<PAGE>
MFS(R) MUNICIPAL LIMITED MATURITY FUND
(A SERIES OF MFS(R) FIXED INCOME TRUST
SUPPLEMENT TO BE AFFIXED TO THE
PROSPECTUS FOR DISTRIBUTION IN MISSOURI
The Fund intends to engage in buying and selling securities, as well as holding
securities to maturity. In buying and selling securities, the Fund seeks to take
advantage of market developments, yield disparities, and variations in the
creditworthiness of issuers. A high portfolio turnover rate necessarily involves
some expenses to the Fund. Distributions from net short-term capital gains and
from taxable investments are taxable to shareholders as ordinary income.
Distributions of net capital gains are taxable to shareholders as long-term
capital gains for federal income tax purposes without regard to the length of
time the shares have been held. These distributions will be treated in the same
manner for income tax purposes whether paid in cash or additional shares.
THE DATE OF THIS SUPPLEMENT IS JULY 1, 1994.
MML-16MO-7/94/6.4M
LNC068
<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>
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-160H-2/95/19.5M
<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>
PROSPECTUS
July 1, 1994
Class A Shares of
Beneficial Interest
Class B Shares of
MFS(R) MUNICIPAL Beneficial Interest
LIMITED MATURITY FUND Class C Shares of
(A Member of the MFS Family of Funds(R)) Beneficial Interest
- --------------------------------------------------------------------------------
Page
----
1. The Fund ............................................................... 2
2. Expense Summary ........................................................ 2
3. Condensed Financial Information ........................................ 3
4. Investment Objective and Policies ...................................... 5
5. Management of the Fund ................................................. 8
6. Information Concerning Shares of the Fund .............................. 9
Purchases ........................................................... 9
Exchanges ........................................................... 15
Redemptions and Repurchases ......................................... 15
Distribution Plans .................................................. 18
Distributions ....................................................... 19
Tax Status .......................................................... 20
Net Asset Value ..................................................... 21
Description of Shares, Voting Rights and Liabilities ................ 21
Performance Information ............................................. 21
7. Shareholder Services ................................................... 22
Appendix A ............................................................. 24
Appendix B ............................................................. 24
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 MUNICIPAL LIMITED MATURITY FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
MFS Municipal Limited Maturity Fund (the "Fund") is a diversified series of
MFS(R) Fixed Income Trust (the "Trust"), an open-end investment company
presently consisting of three series. The investment objective of the Fund is to
provide as high a level of current income exempt from federal income taxes as is
considered consistent with prudent investing while seeking protection of
shareholders' capital (see "Investment Objective and Policies"). The minimum
initial investment generally is $1,000 per account (see "Purchases").
The 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 Trust and
the Fund that a prospective investor ought to know before investing. The Trust,
on behalf of the Fund, has filed with the Securities and Exchange Commission
(the "SEC") a Statement of Additional Information, dated July 1, 1994, which
contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference. See page 23 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 Municipal Limited Maturity Fund (the "Fund") is a diversified series of MFS
Fixed Income Trust (the "Trust"), an open-end management investment company
which was organized as a business trust under the laws of The Commonwealth of
Massachusetts in 1985. The Trust presently consists of three series, each of
which represents a portfolio with separate investment policies. Shares of the
Fund are continuously sold to the public and the Fund uses the proceeds to buy
securities for its portfolio. Three classes of shares of the Fund currently are
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 subject to a
Distribution Plan providing for an annual distribution fee and service fee.
Class B shares are offered at net asset value without an initial sales charge
but subject to a CDSC and a Distribution Plan providing for an annual
distribution fee and service fee which are greater than the Class A annual
distribution fee and service fee. Class B shares will convert to Class A shares
approximately eight years after purchase. Class C shares are offered at net
asset value without a sales charge or a CDSC but subject to a Distribution Plan
providing for an annual distribution and service fee which are equal to the
Class B annual distribution fee and service fee. Class C shares do not convert
to any other class of shares of the Fund.
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust and the Fund. Massachusetts Financial Services Company, a Delaware
corporation ("MFS" or the "Adviser"), is the Fund's investment adviser. A
majority of the Trustees of the Trust are not affiliated with the Adviser. The
Adviser is responsible for the management of the Fund's assets and the officers
of the Trust are responsible for the Fund's 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
Trust also offers to buy back (redeem) shares of the Fund from Fund shareholders
at any time at net asset value, less any applicable CDSC.
2. EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on Purchases of Shares
(as a percentage of offering price) ...................... 2.50% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as
applicable) .............................................. See Below<F1> 4.00% 0.00%
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees<F2> ........................................ 0.40% 0.40% 0.40%
Rule 12b-1 Fees ............................................ 0.15%<F3> 1.00%<F4> 1.00%<F4>
Other Expenses (after applicable fee reduction)<F5> ........ 0.40% 0.40% 0.40%
------ ----- -----
Total Operating Expenses (after applicable fee reduction)<F6> 0.95% 1.80% 1.80%
<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 made in the event
of certain redemption transactions within 12 months following such
purchases (see "Purchases").
<F2> Effective February 1, 1994, the Adviser reduced the management fee to 0.40%
of average net assets on an annualized basis. See "Management of the Fund"
below.
<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 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"). Effective May 1, 1993, the Fund commenced service
fee payments under this Plan of 0.15% per annum of the average daily net
assets of the Fund attributable to Class A shares. A distribution fee of
0.10% per annum of the Fund's average daily net assets attributable to
Class A shares is not being imposed. 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 separate Distribution Plans for its Class B and its
Class C shares in accordance with Rule 12b-1 under the 1940 Act, which
provide that it will pay distribution/service fees aggregating up to (but
not necessarily all of) 1.00% per annum of the average daily net assets
attributable to the Class B shares under the Class B Distribution Plan and
the Class C shares under the Class C Distribution Plan (see "Distribution
Plans"). After a substantial period of time, distribution expenses paid
under these Plans, together with the CDSC payable upon redemption of Class
B shares, may total more than the maximum sales charge that would have been
permissible if imposed entirely as an initial sales charge.
<F5> Except for the shareholder servicing agent fee component, "Other Expenses"
is based on Class A expenses incurred during the fiscal period ended April
30, 1994. The shareholder servicing agent fee component of "Other Expenses"
is a predetermined percentage based upon the Fund's net assets attributable
to each class. The Adviser bears certain expenses of the Fund, subject to
reimbursement. See "Management of the Fund." Otherwise, the Fund's "Other
Expenses" for Class A, Class B and Class C shares would have been 0.47%,
0.54% and 0.47%, respectively, in each case as a percentage of average net
assets attributable to the respective Class.
