<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MFS(R) TOTAL RETURN FUND MFS(R) ALABAMA MUNICIPAL BOND FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND MFS(R) ARKANSAS MUNICIPAL BOND FUND
MFS(R) GROWTH OPPORTUNITIES FUND MFS(R) CALIFORNIA MUNICIPAL BOND FUND
MFS(R) EMERGING GROWTH FUND MFS(R) FLORIDA MUNICIPAL BOND FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) GEORGIA MUNICIPAL BOND FUND
MFS(R) INTERMEDIATE INCOME FUND MFS(R) LOUISIANA MUNICIPAL BOND FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) MARYLAND MUNICIPAL BOND FUND
MFS(R) MANAGED SECTORS FUND MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
MFS(R) VALUE FUND MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
MFS(R) UTILITIES FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) WORLD EQUITY FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) WORLD TOTAL RETURN FUND MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
MFS(R) BOND FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) LIMITED MATURITY FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) GOVERNMENT MORTGAGE FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) GOVERNMENT LIMITED MATURITY FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) GOVERNMENT SECURITIES FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) HIGH INCOME FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
MFS(R) STRATEGIC INCOME FUND MFS(R) MUNICIPAL LIMITED MATURITY FUND
MFS(R) WORLD GOVERNMENTS FUND MFS(R) MUNICIPAL BOND FUND
MFS(R) WORLD GROWTH FUND MFS(R) MUNICIPAL INCOME FUND
MFS(R) OTC FUND MFS(R) RESEARCH FUND
MFS(R) MUNICIPAL HIGH INCOME FUND MFS(R) WORLD ASSET ALLOCATION FUND
MASSACHUSETTS INVESTORS TRUST
SUPPLEMENT TO THE CURRENT PROSPECTUS
During the period from January 3, 1995 through April 28, 1995 (the "Sales
Period") (unless extended by MFS Fund Distributors, Inc. ("MFD"), the funds'
principal underwriter), MFD will pay A. G. Edwards and Sons, Inc., ("A. G.
Edwards") 100% of the applicable sales charge on sales of Class A shares of each
of the funds listed above (the "Funds") sold for investment in Individual
Retirement Accounts ("IRAs") (excluding SEP-IRAs). In addition, MFD will pay A.
G. Edwards an additional commission equal to 0.50% of the net asset value of all
of the Class B shares of the Funds sold by A. G. Edwards during the Sales
Period.
THE DATE OF THIS SUPPLEMENT IS JANUARY 3, 1995.
MFS-16AG-1/95/3.5M
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
MFS(R) MANAGED SECTORS FUND MFS(R) MUNICIPAL LIMITED MATURITY FUND
MFS(R) CASH RESERVE FUND MFS(R) ALABAMA MUNICIPAL BOND FUND
MFS(R) WORLD ASSET ALLOCATION FUND MFS(R) ARKANSAS MUNICIPAL BOND FUND
MFS(R) EMERGING GROWTH FUND MFS(R) CALIFORNIA MUNICIPAL BOND FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) FLORIDA MUNICIPAL BOND FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) GEORGIA MUNICIPAL BOND FUND
MFS(R) INTERMEDIATE INCOME FUND MFS(R) LOUISIANA MUNICIPAL BOND FUND
MFS(R) HIGH INCOME FUND MFS(R) MARYLAND MUNICIPAL BOND FUND
MFS(R) MUNICIPAL HIGH INCOME FUND MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
MFS(R) MONEY MARKET FUND MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
MFS(R) GOVERNMENT MONEY MARKET FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) MUNICIPAL BOND FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) OTC FUND MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
MFS(R) TOTAL RETURN FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) RESEARCH FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) WORLD TOTAL RETURN FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) UTILITIES FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) WORLD EQUITY FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) WORLD GOVERNMENTS FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
MFS(R) VALUE FUND MFS(R) GROWTH OPPORTUNITIES FUND
MFS(R) STRATEGIC INCOME FUND MFS(R) GOVERNMENT MORTGAGE FUND
MFS(R) WORLD GROWTH FUND MFS(R) GOVERNMENT SECURITIES FUND
MFS(R) BOND FUND MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS(R) LIMITED MATURITY FUND MFS(R) GOVERNMENT LIMITED MATURITY FUND
MASSACHUSETTS INVESTORS TRUST
</TABLE>
SUPPLEMENT TO THE CURRENT PROSPECTUS
Effective as of January 1, 1995, MFS Fund Distributors, Inc. ("MFD") has
replaced MFS Financial Services, Inc. ("FSI") as the Fund's distributor. Both
MFD and FSI are wholly-owned subsidiaries of Massachusetts Financial Services
Company ("MFS"), the Fund's investment adviser.
