As filed with the Securities and Exchange Commission on April 28, 1995
1933 Act File No. 2-36431
1940 Act File No. 811-2032
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 33
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 23
MFS GROWTH OPPORTUNITIES FUND
(formerly known as MFS Capital Development Fund)
(Exact Name of Registrant as Specified in Charter)
500 Boylston Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 617-954-5000
Stephen E. Cavan, Massachusetts Financial Services Company,
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|X| on April 30, 1995 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
its Shares of Beneficial Interest (without par value), under the Securities Act
of 1933. The Registrant filed a Rule 24f-2 Notice for its fiscal year ended
December 31, 1994 on or about February 28, 1995.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
PROPOSED
NUMBER MAXIMUM PROPOSED
OF SHARES OFFERING MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING PRICE PER AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED SHARE OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Shares of Beneficial
Interest (without par value) 7,874,231 $10.82 $290,000 $100
</TABLE>
Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 10,592,066 shares were redeemed during the fiscal year ended
December 31, 1994. 2,744,637 shares were used for reductions pursuant to
paragraph (c) of Rule 24f-2 during the current fiscal year. 7,847,429 shares is
the amount of redeemed shares used for reduction in this Amendment. Pursuant to
Rule 457(d) under the Securities Act of 1933, the maximum public offering price
of $10.82 per share on April 17, 1995 is the price used as the basis for
calculating the registration fee. While no fee is required for the 7,847,429
shares, Registrant has elected to register, for $100, an additional $290,000 of
shares (26,802 shares at $10.82 per share).
<PAGE>
MFS GROWTH OPPORTUNITIES FUND
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
1 (a),(b) Front Cover Page <F1>
2 (a) Expense Summary <F1>
(b),(c) <F1> <F1>
3 (a) Condensed Financial Information <F1>
(b) <F1> <F1>
(c) Information Concerning Shares of <F1>
the Fund - Performance Information
(d) Condensed Financial Information <F1>
4 (a) The Fund; Investment Objective <F1>
and Policies
(b),(c) Investment Objective and Policies <F1>
5 (a) The Fund; Management of the Fund - <F1>
Investment Adviser
(b) Front Cover Page; Management of <F1>
the Fund - Investment Adviser; Back
Cover Page
(c),(d) Management of the Fund - <F1>
Investment Adviser
(e) Management of the Fund - <F1>
Shareholder Servicing Agent;
Back Cover Page <F1>
(f) Expense Summary; Condensed <F1>
Financial Information
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
(g) Information Concerning Shares of <F1>
the Fund - Purchases
5A (a),(b),(c) <F2> <F2>
6 (a) Information Concerning Shares of <F1>
the Fund - Description of Shares,
Voting Rights and Liabilities;
Information Concerning Shares of
the Fund - Redemptions and
Repurchases; Information Concerning
Shares of the Fund - Purchases;
Information Concerning Shares of
the Fund - Exchanges
(b),(c),(d) <F1> <F1>
(e) Shareholder Services <F1>
(f) Information Concerning Shares of <F1>
the Fund - Distributions; Shareholder
Services - Distribution Options
(g) Information Concerning Shares of <F1>
the Fund - Tax Status; Information
Concerning Shares of the Fund -
Distributors
7 (a) Front Cover Page; Management of <F1>
the Fund - Distributor; Back Cover
Page
(b) Information Concerning Shares of <F1>
the Fund - Purchases; Information
Concerning Shares of the Fund - Net
Asset Value
(c) Information Concerning Shares of <F1>
the Fund - Purchases; Information
Concerning Shares of the Fund -
Exchanges; Shareholder Services
(d) Front Cover Page; Information <F1>
Concerning Shares of the Fund -
Purchases
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
(e) Information Concerning Shares of <F1>
the Fund - Distribution Plans;
Expense Summary
(f) Information Concerning Shares of <F1>
the Fund - Distribution Plans
8 (a) Information Concerning Shares of <F1>
the Fund - Purchases; Information
Concerning Shares of the Fund -
Redemptions and Repurchases
(b),(c),(d) Information Concerning Shares of <F1>
the Fund - Redemptions and
Repurchases
9 <F1> <F1>
<PAGE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
10 (a),(b) <F1> Front Cover Page
11 <F1> Front Cover Page
12 <F1> Definitions
13 (a),(b),(c) <F1> Investment Objective,
Policies and Restrictions
(d) <F1> <F1>
14 (a),(b) <F1> Management of the Fund -
Trustees and Officers
(c) <F1> Management of the Fund -
Trustees and Officers;
Appendix A
15 (a) <F1> <F1>
(b),(c) <F1> Management of the Fund -
Trustees and Officers
16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser;
Management of the Fund -
Trustees and Officers
(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser
(c) <F1> <F1>
(d) <F1> Management of the Fund -
Investment Adviser
(e) <F1> Portfolio Transactions and
Brokerage Commissions
(f) Information Concerning Shares of Distribution Plans
the Fund - Distribution Plans
(g) <F1> <F1>
(h) <F1> Management of the Fund -
Custodian; Independent
Accountants and Financial
Statements; Back Cover
Page
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
(i) <F1> Management of the Fund -
Shareholder Servicing
Agent
17 (a),(b),(c), <F1> Portfolio Transactions and
(d),(e) Brokerage Commissions
18 (a) Information Concerning Shares of Description of Shares,
the Fund - Description of Shares, Voting Rights and
Voting Rights and Liabilities Liabilities
(b) <F1> <F1>
19 (a) Information Concerning Shares of Shareholder Services
the Fund - Purchases; Shareholder
Services
(b) Information Concerning Shares of Management of the Fund -
the Fund - Net Asset Value; Distributor; Determination
Information Concerning Shares of Net Asset Value and
of the Fund - Purchases Performance - Net Asset
Value
(c) <F1> <F1>
20 <F1> Tax Status
21 (a),(b) <F1> Management of the Fund -
Distributor; Distribution
Plans
(c) <F1> <F1>
22 (a) <F1> <F1>
(b) <F1> Determination of Net Asset
Value and Performance
23 <F1> Independent Accountants
and Financial Statements
<FN>
- ---------------
<F1> Not Applicable
<F2> Contained in Annual Report
</TABLE>
<PAGE>
PROSPECTUS
MFS(R) GROWTH May 1, 1995
OPPORTUNITIES FUND Class A Shares of Beneficial Interest
(A member of the MFS Family of Funds(R)) Class B Shares of Beneficial Interest
- --------------------------------------------------------------------------------
Page
----
1. Expense Summary ................................................. 2
2. The Fund ........................................................ 3
3. Condensed Financial Information ................................. 4
4. Investment Objective and Policies ............................... 6
5. Management of the Fund .......................................... 12
6. Information Concerning Shares of the Fund ....................... 13
Purchases ................................................... 13
Exchanges ................................................... 18
Redemptions and Repurchases ................................. 19
Distribution Plans .......................................... 21
Distributions ............................................... 22
Tax Status .................................................. 22
Net Asset Value ............................................. 22
Description of Shares, Voting Rights and Liabilities ........ 23
Performance Information ..................................... 23
7. Shareholder Services ............................................ 23
Appendix A ...................................................... 25
[/R]
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MFS GROWTH OPPORTUNITIES FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
The investment objective of MFS Growth Opportunities Fund (the "Fund") is to
seek growth of capital (see "Investment Objective and Policies"). The minimum
initial investment is generally $1,000 per account (see "Purchases"). THE FUND
IS DESIGNED FOR INVESTORS WHO UNDERSTAND AND ARE WILLING TO ACCEPT THE RISKS
INHERENT IN SEEKING CAPITAL APPRECIATION.
The Fund's investment adviser and distributor are Massachusetts Financial
Services Company ("MFS" or the "Adviser") and MFS Fund Distributors, Inc.
("MFD"), respectively, both of which are located at 500 Boylston Street, Boston,
Massachusetts 02116.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information concerning the Fund that a
prospective investor ought to know before investing. The Fund has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information, dated May 1, 1995, which contains more detailed information about
the Fund and is incorporated into this Prospectus by reference. See page 25 for
a further description of the information set forth in the Statement of
Additional Information. A copy of the Statement of Additional Information may be
obtained without charge by contacting the Shareholder Servicing Agent (see back
cover for address and phone number).
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS A CLASS B
SHAREHOLDER TRANSACTION EXPENSES: ------- -------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund Shares (as a
percentage of offering price) ........................................ 5.75% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) ................ See Below<F1> 4.00%
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ........................................................ 0.43% 0.43%
Rule 12b-1 Fees (after applicable fee reduction) ....................... 0.13%<F2> 1.00%<F3>
Other Expenses ......................................................... 0.29% 0.37%
----- -----
Total Operating Expenses (after applicable fee reduction) .............. 0.85%<F4> 1.80%
<FN>
- ----------
<F1> Purchases of $1 million or more are not subject to an initial sales charge; however, a contingent
deferred sales charge (a "CDSC") of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases (see "Purchases").
<F2> The Fund has adopted a Distribution Plan for its Class A shares in accordance with Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which provides that it will pay certain
distribution/service fees aggregating up to (but not necessarily all of) 0.35% per annum of the average
daily net assets attributable to Class A shares (see "Distribution Plans"). Currently, 0.10% of the
distribution/ service fee is being waived. After a substantial period of time distribution expenses
paid under this Plan, together with the initial sales charge, may total more than the maximum sales
charge that would have been permissible if imposed entirely as an initial sales charge.
<F3> The Fund has adopted a Distribution Plan for its Class B shares in accordance with Rule 12b-1 under the
1940 Act, which provides that it will pay distribution/service fees aggregating up to 1.00% per annum
of the average daily net assets attributable to Class B shares (see "Distribution Plans"). After a
substantial period of time distribution expenses paid under this Plan, together with any CDSC, may
total more than the maximum sales charge that would have been permissible if imposed entirely as an
initial sales charge.
<F4> Absent any expense reductions, "Total Operating Expenses" would have been 0.96% for Class A shares.
</TABLE>
EXAMPLE OF EXPENSES
-------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated unless otherwise noted:
PERIOD CLASS A CLASS B
------ ------- ------------------
<F1>
1 year .......................... $ 66 $ 58 $ 18
3 years ......................... 83 87 57
5 years ......................... 102 117 97
10 years ......................... 156 187<F2> 187<F2>
- ----------
[FN]
<F1>Assumes no redemption.
<F2>Class B shares convert to Class A shares approximately eight years after
purchase; therefore, years nine and ten reflect Class A expenses.
The purpose of the above expense table is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund will
bear directly or indirectly. More complete descriptions of the following
expenses are set forth in the following sections: (i) varying sales charges on
share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases"; (iii)
management fees -- "Investment Adviser" and (iv) Rule 12b-1 (i.e., distribution
plan) fees -- "Distribution Plans."
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
2. THE FUND
The Fund is an open-end, diversified management investment company which was
organized as a business trust under the laws of The Commonwealth of
Massachusetts in 1985. The Fund is the successor to the business of
Massachusetts Capital Development Fund, Inc. (the "Company") which was
incorporated under the laws of The Commonwealth of Massachusetts in 1970. All
references in this Prospectus to the Fund's past activities are intended to
include those of the Company, unless the context indicates otherwise. Shares of
the Fund are continuously sold to the public and the Fund buys securities
(stocks, bonds and other instruments) for its portfolio. Two classes of shares
of the Fund are currently offered to the general public. Class A shares are
offered at net asset value plus an initial sales charge (or a CDSC in the case
of certain purchases of $1 million or more) and are subject to a Distribution
Plan providing for a distribution and service fee. Class B shares are offered at
net asset value without an initial sales charge but are subject to a CDSC and a
Distribution Plan providing for a distribution and service fee which are greater
than the Class A distribution fee and service fee. Class B shares will convert
to Class A shares approximately eight years after purchase.
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. A majority of the Trustees are not affiliated with the Adviser. The
Adviser is responsible for the management of the Fund's assets and the officers
of the Fund are responsible for its operations. The Adviser manages the
portfolio from day to day in accordance with the Fund's investment objective and
policies. The selection of investments and the way they are managed depend on
the conditions and trends in the economy and the financial marketplaces. The
Fund also offers to buy back (redeem) its shares from its shareholders at any
time at net asset value, less any applicable CDSC.
3. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders which are
incorporated by reference into the Statement of Additional Information in
reliance upon the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing.
<PAGE>
FINANCIAL HIGHLIGHTS
CLASS A AND B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987<F1>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -
beginning of period ..... $11.56 $11.17 $10.75 $ 9.97 $10.93 $10.96 $10.81 $13.41
------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F3> -
Net investment
income<F6>.............. $ 0.02 $ 0.07 $ 0.15 $ 0.24 $ 0.30 $ 0.36 $ 0.22 $ 0.11
Net realized and
unrealized gain (loss)
on investments.......... (0.50) 1.73 0.67 1.94 (0.77) 2.74 0.76 (2.13)
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .......... $(0.48) $ 1.80 $ 0.82 $ 2.18 $(0.47) $ 3.10 $ 0.98 $(2.02)
------ ------ ------ ------ ------ ------ ------ ------
Less distributions
declared to shareholders -
From net investment
income ................ $(0.01) $(0.07) $(0.14) $(0.18) $(0.33) $(0.36) $(0.19) $(0.11)
In excess of net
investment income ... (0.02) (0.02) -- -- -- -- -- --
From net realized gain
on investments ........ (0.83) (1.32) (0.26) (1.22) (0.16)<F5> (2.77) (0.64) (0.47)
In excess of net
realized gain on
investments ......... (0.05) -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders ........ $(0.91) $(1.41) $(0.40) $(1.40) $(0.49) $(3.13) $(0.83) $(0.58)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value - end of
period .................. $10.17 $11.56 $11.17 $10.75 $ 9.97 $10.93 $10.96 $10.81
====== ====== ====== ====== ====== ====== ====== ======
Total return<F4> ......... (4.15%) 16.19% (8.06)% 9.29% (4.57)% 28.23% 8.90% (20.45)%<F2>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:<F6>
Expenses ............... 0.86% 0.84% 0.89% 0.88% 0.80% 0.77% 0.86% 0.72%<F2>
Net investment income... 0.21% 0.60% 1.40% 2.14% 2.91% 2.79% 1.90% 1.08%<F2>
PORTFOLIO TURNOVER ....... 78% 0.79% 102% 131% 89% 0.83% 68% 40%
NET ASSETS AT END OF
PERIOD (000 OMITTED) .... $589,260 $709,839 $739,791 $739,791 $687,847 $805,702 $767,924 $834,359
<FN>
- ----------
<F1> For the nine months ended December 31, 1987.
<F2> Annualized.
<F3> The per share data for the periods subsequent to December 31, 1992 is based on average shares outstanding for both Class A
and Class B shares.
<F4> Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to March
1, 1991). If the charge had been included, the results would have been lower.
<F5> Includes a per share distribution from paid-in capital of $0.0006.
<F6> The distributor did not impose a portion of its distribution fee, attributable to Class A shares, for the periods indicated.
If this fee had been incurred by Class A shareholders, the net investment income per share and the ratios would have been:
Net investment income $ 0.01 $ 0.07 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
RATIOS (TO AVERAGE NET
ASSETS):
Expenses ............ 0.96% 0.87% -- -- -- -- -- --
Net investment income 0.11% 0.56% -- -- -- -- -- --
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS continued
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 YEAR ENDED PERIOD ENDED
--------------------------------- DECEMBER 31, DECEMBER 31,
1987 1986 1985 1994 1993<F4>
- ----------------------------------------------------------------------------------------------
CLASS A CLASS B
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -
beginning of period ... $13.51 $10.77 $10.44 $11.53 $12.52
------ ------ ------ ------ ------
Income from investment
operations<F2>
Net investment
income (loss) ........ $ 0.17 $ 0.22 $ 0.30 $(0.08) $ --
Net realized and
unrealized gain (loss)
on investments ......... 1.20 3.63 0.33 (0.49) 0.36
------ ------ ------ ------ ------
Total from investment
operations ......... $ 1.37 $ 3.85 $ 0.63 $(0.57) $ 0.36
------ ------ ------ ------ ------
Less distributions
declared to shareholders -
From net investment
income ... $(0.17) $(0.22) $(0.30) $ -- $ --
In excess of net
investment income .. -- -- -- -- (0.03)
From net realized gain
on investments ...... (1.30) (0.89) -- (0.83) (1.32)
In excess of net
realized gain on
investments ........ -- -- -- (0.05) --
------ ------ ------ ------ ------
Total distributions
declared to
shareholders ...... $(1.47) $(1.11) $(0.30) $(0.88) $(1.35)
------ ------ ------ ------ ------
Net asset value - end of
period ................ $13.41 $13.51 $10.77 $10.08 $11.53
====== ====== ====== ====== ======
Total return<F3> ....... 11.57% 35.92% 5.93% (4.96)% 9.29%<F1>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses ............. 0.71% 0.71% 0.75% 1.81% 1.33%<F1>
Net investment income
(loss) .............. 1.28% 1.85% 2.90% (0.70)% 0.00%<F1>
PORTFOLIO TURNOVER ..... 109% 117% 101% 78% 79%
NET ASSETS AT END OF
PERIOD (000 OMITTED) $1,090,764 $989,980 $712,551 $3,166 $ 805
<FN>
- ---------------
<F1> Annualized.
<F2> The per share data for the periods subsequent to December 31, 1992 is based
on average shares outstanding for both Class A and Class B shares.
<F3> Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to March 1, 1991). If the charge had
been included, the results would have been lower.
<F4> For the period from the commencement of offering of Class B shares,
September 7, 1993 to December 31, 1993.
</TABLE>
<PAGE>
4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to seek growth of
capital. Dividend income, if any, is a consideration incidental to the Fund's
objective of growth of capital. Any investment involves risk and there can be no
assurance that the Fund will achieve its investment objective.
INVESTMENT POLICIES -- In seeking to achieve its investment objective, the Fund
maintains a flexible approach towards types of companies as well as types of
securities, depending upon the economic environment and the relative
attractiveness of the various securities markets. Generally, emphasis is placed
upon companies believed to possess above average growth opportunities.
While the Fund's policy is to invest primarily in common stocks, it may seek
appreciation in other types of securities such as fixed income securities (which
may be unrated), convertible bonds, convertible preferred stocks and warrants
when relative values make such purchases appear attractive either as individual
issues or as types of securities in certain economic environments. It is
contemplated that the Fund's non-convertible long-term debt investments will
consist primarily of "investment grade" securities (rated at least Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings
Group ("S&P") or Fitch Investors Service, Inc. ("Fitch") (and comparable unrated
securities)) and that the convertible debt investments will consist primarily of
securities rated at least Ba by Moody's or BB by S&P or Fitch (and comparable
unrated securities). The Fund does not intend to invest more than 5% of its
assets in fixed income securities rated Ba or lower by Moody's or BB or lower by
S&P or Fitch (or in comparable unrated securities). See "Risks of Investing in
Lower Rated Bonds" below for information concerning securities rated Baa or
lower by Moody's and BBB or lower by S&P or Fitch. See Appendix A to the
Statement of Additional Information for a description of these ratings.
There is no formula as to the percentage of assets that may be invested in any
one type of security. Cash, commercial paper, repurchase agreements or other
forms of debt securities are held to provide a reserve for future purchases of
common stock or other securities and may also be held as a defensive measure
when the Adviser determines security markets to be overvalued.
Fixed income securities that the Fund may invest in also include zero coupon
bonds, deferred interest bonds and bonds on which the interest is payable in
kind ("PIK bonds"). See the Statement of Additional Information for further
information regarding these securities.
LENDING OF SECURITIES: The Fund may make loans of its portfolio securities. Such
loans will usually be made only to member banks of the Federal Reserve System
and member firms (and subsidiaries thereof) of the New York Stock Exchange (the
"Exchange") and would be required to be secured continuously by collateral in
cash, cash equivalents or U.S. Government Securities maintained on a current
basis at an amount at least equal to the market value of the securities loaned.
The Fund would continue to collect the equivalent of the interest on the
securities loaned and would also receive either interest (through investment of
cash collateral) or a fee (if the collateral is U.S. Government Securities). The
value of securities loaned will not exceed 30% of the value of the Fund's total
assets.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, the Fund acquires securities subject to the
seller's agreement to repurchase at a specified time and price. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Fund's right to liquidate the securities
may be restricted (during which time the value of the securities could decline).
As discussed in the Statement of Additional Information, the Fund has adopted
certain procedures intended to minimize any risk.
FOREIGN SECURITIES: The Fund may invest up to 50% (and expects generally to
invest between 0% and 50%) of its total assets in foreign securities which are
not traded on a U.S. exchange (not including American Depositary Receipts).
Investing in securities of foreign issuers generally involves risks not
ordinarily associated with investing in securities of domestic issuers. These
include changes in currency rates, exchange control regulations, governmental
administration or economic or monetary policy (in the United States or abroad)
or circumstances in dealings between nations. Costs may be incurred in
connection with conversions between various currencies. Special considerations
may also include more limited information about foreign issuers, higher
brokerage costs, different accounting standards and thinner trading markets.
Foreign securities markets may also be less liquid, more volatile and less
subject to government supervision than in the United States. Investments in
foreign countries could be affected by other factors including expropriation,
confiscatory taxation and potential difficulties in enforcing contractual
obligations and could be subject to extended settlement periods. The Fund may
hold foreign currency received in connection with investments in foreign
securities when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. dollars at a later date, based on anticipated
changes in the relevant exchange rate. The Fund may also hold foreign currency
in anticipation of purchasing foreign securities. See the Statement of
Additional Information for further discussion of foreign securities, American
Depositary Receipts ("ADRs") and the holding of foreign currency, as well as the
associated risks.
AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in ADRs' which are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. Because ADRs trade on United States securities
exchanges, the Adviser does not treat them as foreign securities. However, they
are subject to many of the risks of foreign securities such as changes in
exchange rates and more limited information about foreign issuers.
EMERGING MARKET SECURITIES: Consistent with the Fund's investment objective and
policies and its ability to invest in foreign securities, the Fund may invest in
countries or regions with relatively low gross national product per capita
compared to the world's major economies, and in countries or regions with the
potential for rapid economic growth (emerging markets). Emerging markets will
include any country: (i) having an "emerging stock market" as defined by the
International Finance Corporation; (ii) with low-to middle- income economies
according to the International Bank for Reconstruction and Development (the
"World Bank"); (iii) listed in World Bank publications as developing; or (iv)
determined by the Adviser to be an emerging market as defined above. The Fund
may invest in securities of: (i) companies the principal securities trading
market for which is an emerging market country; (ii) companies organized under
the laws of, and with a principal office in, an emerging market country; (iii)
companies whose principal activities are located in emerging market countries;
or (iv) companies traded in any market that derive 50% or more of their total
revenue from either goods or services produced in an emerging market or sold in
an emerging market.
The risks of investing in foreign securities may be intensified in the case of
investments in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Fund is uninvested and no
return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. Certain
markets may require payment for securities before delivery. Securities prices in
emerging markets can be significantly more volatile than in the more developed
nations of the world, reflecting the greater uncertainties of investing in less
established markets and economies. In particular, countries with emerging
markets may have relatively unstable governments, present the risk of
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging
markets may be predominantly based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. Local securities markets
may trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Securities of issuers
located in countries with emerging markets may have limited marketability and
may be subject to more abrupt or erratic price movements.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.
Investment in certain foreign emerging market debt obligations may be restricted
or controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain foreign emerging market debt obligations and
increase the expenses of the Fund.
BRADY BONDS: The Fund may invest in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to public and private
entities in certain emerging markets for new bonds in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt
restructurings have been implemented to date in Argentina, Brazil, Bulgaria,
Costa Rica, Ecuador, Mexico, Nigeria, the Philippines, Poland, Uruguay and
Venezuela. Brady Bonds have been issued only recently, and for that reason do
not have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar) and are actively traded in over-the-counter secondary markets. U.S.
dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity as the bonds. Brady
Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds with
respect to commercial bank loans by public and private entities, investments in
Brady Bonds may be viewed as speculative.
RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933 (the "1933 Act") ("restricted
securities"), including those that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). The Fund's Board of Trustees determines, based upon a continuing
review of the trading markets for a specific Rule 144A security, whether such
security is illiquid and thus subject to the Fund's limitation on investing not
more than 10% of its net assets in illiquid investments, or liquid and thus not
subject to such limitation. The Board of Trustees has adopted guidelines and
delegated to MFS the daily function of determining and monitoring the liquidity
of Rule 144A securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Board will carefully
monitor the Fund's investments in Rule 144A securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities held in
the Fund's portfolio. Subject to the Fund's 10% limitation on investments in
illiquid investments, the Fund may also invest in restricted securities that may
not be sold under Rule 144A, which presents certain risks. As a result, the Fund
might not be able to sell these securities when the Adviser wishes to do so, or
might have to sell them at less than fair value. In addition, market quotations
are less readily available. Therefore, judgment may at times play a greater role
in valuing these securities than in the case of unrestricted securities.
"WHEN-ISSUED" SECURITIES: The Fund may purchase some securities on a "when-
issued" or on a "forward delivery" basis, which means that the securities will
be delivered to the Fund at a future date usually beyond customary settlement
time. The commitment to purchase a security for which payment will be made on a
future date may be deemed a separate security. The Fund does not pay for the
securities until received, and does not start earning interest on the securities
until the contractual settlement date. In order to invest its assets
immediately, while awaiting delivery of securities purchased on such bases, the
Fund will normally invest in cash, short-term money market instruments and high
quality debt securities.
INDEXED SECURITIES: The Fund may invest in indexed securities whose value is
linked to foreign currencies, interest rates, commodities, indices or other
financial indicators. Most indexed securities are short to intermediate term
fixed-income securities whose values at maturity or interest rates rise or fall
according to the change in one or more specified underlying instruments. Indexed
securities may be positively or negatively indexed (i.e., their value may
increase or decrease if the underlying instrument appreciates), and may have
return characteristics similar to direct investments in the underlying
instrument or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself.
OPTIONS ON SECURITIES: The Fund may write (sell) covered put and call options on
securities and purchase put and call options on securities. The Fund will write
such options for the purpose of increasing its return and/or to protect the
value of its portfolio. In particular, where the Fund writes an option which
expires unexercised or is closed out by the Fund at a profit, it will retain the
premium paid for the option, which will increase its gross income and will
offset in part the reduced value of a portfolio security in connection with
which the option may have been written or the increased cost of portfolio
securities to be acquired. In contrast, however, if the price of the security
underlying the option moves adversely to the Fund's position, the option may be
exercised and the Fund will be required to purchase or sell the security at a
disadvantageous price, resulting in losses which may only be partially offset by
the amount of the premium. The Fund may also write combinations of put and call
options on the same security, known as "straddles." Such transactions can
generate additional premium income but also present increased risk.
The Fund may purchase put or call options in anticipation of declines in the
value of portfolio securities or increases in the value of securities to be
acquired. In the event that such declines or increases occur, the Fund may be
able to offset the resulting adverse effect on its portfolio, in whole or in
part, through the options purchased. The risk assumed by the Fund in connection
with such transactions is limited to the amount of the premium and related
transaction costs associated with the option, although the Fund may be required
to forfeit such amounts in the event that the prices of securities underlying
the options do not move in the direction or to the extent anticipated.
The staff of the SEC has taken the position that purchased over-the-counter
options and assets used to cover written over-the-counter options are illiquid
and, therefore, together with other illiquid securities, cannot exceed a certain
percentage (the "SEC illiquidity ceiling") of the Fund's assets. Although the
Adviser disagrees with this position, the Adviser intends to limit the Fund's
writing of over-the-counter options in accordance with the following procedure.
Except as provided below, the Fund intends to write over-the-counter options
only with primary U.S. Government securities dealers recognized by the Federal
Reserve Bank of New York. Also, the contracts the Fund has in place with such
primary dealers will provide that the Fund has the absolute right to repurchase
an option it writes at any time at a price which represents the fair market
value, as determined in good faith through negotiation between the parties, but
which in no event will exceed a price determined pursuant to a formula in the
contract. Although the specific formula may vary between contracts with
different primary dealers, the formula will generally be based on a multiple of
the premium received by the Fund for writing the option, plus the amount, if any
of the option's intrinsic value (i.e., the amount that the option is
in-the-money). The formula may also include a factor to account for the
difference between the price of the security and the strike price of the option
if the option is written out-of- the-money. The Fund will treat all or a portion
of the formula as illiquid for purposes of the SEC illiquidity ceiling. The Fund
may also write over-the-counter options with non-primary dealers, including
foreign dealers, and will treat the assets used to cover these options as
illiquid for purposes of such SEC illiquidity ceiling.
OPTIONS ON STOCK INDICES: The Fund may write (sell) covered put and call options
and purchase put and call options on stock indices. The Fund will write options
on stock indices for the purpose of increasing its gross income and to protect
its portfolio against declines in the value of securities it owns or increases
in the value of securities to be acquired. When the Fund writes an option on a
stock index, and the value of the index moves adversely to the holder's
position, the option will not be exercised, and the Fund will either close out
the option at a profit or allow it to expire unexercised. The Fund will thereby
retain the amount of the premium, which will increase its gross income and
offset part of the reduced value of portfolio securities or the increased cost
of securities to be acquired. Such transactions, however, will constitute only
partial hedges against adverse price fluctuations, since any such fluctuations
will be offset only to the extent of the premium received by the Fund for the
writing of the option. In addition, if the value of an underlying index moves
adversely to the Fund's option position, the option may be exercised, and the
Fund will experience a loss which may only be partially offset by the amount of
the premium received.
The Fund may also purchase put or call options on stock indices in order,
respectively, to hedge its investments against a decline in value or to attempt
to reduce the risk of missing a market or industry segment advance. The Fund's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.
FUTURES CONTRACTS: The Fund may enter into stock index futures contracts or
interest rate futures contracts ("Futures Contracts"). Purchases or sales of
stock index Futures Contracts may be used to attempt to protect the Fund's
current or intended stock investments from broad fluctuations in stock prices.
Purchases or sales of interest rate Futures Contracts (i.e., Futures Contracts
on fixed income securities) may be used to attempt to protect the Fund's current
or intended investments in fixed income securities from the effect of interest
rate changes as well as for non-hedging purposes, to the extent permitted by
applicable law. In the event that an anticipated decrease in the value of
portfolio securities occurs as a result of a general stock market decline or a
general increase in interest rates, the adverse effects of such changes may be
offset, in whole or part, by gains on the sale of Futures Contracts. Conversely,
the increased cost of portfolio securities to be acquired, caused by a general
rise in the stock market or a general decline in interest rates, may be offset,
in whole or part, by gains on Futures Contracts purchased by the Fund. The Fund
will incur brokerage fees when it purchases and sells Futures Contracts, and it
will be required to make and maintain margin deposits.
OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and write options on Futures
Contracts ("Options on Futures Contracts") in order to protect against declines
in the values of portfolio securities or against increases in the cost of
securities to be acquired, as well as for non-hedging purposes to the extent
permitted by applicable law. Purchases of Options on Futures Contracts may
present less risk in hedging the Fund's portfolio than the purchase or sale of
the underlying Futures Contracts since the potential loss is limited to the
amount of the premium plus related transaction costs, although it may be
necessary to exercise an option purchased in order to realize profits or limit
losses. The writing of Options on Futures Contracts, however, does not present
less risk than the trading of Futures Contracts and will constitute only a
partial hedge, up to the amount of the premium received. In addition, if an
option is exercised, the Fund may suffer a loss on the transaction.
FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase and sale of a fixed quantity of a foreign currency at
a future date ("Forward Contracts") in order to attempt to minimize the risk to
the Fund from adverse changes in the relationship between the U.S. dollar and
foreign currencies. These transactions will include forward purchases or sales
of foreign currencies for the purpose of protecting the dollar value of
securities denominated in a foreign currency or protecting the dollar equivalent
of interest or dividends to be paid on such securities. By entering into such
transactions, however, the Fund may be required to forego the benefits of
advantageous changes in exchange rates. Forward Contracts are traded
over-the-counter, and not on organized commodities or securities exchanges. As a
result, such contracts operate in a manner distinct from exchange-traded
instruments, and their use involves certain risks beyond those associated with
transactions in options or Futures Contracts traded on exchanges. The Fund may
also enter into a Forward Contract on one currency in order to hedge against
risk of loss arising from fluctuations in the value of a second currency
(referred to as a "cross-hedge") if, in the judgment of the Adviser, a
reasonable degree of correlation can be expected between movements in the values
of the two currencies. The Fund may also be required to, or may elect to,
receive delivery of foreign currencies underlying Forward Contracts, which may
involve certain risks. See "Risk Factors" below. The Fund has established
procedures consistent with statements of the SEC and its staff regarding the use
of Forward Contracts by registered investment companies, which requires the use
of segregated assets or "cover" in connection with the purchase and sale of such
contracts.
See Appendix A to this Prospectus for a description of the characteristics of
options, Futures Contracts, Options on Futures Contracts and Forward Contracts.
RISK FACTORS -- The Fund's portfolio is aggressively managed and therefore the
value of its shares may be subject to greater fluctuation and an investment in
its shares involves the assumption of a higher degree of risk than would be the
case with an investment in a conservative equity fund or a growth fund investing
entirely in proven growth equities. An investment in shares of the Fund should
not be considered to be a complete investment program. Each prospective
purchaser should take into account his investment objectives as well as his
other investments when considering the purchase of shares of an investment
company which, like the Fund, assumes above average risk of loss.
In addition, although the Fund will enter into transactions in Futures
Contracts, Options on Futures Contracts, Forward Contracts and certain options
for hedging purposes, their use does involve certain risks. For example, a lack
of correlation between the index or instrument underlying an option or Futures
Contract and the assets being hedged, or unexpected adverse price movements,
could render the Fund's hedging strategy unsuccessful and could result in
losses. The Fund also may enter into transactions in such instruments for other
than hedging purposes to the extent permitted by applicable law, which involves
greater risk and may result in losses. In addition, there can be no assurance
that a liquid secondary market will exist for any contract purchased or sold,
and the Fund may be required to maintain a position until exercise or
expiration, which could result in losses. Further, Forward Contracts entail
particular risks related to conditions affecting the underlying currency.
Over-the-counter transactions in options on securities and Forward Contracts
also involve risks arising from the lack of an organized exchange trading
environment. Transactions in Futures Contracts, Options on Futures Contracts,
Forward Contracts and options are subject to other risks as well.
As a result of its investments in foreign securities, the Fund may receive
interest or dividend payments, or the proceeds of the sale or redemption of such
securities, in the foreign currencies in which such securities are denominated.
The Fund may also choose to, or be required to, receive delivery of the foreign
currencies underlying Forward Contracts it has entered into. Under certain
circumstances, such as where the Adviser believes that the applicable exchange
rate is unfavorable at the time the currencies are received or the Adviser
anticipates, for any other reason, that the exchange rate will improve, the Fund
may hold such currencies for an indefinite period of time. While the holding of
currencies will permit the Fund to take advantage of favorable movements in the
applicable exchange rate, such strategy also exposes the Fund to risk of loss if
exchange rates move in a direction adverse to the Fund's position. Such losses
could reduce any profits or increase any losses sustained by the Fund from the
sale or redemption of securities and could reduce the dollar value of interest
or dividend payments received.
See the Statement of Additional Information for a discussion of the risks
related to transactions in options, Futures Contracts, Options on Futures
Contracts and Forward Contracts, for a discussion of other investment policies
and for a listing of specific investment restrictions which govern the Fund's
investment policies. The specific investment restrictions listed in the
Statement of Additional Information may not be changed without shareholder
approval. See "Investment Objective, Policies and Restrictions" in the Statement
of Additional Information. The Fund's investment limitations, policies and
rating standards are adhered to at the time of purchase or utilization of
assets; a subsequent change in circumstances will not be considered to result in
a violation of policy.
RISKS OF INVESTING IN LOWER RATED BONDS: As noted above, the Fund may invest in
fixed income securities that are rated Ba or lower by Moody's or BB or lower by
S&P or Fitch, and comparable unrated securities (commonly known as "junk
bonds"). These securities are considered speculative and, while generally
providing greater income than investments in higher rated securities, will
involve greater risk of principal and income (including the possibility of
default or bankruptcy of the issuers of such securities) and may involve greater
volatility of price than securities in the higher rating categories. The market
for these lower rated fixed income securities may be less liquid than the market
for investment grade fixed income securities. Furthermore, the liquidity of
these lower rated securities may be affected by the market's perception of their
credit quality. Therefore, judgment may at times play a greater role in valuing
these securities than in the case of investment grade fixed income securities,
and it also may be more difficult during certain adverse market conditions to
sell these lower rated securities to meet redemption requests or to respond to
changes in the market.
As noted above, the Fund may also invest in fixed income securities rated Baa by
Moody's or BBB by S&P or Fitch and comparable unrated securities. These
securities, while normally exhibiting adequate protection parameters, may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher grade fixed income securities.
See the Statement of Additional Information for more information on lower rated
securities.
PORTFOLIO TRADING: While it is not the Fund's policy generally to invest or
trade for short-term profits, portfolio securities may be disposed of without
regard to the length of time held whenever the Adviser is of the opinion that a
security no longer has an appropriate appreciation potential or has reached its
anticipated level of performance, or when another security appears to offer
relatively greater appreciation potential or a relatively greater anticipated
level of performance. The Fund's relative equity, fixed income and cash
positions may also be increased or decreased when, in the judgment of the
Adviser, a period of substantial rise or decline in securities price levels is
anticipated. Portfolio changes are made without regard to the length of time a
security has been held, or whether a sale would result in a profit or loss.
Therefore, the rate of portfolio turnover is not a limiting factor when changes
are appropriate. The Fund's annual portfolio turnover rate for each of the past
10 years is listed in the table under the caption "Condensed Financial
Information." The higher levels of portfolio activity result in higher brokerage
commissions and may also result in taxes on realized capital gains to be borne
by the Fund's shareholders. (See "Tax Status" below and "Portfolio Transactions
and Brokerage Commissions" in the Statement of Additional Information.)
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with the foregoing primary consideration, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD"), and
such other policies as the Trustees may determine, the Adviser may consider
sales of shares of the Fund and of the other investment company clients of MFD
as a factor in the selection of broker-dealers to execute the Fund's portfolio
transactions. From time to time, the Adviser may direct certain portfolio
transactions to broker-dealer firms which, in turn, have agreed to pay a portion
of the Fund's operating expenses (e.g., fees charged by the custodian of the
Fund's assets). For a further discussion of portfolio transactions and brokerage
commissions, see "Portfolio Transactions and Brokerage Commissions" in the
Statement of Additional Information.
----------------
The policies described above are not fundamental and may be changed without
shareholder approval, as may the Fund's investment objective.
5. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated July 19, 1985 (the "Fund's Advisory Agreement")
between the Adviser and the Fund. The Adviser provides the Fund with overall
investment advisory and administrative services, as well as general office
facilities. Paul M. McMahon, a Senior Vice President of the Adviser, has been
the Fund's portfolio manager since October of 1992. Mr. McMahon joined the
Adviser in 1981 as an Industry Analyst. Subject to such policies as the Trustees
may determine, the Adviser makes investment decisions for the Fund. For these
services and facilities, the Adviser receives a management fee, computed and
paid monthly, at an annual rate equal to 0.5% of the Fund's average daily net
assets not in excess of $200 million and 0.4% of the Fund's average daily net
assets in excess of $200 million.
For the Fund's fiscal year ended December 31, 1994, MFS received fees under the
Fund's Advisory Agreement of $2,779,813, equivalent on an annualized basis to
0.43% of the Fund's average daily net assets.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS
Institutional Trust, MFS Union Standard Trust, MFS Variable Insurance Trust, Sun
Growth Variable Annuity Fund, Inc., MFS/Sun Life Series Trust and seven variable
accounts, each of which is a registered investment company established by Sun
Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)") in
connection with the sale of Compass-2 and Compass-3 combination fixed/variable
annuity contracts. MFS and its wholly owned subsidiary, MFS Asset Management,
Inc., provide investment advice to substantial private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $35 billion on behalf of approximately 1.6 million investor
accounts as of March 31, 1995. MFS is a wholly owned subsidiary of Sun Life of
Canada (U.S.), which in turn is a wholly owned subsidiary of Sun Life Assurance
Company of Canada ("Sun Life"). The Directors of MFS are A. Keith Brodkin,
Jeffrey L. Shames, Arnold D. Scott, John D. McNeil and John R. Gardner. Mr.
Brodkin is the Chairman, Mr. Shames is the President, and Mr. Scott is the
Secretary and a Senior Executive Vice President of MFS. Messrs. McNeil and
Gardner are the Chairman and President, respectively, of Sun Life. Sun Life, a
mutual life insurance company, is one of the largest international life
insurance companies and has been operating in the United States since 1895,
establishing a headquarters office here in 1973. The executive officers of MFS
report to the Chairman of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is also the Chairman,
President and a Trustee of the Fund. W. Thomas London, Stephen E. Cavan, James
O. Yost and James R. Bordewick, Jr., all of whom are officers of MFS, are
officers of the Fund.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and also serves as distributor for each of the other MFS
Funds.