<F6> Absent all fee reductions and waivers, the Fund's "Total Operating
Expenses" for Class A, Class B and Class C shares would have been 1.02%,
1.94% and 1.87%, respectively, in each case as a percentage of average net
assets attributable to the respective Class.
</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 CLASS C
------ ------- ------- -------
(1)
1 year ................ $ 34 $ 58 $ 18 $ 18
3 years ............... 55 87 57 57
5 years ............... 76 117 97 97
10 years ............... 139 189(2) 189(2) 212
----
(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 expense table above 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 of the Prospectus: (i) varying sales charges on
share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases"; (iii)
management fees -- "Management of the Fund", 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.
3. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Fund's Annual Report to Shareholders, which are
incorporated by reference into the Statement of Additional Information in
reliance upon the report of Deloitte & Touche, independent certified public
accountants, as experts in accounting and auditing.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
EIGHT YEAR ENDED AUGUST 31, EIGHT
MONTHS ENDED ----------------------- MONTHS ENDED
APRIL 30, 1994 1993 1992<F1> APRIL 30, 1994 #
-------------- ---- ----- --------------
CLASS A CLASS B
----------------------------------------- -------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C>
Net asset value - beginning of
period $ 7.72 $ 7.43 $ 7.31 $ 7.75
------ ------ ------ ------
Income from investment operations -<F6>
Net investment income $ 0.19 $ 0.31 $ 0.15 $ 0.14
Net realized and unrealized
gain (loss) on investments (0.22) 0.30 0.12 (0.26)
------ ------ ------ ------
Total from investment
operations $ (0.03) $ 0.61 $ 0.27 $(0.12)
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ (0.19)<F3> $ (0.31) $(0.15)<F2> $(0.13)
From net realized gains -- (0.01) -- --
In excess of net investment
income -- -- -- (0.01)
In excess of net realized
gains (0.03) -- -- (0.03)
------ ------ ------ ------
Total distributions declared
to shareholders $ (0.22) $ (0.32) $ (0.15) $ (0.17)
------ ------ ------ ------
Net asset value - end of period $ 7.47 $ 7.72 $ 7.43 $ 7.46
------ ------ ------ ------
------ ------ ------ ------
Total return<F7> (0.59)%<F4> 8.47% 8.26%<F4> (2.37)%<F4>
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL
DATA:<F8>
Expenses 0.89%<F4> 0.68% 0.55%<F4> 1.74%<F4>
Net investment income 3.72%<F4> 4.04% 4.25%<F4> 2.79%<F4>
PORTFOLIO TURNOVER 48% 69% 8% 48%
NET ASSETS AT END OF PERIOD
($000 OMITTED) 83,367 87,192 21,312 7,415
<FN>
<F1> For the period from the commencement of initial public offering, March 17,
1992 to August 31, 1994.
<F2> Includes a per share distribution from paid-in capital of $0.0007.
<F3> Includes a per share distribution in excess of net investment income of
$0.002.
<F4> Annualized.
<F5> For the period from the commencement of offering of Class B shares,
September 7, 1993 to April 30, 1994.
<F6> Per share data for the eight months ended April 30, 1994 is based on
average shares outstanding.
<F7> Total returns do not include the applicable sales charge. If the sales
charge had been included, the results would have been lower.
<F8> The investment adviser did not impose all or a portion of its management
fee for the periods indicated. If this fee had been incurred by the Fund,
the net investment income per share and the ratios would have been:
Net investment income $ 0.18 $ 0.28 $ 0.13 $ 0.12
RATIOS (TO AVERAGE NET ASSETS):
Expenses 1.12%<F4> 1.16% 1.16%<F4> 2.05%
Net investment income 3.49%<F4> 3.57% 3.64%<F4> 2.48%<F4>
</TABLE>
Further information about the performance of the Fund is contained in the
Fund's Annual Report to shareholders, which can be obtained from the Shareholder
Servicing Agent (see back cover for address and phone number) without charge.
<PAGE>
4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to provide as high a
level of current income exempt from federal income taxes as is considered
consistent with prudent investing and protection of shareholders' capital. Any
investment involves risk and there can be no assurance that the Fund will
achieve its investment objective.
INVESTMENT POLICIES-- The Fund's policy under normal conditions is to invest
substantially all (i.e., at least 80%) of its assets in debt securities issued
by or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies or
instrumentalities, the interest on which is exempt from federal income tax
("Municipal Bonds" or "tax-exempt securities"). As a defensive measure during
times of adverse market conditions, up to 50% of the Fund's assets may be
temporarily invested in short-term investments described in paragraphs 3 and 4
below.
Substantially all of the Fund's total assets will be invested in:
(1) Tax-exempt securities which are rated AAA, AA, A or BBB by Standard
& Poor's Ratings Group ("S&P") or are rated Aaa, Aa, A or Baa by Moody's
Investors Service, Inc. ("Moody's") (and comparable unrated securities);
(2) Notes of issuers having an issue of outstanding Municipal Bonds
rated AAA, AA, A or BBB by S&P or Aaa, Aa, A or Baa by Moody's (or issues
of comparable quality) or which are guaranteed by the U.S. Government;
(3) Obligations issued or guaranteed by the U.S. Government or its
agencies, authorities or instrumentalities; and
(4) Commercial paper, obligations of banks (including certificates of
deposit and bankers' acceptances) with $1 billion or more of assets, and
cash.
Under normal market conditions, the dollar weighted average maturity of the
Fund's portfolio will not exceed 5 years and substantially all of the securities
held by the Fund will have remaining maturities of 10 years or less.
Interest income from the short-term investments described in paragraphs 3 and 4
above will be taxable to shareholders as ordinary income. The Fund may purchase
Municipal Bonds, the interest on which may be subject to an alternative minimum
tax (see "Tax Status"), but for purposes of this Prospectus, such interest is
nonetheless considered to be tax-exempt. For a comparison of yields on Municipal
Bonds and taxable securities, see the Taxable Equivalent Yield Table in Appendix
A to this Prospectus. For a general discussion of Municipal Bonds and
descriptions of short-term investments permitted as investments and the ratings
of S&P and Moody's for Municipal Bonds, see Appendix B to this Prospectus and
Appendix A to the Statement of Additional Information, respectively.