-----------------------------------------------
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
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 contingent deferred sales charge of 1% will be imposed on such
purchases in the event of certain redemption transactions within 12
months following such purchases.
-----------------------------------------------
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 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.
-----------------------------------------------
(Over)
<PAGE>
Class A shares of the Fund (except of the MFS municipal bond funds
identified above) may be purchased at net asset value by retirement plans
qualified under Section 401(k) of the Code 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.
-----------------------------------------------
The CDSC on Class A and 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 MFS Service Center, Inc. (the
"Shareholder Servicing Agent").
-----------------------------------------------
The CDSC on Class A and 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 A and B share
accounts, respectively, 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) of another
similar recordkeeping system made available by the Shareholder Servicing Agent.
-----------------------------------------------
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.
-----------------------------------------------
The current Prospectus discloses that "Class A shares of the Fund may also
be purchased at net asset value where the purchase is in an amount of $3 million
or more and where the dealer and FSI enter into an agreement in which the dealer
agrees to return any commission paid to it on the sale (or a pro rata portion
thereof) as described above if the shareholder redeems his or her shares within
one year of purchase. (Shareholders who purchase shares at NAV pursuant to these
conditions are called ("$3 Million Shareholders")." This policy is terminated
effective as of the date of this Supplement and the above-referenced language,
and all references to "$3 Million Shareholders," are deleted from the
Prospectus.
-----------------------------------------------
From time to time, MFD may pay dealers 100% of the applicable sales charge
on sales of Class A shares of certain specified 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 Funds sold by such dealer
during a specified sales period.
-----------------------------------------------
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 reinvest all dividends
and other distributions reinvested in additional shares.
-----------------------------------------------
From time to time, MFS 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).
THE DATE OF THIS SUPPLEMENT IS JANUARY 13,1995.
MFS-16-1/95/605M
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MASSACHUSETTS INVESTORS TRUST MFS(R) WORLD TOTAL RETURN FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND MFS(R) MUNICIPAL BOND FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) MUNICIPAL HIGH INCOME FUND
MFS(R) EMERGING GROWTH FUND MFS(R) MUNICIPAL INCOME FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) ALABAMA MUNICIPAL BOND FUND
MFS(R) GROWTH OPPORTUNITIES FUND MFS(R) ARKANSAS MUNICIPAL BOND FUND
MFS(R) MANAGED SECTORS FUND MFS(R) CALIFORNIA MUNICIPAL BOND FUND
MFS(R) OTC FUND MFS(R) FLORIDA MUNICIPAL BOND FUND
MFS(R) RESEARCH FUND MFS(R) GEORGIA MUNICIPAL BOND FUND
MFS(R) VALUE FUND MFS(R) LOUISIANA MUNICIPAL BOND FUND
MFS(R) TOTAL RETURN FUND MFS(R) MARYLAND MUNICIPAL BOND FUND
MFS(R) UTILITIES FUND MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
MFS(R) BOND FUND MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
MFS(R) GOVERNMENT MORTGAGE FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) GOVERNMENT SECURITIES FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) HIGH INCOME FUND MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
MFS(R) INTERMEDIATE INCOME FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) STRATEGIC INCOME FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) GOVERNMENT LIMITED MATURITY FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) LIMITED MATURITY FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) MUNICIPAL LIMITED MATURITY FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) WORLD EQUITY FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
MFS(R) WORLD GOVERNMENTS FUND MFS(R) WORLD ASSET ALLOCATION FUND
MFS(R) WORLD GROWTH FUND
</TABLE>
SUPPLEMENT TO THE CURRENT PROSPECTUS
During the period from February 1, 1995 through April 14, 1995 (the "Sales
Period") (unless extended by MFS Fund Distributors, Inc. ("MFD"), the Funds'
distributor), MFD will pay Corelink Financial Inc. ("Corelink") an additional
commission equal to 0.10% of the gross commissonable sales for Class A shares
and Class B shares and the net asset value for Class C shares (if applicable) of
the Funds sold by Corelink during the Sales Period.