SHAREHOLDER SERVICING AGENT -- MFS Service Center, Inc. (the "Shareholder
Servicing Agent"), a wholly owned subsidiary of MFS, performs transfer agency,
certain dividend disbursing agency and other services for the Fund.
6. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Shares of the Fund may be purchased at the public offering price through any
securities dealer, certain banks and other financial institutions having selling
agreements with MFD. Non-securities dealer financial institutions will receive
transaction fees that are the same as commission fees to dealers. Securities
dealers and other financial institutions may also charge their customers fees
relating to investments in the Fund.
The Fund offers two classes of shares which bear sales charges and distribution
fees in different forms and amounts:
CLASS A SHARES: Class A shares are offered at net asset value per share plus
an initial sales charge (or CDSC in the case of certain purchases of $1 million
or more) as follows:
- ------------------------------------------------------------------------------
SALES CHARGE* AS
PERCENTAGE OF:
------------------------------ DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
OFFERING PRICE INVESTED OF OFFERING PRICE
AMOUNT OF PURCHASE -------------- ---------- -----------------
Less than $50,000 ............... 5.75% 6.10% 5.00%
$50,000 but less than $100,000 .. 4.75 4.99 4.00
$100,000 but less than $250,000 . 4.00 4.17 3.20
$250,000 but less than $500,000 . 2.95 3.04 2.25
$500,000 but less than $1,000,000 2.20 2.25 1.70
$1,000,000 or more .............. None** None** See Below**
- ----------
*Because of rounding in the calculation of offering price, actual sales charges
may be more or less than those calculated using the percentages above.
**A CDSC may apply in certain instances. MFD (on behalf of the Fund) will pay a
commission on purchases of $1 million or more (see below).
No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC may be imposed on such
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% on the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares.
In determining whether a CDSC on such Class A shares is payable, and, if so, the
amount of the charge, it is assumed that shares not subject to the CDSC are the
first redeemed followed by other shares held for the longest period of time. All
investments made during a calendar month, regardless of when during the month
the investment occurs, will age one month on the last day of the month and each
subsequent month. Except as noted below, the CDSC on Class A shares will be
waived in the case of: (i) exchanges (except that if the shares acquired by
exchange were then redeemed within 12 months of the initial purchase (other than
in connection with subsequent exchanges to other MFS Funds), the charge would
not be waived); (ii) distributions to participants from a retirement plan
qualified under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") (a "Retirement Plan") due to: (a) a loan from the plan (repayments
of loans, however, will constitute new sales for purposes of assessing the
CDSC); (b) "financial hardship" of the participant in the plan, as that term is
defined in Treasury Regulation Section 1.401(k)-1 (d)(2), as amended from time
to time; or (c) due to the death of a participant in such a plan; (iii)
distributions from a 403(b) plan or an Individual Retirement Account ("IRA") due
to death, disability, or attainment of age 59 1/2; (iv) tax-free returns of
excess contributions to an IRA; (v) distributions by other employee benefit
plans to pay benefits; and (vi) certain involuntary redemptions and redemptions
in connection with certain automatic withdrawals from a qualified Retirement
Plan. The CDSC on Class A shares will not be waived, however, if the Retirement
Plan withdraws from the Fund except if the Retirement Plan has invested its
assets in Class A shares of one or more of the MFS Funds for more than 10 years
from the later to occur of (i) January 1, 1993 or (ii) the date such Retirement
Plan first invests its assets in Class A shares of one or more of the MFS Funds,
the CDSC on Class A shares will be waived in the case of a redemption of all of
the Retirement Plan's shares (including shares of any other class) in all MFS
Funds (i.e., all the assets of the Retirement Plan invested in the MFS Funds are
withdrawn), except that if, immediately prior to the redemption, the aggregate
amount invested by the Retirement Plan in Class A shares of the MFS Funds
(excluding the reinvestment of distributions) during the prior four-year period
equals 50% or more of the total value of the Retirement Plan's assets in the MFS
Funds, then the CDSC will not be waived. The CDSC on Class A shares will be
waived upon redemption by a Retirement Plan where the redemption proceeds are
used to pay expenses of the Retirement Plan or certain expenses of participants
under the Retirement Plan (e.g., participant account fees), provided that the
Retirement Plan's sponsor subscribes to the MFS FUNDamental 401(k) Plan(sm) or
another similar recordkeeping system made available by the Shareholder Servicing
Agent. The CDSC on Class A shares will be waived upon the transfer of
registration from shares held by a Retirement Plan through a single account
maintained by the Shareholder Servicing Agent to multiple Class A share accounts
maintained by the Shareholder Servicing Agent on behalf of individual
participants in the Retirement Plan, provided that the Retirement Plan's sponsor
subscribes to the MFS FUNDamental 401(k) Plan(sm) or another similar
recordkeeping system made available by the Shareholder Servicing Agent. Any
applicable CDSC will be deferred upon an exchange of Class A shares of the Fund
for units of participation of the MFS Fixed Fund (a bank collective investment
fund) (the "Units"), and the CDSC will be deducted from the redemption proceeds
when such Units are subsequently redeemed (assuming the CDSC is then payable).
No CDSC will be assessed upon an exchange of Units for Class A shares of the
Fund. For purposes of calculating the CDSC payable upon redemption of Class A
shares of the Fund or Units acquired pursuant to one or more exchanges, the
period during which the Units are held will be aggregated with the period during
which the Class A shares are held. MFD will receive all CDSCs which it intends
to apply for the benefit of the Fund.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 5% and MFD retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending on
the number of shares of the Fund as well as certain other MFS Funds owned or
being purchased, the existence of an agreement to purchase additional shares
during a 13-month period (or a 36-month period for purchases of $1 million or
more) or special purchase programs. A description of the Right of Accumulation,
Letter of Intent and Group Purchase privileges by which the sales charge may
also be reduced is set forth in the Statement of Additional Information. In
addition, MFD pays a commission to dealers who initiate and are responsible for
purchases of $1 million or more as follows: 1.00% on sales up to $5 million,
plus 0.25% on the amount in excess of $5 million. Purchases of $1 million or
more for each shareholder account will be aggregated over a 12-month period
(commencing from the date of the first such purchase) for purposes of
determining the level of commissions to be paid during that period with respect
to such account.
Class A shares of the Fund may be sold at their net asset value to the officers
of the Fund, to any of the subsidiary companies of Sun Life, to eligible
Directors, officers, employees (including retired employees) and agents of MFS,
Sun Life or any of their subsidiary companies, to any trust, pension,
profit-sharing or any other benefit plan for such persons, to any trustees and
retired trustees of any investment company for which MFD serves as distributor
or principal underwriter, and to certain family members of such individuals and
their spouses, provided the shares will not be resold except to the Fund. Class
A shares of the Fund may be sold at net asset value to any employee, partner,
officer or trustee of any sub-adviser to any MFS Fund and to certain family
members of such individuals and their spouses, or to any trust, pension,
profit-sharing or other retirement plan for the sole benefit of such employee or
representative, provided such shares will not be resold except to the Fund.
Class A shares of the Fund may also be sold at their net asset value to any
employee or registered representative of any dealer or other financial
institution which has a sales agreement with MFD or its affiliates, to certain
family members of such employee or representative and their spouses, or to any
trust, pension, profit-sharing or other retirement plan for the sole benefit of
such employee or representative, as well as to clients of MFS Asset Management,
Inc.
Class A shares may be sold at net asset value, subject to appropriate
documentation, through a dealer where the amount invested represents redemption
proceeds from a registered open-end management investment company not
distributed or managed by MFD or its affiliates if: (i) the redeemed shares were
subject to an initial sales charge or a deferred sales charge (whether or not
actually imposed); (ii) such redemption has occurred no more than 90 days prior
to the purchase of Class A shares of the Fund; and (iii) the Fund, MFD or its
affiliates have not agreed with such company or its affiliates, formally or
informally, to sell Class A shares at net asset value or provide any other
incentive with respect to such redemption and sale. Class A shares of the Fund
may also be sold at net asset value where the amount invested represents
redemption proceeds from the MFS Fixed Fund. In addition, Class A shares of the
Fund may be sold at net asset value in connection with the acquisition or
liquidation of the assets of other investment companies or personal holding
companies. Insurance company separate accounts may purchase Class A shares of
the Fund at their net asset value per share. Class A shares of the Fund may be
purchased at net asset value by retirement plans whose third party
administrators have entered into an administrative services agreement with MFD
or one or more of its affiliates to perform certain administrative services,
subject to certain operational requirements specified from time to time by MFD
or one or more of its affiliates. Class A shares of the Fund may be purchased at
net asset value through certain broker-dealers and other financial institutions
which have entered into an agreement with MFD which includes a requirement that
such shares be sold for the benefit of clients participating in a "wrap account"
or a similar program under which such clients pay a fee to such broker-dealer or
other financial institution.
Class A shares of the Fund may be purchased at net asset value by certain
Retirement Plans subject to the Employee Retirement Income Security Act of 1974,
as amended subject to the following:
(i) the sponsoring organization must demonstrate to the satisfaction of MFD
that either (a) the employer has at least 25 employees or (b) the aggregate
purchases by the Retirement Plan of Class A shares of the MFS Funds will be
in an amount of at least $250,000 within a reasonable period of time, as
determined by MFD in its sole discretion; and
(ii) a CDSC of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases.
Dealers who initiate and are responsible for purchases of Class A shares of the
Fund in this manner will be paid a commission by MFD, as follows: 1.00% on sales
up to $5 million, plus 0.25% on the amount in excess of $5 million; provided,
however, that MFD may pay a commission, on sales in excess of $5 million to
certain retirement plans, of 1.00% to certain dealers which, at MFD's
invitation, enter into an agreement with MFD in which the dealer agrees to
return any commission paid to it on the sale (or on a pro rata portion thereof)
if the shareholder redeems his or her shares within a period of time after
purchase as specified by MFD. Purchases of $1 million or more for each
shareholder account will be aggregated over a 12-month period (commencing from
the date of the first such purchase) for purposes of determining the level of
commissions to be paid during that period with respect to such account.
Class A shares of the Fund may be purchased at net asset value by Retirement
Plans through certain broker-dealers and other financial institutions which have
entered into an agreement with MFD which includes certain minimum size
qualifications for such retirement plans and provides that the broker-dealer or
other financial institution will perform certain administrative services with
respect to the plan's account. Class A shares of the Fund may be sold at net
asset value through the automatic reinvestment of Class A and Class B
distributions which constitute required withdrawals from qualified retirement
plans. Furthermore, Class A shares of the Fund may be sold at net asset value
through the automatic reinvestment of distributions of dividends and capital
gains of Class A shares of other MFS Funds pursuant to the Distribution
Investment Program (see "Shareholder Services" in the Statement of Additional
Information).
CLASS B SHARES: Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC as follows:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- -------------- --------------
First ................................................. 4%
Second ................................................ 4%
Third ................................................. 3%
Fourth ................................................ 3%
Fifth ................................................. 2%
Sixth ................................................. 1%
Seventh and following ................................. 0%
For Class B shares purchased prior to January 1, 1993, the Fund imposes a CDSC
as a percentage of the original purchase price or redemption proceeds as
applicable:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- -------------- --------------
First ................................................. 6%
Second ................................................ 5%
Third ................................................. 4%
Fourth ................................................ 3%
Fifth ................................................. 2%
Sixth ................................................. 1%
Seventh and following ................................. 0%
No CDSC is paid upon an exchange of shares. For purposes of calculating the CDSC
upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares. See "Redemptions and Repurchases --
Contingent Deferred Sales Charge" for further discussion of the CDSC.
The CDSC on Class B shares will be waived upon the death or disability (as
defined in section 72(m)(7) of the Code) of any investor, provided the account
is registered (i) in the case of a deceased individual, solely in the deceased
individual's name, (ii) in the case of a disabled individual, solely or jointly
in the disabled individual's name or (iii) in the name of a living trust for the
benefit of the deceased or disabled individual. The CDSC on Class B shares will
also be waived in the case of redemptions of shares of the Fund pursuant to a
Systematic Withdrawal Plan. In addition, the CDSC on Class B shares will be
waived in the case of distributions from an IRA, SAR-SEP or any other retirement
plan qualified under sections 401(a) or 403(b) of the Code, due to death or
disability, or in the case of required minimum distributions from any such
retirement plan due to attainment of age 70 1/2. The CDSC on Class B shares will
be waived in the case of distributions from a Retirement Plan due to (i) returns
of excess contribution to the plan, (ii) retirement of a participant in the
plan, (iii) a loan from the plan (repayments of loans, however, will constitute
new sales for purposes of assessing the CDSC), (iv) "financial hardship" of the
participant in the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time, and (v) termination of
employment of the participant in the plan (excluding, however, a partial or
other termination of the plan). The CDSC on Class B shares will also be waived
upon redemption by (i) officers of the Fund, (ii) any of the subsidiary
companies of Sun Life, (iii) eligible Directors, officers, employees (including
retired employees) and agents of MFS, Sun Life or any of their subsidiary
companies, (iv) any trust, pension, profit-sharing or any other benefit plan for
such persons, (v) any trustees and retired trustees of any investment company
for which MFD serves as distributor or principal underwriter, and (vi) certain
family members of such individuals and their spouses, provided in each case that
the shares will not be resold except to the Fund. The CDSC on Class B shares
will also be waived in the case of redemptions by any employee or registered
representative of any dealer or other financial institution which has a sales
agreement with MFD, by certain family members of any such employee or
representative and his or her spouse or by any trust, pension, profit-sharing or
other retirement plan for the sole benefit of such employee or representative
and by clients of MFS Asset Management, Inc. A Retirement Plan that has invested
its assets in Class B shares of one or more of the MFS Funds for more than 10
years from the later to occur of (i) January 1, 1993 or (ii) the date the
Retirement Plan first invests its assets in Class B shares of one or more of the
funds in the MFS Funds will have the CDSC on Class B shares waived in the case
of a redemption of all the Retirement Plan's shares (including shares of any
other class in all MFS Funds (i.e., all the assets of the Retirement Plan
invested in the MFS Funds are withdrawn), except that if, immediately prior to
the redemption, the aggregate amount invested by the Retirement Plan in Class B
shares of the MFS Funds (excluding the reinvestment of distributions) during the
prior four-year period equals 50% or more of the total value of the Retirement
Plan's assets in the MFS Funds, then the CDSC will not be waived. The CDSC on
Class B shares will be waived upon redemption by a Retirement Plan where the
redemption proceeds are used to pay expenses of the Retirement Plan or certain
expenses of participants under the Retirement Plan (e.g., participant account
fees), provided that the Retirement Plan's sponsor subscribes to the MFS
FUNDamental 401(k) Plan(sm) or another similar recordkeeping system made
available by the Shareholder Servicing Agent. The CDSC on Class B shares will be
waived upon the transfer of registration from shares held by a Retirement Plan
through a single account maintained by the Shareholder Servicing Agent to
multiple Class B share accounts provided that the Retirement Plan's sponsor
subscribes to the MFS FUNDamental 401(k) Plan (sm) or another similar
recordkeeping system made available by the Shareholder Servicing Agent. The CDSC
on Class B shares may also be waived in connection with the acquisition or
liquidation of the assets of other investment companies or personal holding
companies.
CONVERSION OF CLASS B SHARES: Class B shares of the Fund that remain outstanding
for approximately eight years will convert to Class A shares of the Fund. Shares
purchased through the reinvestment of distributions paid in respect of Class B
shares will be treated as Class B shares for purposes of the payment of the
distribution and service fees under the Distribution Plan applicable to Class B
shares. However, for purposes of conversion to Class A shares, all shares in a
shareholder's account that were purchased through the reinvestment of dividends
and distributions paid in respect of Class B shares (and which have not
converted to Class A shares as provided in the following sentence) will be held
in a separate sub-account. Each time any Class B shares in the shareholder's
account (other than those in the sub-account) convert to Class A shares, a
portion of the Class B shares then in the sub-account will also convert to Class
A shares. The portion will be determined by the ratio that the shareholder's
Class B shares not acquired through reinvestment of dividends and distributions
that are converting to Class A shares bear to the shareholder's total Class B
shares not acquired through reinvestment. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service or an opinion of counsel that such conversion will not
constitute a taxable event for Federal tax purposes. There can be no assurance
that such ruling or opinion will be available, and the conversion of Class B
shares to Class A shares will not occur if such ruling or opinion is not
available. In such event, Class B shares would continue to be subject to higher
expenses than Class A shares for an indefinite period.
GENERAL: Except as described below, the minimum initial investment is $1,000 per
account and the minimum additional investment is $50 per account. Accounts being
established for monthly automatic investments and under payroll savings programs
and tax-deferred retirement programs (other than IRAs) involving the submission
of investments by means of group remittal statements are subject to the $50
minimum on initial and additional investments per account. The minimum initial
investment for IRAs is $250 per account and the minimum additional investment is
$50 per account. Accounts being established for participation in the Automatic
Exchange Plan are subject to a $50 minimum on initial and additional investments
per account. There are also other limited exceptions to these minimums for
certain tax-deferred retirement programs. Any minimums may be changed at any
time at the discretion of MFD. The Fund reserves the right to cease offering its
shares at any time.
For shareholders who elect to participate in certain investment programs (e.g.,
the Automatic Investment Plan) or other shareholder services, MFD or its
affiliates may either (i) give a gift of nominal value, such as a hand-held
calculator, or (ii) make a nominal charitable contribution on their behalf.
A shareholder whose shares are held in the name of, or controlled by, an
investment dealer might not receive many of the privileges and services from the
Fund (such as Right of Accumulation, Letter of Intent and certain recordkeeping
services) that the Fund ordinarily provides.
Purchases and exchanges should be made for investment purposes only. The Fund
and MFD each reserve the right to reject any specific purchase order or to
restrict purchases by a particular purchaser (or group of related purchasers).
The Fund or MFD may reject or restrict any purchases by a particular purchaser
or group, for example, when such purchase is contrary to the best interests of
the Fund's other shareholders or otherwise would disrupt the management of the
Fund.
MFD may enter into an agreement with shareholders who intend to make exchanges
among certain classes of certain MFS Funds (as determined by MFD) which follow a
timing pattern, and with individuals or entities acting on such shareholders'
behalf (collectively, "market timers"), setting forth the terms, procedures and
restrictions with respect to such exchanges. In the absence of such an
agreement, it is the policy of the Fund and MFD to reject or restrict purchases
by market timers if (i) more than two exchange purchases are effected in a timed
account in the same calendar quarter or (ii) a purchase would result in shares
being held in timed accounts by market timers representing more than (x) one
percent of the Fund's net assets or (y) specified dollar amounts in the case of
certain MFS Funds which may include the Fund and which may change from time to
time. The Fund and MFD each reserve the right to request market timers to redeem
their shares at net asset value, less any applicable CDSC, if either of these
restrictions is violated.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class B shares. In some
instances, promotional incentives to dealers may be offered only to certain
dealers who have sold or may sell significant amounts of Fund shares. In
addition, from time to time, MFD may pay dealers 100% of the applicable sales
charge on sales of Class A shares of certain specified MFS Funds sold by such
dealer during a specified sales period. In addition, MFD or its affiliates may,
from time to time, pay dealers an additional commission equal to 0.50% of the
net asset value of all of the Class B shares of certain specified MFS Funds sold
by such dealer during a specified sales period. In addition, from time to time,
MFD, at its expense, may provide additional commissions, compensation or
promotional incentives ("concessions") to dealers which sell shares of the Fund.
The staff of the SEC has indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters. Such concessions provided by MFD
may include financial assistance to dealers in connection with preapproved
conferences or seminars, sales or training programs for invited registered
representatives, payment for travel expenses, including lodging, incurred by
registered representatives and members of their families or other invited guests
to various locations for such seminars or training programs, seminars for the
public, advertising and sales campaigns regarding one or more MFS Funds, and/or
other dealer-sponsored events. In some instances, these concessions may be
offered to dealers or only to certain dealers who have sold or may sell, during
specified periods, certain minimum amounts of shares of the Fund. From
time-to-time, MFD may make expense reimbursements for special training of a
dealer's registered representatives in group meetings or to help pay the
expenses of sales contests. Other concessions may be offered to the extent not
prohibited by the laws of the state or any self-regulatory agency, such as the
NASD.
The Glass-Steagall Act prohibits national banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of the
prohibition has not been clearly defined, MFD believes that such Act should not
preclude banks from entering into agency agreements with MFD (as described
above). If, however, a bank were prohibited from so acting, the Trustees would
consider what actions, if any, would be necessary to continue to provide
efficient and effective shareholder services. It is not expected that
shareholders would suffer any adverse financial consequence as a result of these
occurrences. In addition, state securities laws on this issue may differ from
the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as broker-dealers pursuant to state
law.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged at net asset value for shares of the same
class of any of the other MFS Funds (if available for sale). Shares of one class
may not be exchanged for shares of any other class. Exchanges will be made only
after instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Shareholder Servicing Agent in proper
form (i.e., if in writing -- signed by the record owner(s) exactly as the shares
are registered by telephone -- proper account identification is given by the
dealer or shareholder of record) and each exchange must involve either shares
having an aggregate value of at least $1,000 ($50 in the case of retirement plan
participants whose sponsoring organizations subscribe to the MFS FUNDamental
401(k) Plan or another similar 401(k) recordkeeping system made available by the
Shareholder Servicing Agent, or all the shares in the account). If an Exchange
Request is received by the Shareholder Servicing Agent on any business day prior
to the close of regular trading on the Exchange, the exchange usually will occur
on that day if all the requirements set forth above have been complied with at
that time. No more than five exchanges may be made in any one Exchange Request
by telephone. Additional information concerning this exchange privilege and
prospectuses for any of the other MFS Funds may be obtained from investment
dealers or the Shareholder Servicing Agent. A shareholder should read the
prospectus of the other MFS Fund and consider the differences in objectives and
policies before making any exchange. For federal and (generally) state income
tax purposes, an exchange is treated as a sale of the shares exchanged and,
therefore, an exchange could result in a gain or loss to the shareholder making
the exchange. Exchanges by telephone are automatically available to most
nonretirement plan accounts and certain retirement plan accounts. For further
information regarding exchanges by telephone see "Redemptions by Telephone"
below. The exchange privilege (or any aspect of it) may be changed or
discontinued and is subject to certain limitations, including certain
restrictions on purchases by market timers. Special procedures, privileges and
restrictions with respect to exchanges may apply to market timers who enter into
an agreement with MFD, as set forth in such agreement (see "Purchases").
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the amount in his account on
any date on which the Fund is open for business by redeeming shares at their net
asset value or by selling such shares to the Fund through a dealer (a
repurchase). Since the net asset value of shares of the account fluctuates,
redemptions or repurchases, which are taxable transactions, are likely to result
in gains or losses to the shareholder. When a shareholder withdraws an amount
from his account, the shareholder is deemed to have tendered for redemption a
sufficient number of full and fractional shares in his account to cover the
amount withdrawn. The proceeds of a redemption or repurchase will normally be
available within seven days, except that for shares purchased, or received in
exchange for shares purchased, by check (including certified checks or cashier's
checks) payment of redemption proceeds may be delayed for up to 15 days from the
purchase date in an effort to assure that such check has cleared. Payment of
redemption proceeds may be delayed for up to seven days from the redemption date
if the Fund determines that such a delay would be in the best interest of all
its shareholders.
A. REDEMPTION BY MAIL -- Each shareholder has the right to redeem all or any
portion of the shares in his account by mailing or delivering to the Shareholder
Servicing Agent (see back cover for address) a stock power with a written
request for redemption or letter of instruction, together with his share
certificates (if any were issued), all in "good order" for transfer. "Good
order" generally means that the stock power, written request for redemption,
letter of instruction or share certificate must be endorsed by the record
owner(s) exactly as the shares are registered and the signature(s) must be
guaranteed in the manner set forth below under the caption "Signature
Guarantee." In addition, in some cases, "good order" may require the furnishing
of additional documents. The Shareholder Servicing Agent may make certain de
minimis exceptions to the above requirements for redemption. Within seven days
after receipt of a redemption request in "good order" by the Shareholder
Servicing Agent, the Fund will make payment in cash of the net asset value of
the shares next determined after such redemption request was received, reduced
by the amount of any applicable CDSC described above and the amount of any
income tax required to be withheld, except during any period in which the right
of redemption is suspended or date of payment is postponed because the Exchange
is closed or trading on the Exchange is restricted or to the extent otherwise
permitted by the 1940 Act if an emergency exists (see "Tax Status").
B. REDEMPTION BY TELEPHONE -- Each shareholder may redeem an amount from his
account by telephoning the Shareholder Servicing Agent toll-free at (800) 225-
2606. Shareholders wishing to avail themselves of this telephone redemption
privilege must so elect on their Account Application, designate thereon a
commercial bank and account number to receive the proceeds of such redemption,
and sign the Account Application Form with the signature(s) guaranteed in the
manner set forth below under the caption "Signature Guarantee." The proceeds of
such a redemption, reduced by the amount of any applicable CDSC described above
and the amount of any income tax required to be withheld, are mailed by check to
the designated account, without charge. As a special service, investors may
arrange to have proceeds in excess of $1,000 wired in federal funds to the
designated account. If a telephone redemption request is received by the
Shareholder Servicing Agent by the close of regular trading on the Exchange on
any business day, shares will be redeemed at the closing net asset value of the
Fund on that day. Subject to the conditions described in this section, proceeds
of a redemption are normally mailed or wired on the next business day following
the date of receipt of the order for redemption. The Shareholder Servicing Agent
will not be responsible for any losses resulting from unauthorized telephone
transactions if it follows reasonable procedures designed to verify the identity
of the caller. The Shareholder Servicing Agent will request personal or other
information from the caller, and will normally also record calls. Shareholders
should verify the accuracy of confirmation statements immediately after their
receipt.
C. REPURCHASE THROUGH A DEALER -- If a shareholder desires to sell his shares at
their net asset value through his securities dealer (a repurchase), the
shareholder can place a repurchase order with his dealer, who may charge the
shareholder a fee. IF THE DEALER RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE
CLOSE OF REGULAR TRADING ON THE EXCHANGE AND COMMUNICATES IT TO MFD BEFORE THE
CLOSE OF BUSINESS ON THE SAME DAY, THE SHAREHOLDER WILL RECEIVE THE NET ASSET
VALUE CALCULATED ON THAT DAY.
GENERAL: Shareholders of the Fund who have redeemed their shares have a one-time
right to reinvest the redemption proceeds at net asset value (with credit for
any CDSC paid) in the same class of shares of any of the MFS Funds (if shares of
such Fund are available for sale) at net asset value (with a credit for any CDSC
paid) within 90 days of the redemption pursuant to the Reinstatement Privilege.
If the shares credited for any CDSC paid are then redeemed within six years of
the initial purchase in the case of Class B shares, or within 12 months of the
initial purchase for certain Class A share purchases, a CDSC will be imposed
upon redemption. Such purchases under the Reinstatement Privilege are subject to
all limitations in the Statement of Additional Information regarding this
privilege.
Subject to the Fund's compliance with applicable regulations, the Fund has
reserved the right to pay the redemption or repurchase price of shares of the
Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash) from the Fund's portfolio. The securities so
distributed would be valued at the same amount as that assigned to them in
calculating the net asset value for the shares being sold. If a shareholder
received a distribution in kind, the shareholder could incur brokerage or
transaction charges in converting the securities to cash.
Due to the relatively high cost of maintaining small accounts, the Fund reserves
the right to redeem shares in any account for their then-current value (which
will be promptly paid to the shareholder) if at any time the total investment in
such account drops below $500 because of redemptions, except in the case of
accounts established for monthly automatic investments and certain payroll
savings programs, Automatic Exchange Plan accounts and tax-deferred retirement
plans, for which there is a lower minimum investment requirement (see
"Purchases"). Shareholders will be notified that the value of their account is
less than the minimum investment requirement and allowed 60 days to make an
additional investment before the redemption is processed. No CDSC will be
imposed with respect to such involuntary redemptions.
SIGNATURE GUARANTEE: In order to protect shareholders to the greatest extent
possible against fraud, the Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent.
CONTINGENT DEFERRED SALES CHARGE: Investments ("Direct Purchases") will be
subject to a CDSC for a period of 12 months (in the case of purchases of $1
million or more of Class A shares) or six years (in the case of purchases of
Class B shares). Purchases of Class A shares made during a calendar month,
regardless of when during the month the investment occurred, will age one month
on the last day of the month and each subsequent month. Class B shares purchased
on or after January 1, 1993 will be aggregated on a calendar month basis -- all
transactions made during a calendar month, regardless of when during the month
they have occurred, will age one year at the close of business on the last day
of such month in the following calendar year and each subsequent year. For Class
B shares of the Fund purchased prior to January 1, 1993, transactions will be
aggregated on a calendar year basis -- all transactions made during a calendar
year, regardless of when during the year they have occurred, will age one year
at the close of business on December 31 of that year and each subsequent year.
At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class represented by Direct Purchases exceeds the sum
of the six calendar year aggregations (12 months in the case of purchases of $1
million or more of Class A shares) of Direct Purchases may be redeemed without
charge ("Free Amount"). Moreover, no CDSC is ever assessed on additional shares
acquired through the automatic reinvestment of dividends or capital gain
distributions ("Reinvested Shares").
Therefore, at the time of redemption of shares of a particular class, (i) any
Free Amount is not subject to the CDSC, and (ii) the amount of the redemption
equal to the then-current value of Reinvested Shares is not subject to the CDSC,
but (iii) any amount of redemption in excess of the aggregate of the
then-current value of Reinvested Shares and the Free Amount is subject to a
CDSC. The CDSC will first be applied against the amount of Direct Purchases
which will result in any such charge being imposed at the lowest possible rate.
The CDSC to be imposed upon redemptions will be calculated as set forth in
"Purchases" above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except that, with respect to transfers of registration to an IRA
rollover account, the CDSC will be waived if the shares being reregistered would
have been eligible for a CDSC waiver had they been redeemed.
DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A and Class B
shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Rule"), after having concluded that there is a reasonable likelihood that the
plans would benefit the Fund and its shareholders.
CLASS A DISTRIBUTION PLAN. The Class A Distribution Plan provides that the
Fund will pay MFD a distribution/service fee aggregating up to (but not
necessarily all of) 0.35% of the average daily net assets attributable to Class
A shares annually in order that MFD may pay expenses on behalf of the Fund
related to the distribution and servicing of Class A shares. The expenses to be
paid by MFD on behalf of the Fund include a service fee to securities dealers
which enter 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 that are owned by
investors for whom such securities dealer is the holder or dealer of record.
This fee is intended to be partial consideration for all personal services
and/or account maintenance services rendered by the dealer with respect to Class
A shares. MFD may from time to time reduce the amount of the service fee paid
for shares sold prior to a certain date. MFD may also retain a distribution fee
of 0.10% per annum of the Fund's average daily net assets attributable to Class
A shares as partial consideration for services performed and expenses incurred
in the performance of MFD's obligations under its distribution agreement with
the Fund. MFD, however, is currently waiving this 0.10% per annum distribution
fee and will not in the future accept payment of this fee unless it first
obtains the approval of the Fund's Board of Trustees. In addition, to the extent
that the aggregate of the foregoing fees does not exceed 0.35% per annum of the
average daily net assets of the Fund attributable to Class A shares, the Fund is
permitted to pay other distribution-related expenses, including commissions to
dealers and payments to wholesalers employed by MFD for sales at or above a
certain dollar level. Fees payable under the Class A Distribution Plan are
charged to, and therefore reduce, income allocated to Class A shares. Service
fees may be reduced for a securities dealer that is the holder or dealer of
record for an investor who owns shares of the Fund having a net asset value at
or above a certain dollar level. Dealers may from time to time be required to
meet certain criteria in order to receive service fees. MFD or its affiliates
are entitled to retain all service fees payable under the Class A Distribution
Plan for which there is no dealer of record or for which qualification standards
have not been met as partial consideration for personal services and/or account
maintenance services performed by MFD or its affiliates for shareholder
accounts. Certain banks and other financial institutions that have agency
agreements with MFD will receive service fees that are the same as service fees
to dealers.
CLASS B DISTRIBUTION PLAN. The Class B Distribution Plan provides that the
Fund will pay MFD a daily distribution fee equal on an annual basis to 0.75% of
the Fund's average daily net assets attributable to Class B shares and will pay
MFD a service fee of up to 0.25% per annum of the Fund's average daily net
assets attributable to Class B shares (which MFD will in turn pay to securities
dealers which enter into a sales agreement with MFD at a rate of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be additional consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to Class B shares. Fees payable under the Class B Distribution Plan
are charged to, and therefore reduce, income allocated to Class B shares. The
Class B Distribution Plan also provides that MFD will receive all CDSCs
attributable to Class B shares (see "Redemptions and Repurchases" above), which
do not reduce the distribution fee. MFD will pay commissions to dealers of 3.75%
of the purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee at a rate equal to 0.25% per annum
of the purchase price of such shares and, as compensation therefor, MFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Therefore, the total amount paid to a dealer upon the
sale of shares is 4.00% of the purchase price of the shares (commission rate of
3.75% plus service fee equal to 0.25% of the purchase price). Dealers will
become eligible for additional service fees with respect to such shares
commencing in the thirteenth month following the purchase. Dealers may from time
to time be required to meet certain criteria in order to receive service fees.
MFD or its affiliates are entitled to retain all service fees payable under the
Class B Distribution Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by MFD or its affiliates
for shareholder accounts. The purpose of the distribution payments to MFD under
the Class B Distribution Plan is to compensate MFD for its distribution services
to the Fund. Since MFD's compensation is not directly tied to its expenses, the
amount of compensation received by MFD during any year may be more or less than
its actual expenses. For this reason, this type of distribution fee arrangement
is characterized by the staff of the SEC as being of the "compensation" variety.
However, the Fund is not liable for any expenses incurred by MFD in excess of
the amount of compensation it receives. The expenses incurred by MFD, including
commissions to dealers, are likely to be greater than the distribution fees for
the next several years, but thereafter such expenses may be less than the amount
of the distribution fees. Certain banks and other financial institutions that
have agency agreements with MFD will receive agency transaction and service fees
that are the same as commissions and service fees to dealers.
DISTRIBUTIONS
The Fund intends to pay substantially all of its net investment income for any
calendar year to its shareholders as dividends on an annual basis. The Fund may
make one or more distributions during the calendar year to its shareholders from
any long-term capital gains and also may make one or more distributions during
the calendar year to its shareholders from short-term capital gains.
Shareholders may elect to receive dividends and capital gain distributions in
either cash or additional shares of the same class to which a distribution is
made. See "Tax Status" and "Shareholder Services -- Distribution Options" below.
Distributions paid by the Fund with respect to Class A shares will generally be
greater than those paid with respect to Class B shares because expenses
attributable to Class B shares will generally be higher.
TAX STATUS
In order to minimize the taxes the Fund would otherwise be required to pay, the
Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Code and to make distributions to its shareholders in
accordance with the timing requirements imposed by the Code. It is expected that
the Fund will not be required to pay entity level federal income or excise
taxes, although foreign-source income received by the Fund may be subject to
foreign withholding taxes.
Shareholders of the Fund normally will have to pay federal income taxes and any
state or local taxes on the dividends and capital gain distributions they
receive from the Fund, whether paid in cash or in additional shares. A portion
of the dividends received from the Fund (but none of the Fund's capital gain
distributions) may qualify for the dividends-received deduction for
corporations. A statement setting forth the federal income status of all
dividends and distributions for each year, including any portion taxable as
ordinary income, any portion taxable as long-term capital gains, the portion, if
any, representing a return of capital (which is generally free of current taxes,
but results in a basis reduction), and the amount, if any, of federal income tax
withheld will be sent to each shareholder promptly after the end of such year.
Fund distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares shortly before the Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
The Fund intends to withhold U.S. federal income tax at the rate of 30% on
dividends and other payments that are subject to such withholding and that are
made to persons who are neither citizens nor residents of the U.S., regardless
of whether a lower rate may be permitted under an applicable treaty. The Fund is
also required in certain circumstances to apply backup withholding at a rate of
31% on taxable dividends and redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the Fund certain information and certifications or who
is otherwise subject to backup withholding. However, backup withholding will not
be applied to payments which have been subject to 30% withholding. Prospective
investors should read the Fund's Account Application for additional information
regarding backup withholding of federal income tax and should consult their own
tax advisers as to the tax consequences to them of an investment in the Fund.
NET ASSET VALUE
The net asset value per share of each class of the Fund is determined each day
during which the Exchange is open for trading. This determination is made once
each day as of the close of regular trading on the Exchange by deducting the
amount of the liabilities attributable to the class from the value of the assets
attributable to the class and dividing the difference by the number of shares of
the class outstanding. Values of assets in the Fund's portfolio are determined
on the basis of their market or other fair value, as described in the Statement
of Additional Information. The net asset value per share of each class of shares
is effective for orders received by the dealer prior to its calculation and
received by MFD prior to the close of that business day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has two classes of shares, entitled Class A and Class B Shares of
Beneficial Interest (without par value). Each share of a class of the Fund
represents an equal proportionate interest in the Fund with each other share of
that class of the Fund subject to any liabilities of the particular class.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of shareholders.
Each class of shares of the Fund will vote separately on any material increase
in the fees under its Distribution Plan or on any other matter that affects
solely that class of shares, but will otherwise vote together with all other
classes of shares of the Fund on all other matters. The Fund does not intend to
hold annual shareholder meetings. The Fund's Declaration of Trust provides that
a Trustee may be removed from office in certain instances (see "Description of
Shares, Voting Rights and Liabilities" in the Statement of Additional
Information).
Shares have no pre-emptive or conversion rights (except as set forth above in
"Purchases -- Conversion of Class B Shares"). Shares are fully paid and
non-assessable. Should the Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances.
The Fund reserves the right to create and issue a number of series and
additional classes of shares, in which case the shares of each class of a series
would participate equally in the earnings, dividends and assets attributable to
that class of that particular series. Shares of each series would be entitled to
vote separately to approve investment advisory agreements or changes in
investment restrictions but shares of all series would vote together in the
election or selection of Trustees and accountants.
The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance (e.g., fidelity bonding and errors and omissions insurance) existed
and the Fund itself was unable to meet its obligations.
PERFORMANCE INFORMATION
From time to time, the Fund will provide total rate of return quotations for
each class of shares and may also quote fund rankings in the relevant fund
category from various sources, such as the Lipper Analytical Services, Inc. and
Weisenberger Investment Companies Service. Total rate of return quotations will
reflect the average annual percentage change over stated periods in the value of
an investment in a class of shares of the Fund made at the maximum public
offering price of the shares of that class with all distributions reinvested and
which, if quoted for periods of six years or less, will give effect to the
imposition of the CDSC assessed upon redemptions of the Fund's Class B shares.
Such total rate of return quotations may be accompanied by quotations which do
not reflect the reduction in value of the initial investment due to the sales
charge, and which will thus be higher. The Fund's total rate of return
quotations are based on historical performance and are not intended to indicate
future performance. The Fund's quotations may from time to time be used in
advertisements, shareholder reports or other communications to shareholders. For
a discussion of the manner in which the Fund will calculate its total rate of
return, see the Statement of Additional Information. For further information
about the Fund's performance for the fiscal year ended December 31,1994, please
see the Fund's Annual Report. A copy of the Annual Report may be obtained
without charge by contacting the Shareholder Servicing Agent (see back cover for
address and phone number). In addition to information provided in shareholder
reports, the Fund may, in its discretion, from time to time, make a list of all
or a portion of its holdings available to investors upon request.
7. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Fund should contact the Shareholder Servicing
Agent (see back cover for address and phone number).
ACCOUNT AND CONFIRMATION STATEMENTS: Each shareholder will receive confirmation
statements showing the transaction activity in his account. At the end of each
calendar year, each shareholder will receive information regarding the tax
status of reportable dividends and distributions for that year (see "Tax Status"
above).
DISTRIBUTION OPTIONS: The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional
shares. This option will be assigned if no other option is specified;
-- Dividends in cash; capital gain distributions reinvested in additional
shares;
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gain
distributions in amounts less than $10 will automatically be reinvested in
additional shares of the Fund. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividends and other distributions reinvested in additional shares. Any request
to change a distribution option must be received by the Shareholder Servicing
Agent by the record date for a dividend or distribution in order to be effective
for that dividend or distribution. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, the
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with the Fund or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the Statement of Additional Information) anticipates purchasing
$50,000 or more of Class A shares of the Fund alone or in combination with
shares of any classes of other MFS Funds or MFS Fixed Fund within a 13-month
period (or a 36-month period for purchases of $1 million or more), the
shareholder may obtain such shares at the same reduced sales charge as though
the total quantity were invested in one lump sum, subject to escrow agreements
and the appointment of an attorney for redemptions from the escrow amount if the
intended purchases are not completed, by completing the Letter of Intent section
of the Account Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when his new investment, together
with the current offering price value of all holdings of all classes of shares
of that shareholder in the MFS Funds or MFS Fixed Fund reaches a discount level.