The net asset value of the shares of an open-end investment company such as the
Fund, which invests primarily in fixed income tax-exempt securities, changes as
the general levels of interest rates fluctuate. When interest rates decline, the
market value of the portfolio can be expected to rise. Conversely, when interest
rates rise, the market value of the portfolio can be expected to decline.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Bonds. For the effect of current federal tax law on this
exemption, see the "Tax Status" section of this Prospectus.
SECURITIES RATED BBB/BAA: As noted above, the Fund may invest in tax-exempt
securities rated Baa by Moody's or BBB by S&P (and comparable unrated
securities). These securities, while normally exhibiting adequate protection
parameters, 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 tax-exempt
securities. If a security purchased by the Fund is subsequently downgraded to
below BBB by S&P or Baa by Moody's or comparable standards for unrated
securities, the security will be sold only if the Adviser believes it is
advantageous to do so.
"WHEN-ISSUED" OR "FORWARD DELIVERY" SECURITIES: Some tax-exempt securities may
be purchased 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, often 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 them 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 or high quality liquid debt securities. Although the Fund does not
intend to make such purchases for speculative purposes, purchases of securities
on such bases may involve more risk than other types of purchases. For
additional information concerning the use, risks and costs of "when- issued" and
"forward delivery" securities, see the Statement of Additional Information.
ZERO COUPON BONDS: Municipal Bonds in which the Fund may invest also include
zero coupon bonds. Zero coupon bonds are debt obligations which are issued at a
significant discount from face value and do not require the periodic payment of
interest. The discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity or the first interest payment
date at a rate of interest reflecting the market rate of the security at the
time of issuance. Zero coupon bonds benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of such cash. Such
investments may experience greater volatility in market value than debt
obligations which make regular payments of interest. The Fund will accrue income
on such investments for tax and accounting purposes, as required, which is
distributable to shareholders and which, because no cash is received at the time
of accrual, may require the liquidation of other portfolio securities to satisfy
the Fund's distribution obligations.
RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933 ("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 15% 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. Investing in restricted securities could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing Rule 144A
securities held in the Fund's portfolio. Subject to the Fund's 15% 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.
OPTIONS: The Fund may write (sell) "covered" put and call options on fixed
income securities. Call options written by the Fund give the holder the right to
buy the underlying securities from the Fund at a fixed exercise price up to a
stated expiration date or, in the case of certain options, on such date. Put
options written by the Fund give the holder the right to sell the underlying
securities to the Fund during the term of the option at a fixed exercise price
up to a stated expiration date or, in the case of certain options, on such date.
Call options are "covered" by the Fund, for example, when it owns the underlying
securities, and put options are "covered" by the Fund, for example, when it has
established a segregated account of cash, short-term money market instruments or
high quality debt securities which can be liquidated promptly to satisfy any
obligation of the Fund to purchase the underlying securities. The Fund may also
write straddles (combinations of puts and calls on the same underlying
security). The writing of straddles generates additional premium income but may
present greater risk.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a put option, the
Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
The Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. It is possible, however, that
illiquidity in the options markets may make it difficult from time to time for
the Fund to close out its written option positions.
The Fund may also purchase put or call options in anticipation of changes in
interest rates which may adversely affect the value of its portfolio or the
prices of securities that the Fund wants to purchase at a later date. The
premium paid for a put or call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security changes sufficiently to result in exercise,
the option may expire without value to the Fund.
In addition, the Fund may purchase warrants on fixed income securities. A
warrant on a fixed income security is a long-dated (i.e., long term) call option
conveying to the holder of the warrant the right, but not the obligation, to
purchase a fixed income security of a specific description (from the issuer) on
a certain date or dates (the exercise date) at a fixed exercise price.
The Fund intends to write and purchase options on securities primarily for
hedging purposes and also in an effort to increase current income. Options on
securities, including warrants, that are written or purchased by the Fund will
be traded on U.S. securities exchanges and in the over-the-counter market.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and
sell futures contracts on fixed income securities or indices of such securities,
including Municipal Bond indices and any other indices of fixed income
securities which may become available for trading ("Futures Contracts"). The
Fund may also purchase and write options on such Futures Contracts ("Options on
Futures Contracts"). These instruments will be used to hedge against anticipated
future changes in interest rates which otherwise might either adversely affect
the value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date. Should interest
rates move in an unexpected manner, the Fund may not achieve the anticipated
benefits of the hedging transactions and may realize a loss. Such investments
may also be used for non-hedging purposes, to the extent permitted by applicable
law.
ADDITIONAL POLICIES ON THE USE OF OPTIONS AND FUTURES:In order to assure that
the Fund will not be deemed to be a "commodity pool" for purposes of the
Commodity Exchange Act, regulations of the CFTC require that the Fund enter into
transactions in Futures Contracts and Options on Futures Contracts only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and premiums on
such non-hedging positions does not exceed 5% of the liquidation value of the
Fund's assets. In addition, the Fund must comply with the requirements of
various state securities laws in connection with such transactions.
The Fund has adopted the additional restriction that it will not enter into a
Futures Contract if, immediately thereafter, the value of securities and other
obligations underlying all such Futures Contracts would exceed 50% of the value
of the Fund's total assets. Moreover, the Fund will not purchase put and call
options on securities or on Futures Contracts, if as a result, more than 5% of
its total assets would be invested in such options.
Futures Contracts and Options on Futures Contracts that are entered into by the
Fund will be traded on U.S. commodities exchanges.
RISK FACTORS: Although the Fund will enter into certain transactions in Futures
Contracts and Options on Futures Contracts for hedging purposes, such
transactions nevertheless involve risks. For example, a lack of correlation
between the 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 investments for other than hedging purposes,
which involves greater risk. In particular, such transactions may result in
losses for the Fund which are not offset by gains on other portfolio positions,
thereby reducing gross income. 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. The Statement of Additional Information contains a
further description of options, Futures Contracts and Options on Futures
Contracts, and a discussion of the risks related to transactions therein.
Transactions in options may be entered into on U.S. exchanges regulated by the
SEC and in the over-the-counter market, while Futures Contracts and Options on
Futures Contracts may be entered into on U.S. commodities exchanges regulated by
the CFTC. Over-the-counter transactions involve certain risks which may not be
present in exchange-traded transactions.
Gains recognized from options and futures transactions engaged in by the Fund
are taxable income to shareholders upon distributions.