THE DATE OF THIS SUPPLEMENT IS FEBRUARY 1, 1995.
MFS-16CL-2/95/5M
<PAGE>
MFS(R) MANAGED SECTORS FUND MFS(R) GROWTH OPPORTUNITIES FUND
MFS(R) EMERGING GROWTH FUND MFS(R) HIGH INCOME FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) MUNICIPAL BOND FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) RESEARCH FUND
MFS(R) WORLD TOTAL RETURN FUND MFS(R) VALUE FUND
MFS(R) WORLD EQUITY FUND MFS(R) BOND FUND
MFS(R) UTILITIES FUND MFS(R) LIMITED MATURITY FUND
MFS(R) STRATEGIC INCOME FUND MFS(R) MUNICIPAL LIMITED MATURITY FUND
MFS(R) MUNICIPAL INCOME FUND MFS(R) MUNICIPAL SERIES TRUST
SUPPLEMENT TO BE AFFIXED TO THE CURRENT PROSPECTUS FOR DISTRIBUTION IN OHIO
Prospective Ohio investors should note the following:
a) This Prospectus must be delivered to the investor prior to consummation of
the sale;
b) The Fund may invest up to 50% of its assets in restricted securities,
including Rule 144A securities which have been deemed to be liquid by the
Board of Trustees.
THE DATE OF THIS SUPPLEMENT IS FEBRUARY 1, 1995.
MFS-16OH-2/95/19.5M
<PAGE>
PROSPECTUS
MFS(R) GROWTH May 1, 1994
OPPORTUNITIES FUND Class A Shares of
(A member of the MFS Family of Funds(R)) Beneficial Interest
Class B Shares of
Beneficial Interest
- --------------------------------------------------------------------------------
Page
----
1. The Fund ............................................................... 2
2. Expense Summary ........................................................ 2
3. Condensed Financial Information ........................................ 4
4. Investment Objective and Policies ...................................... 5
5. Management of the Fund ................................................. 10
6. Information Concerning Shares of the Fund .............................. 10
Purchases .......................................................... 10
Exchanges .......................................................... 15
Redemptions and Repurchases ........................................ 16
Distribution Plans ................................................. 18
Distributions ...................................................... 19
Tax Status ......................................................... 19
Net Asset Value .................................................... 20
Description of Shares, Voting Rights and Liabilities ............... 20
Performance Information ............................................ 20
7. Shareholder Services ................................................... 21
Appendix ............................................................... 23
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 Fund's investment objective 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 and MFS Financial Services, Inc., 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, 1994, which contains more detailed information about
the Fund and is incorporated into this Prospectus by reference. See page 22 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. THE FUND
MFS Growth Opportunities 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
contingent deferred sales charge (a "CDSC") in the case of certain purchases of
$1 million or more) and are subject to a Distribution Plan providing for a
distribution fee and a 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 fee and a 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. Massachusetts Financial Services Company, a Delaware corporation ("MFS" or
the "Adviser"), is the Fund's investment adviser. 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.
