in currencies other than
the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars GRD = Greek Drachmas
CHF = Swiss Franc JPY = Japanese Yen
DKK = Danish Kroner NOK = Norwegian Krone
EUR = Euro NZD = New Zealand Dollars
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $110,064,211) $ 107,553,553
Foreign currency, at value (identified cost, $46,799) 45,755
Cash 20,799
Receivable for daily variation margin on open futures
contracts 29,219
Net receivable for forward foreign currency exchange
contracts to purchase 123,145
Net receivable for forward foreign currency exchange
contracts to sell 112,156
Receivable for Fund shares sold 24,155
Interest receivable 1,445,998
Other assets 1,849
-------------
Total assets $ 109,356,629
-------------
Liabilities:
Payable for Fund shares reacquired $ 138,613
Payable for investments purchased 1,076,253
Net payable for forward foreign currency exchange
contracts closed or subject to master netting
agreements 414,630
Payable to affiliates -
Management fee 4,832
Shareholder servicing agent fee 879
Distribution and service fee 4,980
Accrued expenses and other liabilities 168,774
-------------
Total liabilities $ 1,808,961
-------------
Net assets $ 107,547,668
=============
Net assets consist of:
Paid-in capital $ 119,328,965
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (2,802,420)
Accumulated net realized loss on investments and foreign
currency transactions (9,156,218)
Accumulated undistributed net investment income 177,341
-------------
Total $ 107,547,668
=============
Shares of beneficial interest outstanding 13,756,427
==========
Class A shares:
Net asset value per share
(net assets of $46,550,366 / 5,965,473 shares of
beneficial interest outstanding) $7.80
=====
Offering price per share (100/95.25) $8.19
=====
Class B shares:
Net asset value and offering price per share
(net assets of $60,984,156 / 7,789,273 shares of
beneficial interest outstanding) $7.83
=====
Class I shares:
Net asset value and offering price per share
(net assets of $13,146 / 1,681 shares of beneficial
interest outstanding) $7.82
=====
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
<CAPTION>
- --------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Interest income $ 8,196,583
-----------
Expenses -
Management fee $ 845,824
Trustees' compensation 41,644
Shareholder servicing agent fee 126,737
Distribution and service fee (Class A) 114,372
Distribution and service fee (Class B) 755,996
Administrative fee 15,631
Custodian fee 58,082
Auditing fees 39,823
Printing 35,154
Postage 27,618
Legal fees 4,809
Miscellaneous 107,016
-----------
Total expenses $ 2,172,706
Fees paid indirectly (17,299)
Reduction of expenses by investment adviser and distributor (292,738)
-----------
Net expenses $ 1,862,669
-----------
Net investment income $ 6,333,914
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(1,977,584)
Written option transactions 269,128
Foreign currency transactions (743,411)
Futures contracts (404,367)
-----------
Net realized loss on investments and foreign currency transactions $(2,856,234)
-----------
Change in unrealized appreciation (depreciation) -
Investments $(4,398,659)
Written options (46,880)
Translation of assets and liabilities in foreign currencies 51,843
Futures contracts (102,864)
-----------
Net unrealized loss on investments and foreign currency
translation $(4,496,560)
-----------
Net realized and unrealized loss on investments and foreign
currency $(7,352,794)
-----------
Decrease in net assets from operations $(1,018,880)
===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
- ------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 6,333,914 $ 7,795,666
Net realized loss on investments and foreign currency
transactions (2,856,234) (2,272,438)
Net unrealized gain (loss) on investments and foreign
currency translation (4,496,560) 1,509,991
------------ ------------
Increase (decrease) in net assets from operations $ (1,018,880) $ 7,033,219
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (2,293,617) $ (2,360,988)
From net investment income (Class B) (3,171,540) (5,169,854)
From net investment income (Class I) (526) (350)
From paid-in capital (Class A) (389,768) (287,926)
From paid-in capital (Class B) (538,960) (630,471)
From paid-in capital (Class I) (89) (43)
------------ ------------
Total distributions declared to shareholders $ (6,394,500) $ (8,449,632)
------------ ------------
Decrease in net assets from Fund share transactions $(18,508,199) $(15,385,822)
------------ ------------
Total decrease in net assets $(25,921,579) $(16,802,235)
Net assets:
At beginning of period 133,469,247 150,271,482
------------ ------------
At end of period (including accumulated undistributed net
investment income of $177,341 and 74,049, respectively) $107,547,668 $133,469,247
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 8.29 $ 8.39 $ 8.57 $ 8.59 $ 7.96
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.47 $ 0.53 $ 0.55 $ 0.55 $ 0.57
Net realized and unrealized gain (loss) on
investments and foreign currency (0.49) (0.05) (0.18) (0.01) 0.61
------ ------ ------ ------ ------
Total from investment operations $(0.02) $ 0.48 $ 0.37 $ 0.54 $ 1.18
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.40) $(0.52) $(0.55) $(0.56) $(0.55)
In excess of net investment income+++ -- -- -- (0.00) --
From paid-in capital (0.07) (0.06) -- -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.47) $(0.58) $(0.55) $(0.56) $(0.55)
------ ------ ------ ------ ------
Net asset value - end of period $ 7.80 $ 8.29 $ 8.39 $ 8.57 $ 8.59
====== ====== ====== ====== ======
Total return(+) (0.21)% 5.86% 4.59% 6.61% 15.40%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.93% 1.12% 1.17% 1.17% 1.14%
Net investment income 5.85% 6.33% 6.63% 6.58% 6.81%
Portfolio turnover 154% 173% 226% 288% 275%
Net assets at end of period (000 Omitted) $46,550 $44,116 $30,833 $21,291 $12,659