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of another MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic payments,
as designated on the Account Application and based upon the value of his
account. Each payment under a Systematic Withdrawal Plan (a "SWP") must be at
least $100, except in certain limited circumstances. The aggregate withdrawals
of Class B shares in any year pursuant to a SWP will not be subject to a CDSC
and are generally limited to 10% of the value of the account at the time of the
establishment of the SWP. The CDSC will not be waived in the case of SWP
redemptions of Class A shares which are subject to a CDSC.
DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account twice monthly, monthly or quarterly.
Required forms are available from the Shareholder Servicing Agent or investment
dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
other MFS Funds if such fund is available for sale under the Automatic Exchange
Plan, a dollar cost averaging program. The Automatic Exchange Plan provides for
automatic monthly or quarterly exchanges of funds from the shareholder's account
in an MFS Fund for investment in the same class of shares of other MFS Funds
selected by the shareholder. Under the Automatic Exchange Plan, exchanges of at
least $50 each may be made to up to four different funds. A shareholder should
consider the objectives and policies of a fund and review its prospectus before
electing to exchange money into such fund through the Automatic Exchange Plan.
No transaction fee is imposed in connection with exchange transactions under the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market Fund,
MFS Government Money Market Fund or Class A shares of MFS Cash Reserve Fund will
be subject to any applicable sales charge. For federal and (generally) state
income tax purposes, an exchange is treated as a sale of the shares exchanged
and, therefore, could result in a capital gain or loss to the shareholder making
the exchange. See the Statement of Additional Information for further
information concerning the Automatic Exchange Plan. Investors should consult
their tax advisers for information regarding the potential capital gain and loss
consequences of transactions under the Automatic Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of shares
regardless of fluctuating share offering prices, a shareholder should consider
his financial ability to continue his purchases through periods of low price
levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares, and because of the
assessment of the CDSC for certain share redemptions in the case of Class A
shares.
TAX-DEFERRED RETIREMENT PLANS -- Shares of the Fund may be purchased by all
types of tax-deferred retirement plans, including IRAs, SEP-IRAs, 401(k)
plans, 403(b) plans and other corporate pension and profit-sharing plans.
Investors should consult with their tax advisers before establishing any of the
tax-deferred retirement plans described above.
----------------
The Fund's Statement of Additional Information, dated May 1, 1995, contains more
detailed information about the Fund, including, but not limited to, information
related to (i) investment objective, policies and restrictions, (ii) Trustees,
officers and investment adviser, (iii) portfolio transactions and brokerage
commissions, (iv) the method used to calculate total rate of return quotations,
(v) the Class A and Class B Distribution Plans, and (vi) various services and
privileges provided for the benefit of its shareholders, including additional
information with respect to the exchange privilege.
APPENDIX A
DESCRIPTION OF OPTIONS, FUTURES AND FORWARD CONTRACTS
OPTIONS ON SECURITIES
An option on a security provides the purchaser, or "holder," with the right, but
not the obligation, to purchase, in the case of a "call" option, or sell, in the
case of a "put" option, the security or securities underlying the option, for a
fixed exercise price up to a stated expiration date or, in the case of certain
options, on such date. The holder pays a non-refundable purchase price for the
option, known as the "premium." The maximum amount of risk the purchaser of the
option assumes is equal to the premium plus related transaction costs, although
this entire amount may be lost. The risk of the seller, or "writer," however, is
potentially unlimited, unless the option is "covered" which is generally
accomplished, for example, through the writer's ownership of the underlying
security, in the case of a call option, or the writer's segregation of an amount
of cash or securities equal to the exercise price in the case of a put option.
If the writer's obligation is not so covered, it is subject to the risk of the
full change in value of the underlying security from the time the option is
written until exercise.
Upon exercise of the option, the holder is required to pay the purchase price of
the underlying security, in the case of a call option, or to deliver the
security in return for the purchase price in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities and options on indexes of securities, discussed below, are
traded on national securities exchanges, such as the Chicago Board Options
Exchange and the New York Stock Exchange, which are regulated by the SEC. The
Options Clearing Corporation guarantees the performance of each party to an
exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded options
on securities and options on indexes of securities only through a registered
broker-dealer which is a member of the exchange on which the option is traded.
In addition, options on securities and options on indexes of securities are
traded over-the-counter through financial institutions dealing in such options.
Such options are traded in a manner substantially similar to exchange-traded
options, except that many of the protections offered in an exchange environment,
such as a clearing house performance guarantee, are not available. The
particular risks of over-the-counter transactions are set forth more fully in
the Statement of Additional Information.
OPTIONS ON STOCK INDICES
In contrast to an option on a security, an option on a stock index provides the
holder with the right to make or receive a cash settlement upon exercise of the
option, rather than the right to purchase or sell a security. The amount of this
settlement is equal to (i) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a call) or is below (in the case of a put)
the closing value of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." The purchaser of the option receives this cash
settlement amount if the closing level of the stock index on the day of exercise
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The writer of the option is obligated, in return
for the premium received, to make delivery of this amount if the option is
exercised. As in the case of options on securities, the writer or holder may
liquidate positions in stock index options prior to exercise or expiration by
entering into closing transactions on the exchange on which such positions were
established, subject to the availability of a liquid secondary market.
The index underlying a stock index option may be a "broad-based" index, such as
the Standard & Poor's 500 Index or the New York Stock Exchange Composite Index,
the changes in value of which ordinarily will reflect movements in the stock
market in general. In contrast, certain options may be based on narrower market
indexes, such as the Standard & Poor's 100 Index, or on indexes of securities of
particular industry groups, such as those of oil and gas or technology
companies. A stock index assigns relative values to the stocks included in the
index and the index fluctuates with changes in the market values of the stocks
so included.
FUTURES CONTRACTS
A "sale" of a Futures Contract means a contractual obligation to make or receive
a cash settlement, in the case of a stock index Futures Contract, or to deliver
the securities called for by the contract at a specified price in a fixed
delivery month, in the case of an interest rate Futures Contract. A "purchase"
of a Futures Contract means a contractual obligation to make or receive a cash
settlement, in the case of a stock index Futures Contract, or to acquire the
securities called for by the contract at a specified price in a fixed delivery
month, in the case of an interest rate Futures Contract. Futures Contracts
differ from options in that they are bilateral agreements, with both the
purchaser and the seller equally obligated to complete the transaction. In
addition, Futures Contracts call for settlement only on the expiration date, and
cannot be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract also differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or security underlying the Futures Contract fluctuates, making positions
in the Futures Contract more or less valuable, a process known as "marking to
the market."
A Futures Contract may be purchased or sold only on an exchange, known as a
"contract market," designated by the Commodity Futures Trading Commission for
the trading of such contracts, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each clearing member party to a Futures Contract,
by in effect taking the opposite side of such Contract. At any time prior to the
expiration of a Futures Contract, a trader may elect to close out its position
by taking an opposite position on the contract market on which the position was
entered into, subject to the availability of a secondary market, which will
operate to terminate the initial position. At that time, a final determination
of variation margin is made and any loss experienced by the trader is required
to be paid to the contract market clearing house while any profit due to the
trader must be delivered to it.
OPTIONS ON FUTURES CONTRACTS
An Option on a Futures Contract provides the holder with the right to enter into
a "long" position in the underlying Futures Contract (i.e., the purchase of a
Futures Contract), in the case of a call option, or a "short" position in the
underlying Futures Contract (i.e., the sale of a Futures Contract), in the case
of a put option, at a fixed exercise price up to a stated expiration date or, in
the case of certain options, on such date. Upon exercise of the option by the
holder, the contract market clearing house establishes a corresponding short
position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of Futures Contracts, such as payment of margin deposits. In
addition, the writer of an Option on a Futures Contract, unlike the holder, is
subject to initial and variation margin requirements on the option position.
Options on Futures Contracts that are written or purchased by the Fund are
traded on the same contract market as the underlying Futures Contract.
A position in an Option on a Futures Contract may be terminated by the purchaser
or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether on a security, an index or a Futures Contract, becomes
worthless to the holder when it expires. Upon exercise of an option, the
exchange or contract market clearing house assigns exercise notices on a random
basis to those of its members which have written options of the same series and
with the same expiration date. A brokerage firm receiving such notices then
assigns them on a random basis to those of its customers which have written
options of the same series and expiration date. A writer therefore has no
control over whether an option will be exercised against it, nor over the timing
of such exercise.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A Forward Contract is a contractual obligation to purchase or sell a specific
quantity of a given foreign currency for a fixed exchange rate at a future date.
Forward Contracts are individually negotiated and are traded through the
"interbank currency market," an informal network of banks and brokerage firms
which operates around the clock and throughout the world. Transactions in the
interbank market may be executed only through financial institutions acting as
market-makers in the interbank market, or through brokers executing purchases
and sales through such institutions. Market-makers in the interbank market
generally act as principals in taking the opposite side of their customers'
positions in Forward Contracts, and ordinarily charge a mark-up or commission
which may be included in the cost of the Forward Contract. In addition,
market-makers may require their customers to deposit collateral upon entering
into a Forward Contract, as security for the customer's obligation to make or
receive delivery of currency, and to deposit additional collateral if exchange
rates move adversely to the customer's position. Such deposits may function in a
manner similar to the margining of Futures Contracts, described above.
Prior to the stated maturity date of a Forward Contract, it may be possible to
liquidate the transaction by entering into an offsetting Contract. In order to
do so, however, a customer may be required to maintain both Contracts as open
positions until maturity and to make or receive a settlement of the difference
owed to or from the market-maker or broker at that time.
<PAGE>
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Custodian and Dividend Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Shareholder Servicing Agent
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Toll-free: (800) 225-2606
Mailing Address:
P.O. Box 2281
Boston, MA 02107-9906
Independent Accountants
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
[LOGO] MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) GROWTH
OPPORTUNITIES FUND
500 Boylston Street
Boston, MA 02116 MGO-1 5/95/124M 16/216
[LOGO] MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) GROWTH OPPORTUNITIES FUND
Prospectus
May 1, 1995
<PAGE>
[LOGO] MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) GROWTH STATEMENT OF
OPPORTUNITIES FUND ADDITIONAL INFORMATION
(A member of the MFS Family of Funds(R)) May 1, 1995
- --------------------------------------------------------------------------------
Page
----
1. Definitions ................................................. 2
2. The Fund .................................................... 2
3. Investment Objective, Policies and Restrictions ............. 2
4. Management of the Fund ...................................... 9
Trustees ................................................. 9
Officers ................................................. 10
Investment Adviser ....................................... 10
Custodian ................................................ 11
Shareholder Servicing Agent .............................. 11
Distributor .............................................. 11
5. Portfolio Transactions and Brokerage Commissions ............ 12
6. Shareholder Services ........................................ 13
Investment and Withdrawal Programs ....................... 13
Exchange Privilege ....................................... 15
Tax-Deferred Retirement Plans ............................ 16
7. Tax Status .................................................. 16
8. Determination of Net Asset Value and Performance ............ 17
9. Distribution Plans .......................................... 18
10. Description of Shares, Voting Rights and Liabilities ........ 20
11. Independent Accountants and Financial Statements ............ 20
Appendix A (Description of Bond Ratings) .................... 22
Appendix B .................................................. 24
MFS GROWTH OPPORTUNITIES FUND
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information (the "SAI") sets forth information
which may be of interest to investors but which is not necessarily included in
the Fund's Prospectus, dated May 1, 1995. This SAI should be read in conjunction
with the Prospectus, a copy of which may be obtained without charge by
contacting the Shareholder Servicing Agent (see last page for address and phone
number).
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>
1. DEFINITIONS
"Fund" -- MFS Growth Opportunities Fund, a Massachusetts
business trust. The Fund was known as MFS
Capital Development Fund until August 17, 1993
and was known as Massachusetts Capital
Development Fund until August 3, 1992.
"MFS" or the "Adviser" -- Massachusetts Financial Services Company, a
Delaware corporation.
"MFD" -- MFS Fund Distributors, Inc., a Delaware
corporation.
"Prospectus" -- The Prospectus, dated May 1, 1995, of the Fund.
2. THE FUND
The predecessor of the Fund -- Massachusetts Capital Development Fund, Inc. (the
"Company") -- was incorporated under the laws of The Commonwealth of
Massachusetts in 1970. The Fund was reorganized as a Massachusetts business
trust on July 29, 1985 pursuant to an Agreement and Plan of Reorganization dated
July 16, 1985. The reorganization received shareholder approval on March 29,
1985. All references in this SAI to the Fund's past activities are intended to
include those of the Company, unless the context indicates otherwise.
3. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE. The Fund's investment objective is to seek growth of
capital. Dividend income, if any, is a consideration incidental to the Fund's
objective of growth of capital. There are risks involved in any investment and
there can be no assurance that the Fund's investment objective will be achieved.
INVESTMENT POLICIES. While the Fund's policy is to invest primarily in common
stocks, it may seek appreciation in other types of securities such as fixed
income securities (which may be unrated), convertible bonds, convertible
preferred stocks and warrants when relative values make such purchases appear
attractive either as individual issues or as types of securities in certain
economic environments. There is no formula as to the percentage of assets that
may be invested in any one type of security. The Prospectus contains a
discussion of the various types of securities in which the Fund may invest and
the risks involved in such investments some of which are described further
below.
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS: Fixed income
securities that the Fund may invest in also include zero coupon bonds, deferred
interest bonds and bonds on which the interest is payable in kind ("PIK bonds").
Zero coupon and deferred interest bonds are debt obligations which are issued at
a significant discount from face value. The discount approximates the total
amount of interest the bonds will accrue and compound over the period until
maturity or the first interest payment date at a rate of interest reflecting the
market rate of the security at the time of issuance. While zero coupon bonds do
not require the periodic payment of interest, deferred interest bonds provide
for a period of delay before the regular payment of interest begins. PIK bonds
are debt obligations which provide that the issuer may, at its option, pay
interest on such bonds in cash or in the form of additional debt obligations.
Such investments benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. Such investments may experience greater
volatility in market value than debt obligations which make regular payments of
interest. The Fund will accrue income on such investments for tax and accounting
purposes, which is distributable to shareholders and which, because no cash is
received at the time of accrual, may require the liquidation of other portfolio
securities to satisfy the Fund's distribution obligations.
LENDING OF SECURITIES: The Fund may seek to increase its income by lending
portfolio securities. Such loans will usually be made only to member banks of
the Federal Reserve System and to member firms (and subsidiaries thereof) of the
New York Stock Exchange (the "Exchange") and would be required to be secured
continuously by collateral in cash, cash equivalents, or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Fund would have the right to call a
loan and obtain the securities loaned at any time on customary industry
settlement notice (which will usually not exceed five days). During the
existence of a loan, the Fund would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would also
receive compensation based on investment of the collateral. The Fund would not,
however, have the right to vote any securities having voting rights during the
existence of the loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or of the giving or withholding
of their consent on a material matter affecting the investment. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower fail financially. However, the
loans would be made only to firms deemed by the Adviser to be of good standing,
and when, in the judgment of the Adviser, the consideration which could be
earned currently from securities loans of this type justifies the attendant
risk. If the Adviser determines to make securities loans, it is not intended
that the value of the securities loaned would exceed 30% of the value of the
Fund's total assets.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements with
sellers who are member firms (or a subsidiary thereof) of the Exchange or
members of the Federal Reserve System, recognized primary U.S. Government
securities dealers or institutions which the Adviser has determined to be of
comparable creditworthiness. The securities that the Fund purchases and holds
through its agent are U.S. Government securities, the values of which are equal
to or greater than the repurchase price agreed to be paid by the seller. The
repurchase price may be higher than the purchase price, the difference being
income to the Fund, or the purchase and repurchase prices may be the same, with
interest at a standard rate due to the Fund together with the repurchase price
on repurchase. In either case, the income to the Fund is unrelated to the
interest rate on the U.S. Government securities.
The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, the Fund will have the right to liquidate the securities. If at the time
the Fund is contractually entitled to exercise its right to liquidate the
securities, the seller is subject to a proceeding under the bankruptcy laws or
its assets are otherwise subject to a stay order, the Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
only enters into repurchase agreements after the Adviser has determined that the
seller is creditworthy, and the Adviser monitors that seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value of the
securities (which are marked to market every business day) is required to be
greater than the repurchase price, and the Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.
"WHEN-ISSUED" SECURITIES: When the Fund commits to purchase a security on a
"when-issued" or "forward delivery" basis, it will set up procedures consistent
with policies promulgated by the Securities and Exchange Commission (the "SEC")
concerning such purchases. Since that policy currently recommends that an amount
of the Fund's assets equal to the amount of the purchase be held aside or
segregated to be used to pay for the commitment, the Fund will always have cash,
short-term money market instruments or high quality debt securities sufficient
to cover any commitments or to limit any potential risk. However, although the
Fund does not intend to make such purchases for speculative purposes and intends
to adhere to policies promulgated by the SEC, purchases of securities on such
bases may involve more risk than other types of purchases. For example, the Fund
may have to sell assets which have been set aside in order to meet redemptions.
Also, if the Fund determines it necessary to sell the "when-issued" or "forward
delivery" securities before delivery, it may incur a loss because of market
fluctuations since the time the commitment to purchase such securities was made.
FOREIGN SECURITIES: The Fund may invest up to 50% (and expects generally to
invest between 0% and 50%) of its total assets in foreign securities (not
including American Depositary Receipts). As discussed in the Prospectus,
investing in foreign securities generally represent a greater degree of risk
than investing in domestic securities, due to possible exchange rate
fluctuations, less publicly available information, more volatile markets, less
securities regulation, less favorable tax provisions, war or expropriation. As a
result of its investments in foreign securities, the Fund may receive interest
or dividend payments, or the proceeds of the sale or redemption of such
securities, in the foreign currencies in which such securities are denominated.
Under certain circumstances, such as where the Adviser believes that the
applicable exchange rate is unfavorable at the time the currencies are received
or the Adviser anticipates, for any other reason, that the exchange rate will
improve, the Fund may hold such currencies for an indefinite period of time.
While the holding of currencies will permit the Fund to take advantage of
favorable movements in the applicable exchange rate, such strategy also exposes
the Fund to risk of loss if exchange rates move in a direction adverse to the
Fund's position. Such losses could reduce any profits or increase any losses
sustained by the Fund from the sale or redemption of securities and could reduce
the dollar value of interest or dividend payments received. The Fund may also
hold foreign currency in anticipation of purchasing foreign securities.
AMERICAN DEPOSITARY RECEIPTS: American Depositary Receipts ("ADRs") are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. ADRs may be sponsored or unsponsored. A sponsored
ADR is issued by a depository which has an exclusive relationship with the
issuer of the underlying security. An unsponsored ADR may be issued by any
number of U.S. depositories. The Fund may invest in either type of ADR. Although
the U.S. investor holds a substitute receipt of ownership rather than direct
stock certificates, the use of the depository receipts in the United States can
reduce costs and delays as well as potential currency exchange and other
difficulties. The Fund may purchase securities in local markets and direct
delivery of these ordinary shares to the local depository of an ADR agent bank
in the foreign country. Simultaneously, the ADR agents create a certificate
which settles at the Fund's custodian in five days. The Fund may also execute
trades on the U.S. markets using existing ADRs. A foreign issuer of the security
underlying an ADR is generally not subject to the same reporting requirements in
the United States as a domestic issuer. Accordingly, the information available
to a U.S. investor will be limited to the information the foreign issuer is
required to disclose in its own country and the market value of an ADR may not
reflect undisclosed material information concerning the issuer of the underlying
security. ADRs may also be subject to exchange rate risks if the underlying
foreign securities are denominated in foreign currency.
RISKS OF INVESTING IN LOWER RATED BONDS: As noted in the Prospectus, the Fund
may invest in fixed income securities rated Baa by Moody's Investors Services,
Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch") and comparable unrated securities. These
securities, while normally exhibiting adequate protection parameters, may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher grade fixed income securities.
The Fund may also invest in securities rated Ba or lower by Moody's or BB or
lower by S&P or Fitch and comparable unrated securities (commonly known as "junk
bonds"). While no minimum rating standard is required by the Fund, it is
contemplated that the Fund's non-convertible long-term debt investments will
consist primarily of "investment grade" securities rated at least Baa by Moody's
or BBB by S&P or Fitch (and comparable unrated securities) and that the
convertible debt investments will consist primarily of securities rated at least
Ba by Moody's or BB by S&P or Fitch (and comparable unrated securities).
Securities rated BB or lower by S&P or Fitch or Ba or lower by Moody's are
considered speculative and, while generally providing greater income than
investments in higher rated securities, will involve greater risk of principal
and income (including the possibility of default or bankruptcy of the issuers of
such securities) and may involve greater volatility of price (especially during
periods of economic uncertainty or change) than securities in the higher rating
categories and because yields vary over time, no specific level of income can
ever be assured. These lower rated high yielding fixed income securities
generally tend to reflect economic changes (and the outlook for economic
growth), short-term corporate and industry developments and the market's
perception of their credit quality (especially during times of adverse
publicity) to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates (although these
lower rated fixed income securities are also affected by changes in interest
rates). In the past, economic downturns or an increase in interest rates have,
under certain circumstances, caused a higher incidence of default by the issuers
of these securities and may do so in the future, especially in the case of
highly leveraged issuers. The prices for these securities may be affected by
legislative and regulatory developments. For example, federal rules require that
savings and loan associations gradually reduce their holdings of high-yield
securities. An effect of such legislation may be to depress the prices of
outstanding lower rated high yielding fixed income securities. The market for
these lower rated fixed income securities may be less liquid than the market for
investment grade fixed income securities. Furthermore, the liquidity of these
lower rated securities may be affected by the market's perception of their
credit quality. Therefore, judgment may at times play a greater role in valuing
these securities than in the case of investment grade fixed income securities,
and it also may be more difficult during times of certain adverse market
conditions to sell these lower rated securities to meet redemption requests or
to respond to changes in the market.
While the Adviser may refer to ratings issued by established credit rating
agencies, it is not the Fund's policy to rely exclusively on ratings issued by
these rating agencies, but rather to supplement such ratings with the Adviser's
own independent and ongoing review of credit quality. To the extent the Fund
invests in these lower rated securities, the achievement of its investment
objective may be more dependent on the Adviser's own credit analysis than in the
case of a fund investing in higher quality fixed income securities.
OTHER INVESTMENT POLICIES: The Fund has also adopted the following policies: The
Fund's purchases of warrants will not exceed 5% of its net assets. Included
within that amount, but not exceeding 2% of its net assets, may be warrants
which are not listed on the New York or American Stock Exchange. Any such
warrants will be valued at their market value except that warrants which are
attached to securities at the time such securities are acquired by the Fund will
be deemed to be without value for the purpose of this restriction.
The investment policies described above, as well as the policies described below
regarding options, Futures Contracts, Options on Futures Contracts and Forward
Contracts, are not fundamental and may be changed without shareholder approval,
as may the Fund's investment objective.
INDEXED SECURITIES: The Fund may purchase securities whose prices are indexed to
the prices of other securities, securities indices, currencies, precious metals
or other commodities, or other financial indicators. Indexed securities
typically, but not always, are debt securities or deposits whose value at
maturity or coupon rate is determined by reference to a specific instrument or
statistic. Gold-indexed securities, for example, typically provide for a
maturity value that depends on the price of gold, resulting in a security whose
price tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt securities whose
maturity values or interest rates are determined by reference to the values of
one or more specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed securities
may be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
that performs similarly to a foreign-denominated instrument, or their maturity
value may decline when foreign currencies increase, resulting in a security
whose price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the U.S. and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Recent issuers of
indexed securities have included banks, corporations, and certain U.S.
government agencies.
OPTIONS ON SECURITIES: The Fund may write (sell) covered call and put options on
securities and purchase call and put options on securities. The Fund may write
options on securities for the purpose of increasing its return on such
securities and for hedging purposes. A call option written by the Fund would be
covered if the Fund owned the security underlying the call or had an absolute
and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities held in its
portfolio. A call option would also be covered if the Fund held a call on the
same security and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, short-term money
market instruments or high grade fixed income securities in a segregated account
with its custodian. A put option written by the Fund would be "covered" if the
Fund maintained cash, short-term money market instruments or high grade
government securities with a value equal to the exercise price in a segregated
account with its custodian, or else held a put on the same security and in the
same principal amount as the put written where the exercise price of the put
held is equal to or greater than the exercise price of the put written. Put and
call options on securities written by the Fund may also be covered in such other
manner as may be in accordance with the requirements of the exchange on which,
or the counterparty with which, they are traded and applicable laws and
regulations.
Effecting a closing transaction in the case of a written call option will permit
the Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both, or in the case of a written
put option will permit the Fund to write another put option to the extent that
the exercise price thereof is secured by deposited cash or short-term
securities. Such transactions permit the Fund to generate additional premium
income, which will partially offset declines in the value of portfolio
securities or increases in the cost of securities to be acquired. Also,
effecting a closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
investments of the Fund, provided that another option on such security is not
written. If the Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will effect a closing transaction in
connection with the option prior to or concurrent with the sale of the security.
The Fund will realize a profit from a closing transaction if the premium paid in
connection with the closing of an option written by the Fund is less than the
premium received from writing the option, or if the premium received in
connection with the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, the Fund will suffer a loss
if the premium paid or received in connection with a closing transaction is more
or less, respectively, than the premium received or paid in establishing the
option position. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the closing out of a call option previously written by the
Fund is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.
The Fund may write options in connection with buy-and-write transactions; that
is, the Fund may purchase a security and then write a call option against that
security. The exercise price of the call option the Fund determines to write
will depend upon the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"), equal to ("at-
the-money") or above ("out-of-the-money") the current value of the underlying
security at the time the option is written. If the call options are exercised in
such transactions, the Fund's maximum gain will be the premium received by it
for writing the option, adjusted upwards or downwards by the difference between
the Fund's purchase price of the security and the exercise price. If the options
are not exercised and the price of the underlying security declines, the amount
of such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put options could be used by the
Fund in the same market environments that call options would be used in
equivalent buy-and-write transactions.
The Fund may write combinations of put and call options on the same security, a
practice known as a "straddle." By writing a straddle, the Fund undertakes a
simultaneous obligation to sell and purchase the same security in the event that
one of the options is exercised. If the price of the security subsequently rises
sufficiently above the exercise price to cover the amount of the premium and
transaction costs, the call will likely be exercised and the Fund will be
required to sell the underlying security at a below market price. This loss may
be offset, however, in whole or in part, by the premiums received on the writing
of the two options. Conversely, if the price of the security declines by a
sufficient amount, the put will likely be exercised. The writing of straddles
will likely be effective, therefore, only where the price of a security remains
stable and neither the call nor the put is exercised. In an instance where one
of the options is exercised, the loss on the purchase or sale of the underlying
security may exceed the amount of the premiums received.
By writing a call option, the Fund limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise price
of the option. By writing a put option, the Fund assumes the risk that it may be
required to purchase the underlying security for an exercise price above its
then-current market value, resulting in a loss unless the security subsequently
appreciated in value. The writing of options on securities will be undertaken by
the Fund for purposes in addition to hedging, and could involve certain risks
which are not present in the case of hedging transactions. Moreover, even where
options are written for hedging purposes, such transactions will constitute only
a partial hedge against declines in the value of portfolio securities or against
increases in the value of securities to be acquired, up to the amount of the
premium.
The Fund also may purchase put and call options on securities. Put options would
be purchased to hedge against a decline in the value of securities held in the
Fund's portfolio. If such a decline occurs, the put options will permit the Fund
to sell the underlying securities at the exercise price, or to close out the
options at a profit. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and related transaction costs. The Fund
may purchase call options to hedge against an increase in the price of
securities that the Fund anticipates purchasing in the future. If such an
increase occurs, the call option will permit the Fund to purchase the securities
at the exercise price or to close out the option at a profit. The premium paid
for a call or put option plus any transaction costs will reduce the benefit, if
any, realized by the Fund upon exercise of the option, and, unless the price of
the underlying security rose or declined sufficiently, the option may expire
worthless to the Fund.
OPTIONS ON STOCK INDICES: The Fund may write (sell) covered call and put options
on stock indices and purchase call and put options on stock indices for the
purpose of increasing its gross income and to protect its portfolio against
declines in the value of securities it owns or increases in the value of
securities to be acquired.
The Fund may cover call options on stock indices by owning securities whose
price changes, in the opinion of the Adviser, are expected to be similar to
those of the index, or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities in its portfolio. Where the Fund covers a call
option on a stock index through ownership of securities, such securities may not
match the composition of the index and, in that event, the Fund will not be
fully covered and could be subject to risk of loss in the event of adverse
changes in the value of the index. The Fund may also cover call options on stock
indices by holding a call on the same index and in the same principal amount as
the call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash, short-term money market instruments or high grade fixed income
securities in a segregated account with its custodian. The Fund may cover put
options on stock indices by maintaining cash, short-term money market
instruments or high grade fixed income securities with a value equal to the
exercise price in a segregated account with its custodian, or else by holding a
put on the same index and in the same principal amount as the put written where
the exercise price of the put held is equal to or greater than the exercise
price of the put written. Put and call options on stock indices written by the
Fund may also be covered in such other manner as may be in accordance with the
requirements of the exchange on which, or the counterparty with which, they are
traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of an index on which the Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation in
the Fund's stock investments. By writing a put option, the Fund assumes the risk
of a decline in the index. To the extent that the price changes of securities
owned by the Fund correlate with changes in the value of the index, writing
covered put options on indices will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.
The purchase of call options on stock indexes may be used by the Fund to attempt
to reduce the risk of missing a broad market advance, or an advance in an
industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for
this purpose, the Fund will also bear the risk of losing all or a portion of the
premium paid, and related transaction costs, if the value of the index does not
rise. The purchase of call options on stock indices when the Fund is
substantially fully invested is a form of leverage, up to the amount of the
premium and related transaction costs, and involves risks of loss and of
increased volatility similar to those involved in purchasing calls on securities
the Fund owns.
The Fund also may purchase put options on stock indices to hedge its investments
against a decline in value. By purchasing a put option on a stock index, the
Fund will seek to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option, plus related
transaction costs. The success of this strategy will largely depend on the
accuracy of the correlation between the changes in value of the index and the
changes in value of the Fund's security holdings.
FUTURES CONTRACTS: The Fund may enter into stock index or interest rate futures
contracts ("Futures Contracts") in order to attempt to protect the Fund's
current or intended stock investments from broad fluctuations in stock prices.
For example, the Fund may sell Futures Contracts in anticipation of or during a
decline in market prices or a rise in interest rates to attempt to offset the
decrease in market value of the Fund's securities portfolio that might otherwise
result. If such market decline or interest rate increase occurs, the loss in
value of portfolio securities may be offset, in whole or in part, by gains on
the futures position. When the Fund is not fully invested in the securities
market and anticipates a significant market advance or decrease in interest
rates, it may purchase Futures Contracts in order to gain rapid market exposure
that may, in part or in whole, offset increases in the cost of securities that
the Fund intends to purchase. As such acquisitions are made, the corresponding
positions in Futures Contracts will be closed out. In a substantial majority of
these transactions, the Fund will purchase such securities upon the termination
of the futures position, but under unusual market conditions, a long futures
position may be terminated without a related purchase of securities. The Fund
may also enter into Futures Contracts for non-hedging purposes, to the extent
permitted by applicable law.
OPTIONS ON FUTURES CONTRACTS: The Fund may write or purchase options to buy or
sell Futures Contracts ("Options on Futures Contracts"). The writing of a call
Option on a Futures Contract may constitute a partial hedge against declining
prices of the security, or the securities comprising the index, underlying the
Futures Contract. If the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the option premium, less
related transaction costs, which provides a partial hedge against any decline
that may have occurred in the Fund's portfolio holdings. The writing of a put
Option on a Futures Contract may constitute a partial hedge against increasing
prices of the security, or the securities comprising the index, underlying the
Futures Contract. If the futures price at expiration of the option is higher
than the exercise price, the Fund will retain the full amount of the option
premium, less related transaction costs, which provides a partial hedge against
any increase in the price of securities which the Fund intends to purchase. If a
put or call option the Fund has written is exercised, the Fund will incur a loss
which will be reduced by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, the Fund's losses from
existing Options on Futures Contracts may to some extent be reduced or increased
by changes in the value of portfolio securities.
The Fund may cover the writing of call Options on Futures Contracts (a) through
purchases of the underlying Futures Contract, (b) through ownership of the
security, or securities included in the index, underlying the Futures Contract
or (c) through the holding of a call on the same Futures Contract and in the
same principal amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call written or (ii)
is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, short-term money market instruments or high
grade fixed income securities in a segregated account with its custodian. The
Fund may cover the writing of put Options on Futures Contracts (a) through sales
of the underlying Futures Contract, (b) through segregation of cash, short-term
money market instruments or high grade fixed income securities in an amount
equal to the value of the security or index underlying the Futures Contract or
(c) through the holding of a put on the same Futures Contract and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. Put and call
Options on Futures Contracts written by the Fund may also be covered in such
other manner as may be in accordance with the requirements of the exchange on
which they are traded and applicable laws and regulations. Upon the exercise of
a call Option on a Futures Contract written by the Fund, the Fund will be
required to sell the underlying Futures Contract which, if the Fund has covered
its obligation through the purchase of such Contract, will serve to liquidate
its futures position. Similarly, where a put Option on a Futures Contract
written by the Fund is exercised, the Fund will be required to purchase the
underlying Futures Contract which, if the Fund has covered its obligation
through the sale of such Contract, will close out its futures position.
The Fund may purchase Options on Futures Contracts in part for hedging purposes
as an alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline or increase in interest rates, the
Fund could, in lieu of selling Futures Contracts, purchase put options thereon.
In the event that such decrease occurs, it may be offset, in whole or part, by a
profit on the option. Conversely, where it is projected that the value of
securities to be acquired by the Fund will increase prior to acquisition, due to
a market advance or decrease in interest rates, the Fund could purchase call
Options on Futures Contracts, rather than purchasing the underlying Futures
Contracts. The Fund may also enter into transactions in Options on Futures
Contracts for non-hedging purposes subject to applicable law.
FORWARD CONTRACTS: The Fund may enter into contracts for the purchase or sale of
a specific currency at a future date at a price set at the time the contract is
entered into (a "Forward Contract"), for hedging purposes as well as for
non-hedging purpose. The Fund may also enter into Forward Contracts for
"cross-hedging" purposes as noted in the Prospectus. The Fund will enter into
Forward Contracts for the purpose of protecting its current or intended
investments from fluctuations in currency exchange rates.
A Forward Contract to sell a currency may be entered into where the Fund seeks
to protect against an anticipated increase in the exchange rate for a specific
currency which could reduce the dollar value of portfolio securities denominated
in such currency. Conversely, the Fund may enter into a Forward Contract to
purchase a given currency to protect against a projected increase in the dollar
value of securities denominated in such currency which the Fund intends to
acquire.
If a hedging transaction in Forward Contracts is successful, the decline in the
value of portfolio securities or the increase in the cost of securities to be
acquired may be offset, at least in part, by profits on the Forward Contract.
Nevertheless, by entering into such Forward Contracts, the Fund may be required
to forego all or a portion of the benefits which otherwise could have been
obtained from favorable movements in exchange rates. The Fund does not presently
intend to hold Forward Contracts entered into until maturity, at which time it
would be required to deliver or accept delivery of the underlying currency, but
will seek in most instances to close out positions in such Contracts by entering
into offsetting transactions, which will serve to fix the Fund's profit or loss
based upon the value of the Contracts at the time the offsetting transaction is
executed.
The Fund has established procedures consistent with statements by the SEC and
its staff regarding the use of Forward Contracts by registered investment
companies, which require the use of segregated assets or "cover" in connection
with the purchase and sale of such Contracts. In those instances in which the
Fund satisfies this requirement through segregation of assets, it will maintain,
in a segregated account, cash, cash equivalents or high grade debt securities,
which will be marked to market on a daily basis, in an amount equal to the value
of its commitments under Forward Contracts.
RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO -- The Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts and Forward
Contracts will depend on the degree to which price movements in the underlying
index or instrument correlate with price movements in the relevant portion of
the Fund's portfolio. Because the securities in the Fund's portfolio will most
likely not be the same as those securities comprising a stock index or
underlying interest rate Futures Contracts, the correlation between movements in
the portfolio and in the securities underlying the index or Futures Contract
will not be perfect. The trading of Futures Contracts and options entails the
additional risk of imperfect correlation between movements in the futures or
option price and the price of the underlying index or obligation. The
anticipated spread between the prices may be distorted due to the differences in
the nature of the markets, such as differences in margin requirements, the
liquidity of such markets and the participation of speculators in such markets.
In this regard, trading by speculators in options and Futures Contracts has in
the past occasionally resulted in market distortions, which may be difficult or
impossible to predict, particularly near the expiration of such contracts. It
should be noted that Futures Contracts or options based upon a narrower index of
securities, such as those of a particular industry group, may present greater
risk than options or Futures Contracts based on a broad market index, because a
narrower index is more susceptible to rapid and extreme fluctuations as a result
of changes in the value of a small number of securities. The trading of Options
on Futures Contracts also entails the risk that changes in the value of the
underlying Futures Contracts will not be fully reflected in the value of the
option. Further, with respect to options on securities, options on stock indices
and Options on Futures Contracts, the Fund is subject to the risk of market
movements between the time that the option is exercised and the time of
performance thereunder. In writing a covered call option on a security, index or
Futures Contract, the Fund also incurs the risk that changes in the value of the
instruments used to cover the position will not correlate closely with changes
in the value of the option or underlying index or instrument.
The Fund will invest in a hedging instrument only if, in the judgment of its
Adviser, there would be expected to be a sufficient degree of correlation
between movements in the value of the instrument and movements in the value of
the relevant portion of the Fund's portfolio for such hedge to be effective.
There can be no assurance that the Adviser's judgment will be accurate.
It should also be noted that the Fund may purchase and sell options on
securities and stock indices, Futures Contracts, Options on Futures Contracts
and Forward Contracts not only for hedging purposes, but also for non-hedging
purposes, to the extent permitted by applicable law, for the purpose of
increasing its return on portfolio securities. As a result, in the event of
adverse market movements, the Fund might be subject to losses which would not be
offset by increases in the value of portfolio securities or declines in the cost
of securities to be acquired. In addition, the method of covering an option
employed by the Fund may not fully protect it against risk of loss and, in any
event, the Fund could suffer losses on the option position which might not be
offset by corresponding portfolio gains.
With respect to the writing of straddles on securities, the Fund would incur the
risk that the price of the underlying security will not remain stable, that one
of the options written will be exercised and that the resulting loss will not be
offset by the amount of the premiums received.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET -- Prior to exercise or expiration,
a futures or option position can only be terminated by entering into a closing
purchase or sale transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was entered into.
While the Fund will enter into options or futures positions only if there
appears to be a liquid secondary market therefor, there can be no assurance that
such a market will exist for any particular contracts at any specific time. In
that event, it may not be possible to close out a position held by the Fund and
the Fund could be required to purchase or sell the instrument underlying an
option, make or receive a cash settlement or meet ongoing variation margin
requirements. Under such circumstances, if the Fund had insufficient cash
available to meet margin requirements, it might be necessary to liquidate
portfolio securities at a time when it would be disadvantageous to do so. The
inability to close out options and futures positions, therefore, could have an
adverse impact on the Fund's ability to hedge its portfolios effectively and
could result in trading losses. The liquidity of a secondary market in a Futures
Contract or options thereon may also be adversely affected by "daily price
fluctuation limits," established by exchanges, which limit the amount of
fluctuation in the price of a contract during a single trading day. The trading
of Futures Contracts and options is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
MARGIN -- Because of low initial margin deposits made upon the opening of a
futures position and the writing of an option, such transactions involve
substantial leverage. As a result, relatively small movements in the price of
the contract can result in substantial unrealized gains or losses. Where the
Fund engages in the purchase or sale of options, Futures Contracts, Options on
Futures Contracts and Forward Contracts for hedging purposes, however, and any
losses incurred in connection therewith should, if the hedging strategy is
successful, be offset, in whole or in part, by increases in the value of
securities held by the Fund or decreases in the prices of securities the Fund
intends to acquire. Where the Fund purchases such investments for other than
hedging purposes, the margin requirements associated with such transactions
could expose the Fund to greater risk.
TRADING AND POSITION LIMITS -- The exchanges on which Futures Contracts and
options are traded may impose limitations governing the maximum number of
positions on the same side of the market and involving the same underlying
instrument which may be held by a single investor, whether acting alone or in
concert with others (regardless of whether such contracts are held on the same
or different exchanges or held or written in one or more accounts or through one
or more brokers). In addition, the Commodity Futures Trading Commission (the
"CFTC") and the various contract markets have established limits, referred to as
"speculative position limits," on the maximum net long or net short position
which any person may hold or control in a particular futures or option contract.