2. 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):<F2>
Management Fees ......................................................... 0.43% 0.43%
Rule 12b-1 Fees (after applicable fee reduction) ........................ 0.13%<F3> 1.00%<F4>
Other Expenses .......................................................... 0.28% 0.35%<F5>
----- -----
Total Operating Expenses ................................................ 0.84%<F6> 1.78%
<FN>
- ---------
<F1> Purchases of $1 million or more are not subject to an initial sales charge;
however, 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" below).
<F2> For Class A shares, percentages are based on fees incurred during the
fiscal year ended December 31, 1993. For Class B shares, which were
initially offered on September 7, 1993, percentages are based on Class A
expenses adjusted for Class B specific expenses.
<F3> 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 the 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.
<F4> 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 the 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.
<F5> Based on Class A expenses except in the case of shareholder servicing agent
fees which have been estimated for Class B.
<F6> Absent the 12b-1 fee reduction, total operating expenses would have been
1.03%.
</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
------- -------
(1)
1 year .................... $ 66 $ 58 $ 18
3 years ................... 83 85 55
5 years ................... 101 115 95
10 years ................... 155 185(2) 185(2)
- ---------
(1) Assumes no redemption.
(2) 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.
<PAGE>
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 is
incorporated by reference into the Statement of Additional Information in
reliance upon the report of Deloitte & Touche, independent certified public
accountants, as experts in accounting and auditing.
<TABLE>
FINANCIAL HIGHLIGHTS
CLASS A AND B SHARES
CLASS B
<CAPTION>
CLASS A SHARES SHARES
--------------------------------------------------------------------------------------------------- ------------
YEAR ENDED DECEMBER 31, YEAR ENDED MARCH 31, PERIOD ENDED
-------------------------------------------------------------- -------------------------------- December 31,
------------
1993 1992 1991 1990 1989 1988 1987<F1> 1987 1986 1985 1984 1993<F5>
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -
beginning of
period $11.17 $10.75 $ 9.97 $10.93 $10.96 $10.81 $13.41 $13.51 $10.77 $10.44 $11.15 $12.52
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations** -
Net investment
income $ 0.07 $ 0.15 $ 0.24 $ 0.30 $ 0.36 $ 0.22 $ 0.11 $ 0.17 $ 0.22 $ 0.30 $ 0.20 $ 0.00
Net realized
and unrealized
gain
(loss) on
investments 1.73 0.67 1.94 (0.77) 2.74 0.76 (2.13) 1.20 3.63 0.33 (0.07) 0.36
------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations $ 1.80 $ 0.82 $ 2.18 $(0.47) $ 3.10 $ 0.98 $(2.02) $ 1.37 $ 3.85 $ 0.63 $ 0.13 $ 0.36
------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less
distributions
declared to
shareholders -
From net
investment
income $(0.07) $(0.14) $(0.18) $(0.33) $(0.36) $(0.19) $(0.11) $(0.17) $(0.22) $(0.30) $(0.22) $(0.00)
In excess of
net
investment
income (0.02) -- -- -- -- -- -- -- -- -- -- (0.03)
From net
realized
gain on
investments (1.32) (0.26) (1.22) (0.16)<F4> (2.77) (0.64) (0.47) (1.30) (0.89) -- (0.62) (1.32)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distri-
butions
declared
to share-
holders $(1.41) $(0.40) $(1.40) $(0.49) $(3.13) $(0.83) $(0.58) $(1.47) $(1.11) $(0.30) $(0.84) $(1.35)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset
value - end
of period $11.56 $11.17 $10.75 $ 9.97 $10.93 $10.96 $10.81 $13.41 $13.51 $10.77 $10.44 $11.53
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total
return<F6> 16.19% 8.06% 9.29% (4.57)% 28.23% 8.90% (20.45)%<F3> 11.57% 35.92% 5.93% (0.94)% 9.29%<F3>
RATIOS (TO
AVERAGE
NET ASSETS)
/SUPPLEMENTAL
DATA:
Expenses 0.84%<F7> 0.89% 0.88% 0.80 % 0.77% 0.86% 0.72 %<F3> 0.71% 0.71% 0.75% 0.67 % 1.33%<F3>
Net invest-
ment income 0.60%<F7> 1.40% 2.14% 2.91 % 2.79% 1.90% 1.08 %<F3> 1.28% 1.85% 2.90% 1.68 % 0.00%<F3>
PORTFOLIO
TURNOVER 79% 102% 131% 89 % 83% 68% 40 % 109% 117% 101% 67 % 79%
NET ASSETS
AT END OF
PERIOD (000
OMITTED) $709,839 $694,084 $739,791 $687,847 $805,702 $767,924 $834,359 $1,090,764 $989,980 $712,551 $576,343 $ 805
<FN>
- ---------
<F1> For the nine months ended December 31, 1987.