# 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.
+++ For the year ended November 30, 1996, the per share distribution in excess of net investment income was less than $0.01.
(S) The investment adviser voluntarily waived a portion of its fee for certain of the periods indicated. If the fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.44 $ 0.52 -- -- --
Ratios (to average net assets):
Expenses## 1.32% 1.15% -- -- --
Net investment income 5.45% 6.30% -- -- --
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 8.32 $ 8.40 $ 8.57 $ 8.58 $ 7.96
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.39 $ 0.44 $ 0.47 $ 0.46 $ 0.48
Net realized and unrealized gain (loss) on
investments and foreign currency (0.49) (0.04) (0.18) (0.01) 0.61
------ ------ ------ ------ ------
Total from investment operations $(0.10) $ 0.40 $ 0.29 $ 0.45 $ 1.09
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.33) $(0.43) $(0.46) $(0.46) $(0.47)
In excess of net investment income+++ -- -- -- (0.00) --
From paid-in capital (0.06) (0.05) -- -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.39) $(0.48) $(0.46) $(0.46) $(0.47)
------ ------ ------ ------ ------
Net asset value - end of period $ 7.83 $ 8.32 $ 8.40 $ 8.57 $ 8.58
====== ====== ====== ====== ======
Total return (1.24)% 4.86% 3.57% 5.52% 14.12%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.93% 2.12% 2.19% 2.24% 2.23%
Net investment income 4.84% 5.30% 5.61% 5.47% 5.79%
Portfolio turnover 154% 173% 226% 288% 275%
Net assets at end of period (000 Omitted)
$60,984 $89,345 $119,436 $171,148 $232,312
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
+++ For the year ended November 30, 1996, the per share distribution in excess of net investment income was less than $0.01.
(S) The investment adviser voluntarily waived a portion of its fee for certain of the periods indicated. If the fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.38 $ 0.44 -- -- --
Ratios (to average net assets):
Expenses## 2.07% 2.15% -- -- --
Net investment income 4.69% 5.27% -- -- --
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997*
- -------------------------------------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 8.31 $ 8.41 $ 8.43
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.48 $ 0.55 $ 0.61
Net realized and unrealized loss on investments and foreign
currency (0.50) (0.07) (0.17)
------ ------ ------
Total from investment operations $(0.02) $ 0.48 $ 0.44
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.40) $(0.52) $(0.46)
From paid-in capital (0.07) (0.06) --
------ ------ ------
Total distributions declared to shareholders $(0.47) $(0.58) $(0.46)
------ ------ ------
Net asset value - end of period $ 7.82 $ 8.31 $ 8.41
====== ====== ======
Total return (0.20)% 5.97% 5.07%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.93% 1.10% 1.03%+
Net investment income 5.86% 6.36% 6.52%+
Portfolio turnover 154% 173% 226%
Net assets at end of period (000 Omitted) $ 13 $ 8 $ 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.
(S) The investment adviser voluntarily waived a portion of its fee for certain of the periods indicated. If the fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.47 $ 0.55 --
Ratios (to average net assets):
Expenses## 1.07% 1.13% --
Net investment income 5.71% 6.33% --
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Intermediate Income 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. 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 - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, forward contracts,
and swap agreements, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon exchange or over-the-counter
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the
foreign currency and translated into U.S. dollars at the closing daily
exchange rate. Futures contracts, options, and options on futures contracts
listed on commodities exchanges are reported at market value using closing
settlement prices. Over-the-counter options on securities are valued by
brokers. Over-the-counter currency options are valued through the use of a
pricing model which takes into account foreign currency exchange spot and
forward rates, implied volatility, and short-term repurchase rates. Securities
for which there are no such quotations or valuations are valued in good faith
by the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a default under the repurchase agreement. The Fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the Fund
under each such repurchase agreement. The Fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a
joint trading account for the purpose of entering into one or more repurchase
agreements.