An exchange may order the liquidation of positions found to be in violation of
these limits and it may impose other sanctions or restrictions. The Adviser does
not believe that these trading and position limits will have any adverse impact
on the strategies for hedging the portfolio of the Fund.
RISK OF OPTIONS ON FUTURES CONTRACTS -- The amount of risk the Fund assumes when
it purchases an Option on a Futures Contract is the premium paid for the option,
plus related transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to liquidate the
underlying Futures Contract, subject to the risks of the availability of a
liquid offset market described herein. The writer of an Option on a Futures
Contract is subject to the risks of commodity futures trading, including the
requirement of initial and variation margin payments, as well as the additional
risk that movements in the price of the option may not correlate with movements
in the price of the underlying index or Futures Contract.
ADDITIONAL RISKS OF TRANSACTIONS NOT CONDUCTED ON EXCHANGES -- Transactions in
Forward Contracts are subject to all of the correlation, liquidity and other
risks outlined above. In addition, however, such transactions are subject to the
risk of governmental actions affecting trading in, or the prices of, currencies
underlying such Contracts, which could restrict or eliminate trading and could
have a substantial adverse effect on the value of positions held by the Fund. In
addition, the value of such positions could be adversely affected by a number of
other complex political and economic factors applicable to the countries issuing
the underlying currencies. Further, unlike trading in most other types of
instruments, there is no systematic reporting of last sale information with
respect to the foreign currencies underlying contracts thereon. As a result, the
available information on which trading systems will be based may not be as
complete as the comparable data on which the Fund makes investment and trading
decisions in connection with other transactions. Moreover, because the foreign
currency market is a global, 24- hour market, events could occur on that market
which would not be reflected in the forward markets until the following day,
thereby preventing the Fund from responding to such events in a timely manner.
Settlements of exercises of Forward Contracts generally must occur within the
country issuing the underlying currency, which in turn requires traders to
accept or make delivery of such currencies in conformity with any United States
or foreign restrictions and regulations regarding the maintenance of foreign
banking relationships, fees, taxes or other charges.
Forward Contracts and over-the-counter options on securities are not traded on
exchanges regulated by the CFTC or the SEC, but through financial institutions
acting as market-makers. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. In
addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Fund's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Fund. Where
no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the trading
of over-the-counter contracts, and the Fund could be required to retain options
purchased or written, or Forward Contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's ability to profit
from open positions or to reduce losses experienced, and could result in greater
losses. Further, over-the-counter transactions are not subject to the
performance guarantee of an exchange clearing house, and the Fund will therefore
be subject to the risk of default by, or the bankruptcy of, the financial
institution serving as its counterparty. In addition, where the Fund enters into
Forward Contracts as a "cross-hedge" (i.e., the purchase or sale of a Forward
Contract on one currency to hedge against risk of loss arising from changes in
value of a second currency), the Fund incurs the risk of imperfect correlation
between changes in the values of the two currencies, which could result in
losses.
While Forward Contracts are not presently subject to regulation by the CFTC, the
CFTC may in the future assert or be granted authority to regulate such
instruments. In such event, the Fund's ability to utilize Forward Contracts in
the manner set forth above could be restricted.
FURTHER POLICIES ON THE USE OF OPTIONS AND FUTURES -- In order to assure that
the Fund will not be deemed to be a "commodity pool" for purposes of the
Commodity Exchange Act, regulations of the CFTC require that the Fund enter into
transactions in Futures Contracts and options on Futures Contracts only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and premiums on
such non-hedging positions does not exceed 5% of the liquidation value of the
Fund's assets. In addition, the Fund must comply with the requirements of
various state securities laws in connection with such transactions.
The Fund has adopted the additional policy that it will not enter into a Futures
Contract if, immediately thereafter, the value of securities and other
obligations underlying all such Futures Contracts would exceed 50% of the value
of the Fund's total assets. Moreover, the Fund will not purchase put and call
options if, as a result, more than 5% of its total assets would be invested in
such options.
When the Fund purchases a Futures Contract, an amount of cash and cash
equivalents will be deposited in a segregated account with the Fund's custodian
so that the amount so segregated will at all times equal the value of the
Futures Contract, thereby assuring that the use of such Futures Contract is
unleveraged.
INVESTMENT RESTRICTIONS. The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of its
Fund's shares (which, as used in this SAI, means the lesser of (i) more than 50%
of the outstanding shares of the Fund (or a class, as applicable) or (ii) 67% or
more of the outstanding shares of the Fund (or a class, as applicable), present
at a meeting at which holders of more than 50% of the outstanding shares of the
Fund (or a class, as applicable) are represented in person or by proxy):
The Fund may not:
(1) borrow money in an amount in excess of 5% of its gross assets, and then
only as a temporary measure for extraordinary or emergency purposes, or
pledge, mortgage or hypothecate an amount of its assets (taken at market
value) in excess of 15% of its gross assets, in each case taken at the lower
of cost or market value (for the purpose of this restriction, collateral
arrangements with respect to options, Futures Contracts, Options on Futures
Contracts and Forward Contracts and payments of initial and variation margin
in connection therewith are not considered a pledge of assets);
(2) underwrite securities issued by other persons except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of 1933 in
selling a portfolio security;
(3) concentrate its investments in any particular industry, but if it is
deemed appropriate for the attainment of its investment objective, the Fund
may invest up to 25% of its assets (taken at market value at the time of each
investment) in securities of issuers in any one industry;
(4) purchase or sell real estate (including limited partnership interests
but excluding securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein), or mineral leases,
commodities or commodity contracts (except for Futures Contracts, Options on
Futures Contracts and Forward Contracts) in the ordinary course of its
business. The Fund reserves the freedom of action to hold and to sell real
estate or mineral leases, commodities or commodity contracts acquired as a
result of the ownership of securities. The Fund will not purchase securities
for the purpose of acquiring real estate or mineral leases, commodities or
commodity contracts (except for Futures Contracts, Options on Futures
Contracts and Forward Contracts);
(5) make loans to other persons. For these purposes the purchase of
short-term commercial paper, the purchase of a portion or all of an issue of
debt securities in accordance with its investment objectives and policies, the
lending of portfolio securities, or the investment of the Fund's assets in
repurchase agreements, shall not be considered the making of a loan;
(6) purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of its total assets (taken at market value)
to be invested in the securities of such issuer, other than U.S.
Government securities;
(7) purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held by the Fund; or purchase securities of any issuer if
such purchase at the time thereof would cause more than 10% of any class of
securities of such issuer to be held by the Fund. For this purpose all
indebtedness of an issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class;
(8) invest for the purpose of exercising control or management;
(9) purchase securities issued by any other registered investment company or
registered investment trust except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such purchase, though
not made in the open market, is part of a plan of merger or consolidation;
provided, however, that the Fund shall not purchase the securities of any
investment company or investment trust if such purchase at the time thereof
would cause more than 10% of its total assets (taken at market value) to be
invested in the securities of such issuers; and, provided further, that the
Fund shall not purchase securities issued by any open-end investment company;
(10) invest more than 5% of its assets in companies which, including
predecessors, have a record of less than three years' continuous operation;
(11) purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer
or Trustee of the Fund, or is an officer or Director of the Adviser, if after
the purchase of the securities of such issuer by the Fund one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or securities, or
both, of such issuer, and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such shares or
securities, or both;
(12) purchase any securities or evidences of interest therein on margin,
except that the Fund may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of securities and except that the Fund
may make deposits on margin in connection with options, Futures Contracts,
Options on Futures Contracts and Forward Contracts;
(13) sell any security which the Fund does not own unless by virtue of its
ownership of other securities the Fund has at the time of sale a right to
obtain securities without payment of further consideration equivalent in kind
and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions;
(14) purchase or sell any put or call option or any combination thereof,
provided, that this shall not prevent the purchase, ownership, holding or sale
of warrants where the grantor of the warrants is the issuer of the underlying
securities or the writing, purchasing and selling of puts, calls or
combinations thereof with respect to securities, indexes of securities and
Futures Contracts; or
(15) invest in securities which are subject to legal or contractual
restrictions on resale, or for which there is no readily available market
(e.g., trading in the security is suspended or, in the case of unlisted
securities, market makers do not exist or will not entertain bids or offers),
unless the Board of Trustees has determined that such securities are liquid
based upon trading markets for the specific security, if more than 10% of the
Fund's assets (taken at market value) would be invested in such securities.
These investment restrictions are adhered to at the time of purchase or
utilization of assets; a subsequent change in circumstances will not be
considered to result in a violation of policy.
4. MANAGEMENT OF THE FUND
The Board of Trustees of the Fund provides broad supervision over the affairs of
the Fund. The Adviser is responsible for the management of the Fund's assets,
and the officers of the Fund are responsible for its operations. The Trustees
and officers are listed below, together with their principal occupations during
the past five years. (Their titles may have varied during that period.)
TRUSTEES
A. KEITH BRODKIN,* Chairman and President
Massachusetts Financial Services Company, Chairman and Director
RICHARD B. BAILEY*
Private investor; Massachusetts Financial Services Company, former Chairman and
Director (until September 1991)
PETER J. HARWOOD
Loomis, Sayles & Co., Inc. (investment counsel firm), Financial Vice President,
Treasurer and Director (retired October 1988)
Address: 211 Lindsay Pond Road, Concord, Massachusetts
J. ATWOOD IVES
Eastern Enterprises (diversified holding company), Chairman and Chief Executive
Officer (since December 1991); General Cinema Corporation, Vice Chairman and
Chief Financial Officer (until December 1991); The Neiman Marcus Group, Inc.,
Vice Chairman and Chief Financial Officer (from August 1987 to December 1991);
United States Filter Corporation, Director
Address: 9 Riverside Road, Weston, Massachusetts
LAWRENCE T. PERERA
Hemenway & Barnes (attorneys), Partner
Address: 60 State Street, Boston, Massachusetts
WILLIAM J. POORVU
Harvard University Graduate School of Business Administration, Adjunct
Professor; CBL & Associates Properties, Inc. (a real estate investment trust),
Director; The Baupost Fund (a registered investment company), Vice Chairman
(since November 1993), Chairman and Trustee (from June 1990 until November
1993)
Address: Harvard Business School, Soldiers Field Road, Cambridge, Massachusetts
CHARLES W. SCHMIDT
Private investor; Raytheon Company (diversified electronics manufacturer),
Senior Vice President (until December 1990); OHM Corporation, Director; The
Boston Company, Director; Boston Safe Deposit and Trust Company, Director
Address: 30 Colpitts Road, Weston, Massachusetts
ARNOLD D. SCOTT*
Massachusetts Financial Services Company, Senior Executive Vice President and
Secretary
JEFFREY L. SHAMES*
Massachusetts Financial Services Company, President
ELAINE R. SMITH
Independent Consultant; Brigham and Women's Hospital, Executive Vice President
and Chief Operating Officer (from August 1990 to September 1992); Ernst &
Young (accountants), Consultant (from February to July 1990)
Address: Weston, Massachusetts
DAVID B. STONE
North American Management Corp. (investment advisers), Chairman
Address: 10 Post Office Square, Suite 300, Boston, Massachusetts
OFFICERS
A. KEITH BRODKIN,* Chairman and President
Massachusetts Financial Services Company, Chairman President and Director
W. THOMAS LONDON,* Treasurer
Massachusetts Financial Services Company, Senior Vice President
STEPHEN E. CAVAN,* Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President, General Counsel
and Assistant Secretary
JAMES R. BORDEWICK, JR.,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate General
Counsel (since September 1990); associated with major law firm (prior to
August 1990)
JAMES O. YOST,* Assistant Treasurer
Massachusetts Financial Services Company, Vice President
- ----------
*"Interested persons" (as defined in the Investment Company Act of 1940 ("the
1940 Act")) of the Adviser, whose address is 500 Boylston Street, Boston,
Massachusetts 02116.
Each Trustee and officer holds comparable positions with certain MFS affiliates
or with certain other funds of which MFS or a subsidiary of MFS is the
investment adviser or distributor. Mr. Brodkin, the Chairman of MFD, Messrs.
Shames and Scott, Directors of MFD, and Mr. Cavan, the Secretary of MFD, hold
similar positions with certain other MFS affiliates. Mr. Bailey is a Director of
Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)"), the
corporate parent of MFS.
The Fund pays the compensation of non-interested Trustees and Mr. Bailey (who
currently receive a fee of $2,500 per year plus $235 per meeting and committee
meeting attended, together with such Trustees' out-of-pocket expenses) and has
adopted a retirement plan for non-interested Trustees and Mr. Bailey. Under this
plan, a Trustee will retire upon reaching age 73 and if the Trustee has
completed at least five years of service, he would be entitled to annual
payments during his lifetime of up to 50% of such Trustee's average annual
compensation (based on the three years prior to his retirement) depending on his
length of service. A Trustee may also retire prior to age 73 and receive reduced
payments if he has completed at least five years of service. Under the plan, a
Trustee (or his beneficiaries) will also receive benefits for a period of time
in the event the Trustee is disabled or dies. These benefits will also be based
on the Trustee's average annual compensation and length of service. There is no
retirement plan provided by the Fund for the interested Trustees, except Mr.
Bailey. The Fund will accrue compensation expenses each year to cover current
year's service and amortize past service cost.
Set forth in Appendix B hereto is certain information concerning the cash
compensation paid to non-interested Trustees and Mr. Bailey and benefits
accrued, and estimated benefits payable, under the retirement plan.
As of March 31, 1995 all Trustees and officers as a group owned less than 1% of
the outstanding shares of the Fund.
As of March 31, 1995, Nationwide Life Insurance Company, P.O. Box 182029,
Columbus, Ohio owned 15.04% of the outstanding Class A shares of the Fund. As of
March 31, 1995, Merrill Lynch, Pierce, Fenner & Smith Inc., P.O. Box 45286,
Jacksonville, Florida owned 7.11% of the outstanding Class B shares and Michael
Biehle, FBO Biehle Electric Inc., W. State Highway, Seymour, Indiana owned 6.01%
of the outstanding Class B shares of the Fund.
The Fund's Declaration of Trust provides that it will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Fund, unless, as
to liabilities to the Fund or its shareholders, it is finally adjudicated that
they engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or with respect to any
matter, unless it is adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interest of the Fund. In
the case of settlement, such indemnification will not be provided unless it has
been determined pursuant to the Declaration of Trust that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a wholly owned subsidiary of Sun Life of Canada (U.S.), which
in turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life").
INVESTMENT ADVISORY AGREEMENT -- The Adviser manages the assets of the Fund
pursuant to an Advisory Agreement, dated July 19, 1985 (the "Advisory
Agreement") between the Adviser and the Fund. The Adviser provides the Fund with
overall investment advisory and administrative services, as well as general
office facilities. Subject to such policies as the Trustees may determine, the
Adviser makes investment decisions for the Fund. For these services and
facilities, the Adviser receives a management fee, computed and paid monthly, at
an annual rate equal to 0.5% of the Fund's average daily net assets not in
excess of $200 million and 0.4% of the Fund's average daily net assets in excess
of $200 million, in each case on an annualized basis.
For the Fund's fiscal year ended December 31, 1992, MFS received fees under the
Advisory Agreement of $2,952,182. For the Fund's fiscal year ended December 31,
1993, MFS received fees under the Advisory Agreement of $2,996,895. For the
Fund's fiscal year ended December 31, 1994, MFS received fees under the Advisory
Agreement of $2,779,813. In order to comply with the expense limitations of
certain state securities commissions, the Adviser will reduce its management fee
or otherwise reimburse the Fund for any expense, exclusive of interest, taxes
and brokerage commissions, incurred by the Fund in any fiscal year to the extent
such expenses exceed the most restrictive of such state expense limitations. The
Adviser will make appropriate adjustments to such reimbursements in response to
any amendment or recission of the various state requirements. Any such
adjustment would not become effective until the beginning of the Fund's next
fiscal year following the date of such amendments or the date on which such
requirements become no longer applicable.
The Fund pays all of its expenses (other than those assumed by the Adviser or
MFD) including: Trustee fees discussed above, governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund; fees and expenses of independent auditors, of legal counsel, and of
any transfer agent, registrar or dividend disbursing agent of the Fund; expenses
of repurchasing and redeeming shares; expenses of preparing, printing and
mailing share certificates, periodic reports, notices and proxy statements to
shareholders and to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of State Street
Bank and Trust Company, the Fund's Custodian, for all services to the Fund,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the Fund; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses for such purposes are borne by the Fund
except that the Fund's Distribution Agreement with MFD requires MFD to pay for
prospectuses that are to be used for sales purposes. For a list of the Fund's
expenses, including the compensation paid to the Trustees who are not officers
of the Adviser, during the Fund's fiscal year ended December 31, 1994, see
"Financial Statements -- Statement of Operations" in the Annual Report. Payment
by the Fund of brokerage commissions for brokerage and research services of
value to the Adviser in serving its clients is discussed under the caption
"Portfolio Transactions and Brokerage Commissions."
MFS pays the compensation of the Fund's officers and of any Trustee who is an
officer of the Adviser. The Adviser also furnishes at its own expense all
necessary administrative services, including office space, equipment, clerical
personnel, investment advisory facilities and all executive and supervisory
personnel necessary for managing the Fund's investments, effecting the Fund's
portfolio transactions and, in general, administering the Fund's affairs.
The Advisory Agreement will remain in effect until August 1, 1995, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares (as defined in "Investment Restrictions") and, in either case, by
a majority of the Trustees who are not parties to the Fund's Advisory Agreement
or interested persons of any such party. The Advisory Agreement terminates
automatically if it is assigned and may be terminated without penalty by vote of
a majority of the Fund's outstanding shares (as defined above) or by either
party on not more than 60 days' nor less than 30 days' written notice. The
Advisory Agreement provides that MFS may render services to others and that
neither the Adviser nor its personnel shall be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Advisory Agreement.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest and dividends on the
Fund's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of each class of shares of the Fund. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as principal in securities transactions. The Trustees have reviewed and approved
as in the best interests of the Fund and its shareholders the sub- custodial
arrangements with The Chase Manhattan Bank, N.A. for securities of the Fund held
outside the United States. The Custodian also acts as dividend disbursing agent
of the Fund. The Custodian has contracted with the Adviser for the Adviser to
perform certain accounting functions related to options transactions for which
the Adviser receives remuneration on a cost basis.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agent Agreement, effective August 1, 1985 (the "Agency
Agreement") with the Fund. The Shareholder Servicing Agent's responsibilities
under the Agency Agreement include administering and performing transfer agent
functions and keeping records in connection with the issuance, transfer and
redemption of each class of the shares of the Fund. For these services, the
Shareholder Servicing Agent will receive a fee based on the net assets of each
class of shares of the Fund, computed and paid monthly. In addition, the
Shareholder Servicing Agent will be reimbursed by the Fund for certain expenses
incurred by the Shareholder Servicing Agent on behalf of the Fund. For the
fiscal year ended December 31, 1994, the Fund paid the Shareholder Servicing
Agent $926,875 under its Agency Agreement. State Street Bank and Trust Company,
the dividend and distribution disbursing agent of the Fund, has contracted with
the Shareholder Servicing Agent to administer and perform certain dividend and
distribution disbursing functions for the Fund.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the continuous
offering of shares of the Fund pursuant to a Distribution Agreement, dated
January 1, 1995 (the "Distribution Agreement"). Prior to January 1, 1995, MFS
Financial Services, Inc. ("FSI"), another wholly owned subsidiary of MFS, was
the Fund's distributor. Where this SAI refers to MFD in relation to the receipt
or payment of money with respect to a period or periods prior to January 1,
1995, such reference shall be deemed to include FSI, as the predecessor in
interest to MFD.
CLASS A SHARES: MFD acts as agent in selling Class A shares of the Fund to
dealers. The public offering price of Class A shares of the Fund is their net
asset value next computed after the sale plus a sales charge which varies based
upon the quantity purchased. The public offering price of Class A shares of the
Fund is calculated by dividing net asset value of a Class A share by the
difference (expressed as a decimal) between 100% and the sales charge percentage
of offering price applicable to the purchase (see "Purchases" in the
Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of the Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS Funds")
and other Funds (as noted under Right of Accumulation) by any person, including
members of a family unit (e.g., husband, wife and minor children) and bona fide
trustees, and also applies to purchases made under the Right of Accumulation or
a Letter of Intent (see "Investment and Withdrawal Programs" below). A group
might qualify to obtain quantity sales charge discounts (see "Investment and
Withdrawal Programs" in this Statement of Additional Information).
Class A shares of the Fund may be sold at their net asset value to certain
persons and in certain instances as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others with
whom MFS, MFD and/or the Fund have business relationships, and because the sales
effort, if any, involved in making such sales is negligible.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases"). The difference between the total
amount invested and the sum of (a) the net proceeds to the Fund and (b) the
dealer commission is the commission paid to the distributor. Because of rounding
in the computation of offering price, the portion of the sales charge paid to
the distributor may vary and the total sales charge may be more or less than the
sales charge calculated using the sales charge expressed as a percentage of
offering price or as a percentage of the net amount invested as listed in the
Prospectus. In the case of the maximum sales charge, the dealer retains 5% and
MFD retains approximately 3/4 of 1% of the public offering price. In addition,
MFD, on behalf of the Fund, pays commissions to dealers who initiate and are
responsible for purchases of $1 million or more as described in the Prospectus.
CLASS B SHARES: MFD acts as agent in selling Class B shares of the Fund to
dealers. The public offering price of Class B shares is their net asset value
next computed after the sale (see "Purchases" in the Prospectus).
GENERAL: Neither MFD nor dealers are permitted to delay placing orders to
benefit themselves by a price change. Occasionally, MFD may obtain brokers loans
from various banks, including the custodian banks for the MFS Funds, to
facilitate the settlement of sales of shares of the Fund to dealers. MFD may
benefit from its temporary holding of funds paid to it by investment dealers for
the purchase of Fund shares.
For the Fund's fiscal year ended December 31, 1994, MFD received sales charges
of $56,405 and dealers received sales charges of $361,275 (as their concession
on gross sales charges of $417,680) for selling Class A shares of the Fund; the
Fund received $22,722,275 representing the aggregate net asset value of such
shares. For the Fund's fiscal year ended December 31, 1994, the CDSC imposed on
redemption of Class A shares was approximately $3,245. For the Fund's fiscal
year ended December 31, 1993, MFD received sales charges of $67,696 and dealers
received sales charges of $440,129 (as their concession on gross sales charges
of $507,825) for selling Class A shares of the Fund; the Fund received
$28,264,381 representing the aggregate net asset value of such shares. During
the Fund's fiscal year ended December 31, 1992, MFD received sales charges of
$82,983 and dealers received sales charges of $554,488 (as their concession on
gross sales charges of $637,471) for selling Class A shares of the Fund; the
Fund received $41,866,549 representing the aggregate net asset value of such
shares. For the Fund's fiscal year ended December 31, 1994, the CDSC imposed on
redemption of Class B shares was approximately $2,336. During the period
September 7, 1993 through December 31, 1993, the CDSC imposed on redemption of
Class B shares was approximately $500.
The Distribution Agreement will remain in effect until August 1, 1996, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares (as defined in "Investment Restrictions") and, in either case, by
a majority of the Trustees who are not parties to the Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.
5. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by a
portfolio committee which consists of employees of the Adviser who are appointed
and supervised by its senior officers. Changes in the Fund's investments are
reviewed by the Board of Trustees. Members of the Fund's portfolio committee may
serve other clients of the Adviser or any subsidiary of the Adviser in a similar
capacity.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. Securities
firms or futures commission merchants may receive brokerage commissions on
transactions involving options, Futures Contracts and Options on Futures
Contracts and the purchase and sale of underlying securities upon exercise of
options. The brokerage commissions associated with buying and selling options
may be proportionately higher than those associated with general securities
transactions. From time to time, soliciting dealer fees may be available to the
Adviser on the tender of the Fund's portfolio securities in so-called tender or
exchange offers. Such soliciting dealer fees will be in effect recaptured for
the Fund by the Adviser to the extent possible. At present no other recapture
arrangements are in effect.
Consistent with the foregoing primary consideration, the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. ("NASD"), and such other
policies as the Trustees may determine, the Adviser may consider sales of shares
of the Fund and of the other investment company clients of MFD as a factor in
the selection of broker-dealers to execute the Fund's portfolio transactions.
Under the Advisory Agreement and as permitted by Section 28(e) of the Securities
Exchange Act of 1934, the Adviser may cause the Fund to pay a broker-dealer,
which provides brokerage and research services to the Fund and to the Adviser,
an amount of commission for effecting a securities transaction for the Fund in
excess of the amount other broker-dealers would have charged for the
transaction, if the Adviser determines in good faith that the greater commission
is reasonable in relation to the value of the brokerage and research services
provided by the executing broker-dealer viewed in terms of either a particular
transaction or the Adviser's overall responsibilities to the Fund or to its
other clients. Not all of such services are useful or of value in advising the
Fund.
The term "brokerage and research services" includes: advice as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or of purchasers or sellers of securities;
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto, such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Fund and the Adviser's other clients in part for providing advice as to the
availability of securities or of purchasers or sellers of securities and
services in effecting securities transactions and performing functions
incidental thereto, such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other factual
information or services ("Research") to the Adviser for no consideration other
than brokerage or underwriting commissions. Securities may be bought or sold
from time to time through such broker-dealers on behalf of the Fund.The Trustees
of the Fund (together with the Trustees of the other MFS Funds) have directed
the Adviser to allocate a total of $20,000 of commission business from the MFS
Funds to the Pershing Division of Donaldson, Lufkin & Jenrette as consideration
for the annual renewal of the Lipper Directors' Analytical Data Service (which
provides information useful to the Trustees in reviewing the relationship
between the Fund and the Adviser).
The Adviser's investment management personnel attempt to evaluate the quality of
Research provided by brokers. Results of this effort are sometimes used by the
Adviser as a consideration in the selection of brokers to execute portfolio
transactions. However, the Adviser is unable to quantify the amount of
commissions set forth below which were paid as a result of such Research because
a substantial number of transactions were effected through brokers which provide
Research but which were selected principally because of their execution
capabilities.
The management fee paid by the Fund to the Adviser will not be reduced as a
consequence of the Adviser's receipt of brokerage and research services. To the
extent the Fund's portfolio transactions are used to obtain such services, the
brokerage commissions paid by the Fund will exceed those that might otherwise be
paid by an amount which cannot be presently determined. Such services would be
useful and of value to the Adviser in serving both the Fund and other clients
and conversely, such services obtained by the placement of brokerage business of
other clients would be useful to the Adviser in carrying out its obligations to
the Fund. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through use of the services, avoid the additional
expenses which would be incurred if it should attempt to develop comparable
information through its own staff.
For the fiscal years ended December 31, 1994, 1993 and 1992, the Fund paid
brokerage commissions of $1,558,456, $1,683,016 and $1,527,045, respectively, on
total transactions (excluding transactions involving U.S. Government securities
and short-term obligations for which no brokerage commissions are paid) of
$1,081,634,537, $1,136,122,516 and $1,385,340,745, respectively. For the fiscal
year ended December 31, 1994, the Fund acquired and retained securities issued
by Kidder Peabody, a regular broker-dealer of the Fund, which securities had a
value of $8,160,000. For the same period, the Fund acquired and retained
securities issued by Dean Witter Discover & Co. and Charles Schwab Corp.,
regular broker dealers of the Fund, which securities had values of $6,775,000
and $14,996,250, respectively.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for that of one or more of the other clients of the Adviser
or any subsidiary of the Adviser. Investment decisions for the Fund and for such
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as the Fund is concerned.
In other cases, however, the Fund believes that its ability to participate in
volume transactions will produce better executions for the Fund.
6. SHAREHOLDER SERVICES
INVESTMENT AND WITHDRAWAL PROGRAMS -- The Fund makes available the following
programs designed to enable shareholders to add to their investment or withdraw
from it with a minimum of paper work. These are described below and, in certain
cases, in the Prospectus. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $50,000 or more of Class A shares of the Fund
alone or in combination with shares of any classes of other MFS Funds or MFS
Fixed Fund within a 13-month period (or a 36-month period for purchases of $1
million or more), the shareholder may obtain Class A shares of the Fund at the
same reduced sales charge as though the total quantity were invested in one lump
sum by completing the Letter of Intent section of the Fund's Account Application
or filing a separate Letter of Intent application (available from the
Shareholder Servicing Agent) within 90 days of the commencement of purchases.
Subject to acceptance by MFD and the conditions mentioned below, each purchase
will be made at a public offering price applicable to a single transaction of
the dollar amount specified in the Letter of Intent application. The shareholder
or his dealer must inform MFD that the Letter of Intent is in effect each time
shares are purchased. The shareholder makes no commitment to purchase additional
shares, but if his purchases within 13 months (or 36 months in the case of
purchases of $1 million or more) plus the value of shares credited toward
completion of the Letter of Intent do not total the sum specified, he will pay
the increased amount of the sales charge as described below. Instructions for
issuance of shares in the name of a person other than the person signing the
Letter of Intent application must be accompanied by a written statement from the
dealer stating that the shares were paid for by the person signing such Letter.
Neither income dividends nor capital gain distributions taken in additional
shares will apply toward the completion of the Letter of Intent. Dividends and
distributions of other MFS Funds automatically reinvested in shares of the Fund
pursuant to the Distribution Investment Program will also not apply toward
completion of the Letter of Intent.
Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder or
to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month or 36-month period, as applicable), the
shareholder will be notified and the escrowed shares will be released.
If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released by
the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in the
premises.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when his new investment, together
with the current offering price value of all holdings of all classes of shares
of that shareholder in the MFS Funds or MFS Fixed Fund reaches a discount level.
See "Purchases" in the Prospectus for the sales charges on quantity discounts.
For example, if a shareholder owns shares with a current offering price value of
$37,500 and purchases an additional $12,500 of Class A shares of the Fund, the
sales charge for the $12,500 purchase would be at the rate of 4.75% (the rate
applicable to single transactions of $50,000). A shareholder must provide the
Shareholder Servicing Agent (or his investment dealer must provide MFD) with
information to verify that the quantity sales charge discount is applicable at
the time the investment is made.
DISTRIBUTION INVESTMENT PROGRAM: Distributions of dividends and capital gains
made by the Fund with respect to a particular class of shares may be
automatically invested in shares of the same class of one of the other MFS
Family of Funds, if such shares of the fund are available for sale. Such
investments will be subject to additional purchase minimums. Distributions will
be invested at net asset value (exclusive of any sales charge) and not subject
to any CDSC. Distributions will be invested at the close of business on the
payable date for the distribution. A shareholder considering the Distribution
Investment Program should obtain and read the prospectus of the other fund and
consider the differences in objectives and policies before making any
investment.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder Servicing
Agent to send him (or anyone he designates) regular periodic payments, as
designated on the Account Application and based upon the value of his account.
Each payment under a Systematic Withdrawal Plan (a "SWP") must be at least $100,
except in certain limited circumstances. The aggregate withdrawals of Class B
shares in any year pursuant to a SWP generally are limited to 10% of the value
of the account at the time of the establishment of the SWP. SWP payments are
drawn from the proceeds of share redemptions held in the shareholder's account
(which would be a return of principal and, if reflecting a gain, would be
taxable). Redemptions of Class B shares will be made in the following order: (i)
to the extent necessary, any "Free Amount"; (ii) any "Reinvested Shares"; and
(iii) to the extent necessary, the "Direct Purchase" subject to the lowest CDSC
(as such terms are defined in "Contingent Deferred Sales Charge" in the
Prospectus). The CDSC will be waived in the case of redemptions of Class B
shares pursuant to a SWP, but will not be waived in the case of SWP redemptions
of Class A shares which are subject to a CDSC. To the extent that redemptions
for such periodic withdrawals exceed dividend income reinvested in the account,
such redemptions will reduce and may eventually exhaust the number of shares in
the shareholder's account. All dividend and capital gain distributions for an
account with a SWP will be reinvested in additional full and fractional shares
of the Fund at the net asset value in effect at the close of business on the
record date for such distributions. To initiate this service, shares generally
having an aggregate value of at least $10,000 either must be held on deposit by,
or certificates for such shares must be deposited with, the Shareholder
Servicing Agent. With respect to Class A shares, maintaining a withdrawal plan
concurrently with an investment program would be disadvantageous because of the
sales charges included in share purchases and the imposition of a CDSC on
certain redemptions. The shareholder by written instruction to the Shareholder
Servicing Agent may deposit into the account additional shares of the Fund,
change the payee or change the dollar amount of each payment. The Shareholder
Servicing Agent may charge the account for services rendered and expenses
incurred beyond those normally assumed by the Fund with respect to the
liquidation of shares. No charge is currently assessed against the account, but
one could be instituted by the Shareholder Servicing Agent on 60 days' notice in
writing to the shareholder in the event that the Fund ceases to assume the cost
of these services. The Fund may terminate any SWP for an account if the value of
the account falls below $5,000 as a result of share redemptions (other than as a
result of a SWP) or an exchange of shares of the Fund for shares of another MFS
Fund. Any SWP may be terminated at any time by either the shareholder or the
Fund.
INVEST BY MAIL: Additional investments of $50 or more may be made at any time
by mailing a check payable to the Fund directly to the Shareholder Servicing
Agent. The shareholder's account number and the name of his investment dealer
must be included with each investment.
GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent), obtain quantity sales charge discounts on the purchase of Class A
shares if the group (1) gives its endorsement or authorization to the investment
program so it may be used by the investment dealer to facilitate solicitation of
the membership, thus effecting economies of sales effort; (2) has been in
existence for at least six months and has a legitimate purpose other than to
purchase mutual fund shares at a discount; (3) is not a group of individuals
whose sole organizational nexus is as credit cardholders of a company,
policyholders of an insurance company, customers of a bank or broker-dealer,
clients of an investment adviser or other similar groups; and (4) agrees to
provide certification of membership of those members investing money in the MFS
Funds upon the request of MFD.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
other MFS Funds (if available for sale) under the Automatic Exchange Plan. The
Automatic Exchange Plan provides for automatic exchanges of funds from the
shareholder's account in an MFS Fund for investment in the same class of shares
of other MFS Funds selected by the shareholder. Under the Automatic Exchange
Plan, exchanges of at least $50 may be made to up to four different funds
effective on the seventh day of each month or every third month, depending on
whether monthly or quarterly exchanges are elected by the shareholder. If the
seventh day of the month is not a business day, the transaction will be
processed on the next business day. Generally, the initial exchange will occur
after receipt and processing by the Shareholder Servicing Agent of an
application in good order. Exchanges will continue to be made from a
shareholder's account in any MFS Fund, as long as the balance of the account is
sufficient to complete the exchanges. Additional payments made to a
shareholder's account will extend the period that exchanges will continue to be
made under the Automatic Exchange Plan. However, if additional payments are
added to an account subject to the Automatic Exchange Plan shortly before the
exchange is scheduled, such funds may not be available for exchange until the
following month; therefore, care should be used to avoid inadvertently
terminating the Automatic Exchange Plan through exhaustion of the account
balance.
No transaction fee for exchanges will be charged in connection with the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market Fund,
MFS Government Money Market Fund and Class A shares of MFS Cash Reserve Fund
will be subject to any applicable sales charge. Changes in amounts to be
exchanged to each fund, the funds to which exchanges are to be made, the timing
of exchanges (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions in
writing or by telephone (an "Exchange Change Request") have been received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by the
record owner(s) exactly as shares are registered; if by telephone -- proper
account identification given by the dealer or shareholder of record). Each
Exchange Change Request (other than termination of participation in the program)
must involve at least $50. Generally, if an Exchange Change Request is received
by telephone or in writing before the close of business on the last business day
of a month, the Exchange Change Request will be effective for the following
month's exchange.
A shareholder's right to make additional investments in any of the MFS Funds, to
make exchanges of shares from one MFS Fund to another and to withdraw from an
MFS Fund, as well as a shareholder's other rights and privileges, are not
affected by a shareholder's participation in the Automatic Exchange Plan.
The Automatic Exchange Plan is part of the exchange privilege. For additional
information regarding the Automatic Exchange Plan, including the treatment of
any CDSC, see "Exchange Privilege" below.
REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the
other MFS Funds (except MFS Money Market Fund, MFS Government Money Market Fund
and Class A shares of MFS Cash Reserve Fund in the case where the shares are
acquired through direct purchase or reinvested dividends) who have redeemed
their shares have a one-time right to reinvest the redemption proceeds in the
same class of shares of any of the MFS Funds (if shares of the fund are
available for sale) at net asset value (without a sales charge) and, if
applicable, with credit for any CDSC paid. In the case of proceeds reinvested in
MFS Money Market Fund, MFS Government Money Market Fund and Class A shares of
MFS Cash Reserve Fund, the shareholder has the right to exchange the acquired
shares for shares of another MFS Fund at net asset value pursuant to the
exchange privilege described below. Such a reinvestment must be made within 90
days of the redemption and is limited to the amount of the redemption proceeds.
If the shares credited for any CDSC paid are then redeemed within six years of
their initial purchase in the case of Class B shares or within 12 months of the
initial purchase in the case of certain Class A shares, a CDSC will be imposed
upon redemption. Although redemptions and repurchases of shares are taxable
events, a reinvestment within a certain period of time in the same fund may be
considered a "wash sale" and may result in the inability to recognize currently
all or a portion of a loss realized on the original redemption for federal
income tax purposes. Please see your tax adviser for further information.
EXCHANGE PRIVILEGE -- Subject to the requirements set forth below, some or all
of the shares in an account with the Fund for which payment has been received by
the Fund (i.e., an established account) may be exchanged for shares of the same
class of any of the other MFS Funds (if available for sale) at net asset value.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received for an established account by the Shareholder
Servicing Agent.
Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of record),
and each exchange must involve either shares having an aggregate value of at
least $1,000 ($50 in the case of retirement plan participants whose sponsoring
organizations subscribe to the MFS FUNDamental 401(k) Plan or another similar
401(k) recordkeeping system made available by the Shareholder Servicing Agent or
all the shares in the account. Each exchange involves the redemption of the
shares of the Fund to be exchanged and the purchase at net asset value (i.e.,
without a sales charge) of shares of the same class of the other MFS Fund. Any
gain or loss on the redemption of the shares exchanged is reportable on the
shareholder's federal income tax return, unless both the shares received and the
shares surrendered in the exchange are held in a tax-deferred retirement plan or
other tax-exempt account. No more than five exchanges may be made in any one
Exchange Request by telephone. If the Exchange Request is received by the
Shareholder Servicing Agent prior to the close of regular trading on the
Exchange, the exchange usually will occur on that day if all the requirements
set forth above have been complied with at that time. However, payment of the
redemption proceeds by the Fund, and thus the purchase of shares of the other
MFS Fund, may be delayed for up to seven days if the Fund determines that such a
delay would be in the best interest of all its shareholders. Investment dealers
which have satisfied criteria established by MFD may also communicate a
shareholder's exchange instruction to MFD by facsimile subject to the
requirements set forth above.
No CDSC is imposed on exchanges among the MFS Funds, although liability for the
CDSC is carried forward to the exchanged shares. For purposes of calculating the
CDSC upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares.
Additional information with respect to any of the MFS Funds, including a copy of
its current prospectus, may be obtained from investment dealers or the
Shareholder Servicing Agent. A shareholder considering an exchange should obtain
and read the prospectus of the other MFS Fund and consider the differences in
objectives and policies before making any exchange. Shareholders of the other
MFS Funds (except shares of MFS Money Market Fund, MFS Government Money Market
Fund and Class A shares of MFS Cash Reserve Fund acquired through direct
purchase or dividends reinvested prior to June 1, 1992) have the right to
exchange their shares for shares of the Fund, subject to the conditions, if any,
set forth in their respective prospectuses. In addition, unitholders of the MFS
Fixed Fund have the right to exchange their units (except units acquired through
direct purchases) for shares of the Fund, subject to the conditions, if any,
imposed upon such unitholders by the MFS Fixed Fund.
Any state income tax advantages for investment in shares of each state- specific
series of MFS Municipal Series Trust may only benefit residents of such states.
Investors should consult with their own tax advisers to be sure this is an
appropriate investment, based on their residency and each state's income tax
laws.
The exchange privilege (or any aspect of it) may be changed or discontinued and
is subject to certain limitations (see "Purchases" in the Prospectus).
TAX-DEFERRED RETIREMENT PLANS -- Shares of the Fund may be purchased by all
types of tax-deferred retirement plans. MFD makes available, through investment
dealers, plans and/or custody agreements for the following:
Individual Retirement Accounts (IRAs) (for individuals and their non-
employed spouses who desire to make limited contributions to a tax-deferred
retirement program and, if eligible, to receive a federal income tax
deduction for amounts contributed);
Simplified Employee Pension (SEP-IRA) Plans;
Retirement Plans Qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended;
403(b) Plans (deferred compensation arrangements for employees of public
school systems and certain non-profit organizations); and
Certain other qualified pension and profit-sharing plans.