PORTFOLIO TRADING: The Fund intends to engage in buying and selling
securities, as well as holding securities to maturity. In buying and selling
portfolio securities, the Fund seeks to take advantage of market developments,
yield disparities and variations in the creditworthiness of issuers. For a
description of the strategies which may be used by the Fund in buying and
selling portfolio securities, see the Statement of Additional Information. The
primary consideration in placing portfolio security transactions is execution at
the most favorable prices. Consistent with the foregoing primary consideration,
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (the "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 Trust's
distributor, as a factor in the selection of broker-dealers to execute the
portfolio transactions of the Fund. For a further discussion of portfolio
trading, see the Statement of Additional Information.
-----------------
The investment objective and policies described above are not fundamental and
may be changed without shareholder approval. A change in the Fund's investment
objective may result in the Fund having an investment objective different from
the objective which the shareholder considered appropriate at the time of
investment in the Fund.
The Statement of Additional Information includes a discussion of other
investment policies and 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. 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.
5. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement dated August 1, 1993 (the "Advisory Agreement"). The Adviser
provides the Fund with overall investment advisory and administrative services,
as well as general office facilities. Robert A. Dennis has been the Fund's
portfolio manager since 1992. Mr. Dennis has been employed by the Adviser since
1980 and has been a Senior Vice President since 1986. Subject to such policies
as the Trustees may determine, the Adviser makes investment decisions for the
Fund. For these services and facilities, effective February 1, 1994, the Adviser
receives a management fee computed and paid monthly at the rate of 0.40% per
annum of the Fund's average daily net assets. Prior to February 1, 1994 the
Adviser was entitled to receive a management fee computed and paid monthly at
the rate of 0.55% per annum of the Fund's average daily net assets. Effective
September 1, 1992, and prior to February 1, 1994, the Adviser voluntarily
reduced the management fee to 0.30% per annum of average net assets. Prior to
September 1, 1992, the Adviser had voluntarily reduced the management fee to
0.20% per annum of average net assets. For the period September 1, 1993 to its
fiscal year ended April 30, 1994, the Fund incurred management fees of $313,896,
of which $100,052 was not imposed by the Adviser.
The Adviser has agreed to pay expenses of the Fund (except for the fees paid
under the Advisory Agreement and any Distribution Plan) until February 28, 2002
and to pay the expenses relating to the organization of the Fund, all subject to
reimbursement by the Fund. To accomplish such reimbursement, the Adviser
receives an expense reimbursement fee from the Fund in addition to the
investment advisory and distribution fees, computed and paid monthly at a rate
of 0.40% of the average daily net assets of the Fund on an annualized basis for
its then-current fiscal year. The expense reimbursement agreement terminates for
the Fund on the earlier of either (i) the date on which the payments made
thereunder by the Fund equal the prior payment of such reimbursable expenses by
the Adviser or (ii) February 28, 2002. The Adviser may also terminate the
expense reimbursement agreement at any time by written notice to the Trust. See
"Investment Adviser" in the Statement of Additional Information for further
information.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), to MFS Municipal Income Trust, MFS Government
Markets Income Trust, MFS Multimarket 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, a division of the Adviser,
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 $33.8 billion on behalf of approximately 1.5 million accounts as
of May 31, 1994. As of such date, the MFS organization managed approximately
$9.8 billion of assets in equity portfolios and approximately $19.4 billion of
assets invested in fixed income portfolios. 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 the 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 Trust. Robert A. Dennis, Geoffrey L. Kurinsky,
Stephen E. Cavan, W. Thomas London, James R. Bordewick, Jr., Linda J. Hoard
and James O. Yost, all of whom are officers of MFS, are officers of the Trust.
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 certain 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.
Because the Fund expects the dividends it pays to shareholders from interest on
Municipal Bonds to be exempt from federal income tax, the Fund would generally
not be an appropriate investment for entities not subject to federal income tax.
The Fund offers three classes of shares which will bear sales charges and
distribution fees in different forms and amounts:
CLASS A SHARES: Class A shares are offered at net asset value per share plus an
initial sales charge (or CDSC in the case of certain purchases of $1 million or
more) as follows:
<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE AS <F1>
PERCENTAGE OF:
-------------------------------- DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
<S> <C> <C> <C>
Less than $50,000 .......................................................... 2.50% 2.56% 2.25%
$50,000 but less than $100,000 ............................................. 2.25 2.30 2.00
$100,000 but less than $250,000 ............................................ 2.00 2.04 1.75
$250,000 but less than $500,000 ............................................ 1.75 1.78 1.50
$500,000 but less than $1,000,000 .......................................... 1.50 1.52 1.25
$1,000,000 or more ......................................................... None<F2> None<F2> (See Below)<F2>
<FN>
- ---------
<F1> Because of rounding in the calculation of offering price, actual sales
charges may be more or less than those calculated using the percentages
above.
<F2> A CDSC may apply in certain instances. FSI will pay a commission on
purchases of $1 million or more.
</TABLE>
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 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 occurred, 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 plans; (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
shall 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 2.25% and FSI retains approximately
1/4 of 1% of the public offering price. In addition, FSI pays commissions 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
sale) for purposes of determining the level of commissions to be paid during
that period with respect to such account. The sales charge may vary depending on
the number of shares of the Fund as well as certain MFS Funds and other funds
owned or being purchased, the existence of an agreement to purchase additional
shares during a 13-month period, or 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.
Class A shares of the Fund may be sold at their net asset value to the officers
of the Trust, 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
any 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 affiliate, to certain
family members of such employees or representatives and their spouses, or to any
trust pension, profit-sharing or any other benefit plan for the sole benefit of
such employee or representative, as well as to clients of the MFS Asset
Management Group. Insurance company separate accounts may also purchase Class A
shares of the Fund at their net asset value. 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. Class A shares of the Fund may also be sold at net asset value where
the amount invested represents redemption proceeds from the MFS Fixed Fund. In
addition, Class A shares of the Fund may be sold at net asset value in
connection with the acquisition or liquidation of the assets of other investment
companies or personal holding companies. 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 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) PlanSM 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 deterimined 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.
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 one year of purchase (shareholders who purchase shares at net
asset value pursuant to these conditions are called "$3 Million Shareholders").