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.
Written Options - The Fund may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is
subsequently adjusted to the current value of the options contract. When a
written option expires, the Fund realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written put option is exercised, the premium reduces the cost
basis of the security purchased by the Fund. The Fund, as writer of an option,
may have no control over whether the underlying securities may be sold (call)
or purchased (put) and, as a result, bears the market risk of an unfavorable
change in the price of the securities underlying the written option. In
general, written call options may serve as a partial hedge against decreases
in value in the underlying securities to the extent of the premium received.
Written options may also be used as part of an income producing strategy
reflecting the view of the Fund's management on the direction of interest
rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at
a fixed price on a future date. In entering such contracts, the Fund is
required to deposit with the broker either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the Fund each day, depending on the daily fluctuations in
the value of the contract, and are recorded for financial statement purposes
as unrealized gains or losses by the Fund. The Fund's investment in futures
contracts is designed to hedge against anticipated future changes in interest
or exchange rates or securities prices. Investments in interest rate futures
for purposes other than hedging may be made to modify the duration of the
portfolio without incurring the additional transaction costs involved in
buying and selling the underlying securities. Investments in currency futures
for purposes other than hedging may be made to change the Fund's relative
position in one or more currencies without buying and selling portfolio
assets. Investments in equity index contracts or contracts on related options
for purposes other than hedging, may be made when the Fund has cash on hand
and wishes to participate in anticipated market appreciation while the cash is
being invested. Should interest or exchange rates or securities prices move
unexpectedly, the Fund may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
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. Interest payments received in additional
securities are recorded on the ex-interest date in an amount equal to the
value of the security on such date. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities
will be delivered to the Fund at a future date, usually beyond customary
settlement time.
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. 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.
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, $764,939 was reclassified from
accumulated undistributed net investment income to accumulated net realized
loss on investments due to differences between book and tax accounting for
mortgage-backed securities and foreign currency transactions. This change had
no effect on the net assets or net asset value per share. In addition,
$928,817 was redesignated as a tax return of capital distribution. At November
30, 1999, accumulated undistributed net investment income and accumulated net
realized loss on investments and foreign currency transactions under book
accounting were different from tax accounting due to temporary differences in
accounting for capital losses and foreign currency transactions.
At November 30, 1999, the Fund, for federal income tax purposes, had a capital
loss carryforward of $9,259,081 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on November 30, 2002, ($4,226,362), November 30, 2005,
($1,473,779), November 30, 2006, ($1,217,310), and November 30, 2007,
($2,341,630).
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 an annual rate of 0.32%
of the Fund's average daily net assets and 5.65% of investment income. The
investment adviser has voluntarily agreed to waive a portion of its fee, which
is shown as a 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 of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of
$11,366 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
$29,671 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 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 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. The service fee of up to 0.25% per annum of the Fund's daily net
assets is currently being waived on a voluntary basis and may be imposed with
the next prospectus update at the discretion of MFD. Payments of up to 0.10% per
annum of the distribution fee will commence on such date as the trustees of the
Fund 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 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 $26,954
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
$3,989 and $72,540 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 purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
U.S. government securities $ 41,882,842 $125,459,492
------------ ------------
Investments (non-U.S. government
securities) $142,551,823 $ 73,911,940
------------ ------------
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 $110,064,211
------------
Gross unrealized depreciation $ (2,583,929)
Gross unrealized appreciation 73,271
------------
Net unrealized depreciation $ (2,510,658)
============
(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>
Class A Shares
<CAPTION>
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
--------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,433,733 $ 19,595,486 3,557,110 $ 29,662,076
Shares issued to shareholders
in reinvestment of
distributions 233,950 1,877,269 216,409 1,800,509
Shares reacquired (2,020,674) (16,238,209) (2,129,785) (17,689,458)
---------- ------------ ---------- ------------
Net increase 647,009 $ 5,234,546 1,643,734 $ 13,773,127
========== ============ ========== ============
</TABLE>
<TABLE>
Class B Shares
<CAPTION>
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
--------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 923,209 $ 7,484,786 1,345,750 $ 11,221,642
Shares issued to shareholders
in reinvestment of
distributions 260,988 2,107,645 380,682 3,178,360
Shares reacquired (4,136,977) (33,340,759) (5,204,805) (43,564,370)
---------- ------------ ---------- ------------
Net decrease (2,952,780) $(23,748,328) (3,478,373) $(29,164,368)
========== ============ ========== ============
</TABLE>
<TABLE>
Class I Shares
<CAPTION>
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
--------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 680 $ 5,498 715 $ 6,023
Shares issued to shareholders
in reinvestment of
distributions 77 618 47 390
Shares reacquired (64) (533) (117) (994)
---------- ------------ ---------- ------------
Net increase 693 $ 5,583 645 $ 5,419
========== ============ ========== ============
</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 $842. 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 written options, forward foreign currency
exchange contracts, and futures 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.