The plan documents and forms provided by MFD designate a trustee or custodian
(unless another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and distributions will be reinvested automatically.
For further details with respect to any plan, including fees charged by the
trustee, custodian or MFD, tax consequences and redemption information, see the
specific documents for that plan. Plan documents other than those provided by
MFD may be used to establish any of the plans described above. Third party
administrative services, available for some corporate plans, may limit or delay
the processing of transactions.
Investors should consult with their tax adviser before establishing any of the
tax-deferred retirement plans described above.
7. TAX STATUS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute all of
its net investment income and net realized capital gains to shareholders in
accordance with the timing requirements imposed by the Code, it is not expected
that the Fund will be required to pay any federal income or excise taxes,
although the Fund's foreign-source income may be subject to foreign withholding
taxes. If the Fund should fail to qualify as a "regulated investment company" in
any year, the Fund would incur a regular corporate federal income tax upon its
taxable income and Fund distributions would generally be taxable as ordinary
dividend income to shareholders. As long as it qualifies as a "regulated
investment company" under the Code, the Fund will not be required to pay
Massachusetts income or excise taxes.
Shareholders of the Fund normally will have to pay federal income taxes, and any
state and local taxes, on the dividends and capital gain distributions which
they receive from the Fund. Dividends from ordinary income and distributions
from net short-term capital gains, whether paid in cash or reinvested in
additional shares, are taxable to the Fund's shareholders as ordinary income for
federal income tax purposes. A portion of the dividends from ordinary income
(but none of the Fund's capital gains) is normally eligible for the
dividends-received deduction for corporations if the recipient otherwise
qualifies for that deduction with respect to its holding of Fund shares. For the
Fund's last fiscal year, 70% of the dividends the Fund paid to its shareholders
were eligible for the deduction. Availability of the deduction for particular
corporate shareholders is subject to certain limitations and deducted amounts
may be subject to the alternative minimum tax or result in certain basis
adjustments. Distributions from net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses), whether paid in
cash or reinvested in additional shares, are taxable to the Fund's shareholders
as long-term capital gains for federal income tax purposes without regard to the
length of time the shareholders have owned their shares.
Fund dividends that are declared in October, November or December and paid the
following January to shareholders of record in such a month will be taxable to
the shareholders as if received on December 31 of the year in which they are
declared. Any dividend or distribution will have the effect of reducing the per
share net asset value of shares in the Fund by the amount of the dividend or
distribution. Shareholders purchasing shares shortly before the record date of
any taxable dividend or other distribution may thus pay the full price for the
shares and then effectively receive a portion of the purchase price back as a
taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than 12 months and otherwise as a short-term capital gain or loss. However, any
loss realized upon a disposition of shares in the Fund held for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a redemption of shares may also be disallowed under rules relating
to wash sales. Gain may be increased (or loss reduced) upon a redemption of
Class A shares of the Fund within ninety days after their purchase followed by
any purchase (including purchases by exchange or by reinvestment) without
payment of an additional sales charge of Class A shares of the Fund or of
another MFS Fund (or any other shares of an MFS Fund generally sold subject to a
sales charge).
The Fund's transactions in options, Futures Contracts and Forward Contracts will
be subject to special tax rules that may affect the amount, timing and character
of distributions to shareholders. For example, certain positions held by the
Fund on the last business day of each fiscal year would be marked to market
(i.e., treated as if closed out) on such day, and any gain or loss associated
with such positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by the Fund that substantially diminish its
risk of loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of losses, adjustments in the holding periods of the Fund's securities and
conversion of short term into long term capital losses. Certain tax elections
exist for "straddles" which could alter certain effects of the above rules. The
Fund will limit its activities in options, Futures Contracts and Forward
Contracts to the extent necessary to meet the requirements of Subchapter M of
the Code.
The Fund's current dividend and accounting policies will affect the amount,
timing and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders. The
Fund's investment in zero coupon securities, securities calling for deferred
interest or payment of interest in kind and certain securities purchased at a
market discount will cause it to realize income prior to the receipt of cash
payments with respect to these securities. In order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially resulting
in additional taxable gain or loss to the Fund.
Special tax considerations apply with respect to foreign investments of the
Fund. For example, foreign exchange gains and losses realized by the Fund will
generally be treated as ordinary income and losses. The holding of foreign
currencies for non-hedging purposes and investment by the Fund in certain
"passive foreign investment companies" may be limited in order to avoid
imposition of a tax on the Fund. Furthermore, the Fund may be subject to foreign
taxes on its income from foreign securities and will generally be unable to pass
through to shareholders foreign tax credits and deductions with respect to
foreign taxes paid by the Fund. The United States has entered into tax treaties
with many foreign countries that may entitle the Fund to a reduced rate of tax
or an exemption from tax on such income; the Fund intends to qualify for treaty
reduced rates where available. It is impossible, however, to determine the
Fund's effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested within various countries is not known.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Fund intends
to withhold U.S. federal income tax at the rate of 30% on any payments made to
Non-U.S. Persons that are subject to such withholding, regardless of whether a
lower treaty rate may be permitted. Any amounts overwithheld may be recovered by
such persons by filing a claim for refund with the U.S. Internal Revenue Service
within the time period applicable to such claims. Non-U.S. persons may also be
subject to tax under the laws of their own jurisdictions. The Fund is also
required in certain circumstances to apply backup withholding at a rate of 31%
on taxable dividends and the proceeds of redemptions and exchanges paid to any
shareholder (including a Non-U.S. Person) who does not furnish to the Fund
certain information and certifications or who is otherwise subject to backup
withholding. However, backup withholding will not be applied to payments which
have been subject to 30% withholding.
8. DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
NET ASSET VALUE
The net asset value per share of each class of the Fund is determined each day
during which the Exchange is open for trading. As of the date of this SAI, the
Exchange is open for trading every week day except for the following holidays
(or the days on which they are observed): New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day). This determination is made once during each such day as of the
close of regular trading on the Exchange by deducting the amount of the
liabilities attributable to the class from the value of the assets attributable
to the class and dividing the difference by the number of shares of the class
outstanding. Equity securities in the Fund's portfolio are valued at the last
sale price on the exchange on which they are primarily traded or on the NASDAQ
system for unlisted national market issues, or at the last quoted bid price for
listed securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. Bonds and other fixed income
securities (other than short-term obligations) in the Fund's portfolio are
valued on the basis of valuations furnished by a pricing service which utilizes
both dealer-supplied valuations and electronic data processing techniques which
take into account appropriate 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 quoted prices or exchange or over-the-counter prices, since such valuations
are believed to reflect more accurately the fair value of such securities. Use
of the pricing service has been approved by the Board of Trustees. Short-term
obligations with a remaining maturity in excess of 60 days will be valued based
upon dealer supplied valuations. Other short-term obligations in the Fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Positions in listed options, Futures
Contracts and Options on Futures Contracts will normally be valued at the
settlement price on the exchange on which they are primarily traded. Positions
in over-the-counter options will be valued using dealer-supplied valuations.
Forward Contracts will be valued using a pricing model taking into consideration
market data from an extended pricing source and over-the-counter options for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for each
class of shares for certain periods by determining the average annual compounded
rates of return over those periods that would cause an investment of $1,000
(made with all distributions reinvested and reflecting the CDSC or maximum
offering price), to reach the value of that investment at the end of the
periods. The Fund may also calculate (i) a total rate of return, which is not
reduced by the CDSC (4% maximum for Class B shares purchased on and after
September 1, 1993) and therefore may result in a higher rate of return, (ii) a
total rate of return assuming an initial account value of $1,000, which will
result in a higher rate of return since the value of the initial account will
not be reduced by the sales charge (5.75% maximum), and/or (iii) total rates of
return which represent aggregate performance over a period or year-by-year
performance, and which may or may not reflect the effect of the maximum or other
sales charge or CDSC. The Fund's average annual total rate of return for Class A
shares reflecting the initial investment at the maximum public offering price
for the one-year, five-year and ten-year periods ended December 31, 1994 was,
respectively, -9.70%, 5.77% and 9.91%. The Fund's average annual total rate of
return for Class A shares not giving effect to the sales charge on the initial
investment for the one-year, five-year and ten-year periods ended December 31,
1994 was, respectively, -4.15%, 7.03% and 10.56%. The Fund's average annual
total rate of return for Class B shares, reflecting the CDSC, for the one-year
period ended December 31, 1994 and for the period September 7, 1993
(commencement of offering of this class of share) through the Fund's fiscal year
ended December 31, 1994 was -8.46% and -4.15%, respectively. The Fund's average
annual total rate of return for Class B shares, not giving effect to the CDSC,
for the one-year period ended December 31, 1994 and for the period September 7,
1993 (commencement of offering of this class of share) through the Fund's fiscal
year ended December 31, 1994 was -4.96% and -1.68%, respectively. The total
rates of return presented above may not be indicative of future performance.
Total rate of return figures would have been lower if fee waivers were not in
place.
PERFORMANCE RESULTS: The performance results for Class A shares below, based on
an assumed initial investment of $10,000 in Class A shares, cover the period
from January 1, 1985 through December 31, 1994. It has been assumed that
dividends and capital gain distributions were reinvested in additional shares.
These performance results, as well as any total rate of return quotation
provided by the Fund, should not be considered as representative of the
performance of the Fund in the future since the net asset value and public
offering price of shares of the Fund will vary based not only on the type,
quality and maturities of the securities held in the Fund's portfolio, but also
on changes in the current value of such securities and on changes in the
expenses of the Fund. These factors and possible differences in the methods used
to calculate total rates of return should be considered when comparing the total
rate of return of the Fund to total rates of return published for other
investment companies or other investment vehicles. Total rate of return reflects
the performance of both principal and income. Current net asset value and
account balance information may be obtained by calling 1-800-MFS-TALK
(637-8255).
MFS GROWTH OPPORTUNITIES FUND
-----------------------------
VALUE OF SHARES
---------------------------------------------------------------
YEAR ENDED DIRECT CAP GAIN DIVIDEND TOTAL
DECEMBER 31 INVESTMENT REINVESTMENT REINVESTMENT VALUE
----------- ---------- ------------ ------------ -----
1985 $11,630 $ 0 $ 261 $11,891
1986 10,447 1,738 388 12,573
1987 10,074 2,440 554 13,068
1988 10,214 3,248 785 14,247
1989 10,186 6,891 1,228 18,305
1990 9,291 6,568 1,649 17,508
1991 10,018 9,322 2,091 21,431
1992 10,410 10,216 2,456 23,082
1993 10,773 12,869 3,178 26,820
1994 9,478 13,358 2,870 25,706
EXPLANATORY NOTES: The results in the table assume that the initial investment
on January 1, 1985, has been reduced by the current maximum applicable sales
charge of 5.75%. No adjustment has been made for any income taxes payable by
shareholders.
From time to time the Fund may, as appropriate, quote Fund rankings or reprint
all or a portion of evaluations of fund performance and operations appearing in
various independent publications, including but not limited to the following:
Money, Fortune, U.S. News and World Report, Kiplinger's Personal Finance, The
Wall Street Journal, Barron's, Investors Business Daily, Newsweek, Financial
World, Financial Planning, Investment Advisor, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger, Shearson Lehman
and Salomon Bros. Indices, Ibbotson, Business Week, Lowry Associates, Media
General, Investment Company Data, The New York Times, Your Money, Strangers
Investment Advisor, Financial Planning on Wall Street, Standard and Poor's,
Individual Investor, The 100 Best Mutual Funds You Can Buy, by Gordon K.
Williamson, Consumer Price Index, and Sanford C. Bernstein & Co. Fund
performance may also be compared to the performance of other mutual funds
tracked by financial or business publications or periodicals. The Fund may also
quote evaluations mentioned in independent radio or television broadcasts, and
use charts and graphs to illustrate the past performance of various indices such
as those mentioned above and illustrations using hypothetical rates of return to
illustrate the effects of compounding and tax-deferral. The Fund may advertise
examples of the effects of periodic investment plans, including the principle of
dollar cost averaging. In such a program, an investor invests a fixed dollar
amount in a fund at periodic intervals, thereby purchasing fewer shares when
prices are high and more shares when prices are low. While such a strategy does
not assure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
are purchased at the same intervals.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established
as the first open-end mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund
to make full public disclosure of its operations in shareholder
reports.
-- 1932 -- One of the first internal research departments is
established to provide in-house analytical capability for an
investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund
to register under the Securities Act of 1933 ("Truth in
Securities Act" or "Full Disclosure
Act").
-- 1936 -- Massachusetts Investors Trust is the first mutual fund
to allow shareholders to take capital gain distributions either
in additional shares or cash.
-- 1976 -- MFS Municipal Bond Fund is among the first municipal
bond funds established.
-- 1979 -- Spectrum becomes the first combination fixed/ variable
annuity with no initial sales charge.
-- 1981 -- MFS World Governments Fund is established as America's
first globally diversified fixed-income mutual fund.
-- 1984 -- MFS Municipal High Income Fund is the first mutual fund
to seek high tax-free income from lower- rated municipal
securities.
-- 1986 -- MFS(R) Managed Sectors Fund becomes the first mutual
fund to target and shift investments among industry sectors for
shareholders.
-- 1986 -- MFS Municipal Income Trust is the first closed-end,
high-yield municipal bond fund traded on the New York Stock
Exchange.
-- 1987 -- MFS Multimarket Income Trust is the first closed-end,
multimarket high income fund listed on the New York Stock
Exchange.
-- 1989 -- MFS Regatta becomes America's first non-qualified
market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS World Total Return Fund is the first global
balanced fund.
-- 1993 -- MFS World Growth Fund is the first global emerging
markets fund to offer the expertise of two sub-advisers.
-- 1993 -- MFS becomes money manager of MFS Union Standard Trust,
the first trust to invest in companies deemed to be
union-friendly by an Advisory Board of senior labor officials,
senior managers of companies with significant labor contracts,
academics and other national labor leaders or experts.
9. DISTRIBUTION PLANS
CLASS A DISTRIBUTION PLAN: The Trustees have adopted a Distribution Plan
relating to Class A shares (the "Class A Distribution Plan") pursuant to Section
12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Rule") after having
concluded that there is a reasonable likelihood that the Class A Distribution
Plan would benefit the Fund and its Class A shareholders. The Class A
Distribution Plan is designed to promote sales, thereby increasing the net
assets of the Fund. Such an increase may reduce the expense ratio to the extent
the Fund's fixed costs are spread over a larger net asset base. Also, an
increase in net assets may lessen the adverse effects that could result were the
Fund required to liquidate portfolio securities to meet redemptions.
The Class A Distribution Plan provides that the Fund will pay MFD up to (but not
necessarily all of) an aggregate of 0.35% of the average daily net assets
attributable to the Class A shares annually in order that MFD may pay expenses
on behalf of the Fund related to the distribution and servicing of its Class A
shares. The expenses to be paid by MFD on behalf of the Fund include a service
fee to securities dealers which enter into a sales agreement with MFD of up to
0.25% per annum of the portion of the Fund's average daily net assets
attributable to the Class A shares owned by investors for whom that securities
dealer is the holder or dealer of record. These payments are partial
consideration for personal services and/or account maintenance performed by such
dealers with respect to Class A shares. MFD may from time to time reduce the
amount of the service fee paid for shares sold prior to a certain date.
Currently the service fee is reduced to 0.15% for shares sold prior to March 1,
1991. MFD may also retain a distribution fee of 0.10% per annum of the Fund's
average daily net assets attributable to Class A shares as partial consideration
for services performed and expenses incurred in the performance of MFD's
obligations as to Class A shares under the distribution agreement with the Fund.
MFD, however, currently is waiving this 0.10% per annum distribution fee and
will not accept payment of this fee in the future unless it first obtains the
approval of the Fund's Board of Trustees. Any remaining funds may be used to pay
for other distribution related expenses as described in the Prospectus. Service
fees may be reduced for a securities dealer that is the holder or dealer of
record for an investor who owns shares of the Fund having an aggregate net asset
value at or above a certain dollar level. No service fee will be paid (i) to any
securities dealer who is the holder or dealer of record for investors who own
Class A shares having an aggregate net asset value less than $750,000, or such
other amount as may be determined from time to time by MFD (MFD, however, may
waive this minimum amount requirement from time to time if the dealer satisfies
certain criteria), or (ii) to any insurance company which has entered into an
agreement with the Fund and MFD that permits such insurance company to purchase
shares from the Fund at their net asset value in connection with annuity
agreements issued in connection with the insurance company's separate accounts.
Dealers may from time to time be required to meet certain other criteria in
order to receive service fees. MFD or its affiliates are entitled to retain all
service fees payable under the Class A Distribution Plan for which there is no
dealer of record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance services
performed by MFD or its affiliates for shareholder accounts. Certain banks and
other financial institutions that have agency agreements with MFD will receive
agency transaction and service fees that are the same as commissions and service
fees to dealers.
During the fiscal year ended December 31, 1994, the Fund incurred expenses of
$1,492,867 (equal to 0.35% of its average daily net assets attributable to Class
A shares) relating to the distribution and servicing of its Class A shares, of
which MFD waived $638,658 and of which MFD retained $520,206 and securities
dealers of the Fund and certain banks and other financial institutions received
$334,003.
The Class A Distribution Plan will remain in effect until August 1, 1995, and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by vote of both the Trustees and a majority of the
Trustees who are not "interested persons" or financially interested parties to
the Plan ("Class A Distribution Plan Qualified Trustees"). The Class A
Distribution Plan requires that the Fund and MFD each shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under such Plan. The Class A
Distribution Plan may be terminated at any time by vote of a majority of the
Class A Distribution Plan Qualified Trustees or by vote of the holders of a
majority of the Fund's Class A shares (as defined in "Investment Restrictions").
Agreements under the Class A Distribution Plan must be in writing, will be
terminated automatically if assigned, and may be terminated at any time without
payment of any penalty, by vote of a majority of the Class A Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the Fund's Class A
shares. The Class A Distribution Plan may not be amended to increase materially
the amount of permitted distribution expenses without the approval of a majority
of the Fund's Class A shares (as defined in "Investment Restrictions") and may
not be materially amended in any case without a vote of the Trustees and a
majority of the Class A Distribution Plan Qualified Trustees. No Trustee who is
not an "interested person" has any financial interest in the Class A
Distribution Plan or in any related agreement.
CLASS B DISTRIBUTION PLAN: The Trustees of the Fund have adopted a Distribution
Plan relating to Class B shares (the "Class B Distribution Plan") pursuant to
Section 12(b) of the 1940 Act and the Rule, after having concluded that there
was a reasonable likelihood that the Class B Distribution Plan would benefit the
Fund and its Class B shareholders. The Class B Distribution Plan is designed to
promote sales, thereby increasing the net assets of the Fund. Such an increase
may reduce the expense ratio to the extent the Fund's fixed costs are spread
over a larger net asset base. Also, an increase in net assets may lessen the
adverse effects that could result were the Fund required to liquidate portfolio
securities to meet redemptions. There is, however, no assurance that the net
assets of the Fund will increase or that the other benefits referred to above
will be realized.
The Class B Distribution Plan provides that the Fund shall pay MFD, as the
Fund's distributor for its Class B shares, a daily distribution fee equal on an
annual basis to 0.75% of the Fund's average daily net assets attributable to
Class B shares and will pay MFD a service fee of up to 0.25% per annum of the
Fund's average daily net assets attributable to Class B shares (which MFD will
in turn pay to securities dealers which enter into a sales agreement with MFD at
a rate of up to 0.25% per annum of the Fund's average daily net assets
attributable to Class B shares owned by investors for whom that securities
dealer is the holder or dealer of record). This service fee is intended to be
additional consideration for all personal services and/or account maintenance
services rendered by the dealer with respect to Class B shares. MFD will advance
to dealers the first-year service fee at a rate equal to 0.25% of the amount
invested. As compensation therefor, MFD may retain the service fee paid by the
Fund with respect to such shares for the first year after purchase. Dealers will
become eligible for additional service fees with respect to such shares
commencing in the thirteenth month following purchase. Except in the case of the
first year service fee, no service fee will be paid to any securities dealer who
is the holder or dealer of record for investors who own Class B shares having an
aggregate net asset value of less than $750,000 or such other amount as may be
determined from time to time by MFD. MFD, however, may waive this minimum amount
requirement from time to time if the dealer satisfies certain criteria. Dealers
may from time to time be required to meet certain other criteria in order to
receive service fees. MFD or its affiliates are entitled to retain all service
fees payable under the Class B Distribution Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by MFD or its affiliates for shareholder accounts. The purpose of
distribution payments to MFD under the Class B Distribution Plan is to
compensate MFD for its distribution services to the Fund. MFD pays commissions
to dealers as well as expenses of printing prospectuses and reports used for
sales purposes, expenses with respect to the preparation and printing of sales
literature and other distribution related expenses, including, without
limitation, the cost necessary to provide distribution-related services, of
personnel, travel, office expenses and equipment. The Class B Distribution Plan
also provides that MFD will receive all CDSCs attributable to Class B shares
(see "Distribution Plans" and "Purchases" in the Prospectus).
In accordance with the Rule, all agreements relating to the Class B Distribution
Plan entered into between the Fund or MFD and other organizations must be
approved by the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Class B Distribution Plan or
in any agreement related to such Plan ("Class B Distribution Plan Qualified
Trustees"). The Class B Distribution Plan further provides that the selection
and nomination of Class B Distribution Plan Qualified Trustees shall be
committed to the discretion of the non-interested Trustees then in office.
During the fiscal year ended December 31, 1994, the Fund incurred expenses of
$24,368 (equal to 1.0% of its average daily net assets attributable to Class B
shares) relating to the distribution and servicing of its Class B shares, of
which MFD retained $909 and securities dealers of the Fund and certain banks and
other financial institutions received $23,459.
The Class B Distribution Plan will remain in effect until August 1, 1995, and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by vote of the Trustees and a majority of the Class B
Distribution Plan Qualified Trustees. The Class B Distribution Plan requires
that the Fund and MFD shall provide to the Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts expended (and
purposes therefor) under such Plan. The Class B Distribution Plan may be
terminated at any time by vote of a majority of the Class B Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the Class B shares
of the Fund (as defined in "Investment Restrictions" above). The Class B
Distribution Plan may not be amended to increase materially the amount of
permitted distribution expenses without the approval of Class B shareholders and
may not be materially amended in any case without a vote of the majority of both
the Trustees and the Class B Distribution Plan Qualified Trustees. No Trustee
who is not an interested person of the Fund has any financial interest in the
Class B Distribution Plan or in any related agreement.
10. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Shares of Beneficial Interest (without par value)
and to divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in the Fund. The
Declaration of Trust further authorizes the Trustees to classify or reclassify
the shares of the Fund into one or more classes. Pursuant thereto, the Trustees
have authorized the issuance of two classes of shares of the Fund, Class A
shares and Class B shares. Each share of a class of the Fund represents an equal
proportionate interest in the assets of the Fund allocable to that class. The
Fund reserves the right to create and issue a number of series and additional
classes of shares, in which case the shares of each series would participate
equally in the earnings, dividends and assets of the particular series (subject
to any class expenses) and would be entitled to vote separately to approve
investment advisory agreements or changes in the investment restrictions, but
shares of all series would vote together in the election of Trustees and
selection of accountants. Upon liquidation of the Fund, the shareholders of each
class of the Fund are entitled to share pro rata in the net assets allocable to
such class available for distribution to its shareholders.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of shareholders.
Although Trustees are not elected annually by the shareholders, shareholders
have, under certain circumstances, the right to remove one or more Trustees. No
material amendment may be made to the Fund's Declaration of Trust without the
affirmative vote of the holders of a majority of the Fund's shares. The Fund may
be terminated (i) upon the merger or consolidation of the Fund with another
organization or upon the sale of all or substantially all its assets, if
approved by the vote of the holders of two-thirds of the outstanding shares of
the Fund, except that if the Trustees recommend such merger, consolidation or
sale, the approval by vote of the holders of a majority of the Fund's
outstanding shares will be sufficient, (ii) upon liquidation and distribution of
the assets of the Fund, if approved by the vote of the holders of two-thirds of
its outstanding shares or (iii) by the Trustees by written notice to the Fund's
shareholders. If not so terminated, the Fund will continue indefinitely.
The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts, obligations or affairs of the Fund and provides for
indemnification and reimbursement of expenses out of the Fund property for any
shareholder held personally liable for the obligations of the Fund. The
Declaration of Trust also provides that the Fund shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Fund, its shareholders, Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and the Fund
itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the Fund are not
binding upon the Trustees individually but only upon the property of the Fund
and that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
11. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Fund's independent certified public accountants.
The Portfolio of Investments at December 31, 1994, the Statement of Assets and
Liabilities at December 31, 1994, the Statement of Operations for the year ended
December 31, 1994, the Statement of Changes in Net Assets for each of the two
years in the period ended December 31, 1994, the Financial Highlights table for
each of the 10 years in the period ended December 31, 1994, the Notes to
Financial Statements and the Independent Auditors' Report, each of which is
included in the Annual Report to shareholders of the Fund, are incorporated by
reference into this SAI and have been so incorporated in reliance upon the
report of Deloitte & Touche LLP, independent certified public accountants,
experts in accounting and auditing. A copy of the Annual Report accompanies this
SAI.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
MOODY'S
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S & P
AAA: Debt rated AAA has the highest rating assigned by S & P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
NR: indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.
FITCH INVESTORS SERVICE, INC.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeble future
developments, short-term debt of these issuers is generally rated "F- 1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions, however, are more likely to
have adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.
<PAGE>
APPENDIX B
<TABLE>
TRUSTEE COMPENSATION TABLE
<CAPTION>
RETIREMENT BENEFIT ESTIMATED TOTAL TRUSTEE FEES
TRUSTEE FEES ACCRUED AS PART OF CREDITED YEARS FROM FUND AND
TRUSTEE FROM FUND<F1> FUND EXPENSE<F1> OF SERVICE<F2> FUND COMPLEX<F3>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard B. Bailey $4,455 $ 656 8 $226,221
Lawrence T. Perera 4,355 2,322 23 96,592
William Poorvu 4,755 2,316 23 106,482
Charles W. Schmidt 4,455 2,199 16 98,397
David B. Stone 4,655 1,795 14 104,007
Elaine R. Smith 4,455 639 27 98,397
J. Atwood Ives 4,755 669 17 106,482
Peter G. Harwood 4,755 238 5 105,812
<FN>
- -----------
<F1> For fiscal year ended December 31, 1994.
<F2> Based on normal retirement age of 73.
<F3> Information provided is provided for calendar year 1994. All Trustees served as Trustees of 20 funds within the MFS fund
complex (having aggregate net assets at December 31, 1994 of approximately $14,727,659,069) except Mr. Bailey, who served as
Trustee of 56 funds within the MFS fund complex (having aggregate net assets at December 31, 1994 of approximately
$24,474,119,825).
</TABLE>
ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT(4)
YEARS OF SERVICE
---------------------------------------------------------
AVERAGE TRUSTEE FEES 3 5 7 10 OR MORE
- --------------------------------------------------------------------------------
$3,950 $593 $ 988 $1,383 $1,975
4,210 632 1,053 1,474 2,105
4,470 671 1,118 1,565 2,235
4,730 710 1,183 1,656 2,365
4,990 749 1,248 1,747 2,495
5,250 788 1,313 1,838 2,625
(4) Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 225-2606
MAILING ADDRESS
P.O. Box 2281, Boston, MA 02107-9906
INDEPENDENT ACCOUNTANTS
Deloitte & Touche/LLP
125 Summer Street, Boston, MA 02110
MFS(R)
GROWTH
OPPORTUNITIES FUND
500 BOYLSTON STREET
BOSTON, MA 02116
[logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
MGO-13-5/95/500 16/216
<PAGE>
<PAGE>
Front Cover: A 6-1/4" by 8-1/4" photo of a beaker.
MFS Annual Report for
The First Name in Mutual Funds Year Ended
December 31, 1994
MFS(R) GROWTH OPPORTUNITIES FUND
<TABLE>
<S> <C>
MFS(R) GROWTH OPPORTUNITIES FUND
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President State Street Bank and Trust Company
Richard B. Bailey* - Private Investor; AUDITORS
Former Chairman and Director (until 1991), Deloitte & Touche LLP
Massachusetts Financial Services Company
INVESTOR INFORMATION
Peter G. Harwood - Former Financial Vice For MFS stock and bond market outlooks,
President, Treasurer and Director (until 1988), call toll-free: 1-800-637-4458 anytime from
Loomis, Sayles & Co., Inc. a touch-tone telephone.
J. Atwood Ives - Chairman and Chief Executive For information on MFS mutual funds
Officer, Eastern Enterprises call your financial adviser or, for an
information kit, call toll-free:
Lawrence T. Perera - Partner, Hemenway & Barnes 1-800-637-2929 any business day from
9 a.m. to 5 p.m. Eastern time (or, leave
William J. Poorvu - Adjunct Professor, Harvard a message anytime).
University Graduate School of Business
Administration INVESTOR SERVICE
MFS Service Center, Inc.
Charles W. Schmidt - Private Investor; P.O. Box 2281
Former Senior Vice President and Group Executive Boston, MA 02107-9906
(until 1990), Raytheon Company
For current account service, call toll free:
Arnold D. Scott* - Senior Executive Vice President, 1-800-225-2606 any business day from
Massachusetts Financial Services Company 8 a.m. to 8 p.m. Eastern time.
Jeffrey L. Shames* - President and Chief Equity For service to speech- or hearing-impaired,
Officer, Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
Elaine R. Smith - Independent Consultant
For share prices, account balances and
David B. Stone - Chairman, North American exchanges, call toll free: 1-800-MFS-TALK
Management Corp. (Investment Advisers) (1-800-637-8255) anytime from a touch-tone
telephone.
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street ----------------------------
Boston, Massachusetts 02116-3741 TOP-RATED SERVICE
MFS was rated first when
PORTFOLIO MANAGERS securities firms evaluated the
Paul M. McMahon quality of service they receive
from 40 mutual fund compa-
TREASURER nies. MFS got high marks for
W. Thomas London* answering calls quickly,
processing transactions
ASSISTANT TREASURER accurately and sending statements
James O. Yost* out on time.
(Source: 1994 DALBAR Survey)
SECRETARY ----------------------------
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
Cover photo: Through their wide range of
investments, MFS mutual funds help you
share in America's growth.
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
During the fiscal year ended December 31, 1994, the total return for Class A
shares of the Fund was -4.15%, while the total return for Class B shares was
- -4.96%. Both of these figures assume the reinvestment of distributions but
exclude the effects of any sales charges. During the same 12-month period, the
Standard & Poor's 500 Composite Index (S&P 500), a popular, unmanaged index of
common stock performance, had a return of +1.31%. A discussion of some of the
factors which impacted the Fund's performance relative to the S&P 500 is
included in the Portfolio Performance and Strategy section of this letter.
Complete performance data may be found on pages three and four of this report.
Economic Environment
The economic expansion, about to enter its fifth year, has gained firmer
underpinnings as employers have been stepping up hiring levels. Increased
employment, stronger capital spending by businesses, and strengthening overseas
economies resulted in 4% real (adjusted for inflation) gross domestic product
growth in 1994. Interest rates rose significantly in 1994, which should help
restrain, but not curtail, the economic expansion. Based on improving economic
fundamentals both here and abroad, we expect the business expansion to continue
well into 1995.
Stock Market
The stock market proved volatile in 1994, influenced by both a strengthening
economy and uncertainty over interest rates. Although the stronger economy has
been beneficial to corporate earnings, higher interest rates have negatively
impacted price-to-earnings multiples, or stock valuations. Given our expectation
of further upward pressure on short-term interest rates as the Federal Reserve
continues to lean against the current economic expansion, we believe the stock
market will have difficulty sustaining any significant improvement. When
interest rates finally stabilize, however, we expect the stock market to
benefit, given our continuing outlook for improved corporate earnings.
Portfolio Performance and Strategy
The Fund's performance was negatively impacted from an overweighting in the
entertainment area, especially in gaming stocks such as Promus Cos. which came
under significant pressure due to a slowdown in the rate of new jurisdictions
approving gaming licenses. These delays appear to have been temporary as the
pace of license approvals is now accelerating. The underweighting in consumer
staples such as food and household products also hurt performance, since these
sectors outperformed the S&P 500 during the year as investors focused on the
potential for slower economic growth, given the significant rise in interest
rates during the year.
The Fund benefited from its overweighting in technology as represented by
computer software, electronics and telecommunications. Companies such as
Microsoft (a personal computer software company), Intel (a semiconductor
manufacturer), and Newbridge Network (a telecommunications equipment company)
are representative holdings of companies that we believe have good earnings
momentum. However, some positions in technology are being reduced on price
strength due to their superior performance relative to the S&P 500 during the
second half of 1994.
<PAGE>
LETTER TO SHAREHOLDERS- continued
We continue to seek stocks of companies which are generating above-average
earnings momentum and are selling at reasonable price-to-earnings multiples.
Other factors we continue to emphasize are a company's management and overall
financial strength. Our biggest concentrations are in the technology areas
mentioned above. Other significant weightings are entertainment and financial
institutions. The Fund's foreign weighting has been reduced to focus more on
U.S. stocks with stronger earnings fundamentals.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
A 1 1/2" by 1 5/8" photo of A. Keith Brodkin, Chairman and President.
A 1 1/2" by 1 5/8" photo of Paul M. McMahon, Portfolio Manager.
A. Keith Brodkin Paul M. McMahon
Chairman and President Portfolio Manager
January 20, 1995
PORTFOLIO MANAGER PROFILE
Paul McMahon joined the MFS Research Department in 1981 as an Industry
Specialist. A graduate of Holy Cross College and the Amos Tuck School of
Business Administration of Dartmouth College, he was named Investment Officer in
1983; Assistant Vice President - Investments in 1984; Vice President -
Investments in 1986; and Senior Vice President and Portfolio Manager of MFS
Growth Opportunities Fund, formerly MFS Capital Development Fund, in 1992. Mr.
McMahon also manages the MFS/Sun Life Capital Appreciation Series Trust.
<PAGE>
OBJECTIVE AND POLICIES
The Fund's investment objective is to seek growth of capital. Dividend income,
if any, is incidental to the Fund's objective. Generally, emphasis is placed
upon companies believed to possess above-average growth opportunities. The Fund
invests primarily in common stocks, but may seek appreciation in other types of
securities, including fixed-income securities, convertible bonds, convertible
preferred stocks and warrants.
TAX FORM SUMMARY
In January 1995 shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1994.
DIVIDENDS RECEIVED DEDUCTION
For the year ended December 31, 1994, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to 100%.
PERFORMANCE
The following information illustrates the historical performance of MFS Growth
Opportunities Fund Class A shares in comparison to various market indicators.
Fund results reflect the deduction of the 5.75% maximum sales charge. Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. You cannot
invest in an index. All results reflect the reinvestment of all dividends and
capital gains.
Please note that effective September 7, 1993, Class B shares were offered.
Information on Class B share performance appears on the next page.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(Over the 5-Year Period Ended December 31, 1994)
Line graph representing the growth of a $10,000 investment the 5-year period
ended December 31, 1994. The graph is scaled from $8,000 to $18,000 in $2,000
segments. The years are marked from 1990 to 1994. There are three lines drawn to
scale. One is a solid line representing MFS Growth Opportunities Fund Class A, a
second line of short dashes represents the S&P 500, and a third line of long
dashes represents the Consumer Price Index.
MFS Growth Opportunities
Fund Class A $13,231
S&P 500 $15,160
Consumer Price Index $11,872
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(Over the 10-Year Period Ended December 31, 1994)
Line graph representing the growth of a $10,000 investment for the 10-year
period ended December 31, 1994. The graph is scaled from $0 to $50,000 in
$10,000 segments. The years are marked from 1985 to 1994. There are three lines
drawn to scale. One is a solid line representing MFS Growth Opportunities Fund
Class A, a second line of short dashes represents the S&P 500, and a third line
of long dashes represents the Consumer Price Index.
MFS Growth Opportunities
Fund Class A $25,706
S&P 500 $38,268
Consumer Price Index $14,214
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Life of Class
through
1 Year 3 Years 5 Years 12/31/94
==================================================================================================
<S> <C> <C> <C> <C>
MFS Growth Opportunities Fund (Class A) including
5.75% sales charge -9.70% +4.17% +5.77% + 9.91%
- --------------------------------------------------------------------------------------------------
MFS Growth Opportunities Fund (Class A) at net asset value -4.15% +6.25% +7.03% +10.56%
- --------------------------------------------------------------------------------------------------
MFS Growth Opportunities Fund (Class B) with CDSC<F1> -8.46% -- -- - 4.15%<F2>
- --------------------------------------------------------------------------------------------------
MFS Growth Opportunities Fund (Class B) without CDSC -4.96% -- -- - 1.68%<F2>
- --------------------------------------------------------------------------------------------------
Average growth fund -2.15% +5.39% +8.59% 12.55%
- --------------------------------------------------------------------------------------------------
S&P 500 Index +1.31% +6.26% +8.68% 14.36%
- --------------------------------------------------------------------------------------------------
Consumer Price Index<F3> +2.67% +2.78% +3.49% 3.58%
- --------------------------------------------------------------------------------------------------
<FN>
<F1> These returns reflect the current maximum Class B CDSC of 4%.
<F2> For the period from the commencement of offering of Class B shares,
September 7, 1993 to December 31, 1994.
<F3> The Consumer Price Index is a popular measure of change in prices.
</TABLE>
In the above table, we have included the average annual total returns of all
growth funds (including the Fund) tracked by Lipper Analytical Services, Inc.
(an independent firm which reports mutual fund performance) for the applicable
time periods (481, 284, 226 and 132 funds for the 1-, 3-, 5- and 10-year periods
ended December 31, 1994, respectively). Because these returns do not reflect any
applicable sales charges, we have also included the Fund's results at net asset
value (no sales charge) for comparison.
All results are historical and, therefore, are not an indication of future
results. The principal value and income return of an investment in a mutual fund
will vary with changes in market conditions, and shares, when redeemed, may be
worth more or less than their original cost.