<F2> Per share data for the period is based on average shares outstanding on
Class A and Class B shares for the year ended December 31, 1993.
<F3> Annualized.
<F4> Includes a per share distribution from paid-in capital of $0.0006.
<F5> For the period from the commencement of offering of Class B
shares, September 7, 1993, to December 31, 1993.
<F6> Total returns do not include the applicable sales charges (except for
reinvested dividends prior to March 1, 1991). If the sales charge had been
included, the results would have been lower.
<F7> The distributor did not impose a portion of its fee amounting to $0.004 per
share for the year ended December 31, 1993 attributable to Class A shares.
If this fee had been incurred by Class A shareholders, the ratios of
expenses and net investment income to average net assets would have been
0.87% and 0.56%, respectively.
</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") (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 (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 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. 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 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 a 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 10% to 50%) of its total assets in foreign securities (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, ADRs and the holding of foreign currency, as well as the associated
risks.
AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in American Depositary
Receipts ("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. Although ADRs are issued
by a U.S. depository, they are subject to many of the risks of foreign
securities such as changes in exchange rates and more limited information about
foreign issuers.
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 Trust'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 a 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.
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, 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 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 MFS
Financial Services, Inc. ("FSI"), the Fund's distributor, as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions. 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, 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, 1993, MFS received fees under the
Fund's Advisory Agreement of $2,996,895, 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. The MFS Asset Management Group provides 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 $33.6 billion on behalf of approximately 1.4 million investor
accounts as of March 31, 1994. MFS is a subsidiary of Sun Life of Canada (U.S.),
which in turn is a 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, James R. Bordewick, Jr. and Linda J. Hoard, all of whom are officers of
MFS, are officers of the Fund.
DISTRIBUTOR -- FSI, 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,
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 FSI. 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: The 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
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
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. FSI (on behalf of the Fund) will pay a
commission on purchases of $1 million or more.
No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC shall 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) 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 that 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), unless, 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, in
which case the CDSC will not be waived. 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. The
applicability of the CDSC will be unaffected by transfers of registration. FSI
will receive all CDSCs which FSI intends to apply for the benefit of the Fund.
FSI 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 FSI 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 other special purchase programs. A description of the Right of
Accumulation, Letter of Intent and Group Purchases privileges by which the sales
charge may be reduced is set forth in the Statement of Additional Information.