<TABLE>
Written Option Transactions
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
OUTSTANDING, BEGINNING OF PERIOD 1 $ 59,837
Options written 17 454,114
Options terminated in closing transactions (9) (247,619)
Options exercised (2) (92,992)
Options expired (7) (173,340)
---------
OUTSTANDING, END OF PERIOD $ 0
=========
</TABLE>
<TABLE>
Forward Foreign Currency Exchange Contracts
<CAPTION>
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 12/01/99 - 03/15/00 AUD 4,514,127 $ 2,907,428 $ 2,871,376 $ 36,052
12/02/99 CAD 985,769 674,330 670,075 4,255
12/03/99 CHF 1,024,822 672,733 644,865 27,868
12/01/99 - 03/15/00 DKK 5,613,697 784,964 763,394 21,570
12/01/99 - 12/03/99 EUR 3,340,475 3,476,766 3,365,350 111,416
12/03/99 GBP 409,411 664,077 652,776 11,301
12/01/99 - 12/06/99 JPY 742,339,870 7,085,528 7,296,201 (210,673)
12/03/99 NOK 5,286,876 667,080 656,186 10,894
12/01/99 - 03/15/00 NZD 5,001,607 2,655,135 2,555,662 99,473
----------- ----------- --------
$19,588,401 $19,475,885 $112,156
=========== =========== ========
Purchases 12/01/99 - 12/03/99 AUD 4,159,394 $ 2,696,499 $ 2,645,398 $(51,101)
12/02/99 CAD 985,769 672,733 670,075 (2,658)
12/03/99 CHF 1,024,822 660,558 644,866 (15,692)
12/01/99 DKK 2,806,849 387,579 380,435 (7,144)
12/01/99 - 12/03/99 EUR 2,759,108 2,867,798 2,779,681 (88,117)
12/03/99 GBP 409,411 672,734 652,776 (19,958)
12/01/99 - 03/15/00 JPY 1,023,013,256 9,716,847 10,066,163 349,316
12/03/99 NOK 5,286,876 672,733 656,186 (16,547)
12/01/99 NZD 4,131,928 2,131,411 2,106,457 (24,954)
----------- ----------- --------
$20,478,892 $20,602,037 $123,145
=========== =========== ========
</TABLE>
At November 30, 1999, forward foreign currency purchases and sales under
master netting agreements excluded above amounted to a net payable of $34,130
with Deutschebank and $389,642 with Merrill Lynch and a net receivable of
$9,142 with C.S. First Boston.
At November 30, 1999, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
<TABLE>
Futures Contracts
<CAPTION>
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Notes December 1999 170 Long $102,864
--------
</TABLE>
At November 30, 1999, the Fund had sufficient cash and/or securities to cover
any margin requirements under these contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of the MFS Series Trust II and the Shareholders of
MFS Intermediate Income Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Intermediate Income 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
Intermediate Income 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.
<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) INTERMEDIATE INCOME 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 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, III+ - 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 (or leave a message anytime).
Vice 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 specialists) 1-800-225-2606 any business day from 8 a.m. to
8 p.m. Eastern time.
Ward Smith+ - Former Chairman (until 1994),
NACCO Industries (holding company) For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business day
INVESTMENT ADVISER from 9 a.m. to 5 p.m. Eastern time. (To use
Massachusetts Financial Services Company this service, your phone must be equipped with
500 Boylston Street a Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, exchanges,
DISTRIBUTOR or stock and bond outlooks, call toll free:
MFS Fund Distributors, Inc. 1-800-MFS-TALK (1-800-637-8255) anytime from a
500 Boylston Street touch-tone telephone.
Boston, MA 02116-3741
WORLD WIDE WEB
CHAIRMAN AND PRESIDENT www.mfs.com
Jeffrey L. Shames*
PORTFOLIO MANAGERS
Stephen C. Bryant*
James J. Calmas*
TREASURER
W. Thomas London*
+Independent Trustee
*MFS Investment Management
</TABLE>
<PAGE>
MFS(R) INTERMEDIATE INCOME 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
MII-2 01/00 17.5M 05/205/805