Furthermore, Class A shares of the Fund may be sold at net asset value through
the automatic reinvestment of distributions 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 August 31, 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" below 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), 401(k) 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
Section 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 of the Fund will also be waived upon redemptions by
(i) officers of the Trust, (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, by
any trust, pension, profit sharing or any other benefit plan for such persons,
for the sole benefit of such employee or representative or 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 MFS Funds will have the CDSC on Class B
shares waived in the case of a redemption of all the Retirement Plan's shares
(including shares of any other class) in all MFS Funds (i.e., all the assets of
the Retirement Plan invested in the MFS Funds are withdrawn), except that if,
immediately prior to the redemption, the aggregate amount invested by the
Retirement Plan in Class B shares of the MFS Funds (excluding the reinvestment
of distributions) during the prior four year period equals 50% or more of the
total value of the Retirement Plan's assets in the MFS Funds, then the CDSC will
not be waived. The CDSC on Class B shares 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.
CLASS C SHARES: Class C shares are offered at net asset value without an initial
sales charge or a CDSC. Class C shares do not convert to any other class of
shares of the Fund. The maximum investment in Class C shares that may be made is
$5,000,000 per transaction.
Class C shares are not currently available for purchase by any retirement plan
qualified under Sections 401(a) or 403(b) of the Code if the retirement plan
and/or the sponsoring organization subscribe to the MFS FUNDamental 401(k) Plan
or another similar 401(a) or 403(b) recordkeeping program made available by MFS
Service Center, Inc.
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
shares for sale 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.
Although all MFS Funds are generally available as an investment choice for
retirement plans, such as an IRA, municipal bond funds, such as the Fund, may
not be suitable for inclusion in a retirement plan due to their tax-exempt
nature. A shareholder should consult his or her finanical or tax adviser
regarding any such investment.
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 of the Fund's shares 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
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 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, Class B and Class C 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 the same class of shares of any of the
other MFS Funds (if available for sale) at net asset value. In addition, Class C
shares may be exchanged for shares of the MFS Money Market Fund 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 of 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 non-
retirement 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). Certain purchases may, however, be subject to a CDSC in the event
of certain redemption transactions (see "Contingent Deferred Sales Charge"
below). For the convenience of shareholders the Fund has arranged for different
procedures for redemption and repurchase. Since the net asset value of shares of
the account fluctuates, redemptions or repurchases, which are taxable
transactions, are likely to result in gains or losses to the shareholder. When a
shareholder withdraws an amount from his account, the shareholder is deemed to
have tendered for redemption a sufficient number of full and fractional shares
in his account to cover the amount withdrawn. The proceeds of a redemption or
repurchase will normally be available within seven days. 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 a letter of instructions, together with his share
certificates (if any were issued), all in "good order" for transfer. "Good
order" generally means that a stock power, written request for redemption,
letter of instructions or 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 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. Net asset value is calculated on the day the dealer places
the order with FSI, as the Fund's agent. 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 REDUCED BY
THE AMOUNT OF ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO
BE WITHHELD.
D. REDEMPTION BY CHECK -- Only Class A and Class C shares may be redeemed by
check. A shareholder (except a $3 Million Shareholder) owning Class A shares of
the Fund may elect to have a special account with State Street Bank and Trust
Company (the "Bank") for the purpose of redeeming Class A or Class C shares from
his or her account by check. The Bank will provide each Class A or Class C
shareholder, upon request, with forms of checks drawn on the Bank. Only
shareholders having accounts in which no share certificates have been issued
will be permitted to redeem shares by check. Checks may be made payable in any
amount not less than $500. Shareholders wishing to avail themselves of this
redemption by check privilege should so request on their Account Application,
must execute signature cards (for additional information, see the Account
Application) with signature guaranteed in the manner set forth under the caption
"Signature Guarantee", and must return any Class A or Class C share certificates
issued to them. Additional documentation will be required from corporations,
partnerships, fiduciaries or other such institutional investors. All checks must
be signed by the shareholder(s) of record exactly as the account is registered
before the Bank will honor them. The shareholders of joint accounts may
authorize each shareholder to redeem by check. The check may not draw on monthly
dividends which have been declared but not distributed. SHAREHOLDERS WHO
PURCHASE CLASS A AND CLASS C SHARES BY CHECK (INCLUDING CERTIFIED CHECKS OR
CASHIER'S CHECKS) MAY WRITE CHECKS AGAINST THOSE SHARES ONLY AFTER THEY HAVE
BEEN ON THE FUND'S BOOKS FOR 15 DAYS. WHEN SUCH A CHECK IS PRESENTED TO THE BANK
FOR PAYMENT, A SUFFICIENT NUMBER OF FULL AND FRACTIONAL SHARES WILL BE REDEEMED
TO COVER THE AMOUNT OF THE CHECK, ANY APPLICABLE CDSC AND THE AMOUNT OF ANY
INCOME TAX REQUIRED TO BE WITHHELD. IF THE AMOUNT OF THE CHECK, PLUS ANY
APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD IS
GREATER THAN THE VALUE OF THE CLASS A OR CLASS C SHARES HELD IN THE
SHAREHOLDER'S ACCOUNT, THE CHECK WILL BE RETURNED UNPAID, AND THE SHAREHOLDER
MAY BE SUBJECT TO EXTRA CHARGES. TO AVOID DISHONOR OF CHECKS DUE TO FLUCTUATIONS
IN ACCOUNT VALUE, SHAREHOLDERS ARE ADVISED AGAINST REDEEMING ALL OR MOST OF
THEIR ACCOUNT BY CHECK. CHECKS SHOULD NOT BE USED TO CLOSE A FUND ACCOUNT
BECAUSE WHEN THE CHECK IS WRITTEN, THE SHAREHOLDER WILL NOT KNOW THE EXACT TOTAL
VALUE OF THE ACCOUNT ON THE DAY THE CHECK CLEARS. There is presently no charge
to the shareholder for the maintenance of this special account or for the
clearance of any checks, but the Fund and the Bank reserve the right to impose
such charges or to modify or terminate the redemption by check privilege at any
time.
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.
GENERAL: 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 Trust's compliance with applicable regulations, the Trust 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 transaction charges
when converting the securities to cash.
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem shares of the Fund 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 being established for automatic
investments and certain payroll savings programs, and Automatic Exchange Plan,
for which the minimum investment requirement is either $250 or $50. 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 in Class A or Class B shares
("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 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, Class B and
Class C 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% per annum of the
Fund's average daily net assets attributable to Class A shares that are owned by
investors for whom such securities dealer is the holder or dealer of record.