All Class A share results reflect the applicable expense subsidy which is
explained in the Notes to Financial Statements. Had the subsidy not been in
effect, the results would have been less favorable. The subsidy may be rescinded
at any time.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - December 31, 1994
Common Stocks - 94.3%
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Common Stocks - 84.1%
Aerospace - 1.9%
McDonnell Douglas Corp. 80,300 $ 11,402,600
- --------------------------------------------------------------------------------
Automotive - 2.2%
APS Holding Corp., "A"<F1> 225,000 $ 6,356,250
Harley-Davidson, Inc. 242,400 6,787,200
-------------
$13,143,450
- --------------------------------------------------------------------------------
Banks and Credit Companies - 0.5%
Norwest Corp. 122,000 $ 2,851,750
- --------------------------------------------------------------------------------
Business Services - 1.6%
Ceridian Corp.<F1> 350,000 $ 9,406,250
- --------------------------------------------------------------------------------
Cellular Phones - 3.9%
AirTouch Communications, Inc.<F1> 350,000 $ 10,193,750
LIN Broadcasting Corp.<F1> 95,000 12,682,500
-------------
$ 22,876,250
- --------------------------------------------------------------------------------
Chemicals - 2.5%
Geon Co. 167,100 $ 4,574,362
Methanex Corp.<F1> 400,000 5,200,000
Union Carbide Corp. Holding Co. 175,000 5,140,625
-------------
$ 14,914,987
- --------------------------------------------------------------------------------
Computer Software - 9.5%
Cadence Design Systems, Inc.<F1> 285,000 $ 5,878,125
Compaq Computer Corp.<F1> 150,000 5,925,000
Compuware Corp.<F1> 190,000 6,840,000
Electronic Arts, Inc.<F1> 617,200 11,881,100
Informix Corp.<F1> 160,000 5,140,000
Microsoft Corp.<F1> 284,200 17,371,725
Sybase, Inc.<F1> 70,000 3,640,000
-------------
$ 56,675,950
- --------------------------------------------------------------------------------
Consumer Goods and Services - 4.1%
Colgate-Palmolive Co. 62,200 $ 3,941,925
Philip Morris Cos., Inc. 260,000 14,950,000
RJR Nabisco Holdings Corp.<F1> 955,700 5,256,350
-------------
$24,148,275
- --------------------------------------------------------------------------------
Containers - 1.3%
Stone Container Corp.<F1> 432,000 $ 7,452,000
- --------------------------------------------------------------------------------
Electrical Equipment - 1.4%
General Electric Co. 160,000 $ 8,160,000
- --------------------------------------------------------------------------------
Electronics - 7.0%
Analog Devices, Inc. 200,000 $ 7,025,000
Applied Materials, Inc.<F1> 130,000 5,492,500
Intel Corp. 260,000 16,607,500
LSI Logic Corp.<F1> 150,000 6,056,250
Motorola, Inc. 112,600 6,516,725
-------------
$ 41,697,975
- --------------------------------------------------------------------------------
Entertainment - 6.3%
Argosy Gaming Corp.<F1> 286,800 $ 3,405,750
Mirage Resorts, Inc.<F1> 500,000 10,250,000
National Gaming Corp.<F1> 27,500 330,000
Promus Cos., Inc.<F1> 750,000 23,250,000
-------------
$ 37,235,750
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - Continued
Common Stocks - continued
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Common Stocks - continued
Financial Institutions - 7.9%
Dean Witter Discover & Co., Inc. 200,000 $ 6,775,000
Franklin Resources, Inc. 180,000 6,412,500
GFC Financial, Corp. 210,000 6,667,500
MBNA Corp. 260,000 6,077,500
Schwab (Charles) Corp. 430,000 14,996,250
United Asset Management Corp. 165,000 6,084,375
-------------
$ 47,013,125
- --------------------------------------------------------------------------------
Forest and Paper Products - 1.5%
Boise Cascade Corp. 97,100 $ 2,597,425
Georgia-Pacific Corp. 85,000 6,077,500
-------------
$ 8,674,925
- --------------------------------------------------------------------------------
Machinery - 4.5%
Caterpillar, Inc. 270,000 $ 14,883,750
Deere & Co., Inc. 180,000 11,925,000
-------------
$ 26,808,750
- --------------------------------------------------------------------------------
Medical and Health Products - 1.0%
Johnson & Johnson 104,000 $ 5,694,000
- --------------------------------------------------------------------------------
Medical and Health Technology and Services - 4.4%
Columbia HCA Healthcare Corp. 130,000 $ 4,745,000
Genesis Health Ventures, Inc.<F1> 250,000 7,906,250
Manor Care, Inc. 358,200 9,805,725
United Healthcare Corp. 82,500 3,722,813
-------------
$ 26,179,788
- --------------------------------------------------------------------------------
Metals and Minerals - 1.8%
Allegheny Ludlum Corp. 192,300 $ 3,605,625
Minerals Technologies, Inc. 250,000 7,312,500
-------------
$ 10,918,125
- --------------------------------------------------------------------------------
Precious Metals and Minerals - 0.4%
Santa Fe Pacific Gold Co.<F1> 169,597 $ 2,183,561
- --------------------------------------------------------------------------------
Oils - 4.2%
Burlington Resources, Inc. 200,000 $ 7,000,000
Enron Oil & Gas Co. 266,800 5,002,500
Mitchell Energy & Development Corp. 476,700 8,938,125
Seagull Energy Corp.<F1> 200,000 3,825,000
-------------
$ 24,765,625
- --------------------------------------------------------------------------------
Photographic Products - 1.2%
Eastman Kodak Co. 150,000 $ 7,162,500
- --------------------------------------------------------------------------------
Pollution Control - 3.5%
Browning-Ferris Industries 198,700 $ 5,638,113
WMX Technologies, Inc. 575,000 15,093,750
-------------
$ 20,731,863
- --------------------------------------------------------------------------------
Railroads - 0.9%
Southern Pacific Rail Corp.<F1> 300,000 $ 5,437,500
- --------------------------------------------------------------------------------
Restaurants and Lodging - 2.3%
Brinker International, Inc.<F1> 231,700 $ 4,199,563
Hospitality Franchise Systems, Inc.<F1> 275,000 7,287,500
Host Marriott Corp.<F1> 200,000 1,925,000
-------------
$ 13,412,063
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - Continued
Common Stocks - continued
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
U.S. Common Stocks - continued
Retail - 5.7%
Federated Department Stores<F1> 400,000 $ 7,700,000
Hechinger Corp., "A" 200,000 2,325,000
Home Depot, Inc. 65,000 2,990,000
Intelligent Electronics, Inc. 400,000 3,200,000
Lowes Cos., Inc. 100,000 3,475,000
Office Depot, Inc.<F1> 390,000 9,360,000
Tandy Corp 100,000 5,012,500
------------
$ 34,062,500
- --------------------------------------------------------------------------------
Telecommunications - 2.6%
Bay Networks, Inc.<F1> 180,000 $ 5,310,000
Cisco Systems, Inc.<F1> 60,800 2,135,600
Newbridge Networks Corp.<F1> 215,100 8,227,575
------------
$ 15,673,175
- --------------------------------------------------------------------------------
Total U.S. Common Stocks (Identified Cost, $451,052,992) $498,682,737
- --------------------------------------------------------------------------------
Foreign Stocks - 10.2%
Argentina - 0.5%
YPF S.A., ADR (Oils) 150,000 $ 3,206,250
- --------------------------------------------------------------------------------
Canada - 0.4%
Renaissance Energy Ltd., ADR<F1> 133,300 $ 2,579,923
- --------------------------------------------------------------------------------
Denmark - 1.5%
Tele Danmark, ADR (Utilities-Telephone)<F1><F2> 350,000 $ 8,925,000
- --------------------------------------------------------------------------------
Finland - 1.3%
Nokia AB (Telecommunications) 26,000 $ 3,845,991
Nokia Corp., ADR (Telecommunications) 52,000 3,900,000
------------
$ 7,745,991
- --------------------------------------------------------------------------------
Hong Kong - 0.8%
Peregrine Investment Holdings (Finance) 3,800,000 $ 4,469,433
- --------------------------------------------------------------------------------
Spain - 0.8%
Acerinox (Iron/Steel) 46,000 $ 4,808,058
- --------------------------------------------------------------------------------
Sweden - 1.7%
Astra AB, "B" (Medical and Health Products) 325,000 $ 8,293,719
TV 4 AB (Broadcasting)<F1> 68,100 1,513,170
------------
$ 9,806,889
- --------------------------------------------------------------------------------
Switzerland - 1.2%
Publicitas (Advertising)<F1> 8,000 $ 7,123,748
- --------------------------------------------------------------------------------
United Kingdom - 2.0%
Reuters Holdings PLC, ADR (Printing and
Publishing)<F2> 265,000 $ 11,626,875
- --------------------------------------------------------------------------------
Total Foreign Stocks (Identified Cost, $57,431,996) $ 60,292,167
- --------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $508,484,988) $558,974,904
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Convertible Bond - 0.3%
================================================================================
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
Argosy Gaming Corp., 12s, 2001 (Identified
Cost, $1,692,720) $ 1,676 $ 1,592,200
- --------------------------------------------------------------------------------
Short-Term Obligations - 3.9%
================================================================================
Federal Farm Credit Bank, due 1/19/95 $ 2,200 $ 2,193,466
Federal Home Loan Mortgage Corp., due 1/03/95 10,000 9,996,789
Federal National Mortgage Assn., due 1/18/95 1,600 1,595,625
Student Loan Marketing Assn., due 1/05/95 9,100 9,094,277
- --------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 22,880,157
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $533,057,865) $583,447,261
Other Assets, Less Liabilities - 1.5% 8,979,101
================================================================================
Net Assets - 100.0% $592,426,362
- --------------------------------------------------------------------------------
<FN>
<F1> Non-income producing security.
<F2> Restricted security.
</FN>
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified
cost, $533,057,865) $583,447,261
Cash 103,443
Net receivable for forward foreign
currency exchange contracts purchased 145,087
Net receivable for foreign currency
exchange contracts sold 1,092,258
Receivable for investments sold 13,064,033
Receivable for Fund shares sold 692,999
Dividends and interest receivable 970,031
Other assets 14,585
------------
Total assets $599,529,697
------------
Liabilities:
Distributions payable $ 1,846,903
Payable for investments purchased 4,585,851
Payable for Fund shares reacquired 192,335
Payable to affiliates -
Management fee 13,063
Shareholder servicing agent fee 49,055
Distribution fee 119
Accrued expenses and other liabilities 416,009
------------
Total liabilities $ 7,103,335
------------
Net assets $592,426,362
============
Net assets consist of:
Paid-in capital $544,507,003
Unrealized appreciation on investments
and translation of assets and
liabilities in foreign currencies 51,625,787
Accumulated distributions in excess of net
realized gain on investments and
foreign currency transactions (2,720,891)
Accumulated distributions in
excess of net investment income
(985,537)
------------
Total $592,426,362
============
Shares of beneficial interest outstanding 58,250,092
============
Class A shares:
Net asset value and redemption
price per share
(net assets of $589,260,470/57,936,082 shares
of beneficial interest outstanding) $10.17
======
Offering price per share (100/94.25) $10.79
Class B shares:
Net asset value, redemption price
and offering price per share
(net assets of $3,165,892/314,010 shares
of beneficial interest outstanding) $10.08
======
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 December 31, 1994
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends (net of foreign taxes withheld of $2,075) $ 6,112,101
Interest 739,941
------------
Total investment income $ 6,852,042
------------
Expenses -
Management fee $ 2,779,813
Trustees' compensation 52,384
Shareholder servicing agent fee (Class A) 921,514
Shareholder servicing agent fee (Class B) 5,361
Distribution and service fee (Class A) 1,492,867
Distribution and service fee (Class B) 24,368
Custodian fee 280,141
Postage 81,170
Printing 71,551
Auditing fees 39,157
Legal fees 5,793
Miscellaneous 401,400
------------
Total expenses $ 6,155,519
Reduction of expenses by distributor (638,658)
------------
Net expenses $ 5,516,861
------------
Net investment income $ 1,335,181
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 46,346,780
Foreign currency transactions (4,286,525)
------------
Net realized gain on investments $ 42,060,255
------------
Change in unrealized appreciation (depreciation) -
Investments $(72,081,497)
Translation of assets and liabilities in foreign currencies 1,365,640
------------
Net unrealized loss on investments $(70,715,857)
------------
Net realized and unrealized loss on investments
and foreign currency $(28,655,602)
------------
Decrease in net assets from operations $(27,320,421)
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,335,181 $ 4,165,432
Net realized gain on investments and foreign currency transactions 42,060,255 75,297,395
Net unrealized gain (loss) on investments and foreign currency transactions (70,715,857) 25,343,362
------------- -------------
Increase (decrease) in net assets from operations $ (27,320,421) $ 104,806,189
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (724,008) $ (4,211,067)
From net realized gain on investments and foreign currency transactions (44,286,419) (72,942,832)
In excess of net investment income (Class A) (985,537) (868,587)
In excess of net investment income (Class B) -- (1,695)
In excess of net realized gain on investments and foreign currency
transactions (2,720,891) --
------------- -------------
Total distributions declared to shareholders $ (48,716,855) $ (78,024,181)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 30,868,624 $ 32,427,738
Net asset value of shares issued to shareholders in reinvestment of
distributions 46,865,238 74,967,592
Cost of shares reacquired (119,914,672) (117,617,110)
------------- -------------
Decrease in net assets from Fund share transactions $ (42,180,810) $ (10,221,780)
------------- -------------
Total increase (decrease) in net assets $(118,218,086) $ 16,560,228
Net assets:
At beginning of period 710,644,448 694,084,220
------------- -------------
At end of period (including accumulated distributions in excess
of undistributed net investment income of $985,537 and
$174,440, respectively) $ 592,426,362 $ 710,644,448
============= =============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.56 $11.17 $10.75 $ 9.97 $10.93
Income from investment operations<F3> -
Net investment income<F6> $ 0.02 $ 0.07 $ 0.15 $ 0.24 $ 0.30
Net realized and unrealized gain (loss) on investments (0.50) 1.73 0.67 1.94 (0.77)
Total from investment operations $(0.48) $ 1.80 $ 0.82 $ 2.18 $(0.47)
Less distributions declared to shareholders -
From net investment income $(0.01) $(0.07) $(0.14) $(0.18) $(0.33)
In excess of net investment income (0.02) (0.02) -- -- --
From net realized gain on investments (0.83) (1.32) (0.26) (1.22) (0.16)<F5>
In excess of net realized gain on investments (0.05) -- -- -- --
Total distributions declared to shareholders $(0.91) $(1.41) $(0.40) $(1.40) $(0.49)
Net asset value - end of period $10.17 $11.56 $11.17 $10.75 $ 9.97
Total return<F4> (4.15)% 16.19% (8.60)% 9.29% (4.57)%
Ratios (to average net assets)/Supplemental data<F6>:
Expenses 0.86% 0.84% 0.89% 0.88% 0.80%
Net investment income 0.21% 0.60% 1.40% 2.14% 2.91%
Portfolio turnover 78% 0.79% 102% 131% 89%
Net assets at end of period (000 omitted) $589,260 $709,839 $739,791 $739,791 $687,847
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1989 1988 1987<F1>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.96 $10.81 $13.41
Income from investment operations<F3> -
Net investment income<F6> $0.36 $ 0.22 $ 0.11
Net realized and unrealized gain (loss) on investments 2.74 0.76 (2.13)
Total from investment operations $3.10 $ 0.98 $(2.02)
Less distributions declared to shareholders -
From net investment income $(0.36) $(0.19) $(0.11)
In excess of net investment income -- -- --
From net realized gain on investments (2.77) (0.64) (0.47)
In excess of net realized gain on investments -- -- --
Total distributions declared to shareholders $(3.13) $(0.83) $(0.58)
Net asset value - end of period $10.93 $10.96 $10.81
Total return<F4> 28.23% 8.90% (20.45)%<F2>
Ratios (to average net assets)/Supplemental data<F6>:
Expenses 0.77% 0.86% 0.72%<F2>
Net investment income 2.79% 1.90% 1.08%<F2>
Portfolio turnover 0.83% 68% 40%
Net assets at end of period (000 omitted) $805,702 $767,924 $834,359
<FN>
<F1> For the nine months ended December 31, 1987.
<F2> Annualized.
<F3> The per share data for the periods subsequent to December 31, 1992 is based
on average shares outstanding for both Class A and Class B shares.
<F4> Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to March 1, 1991). If the charge had
been included, the results would have been lower.
<F5> Includes a per share distribution from paid-in capital of $0.0006.
<F6> The distributor did not impose a portion of its distribution fee,
attributable to Class A shares, for the periods indicated. If this fee had
been incurred by Class A shareholders, the net investment income per share
and the ratios would have been:
<CAPTION>
1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income $0.01 $0.07 -- -- --
Ratios (to average net assets):
Expenses 0.96% 0.87% -- -- --
Net investment income 0.11% 0.56% -- -- --
<CAPTION>
1989 1988 1987<F1>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income -- -- --
Ratios (to average net assets):
Expenses -- -- --
Net investment income -- -- --
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Year Ended Period Ended
Year Ended March 31, December 31, December 31,
--------------------------- -------------------------------
1987 1986 1985 1994 1993<F4>
- ----------------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.51 $10.77 $10.44 $11.53 $12.52
------ ------ ------ ------ ------
Income from investment operations<F2>--
Net investment income (loss) $ 0.17 $ 0.22 $ 0.30 $(0.08) $ --
Net realized and unrealized gain
(loss) on investments 1.20 3.63 0.33 (0.49) 0.36
------ ------ ------ ------ ------
Total from investment operations $1.37 $ 3.85 $ 0.63 $(0.57) $ 0.36
------ ------ ------ ------ ------
Less distributions declared to
shareholders --
From net investment income $(0.17) $(0.22) $(0.30) $ -- $ --
In excess of net investment income -- -- -- -- (0.03)
From net realized gain on investments (1.30) (0.89) -- (0.83) (1.32)
In excess of net realized
gain on investments -- -- -- (0.05) --
------ ------ ------ ------ ------
Total distributions
declared to shareholers $(1.47) $(1.11) $(0.30) $(0.88) $(1.35)
------ ------ ------ ------ ------
Net asset value -- end of period $13.41 $13.51 $10.77 $10.08 $11.53
====== ====== ====== ====== ======
Total return<F3> 11.57% 35.92% 5.93% (4.96)% 9.29%<F1>
Ratios (to average net assets)/Supplemental data:
Expenses 0.71% 0.71% 0.75% 1.81% 1.33%<F1>
Net investment income (loss) 1.28% 1.85% 2.90% (0.70)% 0.00%<F1>
Portfolio turnover 109% 117% 101% 78% 79%
Net assets at end of period
(000 omitted) $1,090,764 $989,980 $712,551 $3,166 $ 805
<FN>
<F1> Annualized.
<F2> The per share data for the periods subsequent to December 31, 1992 is based
on average shares outstanding for both Class A and Class B shares.
<F3> Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to March 1, 1991). If the charge had
been included, the results would have been lower.
<F4> For the period from the commencement of offering of Class B shares,
September 7, 1993 to December 31, 1993.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Growth Opportunities Fund (the Fund) was organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end, management investment company.
(2) Significant Accounting Policies Investment Valuations - Equity securities
listed on securities exchanges or reported through the NASDAQ system are valued
at last sale prices. Unlisted equity securities or listed equity securities for
which last sale prices are not available are valued at last quoted bid prices.
Debt securities (other than short-term obligations which mature in 60 days or
less), including listed issues and forward contracts, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates value. Non-U.S. dollar
denominated short-term obligations are valued at amortized cost as calculated in
the base currency and translated into U.S. dollars at the closing daily exchange
rate. Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices. Over-the-counter
options are valued by brokers through the use of a pricing model which takes
into account closing bond valuations, implied volatility and short-term
repurchase rates. Securities for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Trustees.
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 purchased 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 securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized 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 covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a 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 a 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 stock index futures contracts for
the delayed delivery of securities or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit 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 underlying
security, 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 rates or securities prices.
The Fund may also invest in futures contracts for non-hedging purposes. Should
interest 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 these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Fund may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign currency
denominated securities from declines in value due to unfavorable exchange rate
movements. For non-hedging purposes, the Fund may enter into contracts with the
intent of changing the relative exposure of the Fund's portfolio of securities
to different currencies to take advantage of anticipated changes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until the contract settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return, and consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV.
Foreign taxes have been provided for on interest and dividend income earned on
foreign investments in accordance with the applicable country's tax rates and to
the extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended December 31, 1994, $436,733 was reclassified from
accumulated undistributed net investment income and $416,749 and $19,984 were
reclassified to accumulated net realized gain on investments and paid-in
capital, respectively, due to differences between book and tax accounting for
currency transactions. This change had no effect on the net assets or net asset
value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A and
Class B shares. The two classes of shares differ in their shareholder servicing
agent, distribution and service fees. Shareholders of each class also bear
certain expenses that pertain only to that particular class. All shareholders
bear the common expenses of the Fund pro rata, based on the average daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses, including distribution and shareholder servicing fees.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee, computed and paid monthly at an annual rate of 0.43% of average
daily net assets, amounted to $2,779,813.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees. Included in Trustees' compensation is a net
periodic pension expense of $15,744 for the year ended December 31, 1994.
Distributor - FSI, a wholly owned subsidiary of MFS, as distributor, received
$56,405 as its portion of the sales charge on sales of Class A shares of the
Fund. Effective January 1, 1995, MFS Financial Services, Inc. (FSI) became MFS
Fund Distributors (MFD). The Trustees have adopted separate distribution plans
for Class A and Class B shares pursuant to Rule 12b-1 of the Investment Company
Act of 1940 as follows:
The Class A Distribution Plan provides that the Fund will pay MFD up to 0. 35%
of its average daily net assets attributable to Class A shares annually in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to 0.10%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD is waiving the 0.10% distribution fee for an
indefinite period. Fees incurred under the distribution plan, net of waiver,
during the year ended December 31, 1994 were 0.13% of average daily net assets
attributable to Class A shares on an annualized basis and amounted to $854,209
(of which MFD retained $520,206).
The Class B Distribution Plan provides that the Fund will pay MFD a monthly
distribution fee, equal to 0.75% per annum, and a quarterly service fee of up to
0.25% per annum, of the Fund's average daily net assets attributable to Class B
shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD, all or a portion of the service fee attributable to Class B shares.
The service fee is intended to be additional consideration for services rendered
by the dealer with respect to Class B shares. Fees incurred under the
distribution plan during the year ended December 31, 1994 were 1.00% of average
daily net assets attributable to Class B shares on an annualized basis and
amounted to $24,368 (of which MFD retained $909).
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a share
redemption within twelve months following the share purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class B shares in
the event of a share redemption within six years of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended December 31, 1994 were $3,245 and $2,336 for Class A
shares and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
$921,514 and $5,361 for Class A and Class B shares, respectively, for its
services as shareholder servicing agent. The fee is calculated as a percentage
of the average daily net assets of each class of shares at an effective annual
rate of up to 0.15% and up to 0.22% attributable to Class A andClass B shares,
respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$491,726,687 and $589,907,850, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $533,072,118
------------
Gross unrealized appreciation $ 78,280,646
Gross unrealized depreciation (27,905,503)
------------
Net unrealized appreciation $ 50,375,143
------------
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
1994 1993
Year Ended December 31, --------------------------- -------------------------
Class A Shares Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,325,560 $ 26,182,936 2,663,520 $ 31,578,619
Shares issued to shareholders in
reinvestment of distributions 4,590,008 46,634,106 6,483,080 74,890,947
Shares reacquired (10,394,202) (117,718,886) (9,873,230) (117,559,113)
---------- ------------ ---------- ------------
Net decrease (3,478,634) $(44,901,844) (726,630) $(11,089,547)
========== ============ ========== ============
<CAPTION>
1994 1993*
Year Ended December 31, --------------------------- -------------------------
Class B Shares Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 419,077 $ 4,685,688 67,941 $849,119
Shares issued to shareholders in
reinvestment of distributions 22,946 231,132 6,665 76,645
Shares reacquired (197,864) (2,195,786) (4,755) (57,997)
------- ----------- ------ --------
Net increase 244,159 $ 2,721,034 69,851 $867,767
======= =========== ====== ========
</TABLE>
* For the period from the commencement of offering of Class B shares, September
7, 1993, to December 31, 1993.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $300 million, collectively.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended December 31, 1994 was $9,639.
(7) Financial Instruments
The Fund regularly 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.
A summary of obligations under these financial instruments at December 31, 1994,
is as follows:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Settlement Contracts to Appreciation/
Date Deliver/Receive In Exchange for Contracts at Value (Depreciation)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 1/29/95 CHF 10,698,200 $8,606,691 $ 8,191,255 $ 415,436
1/23/95 DEM 9,504,420 6,339,556 6,139,839 199,717
1/31/95 ESP 791,250,000 6,302,273 6,004,401 297,872
3/31/95 FIM 17,165,880 3,600,000 3,633,948 (33,948)
1/30/95 SEK 59,091,600 8,160,844 7,947,663 213,181
----------- ----------- ----------
$33,009,364 $31,917,106 $1,092,258
=========== =========== ==========
Purchases 2/07/95 CHF 2,000,000 $ 1,508,080 $ 1,531,838 $ 23,758
1/23/95 DEM 9,504,420 6,037,813 6,139,838 102,025
2/07/95 ESP 201,850,000 1,512,132 1,531,436 19,304
----------- ----------- ----------
$ 9,058,025 $ 9,203,112 $ 145,187
=========== =========== ==========
</TABLE>
At December 31, 1994, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) Restricted Securities
The Fund may invest not more than 10% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At December 31,
1994, the Fund owned the following restricted securities (constituting 3.47% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers.
Date of
Description Acquisition Shares Cost Value
- --------------------------------------------------------------------------------
Tele Danmark, ADR 4/28/94 350,000 $ 8,390,044 $ 8,925,000
Reuters Holdings PLC, ADR 8/27/92 - 11/6/92 265,000 7,999,504 11,626,875
----------- -----------
$16,389,548 $20,551,875
=========== ===========
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.
CHF=Swiss Francs FIM=Finish Markkaa
DEM=Deutsche Marks HKD=Hong Kong Dollar
ESP=Spanish Pesetas SEK=Swedish Krone
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of MFS Growth Opportunities Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Growth Opportunities Fund as of December
31, 1994, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended December 31, 1994 and
1993, and the financial highlights for each of the years in the eleven-year
period ended December 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 1994 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Growth
Opportunities Fund at December 31, 1994, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 1, 1995
---------------------------------------------------
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.
<PAGE>
THE MFS FAMILY OF FUNDS(R)
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call the MFS Service Center
at 1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time. This
material should be read carefully before investing or sending money.
<TABLE>
<CAPTION>
<S> <C>
STOCK LIMITED MATURITY BOND
Massachusetts Investors Trust MFS(r) Government Limited Maturity Fund
Massachusetts Investors Growth Stock Fund MFS(r) Limited Maturity Fund
MFS(r) Capital Growth Fund MFS(r) Municipal Limited Maturity Fund
MFS(r) Emerging Growth Fund WORLD
MFS(r) Gold & Natural Resources Fund MFS(r) World Asset Allocation Fund
MFS(r) Growth Opportunities Fund MFS(r) World Equity Fund
MFS(r) Managed Sectors Fund MFS(r) World Governments Fund
MFS(r) OTC Fund MFS(r) World Growth Fund
MFS(r) Research Fund MFS(r) World Total Return Fund
MFS(r) Value Fund NATIONAL TAX-FREE BOND
STOCK AND BOND MFS(r) Municipal Bond Fund
MFS(r) Total Return Fund MFS(r) Municipal High Income Fund
MFS(r) Utilities Fund (closed to new investors)
BOND MFS(r) Municipal Income Fund
MFS(r) Bond Fund STATE TAX-FREE BOND
MFS(r) Government Mortgage Fund Alabama, Arkansas, California, Florida,
MFS(r) Government Securities Fund Georgia, Louisiana, Maryland, Massachusetts,
MFS(r) High Income Fund Mississippi, New York, North Carolina,
MFS(r) Intermediate Income Fund Pennsylvania, South Carolina Tennessee, Texas,
MFS(r) Strategic Income Fund Virginia, Washington, West Virginia
(formerly MFS(r) Income & Opportunity Fund) MONEY MARKET
MFS(r) Cash Reserve Fund
MFS(r) Government Money Market Fund
MFS(r) Money Market Fund
</TABLE>
<PAGE>
MFS(R) GROWTH
OPPORTUNITIES
FUND
500 Boylston Street BULK RATE
Boston, MA 02116 U.S. POSTAGE
PAID
NUMBER PERMIT #55638
1 BOSTON, MA
DALBAR
TOP-RATED SERVICE
MGO-2 2/95 58.5M 16/216
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
For the ten years ended December 31, 1994:
Financial Highlights
FINANCIAL STATEMENTS INCLUDED IN PART B:
At December 31, 1994:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended December 31, 1994:
Statement of Operations*
For the two years in the period ended December
31, 1994: Statement of Changes in Net
Assets*
- -------------
* Incorporated herein by reference to the Fund's Annual Report to shareholders
dated December 31, 1994 which was filed with the SEC on March 6, 1995.
(B) EXHIBITS
1 Amended and Restated Declaration of Trust, dated
February 17, 1995; filed herewith.
2 Amended and Restated By-Laws, dated December 21,
1994; filed herewith.
3 Not Applicable.
4 (a) Specimen Share Certificate. (1)
(b) Share Certificate for A and B shares. (7)
5 Investment Advisory Agreement dated July 19,
1985, by and between the Registrant and
Massachusetts Financial Services Company. (3)
6 (a) Distribution Agreement, dated January 1, 1995;
filed herewith.
(b) Dealer Agreement between MFS Fund Distributors,
Inc. ("MFD"), and a dealer dated December 28,
1994 and the Mutual Fund Agreement between MFD
and a bank or NASD affiliate, dated December 28,
1994. (8)
7 Retirement Plan for Non-Interested Person
Trustees, dated January 1, 1991. (6)
8 (a) Custodian Contract between Registrant and State
Street Bank and Trust Company, dated April 25,
1988 and two Amendments dated April 25, 1988 and
February 26, 1990, respectively. (2)
(b) Amendment No. 3 to Custodian Contract. (5)
<PAGE>
9 (a) Shareholder Servicing Agent Agreement between
Registrant and Massachusetts Financial Service
Center, dated August 1, 1985. (3)
(b) Amendment to Shareholder Servicing Agent
Agreement, dated December 31, 1992. (8)
(c) Amendment to Shareholder Servicing Agent
Agreement, dated September 7, 1993. (7)
(d) Exchange Privilege Agreement, dated February 8,
1989 as amended through September 1, 1993. (7)
(e) Loan Agreement by and among the Banks named
therein, the MFS Funds named therein, and The
First National Bank of Boston, dated as of
February 21, 1995. (9)
(f) Dividend Disbursing Agency Agreement among MFS
Funds and State Street Bank and Trust Company,
dated February 1, 1986. (4)
10 Opinion and Consent of Counsel; filed herewith.
11 Consent of Deloitte & Touche; filed herewith.
12 Not Applicable.
13 Investment Representation Letter.
14 (a) Forms for Individual Retirement Account
Disclosure Statement as currently in effect. (3)
(b) Forms for MFS 403(b) Custodial Account Agreement
as currently in effect. (3)
(c) Forms for MFS Prototype Paired Defined
Contribution Plans and Fund Agreement as
currently in effect. (3)
15 (a) Amended and Restated Distribution Plan for Class
A Shares, dated December 21, 1994; filed
herewith.
(b) Distribution Plan for Class B Shares, dated
December 21, 1994; filed herewith.
16 Schedule for Computation of Performance
Quotations - Total Rate of Return. (7)
<PAGE>
17 Financial Data Schedules for each class; filed
herewith.
Power of Attorney, dated September 21, 1994;
filed herewith.
- ------------
(1) Incorporated by reference to Registrant's Post-Effective Amendment No.
23 filed with the SEC May 30, 1986.
(2) Incorporated by reference to Registrant's Post-Effective Amendment No.
27 filed with the SEC February 26, 1990.
(3) Incorporated by reference to Registrant's Post-Effective Amendment No.
28 filed with the SEC March 1, 1991.
(4) Incorporated by reference to Massachusetts Financial High Income Trust
(File No. 2-60491) Post-Effective Amendment No. 15 filed with the SEC on
March 31, 1992.
(5) Incorporated by reference to Registrant's Post-Effective Amendment No.
29 filed with the SEC on April 29, 1992.
(6) Incorporated by reference to Registrant's Post-Effective Amendment No.
30 filed with the SEC on April 30, 1993.
(7) Incorporated by reference to Registrant's Post-Effective Amendment No.
32 filed with the SEC on April 29, 1994.
(8) Incorporated by reference to MFS Municipal Series Trust (File Nos
2-92915 and 811-4096) Post-Effective Amendment No. 26 filed with the SEC
on Feburary 22, 1995.
(9) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS
Municipal Income Trust (File No. 811-4841) filed with the SEC on
February 28, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIE
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Class A Shares of Beneficial Interest 47,077
(without par value) (as of March 31, 1995)
Class B Shares of Beneficial Interest 576
(without par value) (as of March 31, 1995)
ITEM 27. INDEMNIFICATION
Reference is hereby made to (a) Article V of Registrant's
Declaration of Trust, filed herewith as Exhibit 1 to this Post-Effective
Amendment No. 33 to the Registrant's Registration Statement on Form N-1A; and
(b) the undertaking of the Registrant regarding indemnification set forth in its
Registration Statement on Form S-5.
The Trustees and officers of the Registrant and the
personnel of the Registrant's Investment adviser are insured under an errors and
omissions liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the Investment
Company Act of 1940.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Massachusetts Financial Services Company ("MFS") serves as
investment adviser to the following open-end funds comprising the MFS Family of
Funds: Massachusetts Investors Trust, Massachusetts Investors Growth Stock Fund,
MFS Growth Opportunities Fund, MFS Government Securities Fund, MFS Government
Mortgage Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has three series: MFS Managed Sectors Fund, MFS Cash Reserve Fund and MFS World
Asset Allocation Fund), MFS Series Trust II (which has four series: MFS Emerging
Growth Fund, MFS Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold
& Natural Resources Fund), MFS Series Trust III (which has two series: MFS High
Income Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has
four series: MFS Money Market Fund, MFS Government Money Market Fund, MFS
Municipal Bond Fund and MFS OTC Fund), MFS Series Trust V (which has two series:
MFS Total Return Fund and MFS Research Fund), MFS Series Trust VI (which has
three series: MFS World Total Return Fund, MFS Utilities Fund and MFS World
Equity Fund), MFS Series Trust VII (which has two series: MFS World Governments
Fund and MFS Value Fund), MFS Series Trust VIII (which has two series: MFS
Strategic Income Fund and MFS World Growth Fund), MFS Municipal Series Trust
(which has 19 series: MFS Alabama Municipal Bond Fund, MFS Arkansas Municipal
Bond Fund, MFS California Municipal Bond Fund, MFS Florida Municipal Bond Fund,
MFS Georgia Municipal Bond Fund, MFS Louisiana Municipal Bond Fund, MFS Maryland
Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS Mississippi
Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North Carolina
Municipal Bond Fund, MFS Pennsylvania Municipal Bond Fund, MFS South Carolina
Municipal Bond Fund, MFS Tennessee Municipal Bond Fund, MFS Texas Municipal Bond
Fund, MFS Virginia Municipal Bond Fund, MFS Washington Municipal Bond Fund, MFS
West Virginia Municipal Bond Fund and MFS Municipal Income Fund) and MFS Series
Trust IX (which has three series: MFS Bond Fund, MFS Limited Maturity Fund and
MFS Municipal Limited Maturity Fund) (the "MFS Funds"). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
MFS also serves as investment adviser of the following
no-load, open-end funds: MFS Institutional Trust ("MFSIT") (which has two
series), MFS Variable Insurance Trust ("MVI") (which has twelve series) and MFS
Union Standard Trust ("UST") (which has two series). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the aforementioned funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life
Series Trust ("MFS/SL"), Sun Growth Variable Annuity Fund, Inc. ("SGVAF"), Money
Market Variable Account, High Yield Variable Account, Capital Appreciation
Variable Account, Government Securities Variable Account, World Governments
Variable Account, Total Return Variable Account and Managed Sectors Variable
Account. The principal business address of each is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company
organized under the laws of the Republic of Ireland and a subsidiary of MFS,
whose principal business address is 41-45 St. Stephen's Green, Dublin 2,
Ireland, serves as investment adviser to and distributor for MFS International
Funds (which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International
Funds-International Governments Fund and MFS International Fund-Charter Income
Fund) (the "MIL Funds"). The MIL Funds are organized in Luxembourg and qualify
as an undertaking for collective investments in transferable securities (UCITS).
The principal business address of the MIL Funds is 47, Boulevard Royal, L-2449
Luxembourg.
<PAGE>
MIL also serves as investment adviser to and distributor for
MFS Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund and MFS Meridian U.S. Equity
Fund (collectively the "MFS Meridian Funds"). Each of the MFS Meridian Funds is
organized as an exempt company under the laws of the Cayman Islands. The
principal business address of each of the MFS Meridian Funds is P.O. Box 309,
Grand Cayman, Cayman Islands, British West Indies.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary
of MFS, serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned
subsidiary of MFS, serves as distributor for certain life insurance and annuity
contracts issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary
of MFS, serves as shareholder servicing agent to the MFS Funds, the MFS
Closed-End Funds, MFS Institutional Trust, MFS Variable Insurance Trust and MFS
Union Standard Trust.
MFS Asset Management, Inc. ("AMI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned
subsidiary of MFS, markets MFS products to retirement plans and provides
administrative and record keeping services for retirement plans.
MFS
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames,
Arnold D. Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the
Chairman, Mr. Shames is the President, Mr. Scott is a Senior Executive Vice
President and Secretary, James E. Russell is a Senior Vice President and the
Treasurer, Stephen E. Cavan is a Senior Vice President, General Counsel and an
Assistant Secretary, and Robert T. Burns is a Vice President and an Assistant
Secretary of MFS.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS GOVERNMENT MORTGAGE FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS GOVERNMENT LIMITED MATURITY FUND
MFS SERIES TRUST VI
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is Assistant Treasurer, James R. Bordewick, Jr., Vice
President and Associate General Counsel of MFS, is Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, Leslie J.
Nanberg, Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer, and James R. Bordewick, Jr., is Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice
President of MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost is Assistant Treasurer, and James
R. Bordewick, Jr., is the Assistant Secretary.
<PAGE>
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T.
Swanson, Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan and Daniel E. McManus, Assistant Vice Presidents of MFS, are
Assistant Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is Assistant Treasurer, and James R. Bordewick,
Jr., is Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, Robert A.
Dennis and Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice
Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, Leslie J.
Nanberg and Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice
Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D.
Laupheimer, Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L.
Schechter and David R. King, Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS UNION STANDARD TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost and
Karen C. Jordan are Assistant Treasurers and James R. Bordewick, Jr., is the
Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert J. Manning are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
<PAGE>
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, and James O. Yost, is
Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the President, Arnold D.
Scott, Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of
MFS, is a Senior Vice President and Managing Director, Thomas J. Cashman, Jr., a
Vice President of MFS, is a Senior Vice President, Stanley T. Kwok is a Vice
President, Anthony F. Clarizio is an Assistant Vice President, Stephen E. Cavan
is a Director, Senior Vice President and the Clerk, James R. Bordewick, Jr. is a
Director, Senior Vice President and an Assistant Clerk, Robert T. Burns is an
Assistant Clerk and James E. Russell is the Treasurer.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary, and Ziad
Malek is a Senior Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James R. Bordewick, Jr., is the
Assistant Secretary and Ziad Malek is a Senior Vice President.
MFD
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, William W. Scott, Jr., an Executive Vice President of
MFS, is the President, Stephen E. Cavan is the Secretary, Robert T. Burns is the
Assistant Secretary, and James E. Russell is the Treasurer.
CIAI
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery, Executive
Vice President of MFS, is the Vice President, James E. Russell is the Treasurer,
Stephen E. Cavan is the Secretary, and Robert T. Burns is the Assistant
Secretary.
MFSC
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Joseph A. Recomendes, Senior Vice President of MFS, is
the President, James E. Russell is the Treasurer, Stephen E. Cavan is the
Secretary, and Robert T. Burns is the Assistant Secretary.
AMI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L.
Shames, Leslie J. Nanberg and Arnold D. Scott are Directors, Thomas J. Cashman
is the President and a Director, James E. Russell is the Treasurer and Robert T.
Burns is the Secretary.
<PAGE>
RSI
William W. Scott, Jr., Joseph A. Recomendes and Bruce C. Avery
are Directors, Arnold D. Scott is the Chairman, Douglas C. Grip, a Senior Vice
President of MFS, is the President, James E. Russell is the Treasurer, Stephen
E. Cavan is the Secretary, Robert T. Burns is the Assistant Secretary and Henry
A. Shea is an Executive Vice President.
In addition, the following persons, Directors or officers of
MFS, have the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive
Park, Wellesley Hills, Massachusetts
Director, Sun Life Insurance and Annuity
Company of New York, 67 Broad Street,
New York, New York
John R. Gardner President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. Gardner is also an
officer and/or Director of various
subsidiaries and affiliates of Sun
Life)
John D. McNeil Chairman, Sun Life Assurance Company of
Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada
(Mr. McNeil is also an officer and/or
Director of various subsidiaries and
affiliates of Sun Life)
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in
whole or in part, at the office of the Registrant and the following locations:
NAME ADDRESS
Massachusetts Financial Services 500 Boylston Street
(investment adviser) Boston, Mass. 02116
MFS Fund Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, Mass. 02116
State Street Bank and State Street South
Trust Company 5 - West
(custodian) North Quincy, Mass. 02171
MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, Mass. 02116
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to shareholders
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 25 day of April, 1995.
MFS GROWTH OPPORTUNITIES
FUND
By: JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on April 25, 1995.
SIGNATURE TITLE
A. KEITH BRODKIN* Chairman, President (Principal
A. Keith Brodkin Executive Officer) and Trustee
W. THOMAS LONDON* Treasurer (Principal Financial
W. Thomas London Officer and Principal Accounting
Officer)
RICHARD B. BAILEY* Trustee
Richard B. Bailey
PETER G. HARWOOD* Trustee
Peter G. Harwood
<PAGE>
J. ATWOOD IVES* Trustee
J. Atwood Ives
LAWRENCE T. PERERA, ESQ* Trustee
Lawrence T. Perera, Esq.
WILLIAM J. POORVU* Trustee
William J. Poorvu
CHARLES W. SCHMIDT* Trustee
Charles W. Schmidt
ARNOLD D. SCOTT* Trustee
Arnold D. Scott
JEFFREY L. SHAMES* Trustee
Jeffrey L. Shames
ELAINE R. SMITH* Trustee
Elaine R. Smith
DAVID B. STONE* Trustee
David B. Stone
*By: JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
as Attorney-in-fact
Executed by James R. Bordewick,
Jr. on behalf of those indicated
pursuant to a Power of Attorney
dated September 21, 1994; filed
herewith.
<PAGE>
POWER OF ATTORNEY
MFS GROWTH OPPORTUNITIES FUND
The undersigned, Trustees and officers of MFS Growth Opportunities Fund
(the "Registrant"), hereby severally constitute and appoint A. Keith Brodkin, W.