In addition, FSI, on behalf of the Fund and pursuant to the Fund's Class A
Distribution Plan will pay 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 net asset value through the automatic
reinvestment of Class A and Class B periodic distributions which constitute
required withdrawals from qualified retirement plans. Class A shares of the Fund
may also be purchased at net asset value where the purchase is in an amount of
$3 million or more and where the dealer and FSI enter into an agreement in which
the dealer agrees to return any commission paid to it on the sale (or on a pro
rata portion thereof) as described above if the shareholder redeems his or her
shares within a year of purchase. (Shareholders who purchase shares at net asset
value pursuant to these conditions are called "$3 Million Shareholders".) 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 FSI 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 FSI or its affiliates, to certain family members of such
employees or representatives 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 the MFS Asset Management Group. Class A
shares of the Fund also 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 FSI or its affiliates, if such redemption has occurred
no more than 60 days prior to the purchase of Class A shares of the Fund and the
shareholder either (i) paid an initial sales charge or (ii) was at some time
subject to, but did not actually pay, a deferred sales charge with respect to
the redemption proceeds. 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 also purchase Class A shares of the Fund at their net
asset value. Class A shares of the Fund may also be purchased at their net asset
value by retirement plans where third party administrators of such plans have
entered into certain arrangements with FSI or its affiliates provided that no
commission is paid to its dealers. 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 FSI, 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 retirement
plans qualified under section 401(a) or 403(b) of the Code which are subject to
the Employee Retirement Income Security Act of 1974, as amended, as follows:
(i) the retirement plan and/or the sponsoring organization must subscribe to
the MFS FUNDamental 401(k) Plan(sm) or another similar Section 401(a) or
403(b) recordkeeping program made available by MFS Service Center, Inc.;
(ii) either (a) the sponsoring organization must have at least 25 employees
or (b) the aggregate purchases by the retirement plan of Class A shares of
the MFS Funds must be in an amount of at least $250,000 within a reasonable
period of time, as determined by FSI in its sole discretion; and
(iii) 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 FSI, as follows: 1.00% on sales
up to $5 million, plus 0.25% on the amount in excess of $5 million; provided,
however, that FSI may pay a commission, on sales in excess of $5 million to
certain retirement plans, of 1.00% to certain dealers which, at FSI's
invitation, enter into an agreement with FSI 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 FSI. 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.
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%
- ---------
*Class B shares purchased between January 1, 1993 and September 1, 1993 will be
subject to a CDSC of 5% in the event of a redemption within the first year
after purchase.
For Class B shares purchased prior to January 1, 1993, the Fund imposes a CDSC
as a percentage of redemption proceeds as follows:
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 section 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 qualified under
Sections 401(a) of the Code 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 FSI 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 FSI, 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 the MFS Asset
Management Group. A retirement plan qualified under section 401(a) of the Code
(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 any Class A shares) 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 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 FSI. 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, FSI 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 FSI 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 FSI 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.
FSI may enter into an agreement with shareholders who intend to make exchanges
among certain classes of certain MFS Funds (as determined by FSI) 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 FSI 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 FSI each reserve the right to request market timers to redeem
their shares at the 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.
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, FSI believes that such Act should not
preclude banks from entering into agency agreements with FSI (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 for shares of the same class of any of the
other MFS Funds (if available for sale) at net asset value. 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; 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 MFS
Service Center, Inc.) 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 New York Stock Exchange (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 FSI, 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 fluctuate,
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 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 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 by the Shareholder Servicing Agent in
"good order," 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 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 FSI ON THE SAME
DAY BEFORE FSI CLOSES FOR BUSINESS, THE SHAREHOLDER WILL RECEIVE THE NET ASSET
VALUE CALCULATED ON THAT DAY.
SIGNATURE GUARANTEE: In order to protect shareholders against fraud to the
greatest extent possible, 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.
Shareholders of the Fund 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 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 securities
(instead of cash) from the Fund's portfolio. The securities distributed in such
a distribution 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 redemption.
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.
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 FSI 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 FSI may pay expenses on behalf of the Fund
related to the distribution and servicing of Class A shares. The expenses to be
paid by FSI on behalf of the Fund include a service fee to securities dealers
which enter into a sales agreement with FSI of up to 0.25% 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. FSI
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 paid to dealers is 0.15% for
shares purchased prior to March 1, 1991. FSI may also retain a distribution fee
of 0.10% 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 FSI's obligations under its distribution agreement with the Fund.