Currently, this service fee has been set at 0.15% per annum. The service fee may
be increased at any time without notice to shareholders. 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. FSI may also retain a distribution fee of 0.10% per annum of the
Fund's average daily net assets attributable to Class A shares as partial
consideration for services performed and expenses incurred in the performance of
FSI's obligations under its distribution agreement with the Fund. The
distribution fee is currently not being imposed. 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. This fee will be paid periodically to dealers described
above with respect to shares owned by investors for whom such dealers are the
holder or dealer of record. Fees payable under the Class A Distribution Plan are
charged to, and therefore reduce, income applicable 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 may pay
FSI service fee of up to 0.25% per annum 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% per annum
of the Fund's average daily net assets attributable to Class B shares owned by
investors for whom that securities dealer is the holder or dealer of record).
This service fee is intended to be additional consideration for all personal
services and/or account maintenance services rendered by the dealer with respect
to Class B shares. Fees payable under the Class B Distribution Plan are charged
to, and therefore reduce, income allocated to Class B shares. Except in the case
of the first year service fee, the service fee has been set at 0.15% per annum
of the Fund's average daily net assets attributable to Class B shares that are
owned by investors for whom that securities dealer is the holder or dealer of
record. The service fee may be increased without notice to shareholders. The
first year service fee will be paid as noted below. The Class B Distribution
Plan also provides that FSI will receive all CDSCs attributable to Class B
shares (see "Redemptions and Repurchases"), 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 a 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 with respect to
accounts 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.
CLASS C DISTRIBUTION PLAN. The Class C Distribution Plan provides that the
Fund will pay FSI a distribution fee of up to 0.75% per annum of the Fund's
average daily net assets attributable to Class C shares and will pay FSI a
service fee of up to 0.25% per annum of the Fund's average daily net assets
attributable to Class C shares (which FSI in turn pays to securities dealers
which enter into a sales agreement with FSI at a rate of up to 0.25% per annum
of the Fund's daily net assets attributable to Class C shares owned by investors
for whom that securities dealer is the holder or dealer of record). The
distribution/service fees attributable to Class C shares are designed to permit
an investor to purchase such shares through a broker-dealer without the
assessment of an initial sales charge or a CDSC while allowing FSI to compensate
broker-dealers in connection with the sale of such shares. The service fee is
intended to be additional consideration for all personal services and/or account
maintenance services rendered with respect to Class C shares. FSI or its
affiliates are entitled to retain all service fees payable under the Class C
Distribution Plan with respect to accounts for which there is no dealer of
record 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 C Distribution Plan
is to compensate FSI for its distribution services to the Fund. Distribution
payments under the Plan will be used by FSI to pay securities dealers a
distribution fee in an amount equal on an annual basis to 0.75% of the Fund's
average daily net assets attributable to Class C shares owned by investors for
whom that securities dealer is the holder or dealer of record. (Therefore, the
total amount of distribution/service fees paid to a dealer on an annual basis is
1.00% of the Fund's average daily net assets attributable to Class C shares
owned by investors for whom the securities dealer is the holder or dealer of
record.) FSI also pays expenses of printing prospectuses and reports used for
sales purposes, expenses with respect to the preparation and printing of sales
literature and other distribution related expenses, including, without
limitation, the compensation of personnel and all costs of travel, office
expense and equipment. Since FSl'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. Certain
banks and other financial institutions that have agency agreements with FSI will
receive agency transaction and service fees that are the same as distribution
fees and service fees to dealers. Fees payable under the Class C Distribution
Plan are charged to, and therefore reduce, income allocated to Class C shares.
DISTRIBUTIONS
The Fund intends to declare dividends daily and pay to its shareholders
substantially all of its net investment income as dividends on a monthly basis
(dividends will only accrue on shares for which payment has been received.)
Dividends generally are distributed on the first business day of the following
month. The Fund will make one or more distributions during the calendar year to
its shareholders from any long-term capital gains, and may also 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 with respect
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
and Class C shares because expenses attributable to Class B and Class C shares
will generally be higher.
TAX STATUS
FEDERAL INCOME TAXES -- The Fund is treated under the Code as an entity separate
from the other series of the Trust. In order to minimize the taxes the Fund
would otherwise be required to pay, the Fund intends to qualify 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. The Fund also expects the dividends it pays to
shareholders from interest on Municipal Bonds to be exempt from federal income
tax (but generally not from any state or local taxes) because the Fund intends
to satisfy certain requirements of the Code. Distributions of income from
capital gains, from investments in taxable securities and from certain other
transactions, including transactions in Municipal Bonds purchased at a market
discount, will be taxable to shareholders whether the distribution is paid in
cash or in additional shares.
Shortly after the end of each calendar year, each shareholder will be sent a
statement setting forth the federal income tax status of all dividends and
distributions for such calendar year, including the portion exempt from federal
income taxes as "exempt-interest dividends," the portion, if any, that is a tax
preference item under the federal alternative minimum tax, the portion, if any,
taxable as ordinary income, the portion taxable as long term capital gain, the
portion, if any representing a return of capital (which is free of current taxes
but results in a basis reduction), and the amount, if any, of federal income tax
withheld.
Interest on indebtedness incurred by shareholders to purchase or carry shares of
the Fund will not be deductible for federal income tax purposes. Exempt-
interest dividends are taken into account in calculating the amount of social
security and railroad retirement benefits that may be subject to federal income
tax. Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by certain private activity bonds
should consult their tax advisers before purchasing shares of the Fund.
"Substantial user" is defined generally as including a "non-exempt person" who
regularly uses in a trade or business a part of a facility financed from the
proceeds of certain private activity bonds.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest and makes interest on certain
tax-exempt bonds and distributions by the Fund of such interest a tax preference
item for purposes of the individual and corporate alternative minimum tax. In
addition, all exempt-interest dividends may affect a corporate shareholder's
alternative minimum tax liability.
The Fund intends to withhold U.S. federal income tax at the rate of 30% on
taxable dividends and certain 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 on 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 advisors as to the tax consequences
of an investment in the Fund.
STATE AND LOCAL TAXES -- The exemption of interest income from Municipal Bonds
for federal income tax purposes does not necessarily result in exemption under
the income or other tax laws of any state or local taxing authority. Therefore,
shareholders of the Fund may be subject to state and local taxes on
distributions from the Fund. Shareholders should consult their own tax advisors
with respect to the tax status of distributions from the Fund in their own
states and localities. The Fund is not liable for any income or excise taxes in
The Commonwealth of Massachusetts as long as it meets the requirements of
Subchapter M of the Code.