Thomas London, Stephen E. Cavan and James R. Bordewick, Jr., and each of them
singly, as true and lawful attorneys, with full power to them and each of them
to sign for each of the undersigned, in the names of, and in the capacities
indicated below, any Registration Statement and any and all amendments thereto
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission for the
purpose of registering the Registrant as a management investment company under
the Investment Company Act of 1940 and/or the shares issued by the Registrant
under the Securities Act of 1933 granting unto our said attorneys, and each of
them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary or desirable to be done in the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys or any of them may
lawfully do or cause to be done by virtue thereof.
In WITNESS WHEREOF, the undersigned have hereunto set their hand on
this 21st day of September, 1994.
Signatures Title(s)
A. KEITH BRODKIN Chairman of the Board; Trustee; and
A. Keith Brodkin Principal Executive Officer
RICHARD B. BAILEY Trustee
Richard B. Bailey
PETER G. HARWOOD Trustee
Peter G. Harwood
J. ATWOOD IVES Trustee
J. Atwood Ives
LAWRENCE T. PERERA, ESQ Trustee
Lawrence T. Perera, Esq.
<PAGE>
WILLIAM J. POORVU Trustee
William J. Poorvu
CHARLES W. SCHMIDT Trustee
Charles W. Schmidt
ARNOLD D. SCOTT Trustee
Arnold D. Scott
JEFFREY L. SHAMES Trustee
Jeffrey L. Shames
ELAINE R. SMITH Trustee
Elaine R. Smith
DAVID B. STONE Trustee
David B. Stone
W. THOMAS LONDON Principal Financial and Accounting
W. Thomas London Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
1 Amended and Restated Declaration of Trust, dated
February 17, 1995.
2 Amended and Restated By-Laws, dated December 21,
1994.
6 (a) Distribution Agreement, dated January 1, 1995.
10 Opinion and Consent of Counsel.
11 Consent of Deloitte & Touche.
15 (a) Amended and Restated Distribution Plan for Class A
Shares, dated December 21, 1994.
15 (b) Distribution Plan for Class B Shares, dated
December 21, 1994.
27 Financial Data Schedules for each class.
<PAGE>
Exhibit No. 99.1
MFS GROWTH OPPORTUNITIES FUND
AMENDED AND RESTATED
DECLARATION OF TRUST
FEBRUARY 15, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - NAME AND DEFINITIONS
Section 1.1 Name 1
Section 1.2 Definitions 2
ARTICLE II - TRUSTEES
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 4
Section 2.4 Vacancies 4
Section 2.5 Delegation of Power to Other Trustees 5
ARTICLE III - POWERS OF TRUSTEES
Section 3.1 General 5
Section 3.2 Investments 5
Section 3.3 Legal Title 7
Section 3.4 Issuance and Repurchase of Securities 7
Section 3.5 Borrowing Money; Lending Trust Property 7
Section 3.6 Delegation; Committees 7
Section 3.7 Collection and Payment 7
Section 3.8 Expenses 8
Section 3.9 Manner of Acting; By-Laws 8
Section 3.10 Miscellaneous Powers 8
Section 3.11 Principal Transactions 9
Section 3.12 Trustees and Officers as Shareholders 9
ARTICLE IV - INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT
Section 4.1 Investment Adviser 10
Section 4.2 Distributor 10
Section 4.3 Transfer Agent 11
Section 4.4 Parties to Contract 11
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE V - LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc. 11
Section 5.2 Non-Liability of Trustees, etc. 12
Section 5.3 Mandatory Indemnification 12
Section 5.4 No Bond Required of Trustees 14
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. 14
Section 5.6 Reliance on Experts, etc. 15
ARTICLE VI - SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest 15
Section 6.2 Rights of Shareholders 15
Section 6.3 Trust Only 16
Section 6.4 Issuance of Shares 16
Section 6.5 Register of Shares 16
Section 6.6 Transfer of Shares 16
Section 6.7 Notices 17
Section 6.8 Voting Powers 17
Section 6.9 Series Designation 18
Section 6.10 Class Designation 20
ARTICLE VII - REDEMPTIONS
Section 7.1 Redemption of Shares 20
Section 7.2 Price 20
Section 7.3 Payment 21
Section 7.4 Effect of Suspension of Determination of
Net Asset Value 21
Section 7.5 Redemption of Shares in Order to Qualify
as Regulated Investment Company; Disclosure
of Holding 21
Section 7.6 Suspension of Right to Redemption 22
ARTICLE VIII - DETERMINATION OF NET ASSET VALUE, NET INCOME
AND DISTRIBUTIONS 22
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE IX - DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1 Duration 23
Section 9.2 Termination of Trust 23
Section 9.3 Amendment Procedure 24
Section 9.4 Merger, Consolidation and Sale of Assets 25
Section 9.5 Incorporation, Reorganization 25
Section 9.6 Incorporation or Reorganization of Series 26
ARTICLE X - REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS 26
------------------------------------------------------
ARTICLE XI - MISCELLANEOUS
Section 11.1 Filing 27
Section 11.2 Governing Law 27
Section 11.3 Counterparts 27
Section 11.4 Reliance by Third Parties 27
Section 11.5 Provisions in Conflict with Law or
Regulations 28
ANNEX A 29
SIGNATURE PAGE 30
<PAGE>
DECLARATION OF TRUST
OF
MFS GROWTH OPPORTUNITIES FUND
500 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02116
AMENDED AND RESTATED DECLARATION OF TRUST, made as of this 15th day of
February, 1995 by the Trustees hereunder.
WHEREAS, the Trust was established pursuant to a Declaration of Trust
dated February 20, 1985 for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets continue to be divided into transferable Shares of Beneficial Interest
(without par value) issued in one or more series, as hereinafter provided; and
WHEREAS, the Declaration of Trust has been, from time to time, amended
in accordance with the provisions of the Declaration; and
WHEREAS, the Trustees now desire further to amend and to restate the
Declaration of Trust and hereby certify, as provided in Section 11.1 of the
Declaration, that this Amended and Restated Declaration of Trust has been
further amended and restated in accordance with the provisions of the
Declaration;
NOW THEREFORE, the Trustees hereby confirm that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the Shares of Beneficial
Interest (without par value) issued hereunder and subject to the provisions
hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 - Name. The name of the trust created hereby is the MFS
Growth Opportunities Fund, the current address of which is 500 Boylston Street,
Boston, Massachusetts 02116.
Section 1.2 - Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof,
as from time to time amended.
(b) "Commission" has the meaning given that term in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(d) "Distributor" means the party, other than the Trust, to the
contract described in Section 4.2 hereof.
(e) "Interested Person" has the meaning given that term in the 1940
Act.
(f) "Investment Adviser" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(g) "Majority Shareholder Vote" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the 1940
Act, except that such term may be used herein with respect to the Shares of the
Trust as a whole or the Shares of any particular series, as the context may
require.
(h) "1940 Act" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time.
(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign.
(j) "Shareholder" means a record owner of outstanding Shares.
(k) "Shares" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series of Shares established by the Trustees
pursuant to Section 6.9 hereof, equal proportionate transferable units into
which such series of Shares shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(1) "Transfer Agent" means the party, other than the Trust, to a
contract described in Section 4.3 hereof.
(m) "Trust" means the trust created hereby.
(n) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(o) "Trustees" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly elected or appointed,
qualified and serving as Trustees in accordance with the provisions hereof, and
reference herein to a Trustee or the Trustees shall refer to such person or
persons in their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1 - Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than two (2) nor more than fifteen (15).
Section 2.2 - Term of Office of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided;
except:
(a) that any Trustee may resign his trust (without need for prior or
subsequent accounting) by an instrument in writing signed by him and delivered
to the other Trustees, which shall take effect upon such delivery or upon such
later date as is specified therein;
(b) that any Trustee may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) with cause, at any time by written instrument, signed by at
least two-thirds of the remaining Trustees, specifying the date when such
removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has
become incapacitated by illness or injury may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; and
(d) a Trustee may be removed at any meeting of Shareholders by a vote
of two-thirds of the outstanding Shares. Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in the
name of the resigning or removed Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on his behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
Section 2.3 - Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees shall fill such vacancy by
appointing such other person as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16(a)
of the 1940 Act.
Section 2.4 - Vacancies. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
Section 2.5 - Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two Trustees personally exercise the powers granted to the Trustees
under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1 - General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2 - Investments.
(a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an
investment company;
(ii) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange,
distribute, lend or otherwise deal in or dispose of U.S. and foreign currencies,
any form of gold and other precious metals, commodity contracts, contracts for
the future acquisition or delivery of fixed income or other securities, and
securities of every nature and kind, including, without limitation, all types of
bonds, debentures, stocks, negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, bankers' acceptances, and other
securities of any kind, issued, created, guaranteed or sponsored by any and all
Persons, including, without limitation, states, territories and possessions of
the United States and the District of Columbia and any political subdivision,
agency or instrumentality of any such Person, or by the U.S. Government, any
foreign government, any political subdivision or any agency or instrumentality
of the U.S. Government, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory or possession thereof, or by any corporation or organization organized
under any foreign law, or in "when issued" contracts for any such securities, to
retain Trust assets in cash and from time to time change the investments of the
assets of the Trust; and to exercise any and all rights, powers and privileges
of ownership or interest in respect of any and all such investments of every
kind and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more persons,
firms, associations or corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments; and
(iii) to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth and to do every other act
or thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
(b) The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Section 3.3 - Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person or nominee, on such terms as the Trustees may determine. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
Section 3.4 - Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds of the Trust or other Trust Property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of The Commonwealth of Massachusetts governing business
corporations.
Section 3.5 - Borrowing Money; Lending Trust Property. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the Trust
Property, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust Property.
Section 3.6 - Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
Section 3.7 - Collection and Payment. Subject to Section 6.9 hereof,
the Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 3.8 - Expenses. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
Section 3.9 - Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of all the Trustees.
The Trustees may adopt By-Laws not inconsistent with this Declaration to provide
for the conduct of the business of the Trust and may amend or repeal such
By-Laws to the extent such power is not reserved to the Shareholders.
Section 3.10 - Miscellaneous Powers. The Trustees shall have the power
to:
(a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust;
(b) enter into joint ventures, partnerships and any other combinations
or associations;
(c) remove Trustees or fill vacancies in or add to their number, elect
and remove such officers and appoint and terminate such agents or employees as
they consider appropriate, and appoint from their own number, and terminate, any
one or more committees which may exercise some or all of the power and authority
of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property, insurance policies
insuring the Shareholders, Trustees, officers, employees, agents, investment
advisers, distributors, selected dealers or independent contractors of the Trust
against all claims arising by reason of holding any such position or by reason
of any action taken or omitted by any such Person in such capacity, whether or
not constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability;
(e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust;
(f) to the extent permitted by law, indemnify any person with whom the
Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent, and any dealer, to such extent as the Trustees shall determine;
(g) determine and change the fiscal year of the Trust and the method by
which its accounts shall be kept; and
(h) adopt a seal for the Trust, provided, that the absence of such seal
shall not impair the validity of any instrument executed on behalf of the Trust.
Section 3.11 - Principal Transactions. Except in transactions permitted
by the 1940 Act, or any order of exemption issued by the Commission, the
Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor, or Transfer Agent or with any
Interested Person of such Person; but the Trust may employ any such Person, or
firm or company in which such Person is an Interested Person, as broker, legal
counsel, registrar, transfer agent, dividend disbursing agent or custodian upon
customary terms.
Section 3.12 - Trustees and Officers as Shareholders. Except as
hereinafter provided, no officer, Trustee or Member of the Advisory Board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser or of the Distributor and no Investment Adviser or Distributor of the
Trust, shall take long or short positions in the securities issued by the Trust.
The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent for the account of
the Trust;
(c) The purchase from the Trust or from the Distributor of Shares by
any officer, Trustee or member of the Advisory Board of the Trust or by any
member, partner, officer, director or trustee of the Investment Adviser or of
the Distributor at a price not lower than the net asset value of the Shares at
the moment of such purchase, provided that any such sales are only to be made
pursuant to a uniform offer described in the Trust's current prospectus; or
(d) The Investment Adviser, the Distributor or any of their officers,
partners, directors or trustees from purchasing Shares prior to the effective
date of the Registration Statement relating to the Shares under the Securities
Act of 1933, as amended.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT
Section 4.1 - Investment Adviser. Subject to a Majority Shareholder
Vote of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby a party to such contract shall undertake to furnish
the Trust such management, investment advisory, statistical and research
facilities and services, promotional activities, and such other facilities and
services, if any, with respect to one or more series of Shares, as the Trustees
shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provision of the Declaration, the Trustees may delegate to the Investment
Adviser authority (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of assets of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any such purchases, sales, loans or exchanges shall be
deemed to have been authorized by all the Trustees.
Section 4.2 - Distributor. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of Shares whereby the
Trust may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares.
Section 4.3 - Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract or
contracts whereby the other party or parties to such contract or contracts shall
undertake to furnish transfer agency and/or shareholder services. The contract
or contracts shall have such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the Declaration or the By-Laws. Such
services may be provided by one or more Persons.
Section 4.4 - Parties to Contract. Any contract of the character
described in Sections 4.1, 4.2 or 4.3 of this Article IV or any Custodian
contract, as described in the By-Laws, may be entered into with any Person,
although one or more of the Trustees or officers of the Trust may be an officer,
partner, director, trustee, shareholder, or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship; nor shall any Person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article IV or
the By-Laws. The same Person may be the other party to contracts entered into
pursuant to Sections 4.1, 4.2 and 4.3 above or Custodian contracts, and any
individual may be financially interested or otherwise affiliated with Persons
who are parties to any or all of the contracts mentioned in this Section 4.4.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1 - No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein. Notwithstanding any other provision of this
Declaration to the contrary, no Trust Property shall be used to indemnify or
reimburse any Shareholder of any Shares of any series other than Trust Property
allocated or belonging to such series.
Section 5.2 - Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
Section 5.3 - Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is or has been a Trustee or officer of the
Trust shall be indemnified by the Trust against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by
reason of a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a
Trustee or officer or other disposition not involving a final adjudication as
provided in paragraph (b) (i) or (b) (ii) above resulting in a payment by a
Trustee or officer, unless there has been either a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition
or by a reasonable determination, based upon a review of readily available facts
(as opposed to a full trial-type inquiry) that he did not engage in such
conduct:
(A) by vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a Person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such Person. Nothing contained herein shall affect any rights
to indemnification to which personnel other than Trustees and officers may be
entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one (i) who
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
Section 5.4 - No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 5.5 - No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, Transfer Agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively presumed to have been executed or done by the
executors thereof only in their capacity as Trustees under the Declaration or in
their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees shall recite that the same
is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of any such instrument are not binding
upon any of the Trustees or Shareholders individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind any of
the Trustees or Shareholders individually. The Trustees shall at all times
maintain insurance for the protection of the Trust Property, the Trust's
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
Section 5.6 - Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 - Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of Beneficial Interest
(without par value) which shall be divided into one or more series as provided
in Section 6.9 hereof. The number of Shares authorized hereunder is unlimited.
All Shares issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and non-assessable.
Section 6.2 - Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in the Declaration. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any series
or class of Shares.
Section 6.3 - Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4 - Issuance of Shares. The Trustees, in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares of any series into a greater or lesser number
without thereby changing their proportionate beneficial interests in Trust
Property allocated or belonging to such series. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or l/l,000ths
of a Share or integral multiples thereof.
Section 6.5 - Register of Shares. A register shall be kept at the
principal office of the Trust or at an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-Laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of Share certificates and promulgate appropriate rules and regulations as to
their use.
Section 6.6 - Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with any certificate or
certificates (if issued) for such Shares and such evidence of the genuineness of
each such execution and authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer, employee or agent
of the Trust shall be affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent; but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 6.7 - Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 6.8 - Voting Powers. The Shareholders shall have power to vote
only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii)
with respect to any investment advisory or management contract as provided in
Section 4.1 hereof, (iii) with respect to termination of the Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to
the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Sections 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or not
a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (viii) with respect to such additional matters relating to the
Trust as may be required by the Declaration, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote, except that Shares
held in the treasury of the Trust shall not be voted. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration or the By-Laws to be taken by Shareholders. The
By-Laws may include further provisions for Shareholder votes and meetings and
related matters.
Section 6.9 - Series Designation. Shares of the Trust may be divided
into series, the number and relative rights, privileges and preferences of which
shall be established and designated by the Trustees, in their discretion, in
accordance with the terms of this Section 6.9. The Trustees may from time to
time exercise their power to authorize the division of Shares into one or more
series by establishing and designating one or more series of Shares upon and
subject to the following provisions:
(a) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption and the price, terms and manner
of redemption, and special and relative rights as to dividends and on
liquidation.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury Shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series, the Trustees shall allocate them among any
one or more of the series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all series for all purposes. No holder of Shares of any
particular series shall have any claim on or right to any assets allocated or
belonging to any other series of Shares.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. Under no circumstances shall the assets allocated
or belonging to any particular series be charged with liabilities attributable
to any other series. All Persons who have extended credit which has been
allocated to a particular series, or who have a claim or contract which has been
allocated to any particular series, shall look only to the assets of that
particular series for payment of such credit, claim or contract.
(e) The power of the Trustees to invest and reinvest the Trust Property
allocated or belonging to any particular series shall be governed by Section 3.2
hereof unless otherwise provided in the instrument of the Trustees establishing
such series which is hereinafter described.
(f) Each Share of a series shall represent a beneficial interest in the
net assets allocated or belonging to such series only, and such interest shall
not extend to the assets of the Trust generally. Dividends and distributions on
Shares of a particular series may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that series, only from such
of the income and capital gains, accrued or realized, from the assets belonging
to that series, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series. All dividends and distributions on
Shares of a particular series shall be distributed pro rata to the holders of
that series in proportion to the number of Shares of that series held by such
holders at the date and time of record established for the payment of such
dividends or distributions. Shares of any particular series of the Trust may be
redeemed solely out of Trust Property allocated or belonging to that series.
Upon liquidation or termination of a series of the Trust, Shareholders of such
series shall be entitled to receive a pro rata share of the net assets of such
series only. A Shareholder of a particular series of the Trust shall not be
entitled to participate in a derivative or class action on behalf of any other
series or the Shareholders of any other series of the Trust.
(g) Notwithstanding any provision hereof to the contrary, on any matter
submitted to a vote of the Shareholders of the Trust, all Shares then entitled
to vote shall be voted in the aggregate, except that (i) when required by the
1940 Act to be voted by individual series, Shares shall not be voted in the
aggregate, and (ii) when the Trustees have determined that the matter affects
only the interests of Shareholders of one or more series, only Shareholders of
such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
Section 6.10 - Class Designation. The Trustees may, in their
discretion, authorize the division of Shares of the Trust (or any series of the
Trust) into one or more classes. All Shares of a class shall be identical with
each other and with the Shares of each other class of the Trust or the same
series of the Trust (as applicable), except for such variations between classes
as may be approved by the Board of Trustees and permitted by the 1940 Act or
pursuant to any exemptive order issued by the Securities and Exchange
Commission. The classes of Shares established pursuant to this Section 6.10 and
existing as of the date hereof are set forth in Annex A hereto.
ARTICLE VII
REDEMPTIONS
Section 7.1 - Redemption of Shares. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from time to time
for that purpose in the Trust's then effective prospectus under the Securities
Act of 1933. The Trustees may from time to time specify additional conditions,
not inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective prospectus under the Securities Act of 1933.
Section 7.2 - Price. Shares shall be redeemed at their net asset value
determined as set forth in Article VIII hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Article VIII hereof after
receipt of such application.
Section 7.3 - Payment. Payment of the redemption price of Shares of any
series shall be made in cash or in property out of the assets of such series to
the Shareholder of record at such time and in the manner, not inconsistent with
the 1940 Act or other applicable laws, as may be specified from time to time in
the Trust's then effective prospectus under the Securities Act of 1933, subject
to the provisions of Section 7.4 hereof.
Section 7.4 - Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 7.6 hereof, the Trustees shall declare a suspension of
the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 7.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on
deposits. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Article VIII after the termination of such suspension, and payment
shall be made within seven days after the date upon which the application was
made plus the period after such applications during which the determination of
net asset value was suspended.
Section 7.5 - Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify the Trust or any series of the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption by any such Person a number, or principal amount, of Shares or
other securities of the Trust sufficient to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 7.1.
The holders of Shares of other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
Section 7.6 - Suspension of Right of Redemption. The Trust may declare
a suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the commission shall govern as to whether
the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment on redemption
until the Trust shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first day on which said stock
exchange shall have reopened or the period specified in (ii) or (iii) shall have
expired (as to which in the absence of an official ruling by the Commission, the
determination of the Trust shall be conclusive). In the case of a suspension of
the right of redemption a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing after the
termination of the suspension as provided in Section 7.4 hereof.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Subject to Section 6.9 hereof, the Trustees, in their absolute
discretion, may prescribe and shall set forth in the By-Laws or in a duly
adopted vote of the Trustees such bases and times for determining the per Share
or net asset value of the Shares of any series or net income attributable to the
Shares of any series, or the declaration and payment of dividends and
distributions on the Shares of any series, as they may deem necessary or
desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1 - Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
Section 9.2 - Termination of Trust.
(a) The Trust may be terminated (i) by a Majority Shareholder Vote of
the holders of its Shares, or (ii) by the Trustees by written notice to the
Shareholders. Any series of the Trust may be terminated (i) by a Majority
Shareholder Vote of the holders of Shares of that series, or (ii) by the
Trustees by written notice to the Shareholders of that series. Upon the
termination of the Trust or any series of the Trust:
(i) The Trust or series of the Trust shall carry on no business
except for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the
Trust or series of the Trust and all the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or series of the Trust
shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust or series of the Trust, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property or Trust Property of the series to one or more persons
at public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its business;
provided, that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property shall require
Shareholder approval in accordance with Section 9.4 hereof, and any sale,
conveyance, assignment, exchange, transfer or other disposition of all or
substantially all of the Trust Property allocated or belonging to any series
shall require the approval of the Shareholders of such series as provided in
Section 9.6 hereof; and
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property of the series, in cash
or in kind or partly in cash and partly in kind, among the Shareholders of the
Trust or the series according to their respective rights.
(b) After termination of the Trust or series and distribution to the
Shareholders of the Trust or series as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder with
respect to the Trust or series, and the rights and interests of all Shareholders
of the Trust or series shall thereupon cease.
Section 9.3 - Amendment Procedure.
(a) This Declaration may be amended by a Majority Shareholder Vote of
the Shareholders of the Trust or by any instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by the holders of
not less than a majority of the Shares of the Trust. The Trustees may also amend
this Declaration without the vote or consent of Shareholders to designate series
in accordance with Section 6.9 hereof, to change the name of the Trust, to
supply any omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary or advisable to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code, as amended, but the Trustees shall not be liable
for failing so to do.
(b) No amendment which the Trustees shall have determined shall affect
the rights, privileges or interests of holders of a particular series of Shares,
but not the rights, privileges or interests of holders of Shares of the Trust
generally, may be made except with the vote or consent by a Majority Shareholder
Vote of such series.
(c) Notwithstanding any other provision hereof, no amendment may be
made under this Section 9.3 which would change any rights with respect to the
Shares, or any series of Shares, by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with a Majority Shareholder Vote of Shares or series
of Shares. Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(d) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
(e) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
Section 9.4 - Merger, Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for such purpose by the Majority Shareholder Vote of the Trust, or by an
instrument or instruments in writing without a meeting, consented to by the
Majority Shareholder Vote of the Trust; provided, however, that if such merger,
consolidation, sale, lease or exchange is recommended by the Trustees, the vote
or written consent of the holders of a majority of Shares outstanding shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall deemed for all purposes to have been accomplished under and
pursuant to the statutes of The Commonwealth of Massachusetts. Nothing contained
herein shall be construed as requiring approval of shareholders for any sale of
assets in the ordinary course of the business of the Trust.
Section 9.5 - Incorporation, Reorganization. With the approval
of the holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the Shares or securities thereof or otherwise, and
to lend money to, subscribe for the Shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire Shares or any other
interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
Section 9.6 - Incorporation or Reorganization of Series. With the
approval of a Majority Shareholder Vote of any series, the Trustees may sell,
lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over
all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the Shares or securities thereof or otherwise.
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
Whenever ten or more Shareholders of record who have been such
for at least six months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least $25,000 or at least
1% of the Shares outstanding, whichever is less, shall apply to the Trustees in
writing, stating that they wish to communicate with other Shareholders with a
view to obtaining signatures to a request for a meeting of Shareholders for the
purpose of removing one or more Trustees pursuant to Section 2.2 hereof and
accompany such application with a form of communication and request which they
wish to transmit, the Trustees shall within five business days after receipt of
such application either (a) afford to such applicants access to a list of the
names and addresses of all Shareholders as recorded on the books of the Trust;
or (b) inform such applicants as to the approximate number of Shareholders of
record, and the approximate cost of mailing to them the proposed communication
and form of request. If the Trustees elect to follow the course specified in (b)
above, the Trustees, upon the written request of such applicants, accompanied by
a tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record, unless within five business days after such tender the Trustees mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority of the
Trustees to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion.
ARTICLE XI
MISCELLANEOUS
Section 11.1 - Filing. This Declaration, as amended, and any subsequent
amendment hereto shall be filed in the office of the Secretary of The
Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of The Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, integrating into a single instrument all of
the provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may thereafter be referred to in lieu of
the original Declaration and the various amendments thereto.
Section 11.2 - Governing Law. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 11.3 - Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.4 - Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote passed at a meeting of Trustees or
Shareholders, (iv) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (v) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (vi) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
Section 11.5 - Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code, as amended, or with other applicable
laws and regulations, the conflicting provision shall be deemed never to have
constituted a part of the Declaration; provided however, that such determination
shall not affect any of the remaining provisions of the Declaration or render
invalid or improper any action taken or omitted prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
<PAGE>
ANNEX A
Pursuant to Section 6.10 of the Declaration of Trust, the Trustees have
divided the Shares of MFS Growth Opportunities Fund (the "Trust"), to create two
classes of Shares, within the meaning of Section 6.10, as follows:
1. The two classes of Shares are designated "Class A Shares" and
"Class B Shares;"
2. Class A Shares and Class B Shares shall be entitled to all the
rights and preferences accorded to Shares under the Declaration;
3. The purchase price of Class A Shares and Class B Shares, the
method of determination of the net asset value of Class A Shares
and Class B Shares, the price, terms and manner of redemption of
Class A Shares and Class B Shares, any conversion feature of the
Class B Shares, and the relative dividend rights of holders of
Class A Shares and Class B Shares shall be established by the
Trustees of the Trust in accordance with the Declaration and shall
be set forth in the current prospectus and statement of additional
information of the Trust or any series thereof, as amended from
time to time, contained in the Trust's registration statement
under the Securities Act of 1933, as amended.
4. Class A Shares and Class B Shares shall vote together as a single
class except that Shares of a class may vote separately on matters
affecting only that class and Shares of a class not affected by a
matter will not vote on that matter.
5. A class of Shares of the Trust may be terminated by the Trustees
by written notice to the Shareholders of the class.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this 15th day
of February, 1995.
A.KEITH BRODKIN CHARLES W. SCHMIDT
A. Keith Brodkin Charles W. Schmidt
76 Farm Road 63 Claypit Hill Road
Sherborn, MA 01770 Wayland, MA 01778
RICHARD B. BAILEY ARNOLD D. SCOTT
Richard B. Bailey Arnold D. Scott
63 Atlantic Avenue 20 Rowes Wharf
Boston, MA 02110 Boston, MA 02110
PETER G. HARWOOD JEFFREY L. SHAMES
Peter G. Harwood Jeffrey L. Shames
211 Lindsay Pond Road 60 Brookside Road
Concord, MA 01742 Needham, MA 02192
J. ATWOOD IVES ELAINE R. SMITH
J. Atwood Ives Elaine R. Smith
1 Bennington Road 75 Scotch Pine Road
Lexington, MA 02173 Weston, MA 02193
LAWRENCE T. PERERA DAVID B. STONE
Lawrence T. Perera David B. Stone
18 Marlborough Street 50 Delano Road
Boston, MA 02116 Marion, MA 02736
WILLIAM J. POORVU
William J. Poorvu
975 Memorial Drive
Cambridge, MA 02138
<PAGE>
Exhibit No. 99.2
AMENDED AND RESTATED
BY-LAWS
OF
MFS GROWTH OPPORTUNITIES FUND
DECEMBER 21, 1994
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
MFS GROWTH OPPORTUNITIES FUND
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property" and "Trustees" have the respective
meanings given them in the Declaration of Trust of MFS Growth Opportunities
Fund, dated February 20, 1985 as amended from time to time.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in The Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other
places without as well as within the Commonwealth as the Trustees may from time
to time determine.
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. Meetings of the Shareholders may be called at any
time by a majority of the Trustees and shall be called by any Trustee upon
written request of Shareholders holding in the aggregate not less than ten
percent (10%) of the outstanding Shares of the Trust having voting rights, if
shareholders of all series are required under the Declaration to vote in the
aggregate and not by individual series at such meeting, or of any series or
class if shareholders of such series or class are entitled under the Declaration
to vote by individual series or class, such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
within or without The Commonwealth of Massachusetts on such day and at such time
as the Trustees shall designate.
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder entitled to vote at such meeting at his
address as recorded on the register of the Trust, mailed at least (ten) 10 days
and not more than (sixty) 60 days before the meeting. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice. No notice need be given
to any Shareholder who shall have failed to inform the Trust of his current
address or if a written waiver of notice, executed before or after the meeting
by the Shareholder or his attorney thereunto authorized, is filed with the
records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than sixty (60) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determination of the persons to be treated as
Shareholders of record for such purpose.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the Clerk,
or with such other officer or agent of the Trust as the Clerk may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
vote of a majority of the Trustees, proxies may be solicited in the name of one
or more Trustees or one or more of the officers of the Trust. When any Share is
held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such Share, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Share. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise, and the burden of proving invalidity shall rest on the challenger.
The placing of a Shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions obtained pursuant to procedures
reasonably designed to verify that such instructions have been authorized by
such Shareholder shall constitute execution of such proxy by or on behalf of
such Shareholder. If the holder of any such Share is a minor or a person of
unsound mind, and subject to guardianship or to the legal control of any other
person as regards the charge or management of such Share, he may vote by his
guardian or such other person appointed or having such control, and such vote
may be given in person or by proxy. Any copy, facsimile telecommunication or
other reliable reproduction of a proxy may be substituted for or used in lieu of
the original proxy for any and all purposes for which the original proxy could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original proxy or
the portion thereof to be returned by the Shareholder.
SECTION 5. QUORUM, ADJOURNMENT AND REQUIRED VOTE. A majority of
outstanding Shares entitled to vote shall constitute a quorum at any meeting of
Shareholders, except that where any provision of law, the Declaration or these
By-laws permits or requires that holders of any series or class shall vote as a
series or class, then a majority of the aggregate number of Shares of that
series or class entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that series or class. In the absence of a quorum,
a majority of outstanding Shares entitled to vote present in person or by proxy,
or, where any provision of law, the Declaration or these By-laws permits or
requires that holders of any series or class shall vote as a series or class, a
majority of outstanding Shares of that series or class entitled to vote present
in person or by proxy, may adjourn the meeting from time to time until a quorum
shall be present. Only Shareholders of record shall be entitled to vote on any
matter. Each full Share shall be entitled to one vote and fractional Shares
shall be entitled to a vote of such fraction. Except as otherwise provided any
provision of law, the Declaration or these By-laws, Shares representing a
majority of the votes cast shall decide any matter (i.e., abstentions and broker
non-votes shall not be counted) and a plurality shall elect a Trustee, provided
that where any provision of law, the Declaration or these By-Laws permits or
requires that holders of any series or class shall vote as a series or class,
then a majority of the Shares of that series or class cast on the matter shall
decide the matter (i.e., abstentions and broker non-votes shall not be counted)
insofar as that series or class is concerned.
SECTION 6. INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
SECTION 7. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the Chairman or
by any one of the Trustees at the time being in office. Notice of the time and
place of each meeting other than regular or stated meetings shall be given by
the Secretary or an Assistant Secretary, or the Clerk or an Assistant Clerk or
by the officer or Trustee calling the meeting and shall be mailed to each
Trustee at least two days before the meeting, or shall be telegraphed, cabled,
or wirelessed or sent by facsimile or other electronic means to each Trustee at
his business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. Except as provided by law the Trustees may
meet by means of a telephone conference circuit or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, which telephone conference meeting shall be deemed to have been held
at a place designated by the Trustees at the meeting. Participation in a
telephone conference meeting shall constitute presence in person at such
meeting. Any action required or permitted to be taken at any meeting of the
Trustees may be taken by the Trustees without a meeting if all the Trustees
consent to the action in writing and the written consents are filed with the
records of the Trustees' meetings. Such consents shall be treated as a vote for
all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees
shall be present at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration or these By-Laws) the act of a
majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) Trustees to hold office at the
pleasure of the Trustees which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to the Executive
Committee except those powers which by law, the Declaration or these By-Laws
they are prohibited from delegating. The Trustees may also elect from their own
number other Committees from time to time, the number composing such Committees,
the powers conferred upon the same (subject to the same limitations as with
respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation a Committee
may elect its own Chairman.
SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may:
(i) provide for stated meetings of any Committee,
(ii) specify the manner of calling and notice required for
special meetings of any Committee,
(iii) specify the number of members of a Committee required
to constitute a quorum and the number of members of a
Committee required to exercise specified powers
delegated to such Committee,
(iv) authorize the making of decisions to exercise
specified powers by written assent of the requisite
number of members of a Committee without a meeting,
and
(v) authorize the members of a Committee to meet by means
of a telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and records
of decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
SECTION 3. ADVISORY BOARD. The Trustees may appoint an Advisory Board
to consist in the first instance of not less than three (3) members. Members of
such Advisory Board shall not be Trustees or officers and need not be
Shareholders. A member of such Advisory Board shall hold office for such period
as the Trustees may by resolution provide. Any member of such board may resign
therefrom by a written instrument signed by him which shall take effect upon
delivery to the Trustees. The Advisory Board shall have no legal powers and
shall not perform the functions of Trustees in any manner, such Advisory Board
being intended merely to act in an advisory capacity. Such Advisory Board shall
meet at such times and upon such notice as the Trustees may by resolution
provide.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
Chairman, a President, a Treasurer and a Clerk, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Vice Presidents, a
Secretary and one or more Assistant Secretaries, one or more Assistant
Treasurers, and one or more Assistant Clerks. The Trustees may delegate to any
officer or Committee the power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise
provided by law, the Declaration or these By-Laws, the Chairman, the President,
the Treasurer and the Clerk shall hold office until his resignation has been
accepted by the Trustees or until his respective successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. Any two or more offices may be held by the same person. Any
officer may be, but none need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause by a vote of a
majority of the Trustees. Any officer or agent appointed by any officer or
Committee may be removed with or without cause by such appointing officer or
Committee.
SECTION 4. POWERS AND DUTIES OF THE CHAIRMAN. The Chairman may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and any Committees of the Trustees, the Chairman shall at all times
exercise a general supervision and direction over the affairs of the Trust. The
Chairman shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. The Chairman shall also have
the power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The Chairman shall have such other powers and duties as,
from time to time, may be conferred upon or assigned to him by the Trustees.
SECTION 5. POWERS AND DUTIES OF THE PRESIDENT. In the absence or
disability of the Chairman, the President shall perform all the duties and may
exercise any of the powers of the Chairman, subject to the control of the
Trustees. The President shall perform such other duties as may be assigned to
him from time to time by the Trustees or the Chairman.
SECTION 6. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees or the President.
SECTION 7. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to such custodian
as the Trustees may employ pursuant to Article X hereof. The Treasurer shall
render a statement of condition of the finances of the Trust to the Trustees as
often as they shall require the same and shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his duties, if required to do so by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
SECTION 8. POWERS AND DUTIES OF THE CLERK. The Clerk shall keep the
minutes of all meetings of the Shareholders in proper books provided for that
purpose; he shall have custody of the seal of the Trust; he shall have charge of
the Share transfer books, lists and records unless the same are in the charge of
the Transfer Agent. He or the Secretary shall attend to the giving and serving
of all notices by the Trust in accordance with the provisions of these By-Laws
and as required by law; and subject to these By-Laws, he shall in general
perform all duties incident to the office of Clerk and such other duties as from
time to time may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF THE SECRETARY. The Secretary, if any,
shall keep the minutes of all meetings of the Trustees. He shall perform such
other duties and have such other powers in addition to those specified in these
By-Laws as the Trustees shall from time to time designate. If there be no
Secretary or Assistant Secretary, the Clerk shall perform the duties of
Secretary.
SECTION 10. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence
or disability of the Treasurer, any Assistant Treasurer designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Treasurer. Each Assistant Treasurer shall perform such other duties as from
time to time may be assigned to him by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his duties, if required to do so
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
SECTION 11. POWERS AND DUTIES OF ASSISTANT CLERKS. In the absence or
disability of the Clerk, any Assistant Clerk designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Clerk. The
Assistant Clerks shall perform such other duties as from time to time may be
assigned to them by the Trustees.
SECTION 12. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. The Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them by the Trustees.
SECTION 13. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF THE
ADVISORY BOARD. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January in
each year and shall end on the last day of December in that year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been telegraphed,
cabled or wirelessed or sent by facsimile or other electronic means for the
purposes of these By-Laws when it has been delivered to a representative of any
telegraph, cable or wireless company with instruction that it be telegraphed,
cabled or wirelessed or when a confirmation of such facsimile having been sent,
or a confirmation that such electronic means has sent the notice being
transmitted, is generated. Any notice shall be deemed to be given at the time
when the same shall be mailed, telegraphed, cabled or wirelessed or when sent by
facsimile or other electronic means.
ARTICLE X
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank or trust company having a capital, surplus and undivided profits
of at least five million dollars ($5,000,000.00) as custodian with authority as
its agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in the Declaration, these By-Laws and the 1940 Act:
(i) to hold the securities owned by the Trust and deliver
the same upon written order;
(ii) to receive and issue receipts for any monies due to
the Trust and deposit the same in its own banking
department or elsewhere as the Trustees may direct;
(iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and
accounting services; and
(v) if authorized to do so by the Trustees, to compute
the net income of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all Trust Property held by it as specified in such
vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least five million dollars ($5,000,000.00)
or such foreign banks and securities depositories as meet the requirements of
applicable provisions of the 1940 Act or the rules and regulations thereunder.
SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodian.
SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The substance of the
following provisions shall apply to the employment of a custodian pursuant to
this Article X and to any contract entered into with the custodian so employed:
(i) The Trustees shall cause to be delivered to the
custodian all securities owned by the Trust or to
which it may become entitled, and shall order the
same to be delivered by the custodian only upon
completion of a sale, exchange, transfer, pledge, or
other disposition thereof, and upon receipt by the
custodian of the consideration therefor or a
certificate of deposit or a receipt of an issuer or
of its Transfer Agent, all as the Trustees may
generally or from time to time require or approve, or
to a successor custodian; and the Trustees shall
cause all funds owned by the Trust or to which it may
become entitled to be paid to the custodian, and
shall order the same disbursed only for investment
against delivery of the securities acquired, or in
payment of expenses, including management
compensation, and liabilities of the Trust, including
distributions to Shareholders, or to a successor
custodian; provided, however, that nothing herein
shall prevent the custodian from paying for
securities before such securities are received by the
custodian or the custodian from delivering securities
prior to receiving payment therefor in accordance
with the payment and delivery customs of the market
in which such securities are being purchased or sold.
(ii) In case of the resignation, removal or inability to
serve of any such custodian, the Trust shall promptly
appoint another bank or trust company meeting the
requirements of this Article X as successor
custodian. The agreement with the custodian shall
provide that the retiring custodian shall, upon
receipt of notice of such appointment, deliver the
funds and property of the Trust in its possession to
and only to such successor, and that pending
appointment of a successor custodian, or a vote of
the Shareholders to function without a custodian, the
custodian shall not deliver funds and property of the
Trust to the Trust, but may deliver all or any part
of them to a bank or trust company doing business in
Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus and undivided profits
(as shown in its last published report) of at least
$5,000,000, as the property of the Trust to be held
under terms similar to those on which they were held
by the retiring custodian.
ARTICLE XI
SALE OF SHARES OF THE TRUST
The Trustees may from time to time issue and sell or cause to be issued
and sold Shares for cash or other property, which shall in every case be paid or
delivered to the Custodian as agent of the Trust before the delivery of any
certificate for such shares. The Shares, including additional Shares which may
have been repurchased by the Trust (herein sometimes referred to as "treasury
shares"), may not be sold at a price less than the net asset value thereof (as
defined in Article XII hereof) determined by or on behalf of the Trustees next
after the sale is made or at some later time after such sale.