FSI, however, is currently waiving this 0.10% 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 FSI 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. FSI 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 FSI or its affiliates for shareholder accounts. Certain
banks and other financial institutions that have agency agreements with FSI 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 FSI 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
FSI a service fee of up to 0.25% of the Fund's average daily net assets
attributable to Class B shares (which FSI will in turn pay to securities dealers
which enter into a sales agreement with FSI at a rate of up to 0.25% 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 FSI will receive all CDSCs attributable to
Class B shares (see "Redemptions and Repurchases" above), which do not reduce
the distribution fee. FSI will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. FSI will also
advance to dealers the first year service fee at a rate equal to 0.25% of the
purchase price of such shares and, as compensation therefor, FSI 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. FSI 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 FSI or its affiliates
for shareholder accounts. The purpose of the distribution payments to FSI under
the Class B Distribution Plan is to compensate FSI for its distribution services
to the Fund. Since FSI's compensation is not directly tied to its expenses, the
amount of compensation received by FSI 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 FSI in excess of
the amount of compensation it receives. The expenses incurred by FSI, 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 FSI 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 that 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.
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 of 31% of
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 FSI 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. 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 (including short-term capital gains) in cash; long-term 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. 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 all classes of all MFS Funds or MFS Fixed Fund (a bank collective
investment 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 (a bank collective
investment 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 (except a $3 Million 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 under the Automatic Exchange Plan, a dollar cost averaging
program. The Automatic Exchange Plan provides for automatic monthly or quarterly
transfers 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, transfers 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 transfer money
into such fund through the Automatic Exchange Plan. No transaction fee is
imposed in connection with transfer transactions under the Automatic Exchange
Plan. However, transfers 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, a transfer is treated as a sale of the shares transferred and,
therefore, could result in a capital gain or loss to the shareholder making the
transfer. 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, 1994, contains more
detailed information about the Fund, including information related to (i)
investment 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 Distribution Plans,
and (vi) various services and privileges provided for the benefit of its
shareholders, including additional information with respect to the exchange
privilege.
<PAGE>
APPENDIX
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>
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 FUNDS BOND FUNDS
Massachusetts Investors Trust MFS(r) Bond Fund
Massachusetts Investors Growth Stock Fund MFS(r) Government Limited Maturity Fund
MFS(r) Capital Growth Fund MFS(r) Government Mortgage Fund
MFS(r) Emerging Growth Fund<F1> MFS(r) Government Securities Fund
MFS(r) Gold & Natural Resources Fund MFS(r) High Income Fund
MFS(r) Growth Opportunities Fund MFS(r) Income & Opportunity Fund
MFS(r) Managed Sectors Fund MFS(r) Intermediate Income Fund
MFS(r) OTC Fund MFS(r) Limited Maturity Fund
MFS(r) Research Fund MFS(r) World Governments Fund
MFS(r) Value Fund TAX-FREE BOND FUNDS
MFS(r) World Equity Fund MFS(r) Municipal Bond Fund
MFS(r) World Growth Fund MFS(r) Municipal High Income Fund<F1>
STOCK AND BOND FUNDS MFS(r) Municipal Income Fund
MFS(r) Total Return Fund MFS(r) Municipal Limited Maturity Fund
MFS(r) World Total Return Fund MFS(r) Municipal Series Trust (AL, AR, CA,
MFS(r) Utilities Fund FL, GA, LA, MD, MS, NY, NC, PA, SC, TN,
TX, VA, WA, WV
MONEY MARKET
MFS(r) Cash Reserve Fund
MFS(r) Government Money Market Fund
MFS(r) Money Market Fund
<FN>
<F1>Closed to new investors.
</TABLE>
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Financial Services, 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
125 Summer Street, Boston, MA 02110
MFS(R) GROWTH
OPPORTUNITIES FUND
500 Boylston Street, Boston,
MA 02116
MGO-1-5/94/149M 16/216
MFS(R)
GROWTH
OPPORTUNITIES
FUND
PROSPECTUS
MAY 1, 1994