NET ASSET VALUE
The net asset value per share of each class of shares of the Fund is determined
each day during which the Exchange is open for trading. This determination is
made once during each such day as of the close of regular trading on the
Exchange by deducting the amount of the liabilities attributable to the class
from the value of the assets attributable to the class and dividing the
difference by the number of the shares of the class outstanding. Assets in the
Fund's portfolio are valued on the basis of valuations furnished by a pricing
service or at their fair value as determined by the Board of Trustees, 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, one of three series of the Trust, has three classes of shares,
entitled Class A, Class B and Class C Shares of Beneficial interest (without par
value). The Trust has reserved the right to create and issue additional series
and classes of shares in which case the shares of each class of each series
participate equally in the earnings, dividends and assets attributable to that
class of the particular series. Shareholders are entitled to one vote for each
share held. Shares of each series are entitled to vote separately to approve
investment advisory agreements or changes in investment restrictions, but shares
of all series vote together in the election of Trustees and ratification of
selection of accountants. Additionally, each class of shares of a series will
vote separately on any material increases 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 series on all
other matters. The Trust does not intend to hold annual shareholder meetings.
The 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).
Each share of a class of the Fund represents an equal proportionate interest in
the Fund with each other class, subject to the liabilities of the particular
class. Shares of the Fund have no pre-emptive or conversion rights (except as
set forth in "Purchase -- Conversion of Class B Shares" above). Shares of the
Fund are fully paid and nonassessable. Should the Fund be liquidated,
shareholders of each class of the Fund would be entitled to share pro rata in
the net assets of the Fund 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 Trust 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 Trust itself was unable to meet its obligations.
PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, tax-equivalent yield, current
distribution rate and total rate of return quotations for each class and may
also quote fund rankings in the relevant fund category from various sources,
such as the Lipper Analytical Services, Inc. and Wiesenberger Investment
Companies Service. Yield and tax-equivalent yield quotations are based on the
annualized net investment income per share of each class over a 30-day period
stated as a percent of the maximum public offering price of that class on the
last day of that period. Yield calculations for Class B shares assume no CDSC is
paid. The current distribution rate for each class is generally based upon the
total amount of dividends per share paid by the Fund to shareholders of that
class during the past 12 months and is computed by dividing the amount of such
dividends by the maximum public offering price of that class at the end of such
period. Current distribution rate calculations for Class B shares assume no CDSC
is paid. The current distribution rate differs from the yield and tax-equivalent
yield calculations because it may include distributions to shareholders from
sources other than dividends and interest, such as premium income from option
writing, short-term capital gains, and return of invested capital, and is
calculated over a different period of time. Total rate of return quotations
reflect the average annual percentage change over stated periods in the value of
an investment in each 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 or the deduction of the CDSC, and which will thus be higher. All
performance quotations are based on historical performance and are not intended
to indicate future performance. Yield and tax-equivalent yield reflect only net
portfolio income as of a stated period of time, and current distribution rate
reflects only the rate of distributions paid by the Fund over a stated period of
time, while total rate of return reflects all components of investment return
over a stated period of time. All performance 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 yield, tax-equivalent yield, current distribution rate and 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 activity in the account. Cancelled checks,
if any, will be sent to shareholders monthly.
DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified.
-- Dividends in cash; capital gain distributions reinvested in additional
shares.
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) of dividends and capital gain
distributions 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
last business day of the month. 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 a reasonable time prior to the last business day of
the month 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 Class
B or Class C shares of the Fund or any of the classes of other MFS Funds or MFS
Fixed Fund (a bank collective investment fund) within a 13-month period (or
36-month period for purchases of $1 million or more), the shareholder may obtain
such shares of the Fund 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 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 distributions of dividends and capital gain
distributions from the same class of any other MFS Fund. Furthermore,
distributions made by the Fund may be automatically invested at net asset value
(and without any applicable CDSC) in the same class of shares of another MFS
Fund, if shares of the fund are available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder (except a $3 Million Shareholder)
may direct the Shareholder Servicing Agent to send to him (or any one 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 generally are 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 PROGRAM --
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 (and, in the case of Class C shares, for shares of MFS Money
Market Fund) under the Automatic Exchange Plan. 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 differences in objectives and policies of a
fund and review its prospectus before electing to transfer money into the 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 and 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 adviser 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 -- Except as noted under "Purchases -- Class C
Shares," shares of the Fund may be purchased by all types of tax-deferred
retirement plans, including IRAs, SEP-IRA plans, 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 July 1, 1994, contains
more detailed information about the Fund, including information related to (i)
the Fund's investment policies and restrictions, (ii) its Trustees, officers and
investment adviser, (iii) portfolio transactions and brokerage commissions, (iv)
the method used to calculate performance quotations of the Fund, (v) the
Distribution Plans and (vi) various services and privileges provided by the Fund
for the benefit of its shareholders, including additional information with
respect to the exchange privilege.
<PAGE>
APPENDIX A
TAXABLE EQUIVALENT YIELD TABLE<F1>
(UNDER FEDERAL INCOME TAX LAW AND RATES FOR 1994)
The table below shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields from 2% to 8% under federal income tax laws that apply
to 1994. (Such yields may differ under the laws applicable to subsequent years.)
Separate calculations, showing the applicable taxable income brackets, are
provided for investors who file joint returns and for those investors who file
individual returns.
<TABLE>
<CAPTION>
TAX-EXEMPT YIELD
- --------------------------------- INCOME<F2>------------------------------------------------------------------------------------
SINGLE RETURN JOINT RETURN BRACKET 2% 2.5% 3% 3.5% 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8%
- --------------------------------------------- --------------------------------------------------------------------------------------
1994 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 22,750 $ 0-$ 38,000 15% 2.35% 2.94% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41%
$ 22,751-$ 55,100 $ 38,001-$ 91,850 28% 2.78% 3.47% 4.17% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11%
$ 55,101-$115,000 $ 91,851-$140,000 31% 2.90% 3.62% 4.35% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59%
$115,101-$250,000 $140,001-$250,000 36% 3.13% 3.91% 4.69% 5.47% 6.25% 7.03% 7.81% 8.59% 9.37% 10.16% 10.94% 11.72% 12.50%
Over $250,001 Over $250,001 39.6% 3.31% 4.14% 4.97% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42% 13.25%
<FN>
<F1> This table was prepared using the federal income tax rates in effect on
January 1, 1994.
<F2> The effective marginal income tax rate will be increased if personal
exemptions are phased out (for the phase out period only) and if a portion
of itemized deductions are disallowed. This increase in the marginal rates,
if applicable, will cause a corresponding increase in the equivalent
taxable yields.