No Shares need be offered to existing Shareholders before being offered
to others. No Shares shall be sold by the Trust (although Shares previously
contracted to be sold may be issued upon payment therefor) during any period
when the determination of net asset value is suspended by declaration of the
Trustees pursuant to the provisions of Article XII hereof. In connection with
the acquisition by merger or otherwise of all or substantially all the assets of
an investment company (whether a regulated or private investment company or a
personal holding company), the Trustees may issue or cause to be issued Shares
and accept in payment therefor such assets valued at not more than market value
thereof in lieu of cash, notwithstanding that the federal income tax basis to
the Trust of any assets so acquired may be less than the market value, provided
that such assets are of the character in which the Trustees are permitted to
invest the funds of the Trust.
The Trustees, in their sole discretion, may cause the Trust to redeem
all of the Shares of the Trust held by any Shareholder if the value of such
Shares is less than a minimum amount established from time to time by the
Trustees.
ARTICLE XII
NET ASSET VALUE OF SHARES
The term "net asset value" per Share of any class or series of Shares
shall mean: (i) the value of all assets of that series or class; (ii) less total
liabilities of such series or class; (iii) divided by the number of Shares of
such series or class outstanding, in each case at the time of such
determination, all as determine by or under the direction of the Trustees. Such
value shall be determined on such days and at such time as the Trustees may
determine. Such determination shall be made with respect to securities for which
market quotations are readily available, at the market value of such securities;
and with respect to other securities and assets, at the fair value as determined
in good faith by or pursuant to the direction of the Trustees, provided,
however, that the Trustees, without shareholder approval, may alter the method
of appraising portfolio securities insofar as permitted under the 1940 Act, and
the rules, regulations and interpretations thereof promulgated or issued by the
Securities and Exchange Commission or insofar as permitted by any order of the
Securities and Exchange commission. The Trustees may delegate any powers and
duties under this Article XII with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the value per share last
determined to be determined again in a similar manner and may fix the time when
such predetermined value shall become effective.
ARTICLE XIII
DIVIDENDS AND DISTRIBUTIONS
SECTION 1. LIMITATIONS ON DISTRIBUTIONS. The total of distributions to
Shareholders of a particular series or class paid in respect of any one fiscal
year, subject to the exceptions noted below, shall, when and as declared by the
Trustees, be approximately equal to the sum of:
(i) the net income, exclusive of the profits or losses
realized upon the sale of securities or other
property, of such series or class for such fiscal
year, determined in accordance with generally
accepted accounting principles (which, if the
Trustees so determine, may be adjusted for net
amounts included as such accrued net income in the
price of Shares of such series or class issued or
repurchased), but if the net income of such series or
class exceeds the amount distributed by less than one
cent per share outstanding at the record date for the
final dividend, the excess shall be treated as
distributable income of such series or class for the
following fiscal year; and
(ii) in the discretion of the Trustees, an additional
amount which shall not substantially exceed the
excess of profits over losses on sales of securities
or other property allocated or belonging to such
series or class for such fiscal year.
The decision of the Trustees as to what, in accordance with generally accepted
accounting principles, is income and what is principal shall be final, and
except as specifically provided herein the decision of the Trustees as to what
expenses and charges of the Trust shall be charged against principal and what
against income shall be final, all subject to any applicable provisions of the
1940 Act and rules, regulations and orders of the Commission promulgated
thereunder. For the purposes of the limitation imposed by this Section 1, Shares
issued pursuant to Section 2 of this Article XIII shall be valued at the amount
of cash which the Shareholders would have received if they had elected to
receive cash in lieu of such Shares.
Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give to the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes. Any payment made to
Shareholders pursuant to clause (ii) of this Section 1 shall be accompanied by a
written statement showing the source or sources of such payment, and the basis
of computation thereof.
SECTION 2. DISTRIBUTIONS PAYABLE IN CASH OR SHARES. The Trustees shall
have power, to the fullest extent permitted by the laws of The Commonwealth of
Massachusetts but subject to the limitation as to cash distributions imposed by
Section 1 of this Article XIII, at any time or from time to time to declare and
cause to be paid distributions payable at the election of any Shareholder of any
series or class (whether exercised before or after the declaration of the
distribution) either in cash or in Shares of such series, provided that the sum
of:
(i) the cash distribution actually paid to any
Shareholder, and
(ii) the net asset value of the Shares which that
Shareholder elects to receive, in effect at such time
at or after the election as the Trustees may specify,
shall not exceed the full amount of cash to which
that Shareholder would be entitled if he elected to
receive only cash.
In the case of a distribution payable in cash or Shares at the election of a
Shareholder, the Trustees may prescribe whether a Shareholder, failing to
express his election before a given time shall be deemed to have elected to take
Shares rather than cash, or to take cash rather then Shares, or to take Shares
with cash adjustment of fractions.
The Trustees, in their sole discretion, may cause the Trust to require
that all distributions payable to a shareholder in amounts less than such amount
or amounts determined from time to time by the Trustees be reinvested in
additional shares of the Trust rather than paid in cash, unless a shareholder
who, after notification that his distributions will be reinvested in additional
shares in accordance with the preceding phrase, elects to receive such
distributions in cash. Where a shareholder has elected to receive distributions
in cash and the postal or other delivery service is unable to deliver checks to
the shareholder's address of record, the Trustees, in their sole discretion, may
cause the Trust to require that such Shareholder's distribution option will be
converted to having all distributions reinvested in additional shares.
SECTION 3. STOCK DIVIDENDS. Anything in these By-Laws to the contrary
notwithstanding, the Trustees may at any time declare and distribute pro rata
among the Shareholders of any series or class a "stock dividend" out of either
authorized but unissued Shares of such series or class or treasury Shares of
such series or class or both.
ARTICLE XIV
DERIVATIVE CLAIMS
No Shareholder shall have the right to bring or maintain any court
action, proceeding or claim on behalf of the Trust or any series or class
thereof without first making demand on the Trustees requesting the Trustees to
bring or maintain such action, proceeding or claim. Such demand shall be excused
only when the plaintiff makes a specific showing that irreparable injury to the
Trust or any series or class thereof would otherwise result. Such demand shall
be mailed to the Clerk of the Trust at the Trust's principal office and shall
set forth in reasonable detail the nature of the proposed court action,
proceeding or claim and the essential facts relied upon by the Shareholder to
support the allegations made in the demand. The Trustees shall consider such
demand within 45 days of its receipt by the Trust. In their sole discretion, the
Trustees may submit the matter to a vote of Shareholders of the Trust or any
series or class thereof, as appropriate. Any decision by the Trustees to bring,
maintain or settle (or not to bring, maintain or settle) such court action,
proceeding or claim, or to submit the matter to a vote of Shareholders, shall be
made by the Trustees in their business judgment and shall be binding upon the
Shareholders. Any decision by the Trustees to bring or maintain a court action,
proceeding or suit on behalf of the Trust or any series or class thereof shall
be subject to the right of the Shareholders under Article VI, Section 6.8 of the
Declaration to vote on whether or not such court action, proceeding or suit
should or should not be brought or maintained.
ARTICLE XV
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed,
restated, or new By-Laws may be adopted:
(i) by Majority Shareholder Vote, or
(ii) by the Trustees,
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration or these By-Laws, a vote of the Shareholders.
Exhibit No. 99.6(a)
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made this first day of January, 1995, by and
between MFS GROWTH OPPORTUNITIES FUND, a Massachusetts business trust (the
"Trust"), and MFS FUND DISTRIBUTORS, INC., a Delaware corporation (the
"Distributor");
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties hereto agree as follows:
1. The Trust grants to the Distributor the right, as agent of the
Trust, to sell Shares of Beneficial Interest, without par value, of the Trust
(the "Shares") upon the terms herein below set forth during the term of this
Agreement. While this Agreement is in force, the Distributor agrees to use its
best efforts to find purchasers for Shares.
The Distributor shall have the right, as agent of the Trust, to order
from the Trust the Shares needed, but not more than the Shares needed (except
for clerical errors and errors of transmission) to fill unconditional orders for
Shares placed with the Distributor by dealers, banks or other financial
institutions or investors as set forth in the current Prospectus and Statement
of Additional Information (collectively, the "Prospectus") relating to the
Shares. The price which shall be paid to the Trust for the Shares so purchased
shall be the net asset value used in determining the public offering price on
which such orders were based. The Distributor shall notify the Custodian of the
Trust, at the end of each business day, or as soon thereafter as the orders
placed with it have been compiled, of the number of Shares and the prices
thereof which have been ordered through the Distributor since the end of the
previous day.
The right granted to the Distributor to place orders for Shares with
the Trust shall be exclusive, except that said exclusive right shall not apply
to Shares issued in the event that an investment company (whether a regulated or
private investment company or a personal holding company) is merged or
consolidated with the Trust or in the event that the Trust acquires by purchase
or otherwise, all (or substantially all) the assets or the outstanding shares of
any such company; nor shall it apply to Shares issued by the Trust as a stock
dividend or a stock split. The exclusive right to place orders for Shares
granted to the Distributor may be waived by the Distributor by notice to the
Trust in writing, either unconditionally or subject to such conditions and
limitations as may be set forth in the notice to the Trust. The Trust hereby
acknowledges that the Distributor may render distribution and other services to
other parties, including other investment companies. In connection with its
duties hereunder, the Distributor shall also arrange for computation of
performance statistics with respect to the Trust and arrange for publication of
current price information in newspapers and other publications.
2. The Shares may be sold through the Distributor to dealers, banks and
other financial institutions having sales agreements with the Distributor, upon
the following terms and conditions:
The public offering price, i.e., the price per Share at which the
Distributor or dealers, banks or other financial institutions purchasing Shares
through the Distributor may sell Shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to the Shares,
including a sales charge (where applicable) not to exceed the amount permitted
by Article III, Section 26 of the National Association of Securities Dealers,
Inc.'s Rule of Fair Practice, as amended from time to time. The Distributor
shall retain the sales charge (where applicable) less any applicable dealer or
comparable discount. If the resulting public offering price does not come out to
an even cent, the public offering price shall be adjusted to the nearer cent. In
addition, the Trust agrees that the Distributor may impose certain contingent
deferred sales charges (where applicable) in connection with the redemption of
Shares, not to exceed 6% of the net asset value of Shares, and the Distributor
shall retain (or receive from the Trust, as the case may be) all such contingent
deferred sales charges.
The Distributor may place orders for Shares at the net asset value for
such Shares (as established pursuant to paragraph l above) on behalf of such
purchasers and under such circumstances as the Prospectus describes, provided
that such sales comply with Rule 22d-1 under the Investment Company Act of 1940
or any exemptive order granted by the Securities and Exchange Commission. The
Distributor may also place orders for Shares at net asset value on behalf of
persons reinvesting the proceeds of the redemption or resale of Shares or shares
of other investment companies for which the Distributor acts as Distributor or
as otherwise provided in the current Prospectus.
The net asset value of Shares shall be determined by the Trust or by an
agent of the Trust, as of the close of regular trading of the New York Stock
Exchange on each business day on which said Exchange is open, in accordance with
the method set forth in the governing instruments (as hereinafter defined) of
the Trust. The Trust may also cause the net asset value to be determined in
substantially the same manner or estimated in such manner and as of such other
hour or hours as may from time to time be agreed upon in writing by the Trust
and Distributor. The Trust shall have the right to suspend the sale of Shares
if, because of some extraordinary condition, the New York Stock Exchange shall
be closed, or if conditions obtaining during the hours when the Exchange is open
render such action advisable, or for any other reasons deemed adequate by the
Trust.
3. The Trust agrees that it will, from time to time, take all necessary
action to register the offering and sale of Shares under the Securities Act of
l933, as amended (the "Act"), and applicable state securities laws.
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or shall
be an employee of the Trust. It is understood that Trustees, officers and
shareholders of the Trust are or may become interested in the Distributor, as
Directors, officers and employees, or otherwise and that Directors, officers and
employees of the Distributor are or may become similarly interested in the Trust
and that the Distributor may be or become interested in the Trust as a
shareholder or otherwise. The Distributor is responsible for its own conduct and
the employment, control and conduct of its agents and employees and for injury
to such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it
will use its best efforts in all respects duly to conform with the requirements
of all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
Shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, damages, claim or expense and reasonable counsel fees incurred in
connection therewith), arising by reason of any person's acquiring any Shares,
which may be based upon the Act or any other statute or common law, on account
of any wrongful act of the Distributor or any of its employees (including any
failure to conform with any requirement of any state or federal law or the Rules
of Fair Practice of the NASD relating to the sale of Shares) or on the ground
that the registration statement or Prospectus as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless any such act, statement or omission
was made in reliance upon information furnished to the Distributor by or on
behalf of the Trust, provided, however, that in no case (i) is the indemnity of
the Distributor in favor of any person indemnified to be deemed to protect the
Trust or any such person against any liability to which the Trust or any such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its or his duties or by reason of its or
his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon the Trust or upon such person (or after the Trust or such
person shall have received notice of such service on any designated agent), but
failure to notify the Distributor of any such claim shall not relieve it from
any liability which it may have to the Trust or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if the Distributor elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any such suit and retain such
counsel, the Trust or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Distributor does
not elect to assume the defense of any such suit, it shall reimburse the Trust
and such officers and Trustees or controlling person or persons, defendant or
defendants in such suit, for the reasonable fees and expenses of any counsel
retained by them. The Distributor agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any Shares.
Neither the Distributor nor any other person is authorized to give any
information or to make any representation on behalf of the Trust, other than
those contained in the registration statement or Prospectus filed with the
Securities and Exchange Commission under the Act (as said registration statement
or Prospectus may be amended or supplemented from time to time), covering the
Shares or other than those contained in periodic reports to shareholders of the
Trust.
5. The Trust will pay, or cause to be paid -
(i) all costs and expenses of the Trust, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required registration statement or Prospectus under the Act covering Shares
and all amendments and supplements thereto and any notices regarding the
registration of shares, and preparing and mailing to shareholders Prospectuses,
statements and confirmations and periodic reports (including the expense of
setting up in type any such registration statement, Prospectus or periodic
report);
(ii) the expenses (including auditing expenses) of
qualification of the Shares for sale, and, if necessary or advisable in
connection therewith, of qualifying the Trust as a dealer or broker, in such
states as shall be selected by the Distributor and the fees payable to each such
state with respect to shares sold and for continuing the qualification therein
until the Distributor notifies the Trust that it does not wish such
qualification continued;
(iii) the cost of preparing temporary or permanent
certificates for Shares;
(iv) all fees and disbursements of the transfer agent of
the Trust;
(v) the cost and expenses of delivering to the Distributor
at its office in Boston, Massachusetts, all Shares sold through it as
Distributor hereunder; and
(vi) all the federal and state issue and/or transfer taxes
payable upon the issue by or (in the case of treasury Shares) transfer from the
Trust of any and all Shares purchased through the Distributor hereunder.
The Distributor agrees that, after the Prospectus and periodic reports
have been set up in type, it will bear the expense (other than the cost of
mailing to shareholders of the Trust of printing and distributing any copies
thereof which are to be used in connection with the offering of Shares to
dealers, banks or other financial institutions or investors. The Distributor
further agrees that it will bear the expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it for
use by dealers, banks or other financial institutions in connection with the
offering of the Shares for sale to the public and expenses of advertising in
connection with such offering. The Distributor will also bear the expense of
sending confirmations and statements to dealers, banks and other financial
institutions having sales agreements with the Distributor. Nothing in this
paragraph 5 shall be deemed to prohibit or conflict with any payment by the
Trust to the Distributor pursuant to any Distribution Plan adopted as in effect
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
6. The Trust hereby authorizes the Distributor to repurchase, upon the
terms and conditions set forth in written instructions given by the Trust to the
Distributor from time to time, as agent of the Trust and for its account, such
Shares as may be offered for sale to the Trust from time to time; provided the
Distributor shall have the right, as stated above in paragraph 2 of this
Agreement, to retain (or to receive from the Trust, as the case may be) a
deferred sales charge not to exceed 6% of the net asset value of the Shares so
repurchased.
(a) The Distributor shall notify in writing the Custodian
of the Trust, at the end of each business day, or as soon thereafter as the
repurchases have been compiled, of the number of Shares repurchased for the
account of the Trust since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any Officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the
foregoing authorization at any time. Unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by an officer of the Distributor, by telegraph or by written notice from
the Trust. In the event that the authorization of the Distributor is, by the
terms of such notice, suspended for more than twenty-four hours or until further
notice, the authorization given by this paragraph 6 shall not be revived except
by action of a majority of the members of the Board of Trustees of the Trust.
(c) The Distributor shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty days' written
notice thereof.
(d) The Trust agrees to authorize and direct the Custodian
to pay, for the account of the Trust, the purchase price of any Shares so
repurchased against delivery of the certificates, if any, in proper form for
transfer to the Trust or for cancellation by the Trust.
(e) The Distributor shall receive no commission in respect
of any repurchase of Shares under the foregoing authorization and appointment as
agent, except in connection with contingent deferred sales charge as provided in
the current Prospectus relating to the Shares.
(f) The Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in connection
with the repurchase of Shares pursuant to this paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under Massachusetts, any state or federal
tax laws, it shall notify the Distributor of the form of amendment which it
deems necessary or advisable and the reasons therefore. If the Distributor
declines to assent to such amendment, the Trust may terminate this Agreement
forthwith by written notice to the Distributor without payment of any penalty.
If, at any time during the existence of this Agreement, upon request by the
Distributor, the Trust fails (after a reasonable time) to make any changes in
its governing instruments or in its methods of doing business which are
necessary in order to comply with any requirements of federal or state laws or
regulations, laws or regulations of the Securities and Exchange Commission or of
a national securities association of which the Distributor is or may be a
member, relating to the sale of Shares, the Distributor may terminate this
Agreement forthwith by written notice to the Trust without payment of any
penalty.
8. The Distributor agrees that it will not take any long or short
positions in the Shares except as permitted by paragraphs l and 6 hereof.
Whenever used in this Agreement, the term "governing instruments" shall mean the
Declaration of Trust and the By-Laws of the Trust, as from time to time amended.
9. This Agreement shall become effective on January 1, 1995 and shall
continue in force until August 1, 1996 on which date it will terminate unless
its continuance after August 1, 1996, is specifically approved at least annually
(i) by the vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Trust or of the Distributor at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of that Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of l940 and the Rules and
Regulations thereunder.
This Agreement may be terminated as to any Fund at any time by either
party without payment of any penalty on not more than sixty days' or less than
thirty days' written notice to the other party.
l0. This Agreement shall automatically terminate in the event of its
assignment.
11. The terms "vote of a majority of the outstanding voting
securities", "interested person" and "assignment" shall have the respective
meanings specified in the Investment Company Act of l940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
12. This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.
13. A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Distributor
acknowledges that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust. If this instrument is executed by the Trust on behalf of one or
more series of the Trust, the Distributor further acknowledges that the assets
and liabilities of each series of the Trust are separate and distinct and that
the obligations of or arising out of this instrument are binding solely upon the
assets or property of the series on whose behalf the Trust has executed this
instrument. If the Trust has executed this instrument on behalf of more than one
series of the Trust, the Distributor also agrees that the obligations of each
series hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Distributor agrees not to proceed
against any series for the obligations of another series.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above.
MFS GROWTH OPPORTUNITIES FUND
By: W. THOMAS LONDON
W. Thomas London as officer
and not individually
MFS FUND DISTRIBUTORS, INC.
By: WILLIAM W. SCOTT, JR.
William W. Scott, Jr.
President
Exhibit No. 99.10
April 25, 1995
MFS Growth Opportunities Fund
500 Boylston Street
Boston, MA 02116
Re: POST-EFFECTIVE AMENDMENT NO. 33 TO REGISTRATION STATEMENT ON FORM
N-1A (FILE NO. 2-36431) (THE "REGISTRATION STATEMENT")
Gentlemen:
I am Vice President and Associate General Counsel of Massachusetts
Financial Services Company, which serves as investment adviser to MFS Growth
Opportunities Fund (the "Fund") and the Assistant Secretary of the Fund. I am
admitted to practice law in The Commonwealth of Massachusetts. The Fund was
created under a written Declaration of Trust dated March 4, 1985, and executed
and delivered in Boston, Massachusetts, as amended and restated February 17,
1995 (the "Declaration of Trust"). The beneficial interest thereunder is
represented by transferable shares without par value. The Trustees have the
powers set forth in the Declaration of Trust, subject to the terms, provisions
and conditions therein provided.
I am of the opinion that the legal requirements have been complied with
in the creation of the Fund, and that said Declaration of Trust is legal and
valid.
Under Article III, Section 3.4 and Article VI, Section 6.4 of the
Declaration of Trust, the Trustees are empowered, in their discretion, from time
to time to issue shares of the Fund for such amount and type of consideration,
at such time or times and on such terms as the Trustees may deem best. Under
Article VI, Section 6.1, it is provided that the number of shares of beneficial
interest authorized to be issued under the Declaration of Trust is unlimited.
By vote adopted on January 18, 1995, the Trustees of the Fund
determined to sell to the public the authorized but unissued shares of
beneficial interest of the Fund for cash at a price which will net the Fund
(before taxes) not less than the net asset value thereof, as defined in the
Fund's By-Laws, determined next after the sale is made or at some later time
after such sale.
<PAGE>
MFS Growth Opportunities Fund
April 25, 1995
Page Two
The Fund is about to register under the Securities Act of 1933, as
amended, 7,874,231 shares of beneficial interest by Post-Effective Amendment No.
33 to the Fund's Registration Statement. W. Thomas London, Treasurer of the
Fund, has certified that the Fund received cash consideration for the issuance
of each of the Shares of the Fund sold during the Fund's fiscal year ended
December 31, 1994, including the 2,744,637 shares which were sold in reliance
upon Rule 24f-2 of the General Rules and Regulations under the Investment
Company Act of 1940, as amended, at a price which netted the Fund (before taxes)
not less than the net asset value per share, as defined in the Fund's
Declaration of Trust, determined next after the sale was made.
Based on the foregoing, I am of the opinion that all necessary Fund
action precedent to the issue of the shares of the Fund, comprising the shares
covered by Post-Effective Amendment No. 33 to the Registration Statement has
been duly taken, and that all such shares may legally and validly be issued for
cash, and when sold will be fully paid and nonassessable, except as described
below, by the Fund upon receipt by the Fund or its agent of consideration
thereof in accordance with the terms described in the Registration Statement. I
express no opinion as to compliance with the Securities Act of 1933, the
Investment Company Act of 1940 and applicable state "Blue Sky" or securities
laws regulating the sale of securities.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Fund
or the Trustees. The Declaration of Trust provides for indemnification out of
the Fund property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
I consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to Post-Effective Amendment No. 33 to the Registration
Statement.
Very truly yours,
JAMES R. BORDEWICK, JR.
James R. Bordewick, Jr.
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 33 to Registration Statement No. 2-36431 of MFS Growth Opportunities Fund of
our report dated February 1, 1995, appearing in the annual report to
shareholders for the year ended December 31, 1994, and to the references to us
under the headings "Condensed Financial Information" in this Prospectus and
"Independent Accountants and Financial Statements" in the Statement of
Additional Information, both of which are part of such Registration Statement
/s/ Delloitte & Touche LLP
Boston, Massachusetts
April 26, 1995
Exhibit No. 99.15(a)
MFS GROWTH OPPORTUNITIES FUND
AMENDED AND RESTATED DISTRIBUTION PLAN
AMENDED AND RESTATED DISTRIBUTION PLAN with respect to the shares of beneficial
interest to be designated "CLASS A" of the MFS GROWTH OPPORTUNITIES FUND (the
"Fund), a business trust organized and existing under the laws of The
Commonwealth of Massachusetts, dated the 19th day of December, 1990, amended and
restated the 17th day of August, 1993, and amended the 21st day of December,
1994.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company and is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, a plan of distribution pursuant to Rule 12b-1 of the 1940 Act was
previously adopted and approved by the Trustees of the Fund, including the
Qualifying Trustees (as defined below), and by the shareholders of the Fund; and
WHEREAS, the Fund intends to continue to distribute the Shares of Beneficial
Interest (without par value) of the Fund designated Class A Shares (the
"Shares") in part in accordance with Rule 12b-1 under the 1940 Act ("Rule
12b-1"), and desires to adopt this amended and restated Distribution Plan (the
"Plan") as a plan of distribution pursuant to such Rule; and
WHEREAS, the Fund has entered into a distribution agreement (the "Distribution
Agreement") in a form approved by the Board of Trustees of the Trust (the "Board
of Trustees") in the manner specified in Rule 12b-1, with MFS Fund Distributors,
Inc., a Delaware corporation, as distributor (the "Distributor"), whereby the
Distributor provides facilities and personnel and renders services to the Fund
in connection with the offering and distribution of the Shares; and
WHEREAS, the Fund recognizes and agrees that the Distributor will enter into
agreements ("Dealer Agreements") with various securities dealers and other
financial intermediaries ("Dealers") pursuant to which the Dealers will act as
dealers of the Shares in connection with the offering of Shares; and
WHEREAS, the Distribution Agreement provides that a sales charge may be paid by
investors who purchase Shares and that the Distributor and Dealers will receive
such sales charge as partial compensation for their services in connection with
sale of Shares; and
WHEREAS, the Board of Trustees, in considering whether the Fund should adopt and
implement this Plan, has evaluated such information as it deemed necessary to an
informed determination as to whether this Plan should be adopted and implemented
and has considered such pertinent factors as it deemed necessary to form the
basis for a decision to use assets of the Fund for such purposes, and has
determined that there is a reasonable likelihood that the adoption and
implementation of this Plan will benefit the Fund and its Class A shareholders;
NOW, THEREFORE, the Board of Trustees hereby adopts this Plan for the Fund as a
plan of distribution relating to the Shares in accordance with Rule 12b-1 under
the 1940 Act, on the following terms and conditions:
1. As specified in the Distribution Agreement, the Distributor
shall provide facilities, personnel and a program with respect to the offering
and sale of Shares. Among other things, the Distributor shall be responsible for
all expenses of printing (excluding typesetting) and distributing prospectuses
to prospective shareholders and providing such other related services as are
reasonably necessary in connection therewith.
2. The Distributor shall bear all distribution-related expenses to
the extent specified in the Distribution Agreement in providing the services
described in Section 1, including without limitation, the compensation of
personnel necessary to provide such services and all costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs.
3. As partial consideration for the services performed and expenses
incurred in the performance of its obligations under the Distribution Agreement,
the Fund shall pay the Distributor a distribution fee periodically at a rate of
0.10% per annum of the average daily net assets of the Fund attributable to the
Shares.
4. As partial consideration for the personal services and/or
account maintenance services performed by each Dealer in the performance of its
obligations under its Dealer Agreement, the Fund shall pay each Dealer a service
fee periodically at a rate not to exceed 0.25% per annum of the portion of the
average daily net assets of the Fund that is represented by Shares that are
owned by investors for whom such Dealer is the holder or dealer of record. The
Distributor may from time to time reduce the amount of the service fee paid to a
Dealer for Shares sold prior to certain date.
5. In addition to fees payable pursuant to Sections 3 and 4 hereof,
the expenses permitted to be paid by the Fund pursuant to this Plan shall
include other distribution related expenses. These other distribution related
expenses may include, but are not limited to, a dealer commission and a payment
to wholesalers employed by the Distributor on net asset value purchases at or
above a certain dollar level.
The aggregate amount of fees and expenses paid pursuant to Sections
3 and 4 hereof and this Section 5 shall not exceed 0.35% per annum of the
average daily net assets of the Fund attributable to the Shares. No fees shall
be paid pursuant to Section 4 hereof or this Section 5 to any insurance company
which has entered into an agreement with the Fund and the Distributor that
permits such insurance company to purchase Shares from the Fund at their net
asset value in connection with annuity agreements issued in connection with the
insurance company's separate accounts. That portion of the Fund's average daily
net assets on which fees payable under Section 4 hereof and this Section 5 are
calculated may be subject to certain minimum amount requirements as may be
determined, and additional or different dealer or wholesaler qualification
standards that may be established, from time to time by the Distributor. The
Distributor shall be entitled to be paid any fees payable under Section 4 hereof
or this Section 5 with respect to accounts for which no Dealer of record exists
or qualification standards have not been met as partial consideration for
personal services and/or account maintenance services provided by the
Distributor to the Shares. The fees and expenses payable pursuant to Section 4
and this Section 5 may from time to time be paid by the Fund to the Distributor
and the Distributor will then pay these expenses on behalf of the Fund.
6. Nothing herein contained shall be deemed to require the Fund to
take any action contrary to its Declaration of Trust or By-Laws or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the
responsibility for and control of the conduct of the affairs of the Fund.
7. This Plan shall become effective upon approval by a vote of the
Board of Trustees and vote of a majority of the Trustees who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any of the agreements related to the Plan (the
"Qualified Trustees"), such votes to be cast in person at a meeting called for
the purpose of voting on this Plan.
8. This Plan shall continue in effect indefinitely; provided,
however, that such continuance is subject to annual approval by a vote of the
Board of Trustees and a majority of the Qualified Trustees, such votes to be
cast in person at a meeting called for the purpose of voting on continuance of
this Plan. If such annual approval is not obtained, this Plan shall expire 12
months after the effective date of the last approval.
9. This Plan may be amended at any time by the Board of Trustees;
provided that (a) any amendment to increase materially the amount to be spent
for the services described herein shall be effective only upon approval by a
vote of a "majority of the outstanding voting securities" of the Shares and (b)
any material amendment of this Plan shall be effective only upon approval by a
vote of the Board of Trustees and a majority of the Qualified Trustees, such
votes to be cast in person at a meeting called for the purpose of voting on such
amendment. This Plan may be terminated at any time by vote of a majority of the
Qualified Trustees or by a vote of a "majority of the outstanding voting
securities" of the Shares.
10. The Distributor shall provide the Board of Trustees, and the
Board of Trustees shall review, at least quarterly, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
11. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Fund.
12. For the purposes of this Plan, the terms "interested person"
and "majority of the outstanding voting securities" are used as defined in the
1940 Act. In addition, for purposes of determining the fees payable to Dealers
and wholesalers, the value of the Share's net assets shall be computed in the
manner specified in the Fund's then current prospectus for computation of the
net asset value of the Shares.
13. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in Section 10 hereof (collectively
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made and each such Record shall be kept in an easily
accessible place for the first two years of said record keeping.
14. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
15. If any provision of this Plan shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Plan shall
not be affected thereby.
Exhibit No. 99.15(b)
MFS GROWTH OPPORTUNITIES FUND
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest to be
designated "CLASS B" of MFS GROWTH OPPORTUNITIES FUND (the "Fund"), a
Massachusetts business trust, dated September 1, 1993 and amended this 21st day
of December, 1994.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act"); and
WHEREAS, the Fund intends to distribute the shares of beneficial interest
(without par value) of the Fund designated Class B Shares (the "Shares") in
accordance with Rule 12b-1 under the 1940 Act ("Rule 12b-1"), and desires to
adopt this Distribution Plan (the "Plan") as a plan of distribution pursuant to
such Rule; and
WHEREAS, the Fund desires for MFS Fund Distributors, Inc., a Delaware
corporation, to provide certain distribution services for the Fund (the
"Distributor"); and
WHEREAS, the Fund has entered into a distribution agreement (the
"Distribution Agreement") (in a form approved by the Board of Trustees of the
Fund in a manner specified in such Rule 12b-1) with the Distributor, whereby the
Distributor will provide facilities and personnel and render services to the
Fund in connection with the offering and distribution of the Shares; and
WHEREAS, the Fund recognizes and agrees that (a) the Distributor may
retain the services of firms or individuals to act as dealers (the "Dealers") of
the Shares in connection with the offering of Shares, and (b) the Distributor
may make payments for such services to the Dealers out of the fee paid to the
Distributor hereunder, any deferred sales charges imposed by the Distributor in
connection with the repurchase of Shares, its profits or any other source
available to it; and
WHEREAS, the Fund recognizes and agrees that the Distributor may impose
certain deferred sales charges in connection with the repurchase of Shares by
the Fund, and the Distributor may retain (or receive from the Fund, as the case
may be) all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Fund, in considering whether the
Fund should adopt and implement this Plan, has evaluated such information as it
deemed necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Fund for such
purposes, and has determined that there is a reasonable likelihood that the
adoption and implementation of this Plan will benefit the Fund and its Class B
shareholders;
NOW, THEREFORE, the Board of Trustees of the Fund hereby adopts this Plan
for the Fund as a plan for distribution relating to the Shares in accordance
with Rule 12b-1, on the following terms and conditions:
1. As specified in the Distribution Agreement, the Distributor shall
provide facilities, personnel and a program with respect to the offering and
sale of Shares. Among other things, the Distributor shall be responsible for
commissions payable to Dealers, all expenses of printing (excluding typesetting)
and distributing prospectuses to prospective shareholders and providing such
other related services as are reasonably necessary in connection therewith.
2. The Distributor shall bear all distribution-related expenses to the
extent specified in the Distribution Agreement in providing the services
described in paragraph 1, including without limitation, the compensation of
personnel necessary to provide such services and all costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs.
3. It is understood that the Distributor may impose certain deferred sales
charges in connection with the repurchase of Shares by the Fund and the
Distributor may retain (or receive from the Fund, as the case may be) all such
deferred sales charges. As additional consideration for all services performed
and expenses incurred in the performance of its obligations under the
Distribution Agreement, the Fund shall pay the Distributor a distribution fee
periodically at a rate of 0.75% per annum of the Fund's average daily net assets
attributable to the Shares.
4. As partial consideration for the personal services and/or account
maintenance services performed by each Dealer in the performance of its
obligations under its dealer agreement with the Distributor, the Fund shall pay
each Dealer a service fee periodically at a rate not to exceed 0.25% per annum
of the portion of the average daily net assets of the Fund that is represented
by Shares that are owned by investors for whom such Dealer is the holder or
dealer of record. That portion of the Fund's average daily net assets on which
the fees payable under this paragraph 4 hereof are calculated may be subject to
certain minimum amount requirements as may be determined, and additional or
different dealer qualification standards that may be established from time to
time, by the Distributor. The Distributor shall be entitled to be paid any fees
payable under this paragraph 4 hereof with respect to Shares for which no Dealer
of record exists or qualification standards have not been met as partial
consideration for personal services and/or account maintenance services provided
by the Distributor to the Shares. The service fee payable pursuant to this
paragraph 4 may from time to time be paid by the Fund to the Distributor and the
Distributor will then pay these fees on behalf of the Fund.
5. The Fund understands that agreements between the Distributor and the
Dealers may provide for payment of commissions to Dealers in connection with the
sales of Shares and may provide for a portion (which may be all or substantially
all) of the fees payable by the Fund to the Distributor under the Distribution
Agreement to be paid by the Distributor to the Dealers in consideration of the
Dealer's services as a dealer of the Shares. Except as described in paragraph 4,
nothing in this Plan shall be construed as requiring the Fund to make any
payment to any Dealer or to have any obligations to any Dealer in connection
with services as a dealer of the Shares. The Distributor shall agree and
undertake that any agreement entered into between the Distributor and any Dealer
shall provide that, except as provided in paragraph 4, such Dealer shall look
solely to the Distributor for compensation for its services thereunder and that
in no event shall such Dealer seek any payment from the Fund.
6. The Fund shall pay all fees and expenses of any independent auditor,
legal counsel, investment adviser, administrator, transfer agent, custodian,
shareholder servicing agent, registrar or dividend disbursing agent of the Fund;
expenses of distributing and redeeming Shares and servicing shareholder
accounts; expenses of preparing, printing and mailing prospectuses, shareholder
reports, notices, proxy statements and reports to governmental officers and
commissions and to shareholders of the Fund, except that the Distributor shall
be responsible for the distribution-related expenses as provided in paragraphs 1
and 2 hereof.
7. Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the responsibility for
and control of the conduct of the affairs of the Fund.
8. This Plan shall become effective upon (a) approval by a vote of at
least a "majority of the outstanding voting securities" of the Shares, and (b)
approval by a vote of the Board of Trustees and a vote of a majority of the
Trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (the "Qualified Trustees"), such votes to be cast in person
at a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect indefinitely; provided that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Fund and a majority of the Qualified Trustees.
If such annual approval is not obtained, this Plan shall expire 12 months after
the effective date of the last approval.
10. This Plan may be amended at any time by the Board of Trustees;
provided that this Plan may not be amended to increase materially the amount of
permitted expenses hereunder without the approval of holders of a "majority of
the outstanding voting securities" of the Shares and may not be materially
amended in any case without a vote of a majority of both the Trustees and the
Qualified Trustees. This Plan may be terminated at any time by a vote of a
majority of the Qualified Trustees or by a vote of the holders of a "majority of
the outstanding voting securities" of the Shares.
11. The Fund and the Distributor shall provide the Board of Trustees, and
the Board of Trustees shall review, at least quarterly, a written report of the
amounts expended under this Plan and the purposes for which such expenditures
were made.
12. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Trust.
13. For the purposes of this Plan, the terms "interested persons",
"majority of the outstanding voting securities" and "specifically approved at
least annually" are used as defined in the 1940 Act. In addition, for purposes
of determining the fees payable to the Distributor hereunder, the value of the
Fund's net assets shall be computed in the manner specified in the Fund's
then-current prospectus and statement of additional information for computation
of the net asset value of the Shares of the Fund.
14. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 11 hereof (collectively,
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made and each such record shall be kept in an easily
accessible place for the first two years of said record-keeping.
15. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
16. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF MFS MASSACHUSETTS GROWTH OPPORTUNITIES FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>
<NAME> MFS MASSACHUSETTS GROWTH OPPORTUNITIES FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 533,057,865
<INVESTMENTS-AT-VALUE> 583,447,261
<RECEIVABLES> 15,964,408
<ASSETS-OTHER> 14,585
<OTHER-ITEMS-ASSETS> 103,443
<TOTAL-ASSETS> 599,529,697
<PAYABLE-FOR-SECURITIES> 4,585,851
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,517,484
<TOTAL-LIABILITIES> 7,103,335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 544,507,003
<SHARES-COMMON-STOCK> 57,936,082
<SHARES-COMMON-PRIOR> 61,414,716
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (985,537)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,720,891)
<ACCUM-APPREC-OR-DEPREC> 51,625,787
<NET-ASSETS> 592,426,362
<DIVIDEND-INCOME> 6,112,101
<INTEREST-INCOME> 739,941
<OTHER-INCOME> 0
<EXPENSES-NET> 5,516,861
<NET-INVESTMENT-INCOME> 1,335,181
<REALIZED-GAINS-CURRENT> 42,060,255
<APPREC-INCREASE-CURRENT> (70,715,857)
<NET-CHANGE-FROM-OPS> (27,320,421)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,709,545)
<DISTRIBUTIONS-OF-GAINS> (46,756,264)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,325,560
<NUMBER-OF-SHARES-REDEEMED> (10,394,202)
<SHARES-REINVESTED> 4,590,008
<NET-CHANGE-IN-ASSETS> (118,218,086)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-NET GAIN-PRIOR> 1,809,415
<OVERDISTRIB-NII-PRIOR> (174,440)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,779,813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,155,519
<AVERAGE-NET-ASSETS> 638,658,384
<PER-SHARE-NAV-BEGIN> 11.56
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> (0.50)
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (0.88)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.17
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF MFS MASSACHUSETTS GROWTH OPPORTUNITIES FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT
</LEGEND>
<SERIES>
<NUMBER>
<NAME> MFS MASSACHUSETTS GROWTH OPPORTUNITIES FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 533,057,865
<INVESTMENTS-AT-VALUE> 583,447,261
<RECEIVABLES> 15,964,408
<ASSETS-OTHER> 14,585
<OTHER-ITEMS-ASSETS> 103,443
<TOTAL-ASSETS> 599,529,697
<PAYABLE-FOR-SECURITIES> 4,585,851
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,517,484
<TOTAL-LIABILITIES> 7,103,335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 544,507,003
<SHARES-COMMON-STOCK> 314,010
<SHARES-COMMON-PRIOR> 69,851
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (985,537)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,720,891)
<ACCUM-APPREC-OR-DEPREC> 51,625,787
<NET-ASSETS> 592,426,362
<DIVIDEND-INCOME> 6,112,101
<INTEREST-INCOME> 739,941
<OTHER-INCOME> 0
<EXPENSES-NET> 5,516,861
<NET-INVESTMENT-INCOME> 1,335,181
<REALIZED-GAINS-CURRENT> 42,060,255
<APPREC-INCREASE-CURRENT> (70,715,857)
<NET-CHANGE-FROM-OPS> (27,320,421)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (251,046)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 419,077
<NUMBER-OF-SHARES-REDEEMED> (197,864)
<SHARES-REINVESTED> 22,946
<NET-CHANGE-IN-ASSETS> (118,218,086)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,809,415
<OVERDISTRIB-NII-PRIOR> (174,440)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,779,813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,155,519
<AVERAGE-NET-ASSETS> 2,424,811
<PER-SHARE-NAV-BEGIN> 11.53
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> (0.49)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.88)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