</TABLE>
While it is expected that a substantial portion of the interest income
distributed to the Fund's shareholders will be exempt from federal income taxes,
portions of such distributions from time to time may be subject to federal
income taxes or a federal alternative minimum tax.
APPENDIX B
DESCRIPTION OF MUNICIPAL BONDS
Municipal Bonds include debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public facilities
such as bridges, highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. Other public purposes for which Municipal
Bonds may be issued include refunding outstanding obligations, obtaining funds
for general operating expenses, and obtaining funds to loan to other public
institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds to provide privately-operated housing facilities, sports facilities,
convention or trade show facilities, airport, mass transit, port or parking
facilities, air or water pollution control facilities for water supply, gas,
electricity or sewage or solid waste disposal. Such obligations are included in
the term Municipal Bonds if the interest paid thereon qualifies as exempt from
federal income tax. Other types of industrial development bonds, the proceeds of
which are used for the construction, equipment, repair or improvement of
privately operated industrial or commercial facilities, may constitute Municipal
Bonds, although the current federal tax laws place substantial limitations on
the size of such issues. Municipal Bonds also include debt obligations secured
by student loan obligations.
The two principal classifications of Municipal Bonds are "general obligation"
and "revenue" bonds. General obligation bonds are secured by the issuer's pledge
of its good faith, credit and taxing power for the payment of principal and
interest. The payment of such bonds may be dependent upon an appropriation by
the issuer's legislative body. The characteristics and enforcement of general
obligation bonds vary according to the law applicable to the particular issuer.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities, or, in some cases, from the proceeds of a
special excise or other specific revenue source. Industrial development bonds
which are Municipal Bonds are in most cases revenue bonds and do not generally
constitute the pledge of the credit of the issuer of such bonds. Municipal Bonds
also include participations in municipal leases. These are undivided interests
in a portion of an obligation in the form of a lease or installment purchase
which is issued by state and local governments to acquire equipment and
facilities. Municipal leases frequently have special risks not normally
associated with general obligation or revenue bonds. Leases and installment
purchase or conditional sale contracts (which normally provide for title to the
leased asset to pass eventually to the governmental issuer) have evolved as a
means for governmental issuers to acquire property and equipment without meeting
the constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations are deemed to be inapplicable because of the inclusion
in many leases or contracts of "non- appropriation" clauses that provide that
the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Although the
obligations will be secured by the leased equipment or facilities, the
disposition of the property in the event of non-appropriation or foreclosure
might, in some cases, prove difficult. In light of these concerns, the Trust has
adopted and follows procedures for determining whether municipal lease
securities purchased by the Fund are liquid and for monitoring the liquidity of
municipal lease securities held in the Fund's portfolio. The procedures require
that a number of factors be used in evaluating the liquidity of a municipal
lease security, including, the frequency of trades and quotes for the security,
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers, the willingness of dealers to undertake to make a
market in the security, the nature of the marketplace in which the security
trades, the credit quality of the security, and other factors in which the
Adviser may deem relevant. There are, of course, variations in the security of
Municipal Bonds, both within a particular classification and between
classifications, depending on numerous factors.
The yields on Municipal Bonds are dependent on a variety of factors, including
general money market conditions, supply and demand and general conditions of the
Municipal Bond market, size of a particular offering, the maturity of the
obligation and rating of the issue.
DESCRIPTION OF OTHER INVESTMENTS
U.S. GOVERNMENT OBLIGATIONS -- are issued by the Treasury and include
bills, certificates of indebtedness, notes, and bonds. Agencies and
instrumentalities of the U.S. Government are established under the authority of
an act of Congress and include, but are not limited to, the Government National
Mortgage Association, the Tennessee Valley Authority, the Bank for Cooperatives,
the Farmers Home Administration, Federal Home Loan Banks, Federal Intermediate
Credit Banks, Federal Land Banks, and the Federal National Mortgage Association.
CERTIFICATES OF DEPOSIT -- are certificates issued against funds deposited
in a commercial bank, are for a definite period of time, earn a specified rate
of return, and are normally negotiable.
BANKERS' ACCEPTANCES -- are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
COMMERCIAL PAPER -- refers to promissory notes issued by corporations in
order to finance their short-term credit needs.
<PAGE>
THE MFS FAMILY OF FUNDS(R) -- AMERICA'S OLDEST MUTUAL FUND GROUP
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call the MFS Service Center
at 1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time. This
material should be read carefully before investing or sending money.
<TABLE>
<CAPTION>
<S> <C>
STOCK LIMITED MATURITY BOND
Massachusetts Investors Trust MFS(r) Government Limited Maturity Fund
Massachusetts Investors Growth Stock Fund MFS(r) Limited Maturity Fund
MFS(r) Capital Growth Fund MFS(r) Municipal Limited Maturity Fund
MFS(r) Emerging Growth Fund WORLD
MFS(r) Gold & Natural Resources Fund MFS(r) World Asset Allocation Fund
MFS(r) Growth Opportunities Fund MFS(r) World Equity Fund
MFS(r) Managed Sectors Fund MFS(r) World Governments Fund
MFS(r) OTC Fund MFS(r) World Growth Fund
MFS(r) Research Fund MFS(r) World Total Return Fund
MFS(r) Value Fund NATIONAL TAX-FREE BOND
STOCK AND BOND MFS(r) Municipal Bond Fund
MFS(r) Total Return Fund MFS(r) Municipal High Income Fund
MFS(r) Utilities Fund (closed to new investors)
BOND MFS(r) Municipal Income Fund
MFS(r) Bond Fund STATE TAX-FREE BOND
MFS(r) Government Mortgage Fund Alabama, Arkansas, California, Florida,
MFS(r) Government Securities Fund Georgia, Louisiana, Maryland, Massachusetts,
MFS(r) High Income Fund Mississippi, New York, North Carolina,
MFS(r) Intermediate Income Fund Pennsylvania, South Carolina Tennessee, Texas,
MFS(r) Strategic Income Fund Virginia, Washington, West Virginia
(formerly MFS(r) Income & Opportunity Fund) MONEY MARAKET
MFS(r) Cash Reserve Fund
MFS(r) Government Money Market Fund
MFS(r) Money Market Fund
</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
AUDITORS
Deloitte & Touche
125 Summer Street, Boston, MA
02110
MFS(R) MUNICIPAL LIMITED
MATURITY FUND
500 Boylston Street, Boston,
MA 02116
MML-1-7/94/97M 37/237
MFS(R)
MUNICIPAL
LIMITED
MATURITY
FUND
PROSPECTUS
JULY 1, 1994
